So, the S&P reverts to a mean, but you cannot say what that mean should be because if you had identified a mean value area and indeed faded the market you would have gotten crushed. For the past two years. But other than that it is not trendy. Put up a Weekly consolidated chart for the S&P 500 for the past 30 years and say that. With a straight face.
What are you talking about? I do. No violation whatsoever, of any kind. Only mental violations I see:
Flaws: No R:R defined No filters defined If you only do this with stocks that gap up on news affecting future performance (raised guidance or biotech positive results), and you place a stop loss on these trades that's half or less your profit target, it should produce consistent profits. As an example of the power of trend-following, I was on Skype with a small group of traders for 7 months. For quite a few weeks I was doing a Stock Trade of the Day call, just for fun. The only qualifying factor was this: After the initial 10 minutes transpired from the market open, as soon as I saw a stock hit the hi ticker with a 3-digit number (100 or more new highs at that point), it was an immediate buy signal at market. I believe only one of the calls was a loser. Why is everybody not rich from trading? Because someone has to provide the profits for those who learn how to hang on to the coattails of big moves. Fade away, faders!
let me put it this way. when S&P is overbought usually is pulls back. Not so for single item based markets like commodities or currencies.
the basic strategy should work if this is really the holy grail. those other things may or may not improve it but the basic strategy must work. did those 7 months happen during the monster bull run during the last 2 years? if everybody jumps in Long would not the spread widen and add costs to the Buyer? and who is pushing the train once everybody is aboard?
This is why market timers using wave counts or oscillators get crushed. On the Daily, the ES is overbought. On the Weekly, the ES is oversold. On the 60 minute it is overbought. On the 5 minute it is middling. Which one is "overbought" ? How much money does one piss away chasing 'usually' ? Example: the second week in May, the ES was "oversold" on the Daily but coming off an "overbought" condition on the Weekly.
yes thats true. you need to look at the market in context. but fact remains indexes are borad based thus more prone to reversion to the mean. I have never heard of S&P limit up 3 days in a row, like in grains.
Bill, with those band settings you will not get much done in terms of catching breakouts and corrections. I mean, you would have missed the classic BB setup with the Sept. 2010 breakout for God's sake. Or the June 2011 correction/consolidation/rally for that matter. The Sept 2010 breakout was classic textbook Bollinger.