Does anyone use this setup?

Hi!

Theres this setup I read about on The Street.com from Ken Wolf so I was just wondering if anyone tried it .

Find the days biggest winners/losers by the end of the day and jump along in the last couple of minutes in hope for another mornings gap in your direction? There are some conditions to be met, but I cant find it anymore... I thik it had to do with wolume, overall market and news driving the momentum.

THX all!
Alex

 

Its called the overnite system and has been around for more than 12 years....I know because I've been trading it for 11 years. He didn't invent it.

 

Yes but thats not what I meant , Actually I would like to know where to learn about it, whats your experience with it, how did you fine tune it etc...Course, I know it is a lot to ask someone.

Its just that I noticed that it works in some occasions but in the others it will kill you. For ex. a stock is in some kind of a sluggish uptrend or a consolidation and on a day like this it gaps down like 2 or 3 points (daily range preety the same) and sells of for another 3 or 4.

Would that fit into this category or is it too extreme? So my question is what situations have the best odds of "doing" what they should, a continuous downtrend or extreme such as the one above?

Cheers

 

System: if stock is up 10%, buy at close and sell at market the next morning.

I ran the system on a basket containing all Nasd 100 stocks. Time frame started one year ago today up until today. I started with $100K and allocated $5K per trade .

Result:
Winning trades: 36%
Losing trades: 64%

Starting capital: $100K
Ending capital: $75K

I made some variation to see if results would improve:
a. Sell at close the next day
b. wait for profit target or stop to get hit

Nothing worked.

I also tried one variation where instead of waiting for a 10% move I would buy at the close if the stock moved past its 1 std bollinger band on a 10 day MA. The results were not good.

My guess is that after a big move you can expect at least a pull back. Might be interesting to try the following system:
a. wait for a big move
b. wait for pullback
c. wait for the high price of the big move day to repeat itself and then buy.

 

I know Wolfe has a lot of qualifiers to take this trade. It is not an automatic hold over.

 

We're in a bear market, so gap ups aren't as likely. I'd like to know how that backtest would work with stocks down 10%, going short, then covering at the open. I guess it would do better.

 

Vishnu,

I doubt it would affect your results but there is a logical flaw in your test. You can't have a condition dependent on the close and also buy on the close. In the real world I doubt it would matter that much, but this is a classic system testing issue.

How about you set a limit buy at a .3 pullback from the high and hold for two days? In other words, buy on day 2 at (high of day 1 - .3 of day 1 range) limit. Take profits on day 3 at open if gap up or MOC.

 

works a little better going short. breaks even. I havent read his street.com articles so I'm not sure what his qualifiers are. I'll try and check this out. Incidentally, his book, "Trading on Momentum", just came out about a week or so ago. I just got it so I'll check if there's anything in there on this system.

 

AA, i agree with you on the integrity of the system testing because I am using data from the close to buy at the close. However, with this type of system I am pretty comfortable that in reality it will not matter. With most Nasd 100 stocks there usually is no problem buying at 3:59:59 or even later once you know what the high percentage stocks for the day are.

If I was being totally thorough I would test the system on minute bars and only use stocks that have a 10% change as of 3:58 and then buy them at the close of the 3:59 bar.