Making strategies from OHLC prices

Discussion in 'Strategy Development' started by etfarb, Apr 9, 2013.

  1. etfarb


    I seem to have come to a brick wall in my researching and backtesting. I recently did some qualitative research/reading on wyckoff and what he says seems to make sense but its not good unless I can quantify it.

    What can you do with OHLC prices? Can you quantitatively determine S/R lines in a series or pivot points? i'd love to get some feed back on this.
  2. dom993


    Finding swing highs & lows is very easy when you start on that ... just define a swing high as an N-ring pivot, meaning it is the highest bar in a group of 2N+1 bars, with N bars stricly lower than the swing high on its left side, and N bars lower or equal to the swing high on the right side.

    But in my experience it takes more than that (regardless of using a minute-based or volume-based timeframe), because you really want:

    - a minimum price excursion on both sides of the swing H/L
    - a minimum elapsed time on both sides of the swing H/L
    - a minimum volume transacted on both sides of the swing H/L

    Different levels of requirements will help define different strengths of these swing highs/lows.

    Once you have "reliable" swing highs/lows (peaks & troughs of price action on the chart), you can either use each of them independently as a potential S/R level, or get into more sophistication and mandate that a swing high (low) be later confirmed by an opposite swing low (high) at ~the same level (old resistance becomes support) to make it a confirmed S/R level.

    (I voluntarily skipped DT/3T DB/3B out, because the more a level is tested and the most likely it will break, but that can be a good - or better - trade, too).