range vs trend and time of the day

Discussion in 'Automated Trading' started by travis, Oct 5, 2006.

  1. travis


    I have just realized there's a new filter to implement in my system, but I didn't feel like testing it yet, though I am sure it makes sense.

    It is based on the relationship of range and trend with the time of the day.

    You must all agree that support and resistance are less likely to last the further we get into the trading session. A system in "range mode" should therefore only trade up to 3 hours before close, because whereas in the first three hour, support and resistance will be tested and price will bounce back, in the latter 3 hours this is less likely to happen.

    Also, the continous going up and down that we see on range days happens much more in the first three hours rather than the last three. But I haven't tested statistically this either.

    So I believe that in the first half of the day range is most likely to last, and support and resistance are most likely to resist.

    Accordingly, I am restricting my system trading hours in a range mode only up to the first 3 hours of trading, and I am letting it go all day long, for the days on which a trend is expected.

    Recapitulating, I haven't tested it, but I believe that in the first half of the day of a typical range day, price respects support and resistance more than in the second half, and also it goes up and down between these two levels more often than it does in the rest of the day.

    What do you think and did you do any tests on this?
  2. I haven't done any tests on this, but i don't see why support and resistance are more likely to fail as we get closer to the end of the day? It's an interesting idea nevertheless but must be tested i think
  3. My guess is your findings would be quite right some of the times.