|
PureBytes Links
Trading Reference Links
|
In a previous report on triangles and the
behavior of
prices on breakouts from triangles I did a
"half-assed" job
and I apologize for it.
This post is a detailed and thorough
examination of ALL the
patterns that have occurred in the DJIA
since 1921 that can
be defined by a detection scheme using 8
bar (day) highest
high and lowest low points to select
"turning points".
There is much detail on this approach
at:
<A
href="http://www.theswingmachine.com";>www.theswingmachine.com
and the enclosed results derive from the
approach outlined
on that site.
The following diagrams outline two
patterns
which (if the upper turning points are
connected
by a line and the lower turning points
are
connected by a line) form the classic
triangle
patterns from which we might expect
certain types
of breakouts.
<FONT face="Courier New"
size=2>...A.............
.........B........./\.............
......../\...........\........C...
......./..\....D......\....../\...
....../....\../\.......\..../..\/.
...../......\/..........\../....D.
..../........C...........\/.......
..\/......................B.......
..A..............Pattern:..#2.....
Pattern:..#8.....A>B B<C C<A D<C
D>B A<B B>C C>A D>C
D<B
A line from A to C A line from A
to Cwould slope downward would slope
upwardand the next move and
the next move from TP-D would be
from TP-D would bean UPSIDE breakout. an
DOWNSIDE breakout.
You can examine the Junk1.gif
attachment for a more
"picturesque" display of these same two
patterns.
Now, what are the statistics on the
behavior of prices
after such patterns occur.
This study considers ALL turning points for
the Dow-Jones
Industrial index from the first of 1921 up
to May 25, 2001.
If we don't really care whether we can make
a profit on a
"breakout" but just simply measure success
or failure to
occur if the next turning point in the
price sequence is
on the PROFIT side of the appropriate
triangle line then:
For UPSIDE breakouts the success rate
is: 92.5% for 200
triangles that have appeared from 1921
until 2001.
For DOWNSIDE breakouts the success rate
is: 92.5% for 213
triangles that have appeared from 1921
until 2001.
HOWEVER, if we ask a bit more out of such
breakouts:
If the breakout must achieve 2% profit
then:
UPSIDE breakout percentage
is: 67% and the
DOWNSIDE breakout percentage
is: 58% .
NOW, if we are realistic and want to insist
that the breakout
must achieve a 5% move over the appropriate
triangle line
then:
UPSIDE breakout percentage
is: 36%
Downside breakout percentage
is: 28% .
The attached .csv file (import
it into Excel) is all the
raw data and the results of the
computations. I did not
bother with the full spreadsheet as it is
much larger than
most of us want to fool with.
I now understand where people come up with
figures like
95% successful for triangle breakouts BUT
even if we
limit it to realistic breakout amounts it
still appears
that such things as this do represent a
significant lowering
of risk of trading when we can find
them.
I would state that for such an advantage to
exist the method
of computation of "patterns" for triangle
would need to be
as rigorous as what is used
here.
Clyde
- - - - - - - - - - - - - - - - - - - -
- - - - - - - -Clyde Lee
Chairman/CEO (Home of
SwingMachine)SYTECH
Corporation email: <A
href="mailto:clydelee@xxxxxxxxxxxx";>clydelee@xxxxxxxxxxxx 7910
Westglen, Suite 105
Office: (713) 783-9540Houston, TX
77063
Fax: (713) 783-1092Details
at:
www.theswingmachine.com- - - -
- - - - - - - - - - - - - - - - - - - - - - -
-
Yahoo! Groups Sponsor
Yahoo! Website Services- Click Here!
To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
Attachment:
Description: "INDU2108_UpTriang.csv"
Attachment:
Description: "junk1.gif"
|