So, inspired by the kinds of indicators I’ve been seeing on the EOTpro.com videos, I played around and created some paintbar indicators this weekend. They aren’t the same strategy as in the videos, but I got ideas like color coding various signal ’strengths’ so I can differentiate the quality of the setups better. Plus, it gave me a chance to play with some QT indicators that I’ve never used, which was fun.
Today, I was inspired to try to use some of my new paintbars, because my connection to scottrade was wacky. The d/l speed dips to 0.00 kb/s for a few seconds, followed by a burst of traffic. Result? Everything freezes, and then it plays what I missed at triple speed until it catches up. Not exactly a prime scalping environment!
So, the strategy with the most impressive non-scientific eyeballed 2-days of data “backtest” was a kind of mean-reversion idea. It basically tries to decide when a stock is primed to return to its recent average price. Not revolutionary, I know. Here’s how the first trade went… it was scary!
First, the daily PnF… Atheros Communications, Inc. (Nasdaq: ATHR) was in such a clear uptrend that I didn’t even bother drawing the arrow for you. If you can’t see it, get your eyes checked:
It gapped up today, and sold off at the open. A couple candles past the premarket, it turned, and I got a blue arrow pointing up. This is the ‘medium strength’ (gray being weak and bright green being strong) buy signal. I’m still playing with the details, but the basic idea is that the signal means “this stock has moved far (in a std. deviation sense) from value, quickly, and has good probability of retracing.”
The target would be the blue line (a T-3 moving average) at minimum. Since we were going long, with the overall trend, I was going to look for more than that. The stop would be below the recent swing low. Here’s how the trade panned out:
Whew! The markets were acting all kinds of skittish (the TICKs were pegged negative for most of the first hour) because they were near the highs from Friday. As you can see, the T-3 average target was starting to drop, so when I got a push through it I sold my position for a 0.55 R gain. I think it was the right choice. As I write this, the price has fallen back to 33.34.
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| ATHR |  |  |  |
July 23rd, 2007 at 5:11 pm
Can you post this paintbar formula?
July 23rd, 2007 at 8:27 pm
When it is done, and is working as well as I can make it work, I will post it. I’m still tweaking it every day. I am using two paintbars now.. the mean-reversion one shown above, and a trend-following one. When they both are in effect, the trend-following one wins (or should, anyway).