Yesterday I discussed two swing-trade systems that work pretty well in out-of-sample data. While each works differently, they overlap enough that you don’t get any benefit from running them both at the same time. One great thing about these two systems is that they’re dead simple to manage. Trade at the open or the close, simple math, etc., etc.
I will repeat the caveat from yesterday: these trades average <1% gain per trade. You must have sufficient capital and/or a low/nonexistent commission fee to make these work. While you can use leveraged ETFs or account leverage to help increase the profit/commission ratio, you also increase your chance of a catastrophic hole in your money.
In the lead image, you can see that I have indicators for both RSI and PIRDPO. PIRDPO occurs more frequently, and the RSI trades are a complete subset of the PIRDPO trades (during this particular time frame). There is no benefit to trading both systems.
That’s it. “WTF? Where are the stops?!” you say. To which I reply, watch your language. Sure there’s a stop…it’s a time stop. You get out after a set period of time. It has been my experience that swing trades rarely benefit from defined stop loss exits. They sometimes don’t even benefit from profit targets, but in this case the profit target is simply “any”.
If you think this sounds stupid, please refer back to the chart in the previous post.
First off, what does “PIRDPO” stand for? “Position In Range Detrended Price Oscillator”. Just say “purd-poh” for ease of use. This one requires that you keep a spreadsheet.
Pretty flippin’ simple, eh? Now go make some money.
--By Matt Haines from blog Throwinggoodmoney
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