Oxfordstrat
Search
  • PRODUCTS
  • RESOURCES
  • R&D BLOG
  • ABOUT
  • CONTACT

R&D Blog

Smash Day Pattern – Type B | Trading Strategy (Filter & Exit)

I. Trading Strategy

Developer: Larry Williams. Concept: Trading strategy based on a failed price pattern. Research Goal: Performance verification of the Smash Day Pattern with the trend filter and time exit. Specification: Table 1. Results: Figure 1-2. Trade Setup: Long trades: Close[i − 1] < Low[i − 2], i.e., a smash day buy setup consists of a day that closes lower than the previous day’s low. Short trades: Close[i − 1] > High[i − 2], i.e., a smash day sell setup consists of a day that closes higher than the previous day’s high. Index: i ~ Current Bar. Trade Entry: Long Trades: A buy stop is placed one tick above the High[i − 1]. Short Trades: A sell stop is placed one tick below the Low[i − 1]. Index: i ~ Current Bar. Trade Exit: Table 1. Portfolio: 42 futures markets from four major market sectors (commodities, currencies, interest rates, and equity indexes). Data: 32 years since 1980. Testing Platform: MATLAB®.

II. Sensitivity Test

All 3-D charts are followed by 2-D contour charts for Profit Factor, Sharpe Ratio, Ulcer Performance Index, CAGR, Maximum Drawdown, Percent Profitable Trades, and Avg. Win / Avg. Loss Ratio. The final picture shows sensitivity of Equity Curve.

Tested Variables: Trend_Index & Time_Index (Definitions: Table 1):

Smash Day Pattern: Profit Factor
Smash Day Pattern: Profit Factor
Smash Day Pattern: Sharpe Ratio
Smash Day Pattern: Sharpe Ratio
Smash Day Pattern: UPI
Smash Day Pattern: UPI
Smash Day Pattern: CAGR
Smash Day Pattern: CAGR
Smash Day Pattern: Max. Drawdown
Smash Day Pattern: Max. Drawdown
Smash Day Pattern: Percent Profitable Trades
Smash Day Pattern: Percent Profitable Trades
Smash Day Pattern: Avg. Win / Avg. Loss Ratio
Smash Day Pattern: Avg. Win / Avg. Loss Ratio
Smash Day Pattern: Equity

Figure 1 | Portfolio Performance (Inputs: Table 1; Commission & Slippage: $0).

STRATEGY
SPECIFICATIONPARAMETERS
Auxiliary Variables:N/A
Setup:Long Trades: Close[i − 1] < Low[i − 2].
Short Trades: Close[i − 1] > High[i − 2].
Index: i ~ Current Bar.
Smash Day Pattern
Filter:Long Trades: Close[i − 1] > Close[i − Trend_Index].
Short Trades: Close[i − 1] < Close[i − Trend_Index].
Index: i ~ Current Bar.
Trend_Index = [4, 80], Step = 2;
Entry:Long Trades: A buy stop is placed one tick above the High[i − 1].
Short Trades: A sell stop is placed one tick below the Low[i − 1].
Index: i ~ Current Bar.
Exit:Time Exit: nth day at the close, n = Time_Index.
Quick Exit: Long Trades: A sell stop is placed one tick below the min(Low[k − 1], Low[k]). Short Trades: A buy stop is placed one tick above the max(High[k − 1], High[k]). Index: k ~ Entry Bar.
Stop Loss Exit: ATR(ATR_Length) is the Average True Range over a period of ATR_Length. ATR_Stop is a multiple of ATR(ATR_Length). Long Trades: A sell stop is placed at [Entry − ATR(ATR_Length) * ATR_Stop]. Short Trades: A buy stop is placed at [Entry + ATR(ATR_Length) * ATR_Stop].
Time_Index = [1, 40], Step = 1;
ATR_Length = 20;
ATR_Stop = 6;
Sensitivity Test:Trend_Index = [4, 80], Step = 2
Time_Index = [1, 40], Step = 1
Position Sizing:Initial_Capital = $1,000,000
Fixed_Fractional = 1%
Portfolio = 42 US Futures
ATR_Stop = 6 (ATR ~ Average True Range)
ATR_Length = 20
Data:42 futures markets; 32 years (1980/01/01−2011/12/31)

Table 1 | Specification: Trading Strategy.

III. Sensitivity Test with Commission & Slippage

Tested Variables: Trend_Index & Time_Index (Definitions: Table 1):

Smash Day Pattern: Profit Factor
Smash Day Pattern: Profit Factor
Smash Day Pattern: Sharpe Ratio
Smash Day Pattern: Sharpe Ratio
Smash Day Pattern: UPI
Smash Day Pattern: UPI
Smash Day Pattern: CAGR
Smash Day Pattern: CAGR
Smash Day Pattern: Max. Drawdown
Smash Day Pattern: Max. Drawdown
Smash Day Pattern: Percent Profitable Trades
Smash Day Pattern: Percent Profitable Trades
Smash Day Pattern: Avg. Win / Avg. Loss Ratio
Smash Day Pattern: Avg. Win / Avg. Loss Ratio
Smash Day Pattern: Equity

Figure 2 | Portfolio Performance (Inputs: Table 1; Commission & Slippage: $50 Round Turn).

IV. Rating: Smash Day Pattern – Type B | Trading Strategy

A/B/C/D

Related Entries: Smash Day Pattern – Type B (Exits) | Smash Day Pattern – Type A (Filter & Exit) | Smash Day Pattern – Type A (Exits) | Smash Day Pattern – Type C (Exits)
Related Topics: (Public) Trading Strategies

CFTC RULE 4.41: HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

RISK DISCLOSURE: U.S. GOVERNMENT REQUIRED DISCLAIMER | CFTC RULE 4.41

Codes: matlab/williams/smash-day/b/

←   Previous Article
Next Article   →
  • Data
  • Ideas
  • Indicators
  • Strategies
  • Traders

We share what we learn.

Sign up to receive research news and exclusive offers.

Learn more about our models.

Email us

  • Terms & Conditions
  • Guarantee
  • Privacy
  • Risk Disclosure
  • Sitemap
  • LinkedIn
  • Twitter
  • RSS
©2023 Oxford Capital Strategies Ltd | Reg. No. 7590685

What are you looking for?