Actually what I want to do is to categorize the days to understand what type of price action might evolve. For me this could be a two.step process
First step: Use daily data only
This already allows to look at various price patterns
- pivots, pivot ranges
- rolling pivots, balance point
- narrow range, inside and outside bars
- closes above or below the midline
- closes in the upper or lower x %
- dojis: |close -open| < 10% of range
- overlap of daily bars
Second step: Add intraday information, which is availbale
- european session high and low
- globex high and low
- RTH open and opening gap
- opening range
This should allow to identify some patterns which are statistically relevant and which - if confirmed by price action - can be exploited.
And it would be a nice way to better prepare the trading session. I still sometimes just hunt signals without really knowing what I am doing.
Last edited by Fat Tails; October 1st, 2010 at 04:08 PM.
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Not sure what you mean by "This is not astonishing."
The number of instances of NR7 and on what day they take place is not really relevant (at least to me) - it's the price move that follows these days that is of significance. You mention news as the cause if i understand you - yet there were only 5 NR7 Tuesdays in your sample, out of a possible 36 (4 days per month x 9 months).
Your numbers confirm my back of the napkin analysis that there are approx two NR7 readings a month. What I do know from experience is that there is a 2-3% price move (even greater if you measure from low to high) in the day or two following these readings (guesstimate is 3 out of 4 times). NR4 readings have similar effect but with less predictability. I haven't run the hard numbers because my moto these days is "hand grenade close".
But I know it works for me from my P/L.
NR7 is just an alert to me and ultimately the success comes from the execution of the trade.
Oil reports are on Wednesdays. So it is not astonishing that there are few narrow range Wednesday. The expectation of the news already may create higher volatility on Wednesday morning prior to the news release at 10:00 AM EST.
Then on Tuesday (prior to the news) and Thursday (after the news) you expect some narrow range days. 20.8% of this years NR7 days were Tuesdays, 33.3% Thursdays and 25.0% Mondays.