Hi All,
Whilst laying in bed, I was looking at a EUD/USD chart and all of the large trend bars and trying to figure out how to get a chunk of them. I remember Al Brooks thoughts on what constituted a trend bar. (Page 8?)
Anyway, what he was looking at was the Median of the absolute value of the (Open-Close) over the past 11 bars.
Multicharts code Med = Median(AbsValue(Open-Close,11);
So what does this give us, Med is the half way point of the opens to closes over the last 11 bars, so this means that 50% of the bars had O..C ranges smaller than the Med and 50%>Med.
So odds are that if a bar moves more than the med from the open, then it will move further still. So this is the entry signal.
Remembering that the Med is the O..C not the H..L, so for an exit, what if we used a simple ATR(14) style of profit take.
So a Long in pseudo code -
Med = Median(AbsValue(Open-Close,11);
Buy ("MED_L") 100000 contracts at Open+Med stop; // Median level
Sell ("LX") 100000 contracts at Open+ATR(14) Limit ; // Profit Target
Sell ("IS") 100000 contracts at Open stop ; // Initial stop OR Stop Loss
Some general thoughts -
- Obviously the period for the median and ATR can be changed to suit the user but would potentially be close enough.
- A lot of the trades would be a single bar trade ie entered at the med and closed for a StopLoss (IS) or closed at the ATR for a profit.
- If the first trade on the bar failed and the price continued in the opposite direction. If it hit the Med value in the opposite direction, take that trade as well.
- Apart for really small time frames where there is a lot of noise, this strategy could be applied to any time frame ie Forex 5min,15min,1h etc. The med and ATR all adapt to suit.
- Some trades may go beyond the single bar.
- A trend direction filter could be added but lots of trend bars happen before the bigger trend is realized.
- Only take trades following a inside bar or things like a NR4 or NR7 etc.