A rather late discoveryâ€"extremely simple. Just add one component to the original five either-or indicators. The sixth signal, again, designed to flash daily save for the rare tie, involves fading the majority direction of the last three open-closes.
If at least two out of the last three open to closes were lower, that's a long signal (+1). A higher majority indicates sell (-1).
Add the number to the original five and you'll get daily totals between -6 (bearish) and +6 (bullish) including 0 (neutral). The results of Table 1 show that you get improvements over the 8-indicator system in some areas, and diminished results in other. The important return on account improves in five out of the nine markets.
Table 1
I'm partial to the idea that all the elements are among the constantly flashing variety. Perhaps in the next volume, I'll have a mechanical way to more definitively integrate them with the other ones--like Einstein searching for his Unified Theory of Everything. (And no, I'm not otherwise comparing myself to Einstein unless you're talking wardrobe.)
Interestingly, I found no threshold number that performs better overall than a simple majority. In other words, unlike the 8-signal system, waiting until you get +/-3 is counterproductive. Optimizing that number doesn't help. The system says be long if you're above zero, short if below, and it offers no special weighting bias beyond that.
DISCLAIMER: It should not be assumed that the methods, techniques, or indicators presented in this column will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented in this column are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The author, Tiger Shark Publishing LLC, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.
Art Collins is the author of Market Beaters, a collection of interviews with renowned mechanical traders. Much of Art's TigerSharkTrading.com material will be expanded upon in his upcoming book that is scheduled to be released later this year. E-mail him at artcollins@ameritech.net.
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