We've shown simple strategies for handling each day of the week in the indexes.  Without any further refinement, the five-year results significantly overcame the standard $100 per trade we can anticipate giving up for slippage and commission.  The average profit per trade gets even better when we throw out any trades that are in opposition to our original two out of three indicator.  (See results here.)

Ever the market explorers (just like Lewis and Clark), we forge onward.  How about turning even more of our previously discussed tools into trade sifters?

In addition to the original three indicators, we'll assign a +1/-1 value to our signal comparing closes and range sizes.  You may remember that if yesterday's range is smaller than the average of the last 10 day's ranges, we want to go in the direction of yesterday's close-to-close net change.  If yesterday's range is greater than the 10-day-range average, then the close points a false direction and we want to take the opposite side.

Another component that can merit a +1/-1: if the close is greater than the 15-day median (15 highs plus 15 lows divided by 30), that's bullish (smaller is bearish).  We now have a total of 5 plus/minus indicators that, when added together, will yield a positive (buy) or negative (sell) number.  We don't follow it�"we merely use it as a tool to affirm or negate the command of the day-of-week signal. 

We'll create a few more “don't do this if” signals from our ongoing toolbox. (See the toolbox here.)

1. Don't take any day-of-week signal that's bucking a cup or cap in which the high (low) is greater (less) than the previous three days.
2. Don't take the signal if there's a contrary five-day-in-row indicator
3. Don't take the signal if it's contrary to the four-day-in-row indicator.

There are now eight filters in place.  If any meet current conditions, we ignore the day of the week trade.  If none do, we take the trade.  The results for the past five years follow.

Art Collins is the author of Market Beaters, a collection of interviews with renowned mechanical traders. He is currently working on a second volume. E-mail Art at artcollins@ameritech.net.