Bars until swing termination point within the active zone

Trying to do a better job of explaining my posts.. makes it way easier to go back to later and understand what I did..

Following the debriefing, I decided to basically hop back into the “try anything I can think of” phase of development (time permitting T_T) with the understanding that the “active zone” or soft reaction point between the 40%-85% is the optimal point of entry for swing (retracement) trading.

The first of my ideas is a simple bar count of how many bars are in the zone before price either a) peaks out or b) blows through. The count is activated once price hits at least 40% retrace, and swings that don’t reach 40% (some UR/DR) are just not counted. The main interest points here are a) if there is a difference between retracements and trends, and b) particularly low counts and high counts.

Bars until swing termination point within the active zone

This is still with the 30m EJ data, and the 80% capture rate is about 6 bars/3 hours on retracement and rejection swings, and 5 on the trending swings. This is kind of interesting because of the following:

If you take DR swings, for example, there were 213 swings that fell between 40.01% and 99.99% (these would then be all the swings used in this analysis). Of that subset, 74.6% of the swings reverse before the 85% mark. On the other hand, if you take DT swings, 100% of them go above 100% (by definition) and therefore 100% of them go past the 85% mark. Yet, the time to reach termination point, be it 50%, 60%, or 85% has only a 1 bar, or 30m difference at most, and is generally not really noticeable.

The other thing to note that is slightly more obvious (and intuitive) is that the longer price spends in the zone, the more likely it is to be a retracement swing rather than a trend type swing.

Edit: I should note that this statistic also has what I would assume to be a pretty high probability scalp imbedded in it. Since about 80% of swings have multiple bars in the zone, it means that after the first bar prints, it’s highly likely that at least one more bar will print to complete the high/low of the swing.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s