A reader asked if I could backtest a trading strategy based on the RSI(2) technical indicator. Most RSI strategies trade mean reversion setups, however, this is actually a trend following strategy. The idea is to follow trends and use an RSI(2) pullback to get a better price entry. We wait for the RSI(2) to turn back […]
Technical Analysis
Double Top Pattern – Backtest Rules & Results
The double top pattern is a chart formation consisting of two consecutive price peaks that leads to a bearish reversal. For years, traders have claimed that the double top is a high probability short setup. This is because a double top pattern signifies that bulls are having trouble pushing the price past the prior high. […]
Testing 3 Divergence Trading Strategies On Stocks
A reader asked about trading divergence so I thought I would look into it. Searching the web I found many articles that claim divergence trading is an effective way to trade stocks. However, there is very little empirical evidence provided. In this article we test several different divergence strategies and we compare our results to […]
Market Meanness Index For Amibroker
The Market Meanness Index is a technical indicator developed by JCL from the Financial Hacker website. In this article we will describe what the indicator is designed to do and provide some code for Amibroker users. MMI is a statistical algorithm based on the median value of a price series. It’s purpose is to help […]
Using This Sector Filter Improves Net Profit By 50%
Old school trading wisdom says you should not only buy the strongest stocks but the strongest stocks in the strongest sectors. In this article, I discuss a simple breakout system. Then I introduce a basic sector filter which improves our net profit by around 50%. Full Amibroker code is also provided.
Testing The Bullish Hikkake Pattern On US Stocks
The Hikkake pattern is a simple price action or candlestick pattern that is used to find market turning points. The pattern is essentially an inside day with a fake breakout and is originally credited to Daniel Chesler CMT.
Testing The Money Flow Indicator With Pinbar Strategy
The Money Flow Index indicator (MFI) is an oscillator that uses price and volume to measure momentum. It’s also known as a volume-weighted RSI and can be used in a similar way. In this article I will be testing a strategy that I found on a popular trading website.
10 Best Swing Trading Books For All Levels
Swing trading is a good option for investors who may not have the temperament or time to engage in day trading. Having success in this field requires you to take the time to learn about the various trading strategies and processes for short-term trading. Fortunately, many successful investors that have come before you have made […]
Trading Gaps In The Forex – Limited Evidence Of Profitability
The focus of this article is a new study by Caporale and Plastun. They suggest that there’s an edge to be had in forex markets by trading gaps. However, they could not find an edge in other assets. Following are some of the findings from the research paper and then some concerns we have about […]
How To Find The Best Candlestick Patterns Using Amibroker
Japanese candlestick patterns are useful because they allow traders to quickly visualise price action in the market. There are many different patterns and many different opinions on their effectiveness. In this article we will look at a trading system that attempts to dynamically select the best performing candlestick pattern from the previous six months and […]
