V.7:10 (372-374): Trading close-to-close patterns by Toby Crabel
Product Description
Trading close-to-close patterns
by Toby Crabel
Do the relationships between day-to-day closing prices predict the next day's price moves and, if so, is it possible to isolate these profitable chart patterns and incorporate them as entry signals in a larger trading system? In pursuit of these answers, I have tested all two- through five-day close-to-close patterns in the T-bond futures market from 1978 to 1987 (Figure 1) and discovered the beginnings of some excellent low-risk entry techniques. My tests assumed that trades were entered on the last close of the pattern and exited on the next day's close. Stops were not used.
Figure 2 is an example of the --++ pattern listed as number 24 in Figure 1. The pattern is two lower closings followed by two higher closings, all relative to the close immediately preceding it. Figure 1 shows this pattern is most profitable as a sale. Entry is taken on the close of the last day which, in this case, is higher and the trade is exited on the next day's close.
Do the relationships between day-to-day closing prices predict the next day's price moves and, if so, is it possible to isolate these profitable chart patterns and incorporate them as entry signals in a larger trading system? In pursuit of these answers, I have tested all two- through five-day close-to-close patterns in the T-bond futures market from 1978 to 1987 (Figure 1) and discovered the beginnings of some excellent low-risk entry techniques. My tests assumed that trades were entered on the last close of the pattern and exited on the next day's close. Stops were not used.
Figure 2 is an example of the --++ pattern listed as number 24 in Figure 1. The pattern is two lower closings followed by two higher closings, all relative to the close immediately preceding it. Figure 1 shows this pattern is most profitable as a sale. Entry is taken on the close of the last day which, in this case, is higher and the trade is exited on the next day's close.
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