Daily Up & Up or Down & Down Trading Strategy

[ModestInvestor]

On a recent podcast I heard about how Renaissance Technologies a top hedge fund founded by Jim Simons started with a simple formula. The idea was basically that if a stock traded up one day then it was more likely to trade up the next day. The opposite also should be true, if the close is lower than the open on one day, the next day is more likely to close lower. (Perhaps there’s a better name for this strategy like ‘Buy the Green Days’, but it doesn’t seem to be talked about much. It has similarities to buying the first green day pattern, but it’s not identical).

I thought, this sounds way too simple, but could there possibly be something in this?

I decided to do a very quick check with data on the S&P 500 , FTSE 100 and Apple.

https://moneysandi.com/daily-up-up-or-down-down-trading-strategy/

After this tiny bit of research, I decided to not look into this further, even if you are leveraged the percentages are way too small to make a valid trading strategy. Perhaps it worked in the past or perhaps it works when coupled with other indicators, but on it’s own this is probably a waste of time.

I'd love to hear if anyone has any other theories that work? or even don't work? 

[MongiIG]

Hi @ModestInvestor

Thanks for sharing

All the best - MongiIG

[THT]

18 hours ago, ModestInvestor said:

On a recent podcast I heard about how Renaissance Technologies a top hedge fund founded by Jim Simons started with a simple formula. The idea was basically that if a stock traded up one day then it was more likely to trade up the next day. The opposite also should be true, if the close is lower than the open on one day, the next day is more likely to close lower. (Perhaps there’s a better name for this strategy like ‘Buy the Green Days’, but it doesn’t seem to be talked about much. It has similarities to buying the first green day pattern, but it’s not identical).

I thought, this sounds way too simple, but could there possibly be something in this?

I decided to do a very quick check with data on the S&P 500 , FTSE 100 and Apple.

https://moneysandi.com/daily-up-up-or-down-down-trading-strategy/

After this tiny bit of research, I decided to not look into this further, even if you are leveraged the percentages are way too small to make a valid trading strategy. Perhaps it worked in the past or perhaps it works when coupled with other indicators, but on it’s own this is probably a waste of time.

I'd love to hear if anyone has any other theories that work? or even don't work? 

If you change the timeframe to WEEKLY/MONTHLY and add in a parameter of seeing a larger range green bar FOLLOWING a correction - you can make it a profitable strategy

Traders and Investors like to pick bottoms or as close to bottoms as possible - There is one such strategy/method - most people are too scared by falling prices to apply this method though, but I've been using it for years and years and years successfully

Without being too specific - the ENERGY/MOMENTUM needed to reverse a falling trend is HUGE, when you get an oversized UP bar, there's nearly always follow thru for significant gains/points/pips etc due to all the short covering and new long positions

and its low hanging fruit - Buffett said "buy when there's blood pouring in the street / bargain prices" - this does exactly that

THT

[ModestInvestor]

Thanks, that's really interesting. I'll keep an eye out for such opportunites. 

5 hours ago, THT said:

If you change the timeframe to WEEKLY/MONTHLY and add in a parameter of seeing a larger range green bar FOLLOWING a correction - you can make it a profitable strategy

Traders and Investors like to pick bottoms or as close to bottoms as possible - There is one such strategy/method - most people are too scared by falling prices to apply this method though, but I've been using it for years and years and years successfully

Without being too specific - the ENERGY/MOMENTUM needed to reverse a falling trend is HUGE, when you get an oversized UP bar, there's nearly always follow thru for significant gains/points/pips etc due to all the short covering and new long positions

and its low hanging fruit - Buffett said "buy when there's blood pouring in the street / bargain prices" - this does exactly that

THT

Thanks, that's really interesting, I'll keep an eye out for this. I wonder at what point you'd sell out and take profits?. 

[THT]

12 hours ago, ModestInvestor said:

Thanks, that's really interesting. I'll keep an eye out for such opportunites. 

Thanks, that's really interesting, I'll keep an eye out for this. I wonder at what point you'd sell out and take profits?. 

Hi

You'd develop a trailing stop method based on what suits your tolerance as a trader/Investor 

You don't need to understand ANYTHING about the market or any perspective - the method works simply BECAUSE buyers en-masse have returned to the market which is ONLY known due to the BIG GREEN price bar, NOTHING else - the market will either rally or not

It's NOT 100% guaranteed, but it has a very healthy win rate and also R value return , so it only works once a price decline/pullback has ended, and you will need to protect with a stop and trailing stop - I'm not prepared to reveal what trailing stop I use, but its pretty simple and keeps me in most of the big moves

REMEMBER - VERY VERY VERY few people make their living from trading the markets (which is why they have to sell you information, courses etc etc) and 95% of methods out there, just do not work in the real world

THT

[gkoptions21]

Evidence based analysis is needed before identifying any strategy as good.

Looking at over 100 reasonably volatile stocks fror one to 5 yrs maybe needed to unstand validity of a strategy.

 

A fund manager using a strategy is not a good evidence.

Most funds in the world fail to produce a performance even as good as any index