So, your suggestion would be to either trade purely intra-day, if trading must be done on a lower TF; or trade larger TF with overnight positions. Is that correct?
Yes, but I am only showing you the
challenges involved in gap trading.
Everything has a trade off. Pros n Cons. Gap strategies generally have very very high win% (
sometimes upto 90%), (especially when coupled with data from other markets, S&P, DJIA, FTSE, Crude Oil and USD Index) (
these factors mainly decide opening level) ya but low pay-off ratio.
You can still go ahead , do more research and better your system, but you will have to step up your sophistication and be state-of-the-art to profit from what I call
less juicy fruits. (Sure you can leave and go for more juicy fruit, where everybody is there but since there are many already here
battle is no less difficult). (I hope you are getting what I am trying to say, !! If not, just try a simple MA crossover system and run WFA by optimizing the parameter for both periods on NSE
(CNX 100 only for liquidity reasons) for around last 10 years). (you will see what I am saying, the current scenario is such that it selects only antitrend (MA1 > MA2) system, because trend crossovers are all "
maxed out")
hmm ... Can you give an example of a system that works on sector volatility? Forgive me if this is too many questions going on different tangents.
Never mind the questions, that is how we learn.
Yes, one system on which I am currently working involves sector analysis. This system takes a sector (
comprising less than 10 stocks) and for 5 year period finds out the beta of each stock (
vs the stock index, if not available, compose one,
in AFL, use Add to Composite), and once we have the data, when there is an aberration on the stock volatility vs the index on last 3 months, it trades against the move. for eg. if stock A had beta of 1.5 but currently trading at beta 1, it goes long and vice versa. It is a good profitable system (
on backtest and WFA), but haven't had time to move it to Live, since occupied with other strategies currently.
The trouble with Easy Language was no built-in ability to Walk Forward Test. So I've been struggling with AFL off-and-on for the past two months. Right now I'm at the stage where I'm awed by the thousand-line-code AFLs strewn around the internet; and have been resisting the temptation to blindly start testing all of them on various instruments. I understand there's no short cut to this, and I'm gradually putting in the hours to get better at AFL.
Information overload is a serious problem in this business. Don't search internet for more afls. It will drive you crazy (
personal experience, I have 20K AFL), rather look at built-in examples, and take it from there. If stuck at any point, I will be glad to help.
I have one question, what is your
computing power ? This line of business needs serious power ! I am currently looking for beyond Desktop PC but within my range (
can't afford IBM servers yet). If you know of any arrangement in between would be glad to know.
Currently I have on my capacity 3 PC (
actually 1 laptop), all having 2 cores and almost all the time they are 100% utilised but
my needs has outgrown my hardware (
pun certainly not intended, he he), don't want to add more PC.
(buying VPS or Colocation is like another PC, looking for something in between). Can't use Cluster or DC for optimization process , this will add to overhead rather...