Ogee wrote: Mon Oct 03, 2022 9:09 pm
Experiment just for fun.
Price to hit target (orange horizontal) at some point in the week.
Looking at strike rate first, not worried about stop loss etc yet (options type trade).
Will explain system if strike rate looks reasonable over time.
Ok, I have a confession to make, I don't really have a crystal ball (mores the pity) but what I do have is trader's data and that might be even better.
So last Monday I posted the above charts, nothing on them, no indicators, just weekly targets, so where did those come from?
Just 2 sources, one for direction and one for the target price.
For direction I used the prior Friday's COT report. In the COT Report thread I explained that the report on Friday evening tells the net positions of large speculators for the start of the next week. If they were net long my target would be on the long side (net short, go short)
Simple enough, now target. That is taken from the implied volatility data supplied by the options market.
Put briefly, implied volatility shows the expected move in price and is based on price changes in the options market. The implied volatility data shows us where the majority of long side traders are expecting price to reach for the next week giving a high probability high band price and short side traders giving a high probability low band price.
All is explained in great detail in the 50 minute video by Chris Weston posted on page 1 of the 'Educational Videos' thread.
There is some math involved in converting the implied volatility annualised % into a weekly price points range as explained in the video so you can apply it to any market but Chris posts a newsletter every Sunday with many already worked out.
So the all the data is all from actual trades placed in the markets.
So on Friday before last I took this COT report;
An on Sunday this IV report;
And on Monday I posted the charts in the first post.
Using Gold as the example COT said net Long and the high probability high band for Gold was 1696.63 so that was the target price.
So how did it go ...
Interesting results. Gold and Eurodollar raced to target on day 1 and 2. AUD and GBP raced off in the opposite direction but then reversed and are heading back towards target and still going while JPY is making slow progress to target.
As an experiment I think it's worth continuing but my sample is probably too heavily weighted on the USD so might change AUDUSD and GBPUSD for whatever is in both lists with opposite net long/shorts
I will post the info tables tomorrow and update targets of those that haven't completed.
Reminder that I haven't added a stop strategy yet but it's looking like it would need to be a fixed stop and quite wide (50 points +) as we are looking at weekly time frames.
Thanks for taking the time to read this and don't forget the video, well worth a watch.