Nasdaq100 - Buy high, sell higher

[tomorton]

Hello all.

This is a very simple spreadbetting strategy requiring only a short session at the NY Close using the D1 chart, and no technical or fundamental analysis as such.

Rules -
1. Set a buy order at the high of the day, stop-loss at the low.
2. Set a sell order at the low of the day, stop-loss at the high.
3. If an order is triggered, exit that position at the first profitable close.

Notes -
Win rate over a month or longer should be about 80%
Pending orders are not cancelled
Position sizes should be strictly managed as individual stop-loss losses are large in comparison with individual gains
Technical indicators and lower time-frame charts are not required
Ignore NFP's and other news events
If you wish, use long orders only, during uptrends - but note this introduces a subjective line of TA

Have fun!

 

[tomorton]

Anyone jumping into this strategy from Friday morning would have had an interesting ride to say the least.

Just to re-cap, if you had set orders at the available high and low daily levels immediately after my original post, you would have lost a couple of longs from Thursday and Friday for about 180pts each, but shorts from both Thursday and Friday would have ridden the steep fall in the index, which closed more than 500pts lower. So, a major and unexpected starting bonus.

Of course the starting situation in now way supported a long-term short on the Nas, but bracketing the daily ranges with buys and sells makes sure that shocks like these are effectively hedged. Maybe we'll get some more like these......

 

[tomorton]

Have to admit it, the first version of this strategy just will not perform. The win rate is very good but the wins:losses ratio is just too weak.

So I have scaled it back. Running this on the S&P as a trial - still setting a buy at the high plus a sell at the low every night, but with a TP 0.5% ahead and a SL 0.5% behind on each.

The exit will on most days be in the same session as the entry. With this in mind, there is now the possibility of pyramiding the winning position through the day if I can screen-watch the remainder of the session.

 

[tomorton]

Of course, v3 of the strategy would involve forgetting about the high and low, just bracketing the close with a buy order and a sell order - setting a buy order at the close + 0.5%, and a sell order at the close - 0.5%. Same SL and TP distances.

Higher probability of early entry so greater potential for pyramiding.

But higher probabiltiy of volatility triggering and stopping out first one order, then the other.

 

[RolloTape2025]

Can I argue with you, but just for learning or discussion, not to create antagonism?

There are certainly systems that can work that buy at the high. But they don't necessarily work because you bought at the high. When you buy at yesterdays high, you are buying at the absolute worst price from yesterday, and when you put your stop loss under the low of the previous day you are willing to sell for a loss at the absolute worst price from the previous day.

Now... of course it is a bit complex, and maybe yesterday's worst price to buy is now a good price to buy because things have changed. And that can be true. But the approach from basics is bad, no?

 

[tomorton]

Can I argue with you, but just for learning or discussion, not to create antagonism?

There are certainly systems that can work that buy at the high. But they don't necessarily work because you bought at the high. When you buy at yesterdays high, you are buying at the absolute worst price from yesterday, and when you put your stop loss under the low of the previous day you are willing to sell for a loss at the absolute worst price from the previous day.

Now... of course it is a bit complex, and maybe yesterday's worst price to buy is now a good price to buy because things have changed. And that can be true. But the approach from basics is bad, no?

Yes your observation is not wrong - buying high is expensive - but expensive and cheap have no relation to how markets work. Buying as the high is breached by a rising price is the maximum price available you could pay using the system but it's also the best indication that price will go higher. Buying as the low is breached by a falling price is definitely not a strong indication that price is about to go higher, exactly the reverse.

 

[steven46]

Hello UK readers

I happened to see this thread and thought to offer a comment

The major institutions have tested this premise
(buy high sell higher and the obverse) and although it can work
in certain time periods, over higher time frames, it requires quite
a larger capital investment, because one has to also run other programs
concurrently to offset the drawdowns. That is the bottom line.
It may be that the person authoring this thread likes to socialize
and invite comments, but as an approach to actually make money
over the longer course of time it leads to financial ruin.

Now if one were to introduce a similar program to hedge against
the reversals, that might be of interest. but I am not seeing that
in this thread

Postscript

As luck would have it, today is a trading range day. We use a standard
framing method similar to other commercial traders, called the VWAP
envelope. This is used by both institutions and commercial firms to measure
trade entry and exit against the VWAP standard. Skilled operators know
that on a trading range day (after the initial balance is in place). They can
buy and sell at the 1st & 2nd standard deviation bands and exit either at
the VWAP median or hold and reverse at the opposite 1st & 2nd SD band
The "Buy & Sell" zones are all about identifying where to buy cheap and then
sell expensive inventory and vice versa.

Good luck

 

[tomorton]

Hello UK readers

I happened to see this thread and thought to offer a comment

The major institutions have tested this premise
(buy high sell higher and the obverse) and although it can work
in certain time periods, over higher time frames, it requires quite
a larger capital investment, because one has to also run other programs
concurrently to offset the drawdowns. That is the bottom line.
It may be that the person authoring this thread likes to socialize
and invite comments, but as an approach to actually make money
over the longer course of time it leads to financial ruin.

Now if one were to introduce a similar program to hedge against
the reversals, that might be of interest. but I am not seeing that
in this thread

Postscript

As luck would have it, today is a trading range day. We use a standard
framing method similar to other commercial traders, called the VWAP
envelope. This is used by both institutions and commercial firms to measure
trade entry and exit against the VWAP standard. Skilled operators know
that on a trading range day (after the initial balance is in place). They can
buy and sell at the 1st & 2nd standard deviation bands and exit either at
the VWAP median or hold and reverse at the opposite 1st & 2nd SD band
The "Buy & Sell" zones are all about identifying where to buy cheap and then
sell expensive inventory and vice versa.

Good luck

Cheers.

You're absolutely right about the "bottom line" of course. And the bottom line is what counts.

I think I'm going to have to relegate this one idea to the "interesting but unhelpful" drawer.

Best wishes.