Newbie question!

[Drumm]

Hello all,

I'm a novice trader with 2 years (on and off) experience in spread betting, I have learned a great deal from these forums and would like to thank you all for the sound advice on offer, much appreciated. Esspecialy the vidoes of des woodruff which i have mimiced in my own trading style...utilising support and resistance levels along with trend lines to judge when a stock will bounce through its trend...or break it

The thing is I've noticed that when a trend or support / resistance level is broken its usualy with a higher degree of volatility... so now im thinking that you could catch that break out by placing an order either side of the key level giving exposure to both long and short

So, whats my question? Is there a way to back test a mechanical / formulated system with such a specific criteria?

Any information you guys could offer would be greatly appreciated.

Drumm

Ps. Please forgive me if I have mixed up any terminologies, Im learning.........slowly!

 

[shadowninja]

I think people do. Haven't figured out which way it should be done, though.

 

[fibonelli]

Hi Drumm,

I can't think of a way of coding up a support/resistance line and/or a trendline, though if anyone can, I'm sure many traders would be very interested!

Here's a thread I started about volatility squeeze
http://www.trade2win.com/boards/showthread.php?p=351775

 

[RichieE]

The thing is I've noticed that when a trend or support / resistance level is broken its usualy with a higher degree of volatility... so now im thinking that you could catch that break out by placing an order either side of the key level giving exposure to both long and short

That sounds very interesting. You're saying that there is a greater volatility immediately after a breakout. However if you're looking at a strategy which is mean reverting this is automatically true. For example, if a spread is bouncing between 10 and 15 and suddenly breaks on the upside to 18 the volatility is, by definition, higher since it looks back over the 'n-day' period you are using. Therefore in this case, the higher volatility is DUE TO rather than indicative of the breakout.

So, whats my question? Is there a way to back test a mechanical / formulated system with such a specific criteria?

If you can describe it mathematically it can be programmed!

Ps. Please forgive me if I have mixed up any terminologies, Im learning.........slowly!

We're all learning!!! No one knows it all. I certainly don't claim to be an expert. All the above is just my opinion, not a statement of fact from a trading oracle.