Trading NR7 setup

[kenneth]

Rohan

Formule for Volatility ratio. you can do your own backtesting. Let us know the results

VolRatio = StDev(log(C/Ref(C,-1)),5) / StDev(log(C/Ref(C,-1)),99);

Regards
ken

 

[rohangawale]

Rohan

Formule for Volatility ratio. you can do your own backtesting. Let us know the results

VolRatio = StDev(log(C/Ref(C,-1)),5) / StDev(log(C/Ref(C,-1)),99);

Regards
ken

Where and how to use this formula i dont know.
is this to put in excel sheet or metastk??

 

[kenneth]

Where and how to use this formula i dont know.
is this to put in excel sheet or metastk??

Rohan

It is for Amibroker. You may convert it to the required program

Regards
Ken

 

[AW10]

Connors and Raschke NR4 Historical Volatility System. Compares the 6 day volatility to the 100 day volatility. When this ratio drops below 50%, a buy stop and sell stop bracket the current price, expecting historical volatility to revert to the mean. Four day Narrow-Range (NR4) and Inside Day patterns are used to filter the trades to increase probabilities

Although yesterday was NR7 day Volatality is above 50% could be the reason? May be AW10 can clarify

Ticker	Date/Time	Buy	Close	 VolRatio	NR4day	NR7day	insidedayBuyStop	,SellStop,	
NIFTY	7/27/2009 	1	4572.300	0.53	1.00	1.00	0.00	4595.33	4530.02

Regards
ken

Thanks Ken for bringing in new dimension to NRx setup by using Historical Volatility. The system that u mentioned uses 100day Historical volatility to last 7 days volatilty to
filter our NR4 signals. My views on this are (I might be wrong..but open to discuss them here)

1) NR4 signals occur more frequently hence we need to have some mechanism for filtering them. Historical Volatilty approach is one such method.
NR7 doesn't occur so frequently and days range is also narrow.. so not sure if historical volatilty parameters need to be adjusted further.

2) Linda's backtesting results given in her book were before 2008. All volatility based systems busted last year due to extreamly high volatility (beyond 5 - Standard deviation) so
I would rather question the basic concept of using last years volatility data for filtering. Is it fair enough to use the numbers that worked in < 2 to 3 Std Dev market in market that is beyond this limit.
or vice versa.

3) I have not backtested NR4 + Historical Volatility based approach.. so can't comment on whether it works or not.. but quite agree with the concept. Will keep this as part of
my to-do list to test this later. Only concern is, this complicates the basic setup and brings in statistics into it. That goes against my basic philosophy of keeping things simple as far as possible.
Leave the complexity for others to handle.


Happy Trading.

 

[AW10]

Hope you have noticed the development of second consecutive NR7 day today.
Pattern that is rarely visible.. 2day- NR7..

So get ready for breakout.. And best way to play this will be to go long with direction neutral strategy like
Buy - Straddle or Buy Strangle. July 4500-4600 strangle is available in 80 Rs or so and Aug 45-4600 strangle in 334 Rs.

Lets see what market is going to do in next few days..

Happy Trading.

Seems we are heading for another NR7 day (posted at 2.35 pm).. Few points here or there might not flag it as NR7 but it doesn't change the bigger picture of market
I have not seen 3 - NR7 days in continuation since the time I am following it closely.. so went back to analyse it... Following are my observations..

1) 9/10/11 June-2004 Nifty was at 1500 to 1550 range. On brk went down to 1450 level (3% change) and reversed. And then we have never seen that level again
2) 5/6/8 Sept-2005 Nifty was at 2456 to 2415 level. Broke up and went to 2660 level (4% change).. Came back and tested 2300 level and then went up
3) 28/29Dec/2Jan-2007 Nifty was at 3950 to 4000 level . Broke down to 3825 level (3% change) . Came back to retest and dropped again to 3500 level

My Interpretation - Breakout from the range generally gives move of 3%+. This NR7 zone gets retested and ..major move appears after that..

Lets us listen to the market this time.. If it is going to repeat the history or not..

Happy Trading.

 

[MurAtt]

http://www.traderji.com/trading-diary/29778-daily-tryst-nifty-128.html#post342464

 

[Satyen]

Nice thanks a lot Dear AW10 ............

 

[Sunil]

no NR day, as per my data of Nifty Future.........!!!

are you considering Nifty spot?

http://www.traderji.com/trading-diary/29778-daily-tryst-nifty-128.html#post342472

 

[rohangawale]

we are abt to get 3NR7 day within few mins.
H=4599.9
L=4529.15

 

[rohangawale]

Technically its not NR7 day as yest range was 68 pts and todays range is 71 pts.

AW Sir can we still call it as 3NR7??