GDX Day trading patterns

I have completed a back-test of day-trading patterns starting from January 2009.
The day trading patterns work best when the GDX model is either in Overbought or Oversold

[U][B]1. Oversold[/B][/U]

We can distinguish here between light oversold (GDX MF lower than -1% and Higher than -1.75%. As a reminder, the OS level is -1.3%) and strong oversold (GDX MG lower than -1.75%)

I found out that when GDX opens on a down-gap while in either Light OS or strong OS, the average returns for the day are slightly negative after 9:50. Hence, do not buy if there was an opening down gap when in oversold. This down gap means "more selling."

When GDX Opens with a gap-up that is higher than 0.2%, then if by 9:50 the MF since the start of the trading day has been positive, then
- [U] a weak oversold situation[/U] would lead to an average gain from 9:50 to 16:00 of 0.78% (66% win/loss ratio)
- [U] a strong oversold situation[/U] would lead to an average gain from 9:50 to 16:00 of 1.08% (72.7% win/loss ratio)

If by 9:50 the MF is negative, this means that the opening gap does not attract money and it is better not to buy.

[U][B]2. Overbought[/B][/U]

We can distinguish here between light Overbought(GDX MF higher than 1% and lower than 1.25%. As a reminder, the OB level is +1.25%) and strong Overbought(GDX MG higher than +1.25%)

I found out that when GDX opens down while in either Light OB or Strong OB, the average returns for the day are slightly positive after 9:50. Hence, do not short if there was a positive open when in overbought.

When GDX Opens up, then if by 9:50 the MF since the start of the trading day has been negative, then
- [U] a weak oversold situation[/U] would lead to an average short gain from 9:50 to 16:00 of 0.26% (57% win/loss ratio)
- [U] a strong oversold situation[/U] would lead to an average short gain from 9:50 to 16:00 of 1.18% (83% win/loss ratio)

This means that if we are overbought, an opening gap that attracts sellers at 9:50 shown by a negative money flow indicates a good probability that we will move lower for the rest of the day.

If we meet the Day Trading conditions stated above, I will buy a long position at 9:50 and will keep it overnight only is we issue a buy signal.



Pascal

Because the MF is positive and we opened on a gap higher than 0.2%, I am taking a long day-trading position here (Short DUST). If we close on a Buy signal, I will only keep overnight half of that leveraged position.


Pascal

[ATTACH=CONFIG]18049[/ATTACH]

Because the MF has been negative since the start of the day while GDX opened in a positive gap higher than 0.2%, the probability that GDX will close higher than the price at 9:50 is not compelling enough to take a long day-trade.

I will keep my long position trade of yesterday, without adding for now.



Pascal

[ATTACH=CONFIG]18064[/ATTACH]

As you can see, we have added a new field where information will appear at 9:50, indicating the probability that we could buy/short depending on the opening gap and the buying pattern. This field will show information only when the GDX Model is either close to overbought (from MF > 1%) or close to oversold (from MF < -1%.)

We sincerely hope that this new feature will work smoothly, but we will monitor the message closely and will inform if there is any discrepancy with reality.



Pascal

After an incomprehensible message that was published at 9:50, the system in fact is not advising any "side" for today, because the MF was basically flat for the first 20 minutes.

I'll check these messages again to make sure that they are user friendly.


Pascal

[ATTACH=CONFIG]18092[/ATTACH]