PS: Apologies Jako in advance for not moving this discussion to today's thread, I just figured this discussion would flow better if kept to the original thread.
Agreed Rob definitely made it look easy. I think the sophistication of his spreadsheet setup gives you a hint as to either how much work he had put into it setting it up, or how smart he is (or both, probably). I'm intermediate with spreadsheets, but definitely have something to learn to set up live data feeds directly into spreadsheets the way he did.
GJ I know what you mean about false crosses through the open. My understanding of how the opening noise is/was handled is that Rob waited at least one or two 10 minute candles before accepting that a price moving through the open was valid (he alluded to that i one of the videos). The theory is though that once an an initial low or high has been set by one of those first few candles, then as soon as price crosses the open it is considered valid and a contingent order is sitting 1 point on the other side of the open to enter the trade. Presumably while there may be noise around the open, even if it swings above and below a few times, the data should validate that there is only a certain percentage of times the openers rule is triggered where it does lead to a new lower low or higher high causing the trade to be stopped out. The remaining percentage of times the price stays within that opening low or high and goes on to hit the target or perhaps more or less, leading to a trailing stop being hit at least at breakeven.
The XJO doesn't gap on open so its not an issue for this index but when used for stocks I think the gap is simpy not factored in - the trade is based purely on 75% of the ATR and the open price and the triggering of the openers rule based on the move to an initial low or high then back through the open. I suspect (and haven't checked this) that the initial low or high in the case of stocks, particularly top 20 stocks, will be a fade into whatever gap often occurs before swinging away again and through the open, which offers a guide on how far the initial low or high might be before the day's trading begins.
As to conditions to handle the triggering of the opener's rule, I have ruled out any days where the price at the open eventually proves to be the low or high of the day. The way to handle this in a filter I believe is to set a minimum criteria like Rob did by waiting for at least 2 candles before the openers rule can be considered valid if triggered, or the other option I am evaluating is to require a minimum price move of x% (I have started with just 1%) of the ATR to ensure that we are not dealing with an open which becomes the day's high or low (which we don't know early in the day of course). The other requirement I am placing on the openers rule is that the open minus the initial low, or the initial high minus the open, can't be more than 23.8% of the ATR (I could choose 25% but I am using fib levels in my analysis). This is so that the opening move doesn't soak up most of the potential day's range of 75% of the ATR. So in theory if the openers rule is triggered, I enter a trade for a potential 75% - 23.8% = 51.2% of the ATR as a profit (less the spread of course) versus a risk of the open minus low or high minus open (plus spread on stoploss).
Masterpiccolo what I am using to do my analysis is simply an excel spreadsheet of historical daily O, H, L & C data. If I get that far then I might try it on the PRT backtesting platform rvm & GJ suggested. So one thing I have to verify with this data is the OHLC sequence - because from the daily data I can't tell that and if its not in the correct sequence it may have a significant effect on the results - so next step is to validate the results I have so far. But based on the initial analysis I've done, the strategy should be profitable (Rob certainly was making a good profit) but I have at least 2 interesting conclusions so far (see summary table below):
The results I find interesting are:
1. I see better results when using a 10 day ATR rather than a 20 day ATR. So I will be interested to see what the optimal ATR value should be - some fine tuning to be done here.
2. Setting the target at the 61.8% fib level of the ATR is more profitable overall than setting it to the 75% level - obviously there is a lower profit per trade but that is more than offset by the significant increase in the number of times the target is hit when the openers rule is triggered.
3. Combining the above 2 tweaks to Rob's system increases the total P/L ratio from 3.9:1 to 8.4:1
As an exercise, purely out of interest, I am thinking I will execute this version of Rob's opener's rule strategy and post the results on the daily XJO thread - stay tuned. Obviously, most days there will be no trade, but I will do a daily post covering trade/no trade & outcome (with maybe a coupe of mini contracts on the line to make it interesting).
(20min delay)