I have often stated, " You can't base any trading strategy on something that happens less than 100 occurrences. This is true. In this article, we will dive into the "How Often" do things happen. Let's Begin.
Take a look at the following Picture:
Did you know that since May of 2005, or the past 15 years almost, the Dow Jones Industrial Average has risen 8 straight weeks in a row only 4 times? You can see this by noticing the number 4, right beside where it gives you the win rate of 100% above (Figure 1).
Figure 2 shows the Weekly Bars in a row. This week hasn't finished yer but if it does finish higher, This asset has ever had 9 straight weeks of profits in the past 15 years.
Figure 3 and 4 shows that I am looking for a "bar Run". This means I am looking for consecutive bars in the same direction, without a pullback.
How often did it rise 9 consecutive weeks? None.
This means that in all 4 instances, the very next week was a Bearish week. Notice the following 4 pictures. The signal always comes out at the OPEN of the bar. These are all weekly time frames. The data was taken from FXPro.
- October 2010
- December 2010
- October 2013
- September 2017
WHAT DO WE KNOW?
We know that over the past 15 years, whatever is happening right now has also happened on 4 other occasions and by trading in the opposite direction produced a profit every time. This is only 4 instances though. What if we looked into more data? What if we looked at 7 Weeks in a row or 5 Weeks in a row?
We have more data than you can ever possibly sift through but here are some stats for your viewing pleasure.
The DJIA FUTURES, /YM, Wall Street 30 (It's all the same thing)
After 7 consecutive weeks in one direction, the 8th week expires in the opposite direction 55% of the time.
After 6 consecutive weeks in one direction, the 7th week expires in the opposite direction 31% of the time.
After 5 consecutive weeks in one direction, the 6th week expires in the opposite direction 38% of the time.
After 4 consecutive weeks in one direction, the 5th week expires in the opposite direction 38% of the time.
After 3 consecutive weeks in one direction, the 4th week expires in the opposite direction 44% of the time.
After 2 consecutive weeks in one direction, the 3rd week expires in the opposite direction 54% of the time.
After 1 consecutive week in one direction, the 2nd week expires in the opposite direction 53% of the time.
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