How To Create Profitable Mechanical Trading Systems

SIMPLE ENGLISH

Trade in daily bars sized for day sessions, 8:30 am-3:15 pm Central Time.
Compare two system performances over the last four trading days.

System 1:
If tomorrow’s open is above today’s close, then buy at the open plus 20% of the last three day average range on a stop.
If tomorrow’s open is below yesterday’s close, then sell short at the open minus 20% of the last three day average range on a stop.

System 2:
If tomorrow’s open is above today’s close, then buy at the open plus 100% of the last three day average range on a stop.
If tomorrow’s open is below yesterday’s close, then sell short at the open minus 100% of the last three day average range on a stop.

Use whichever percentage worked the best (or the least bad) over the last four trading days. Hold the trade through the day and exit on the close.

TRADE STATION FORMULA

inputs:n(4),e(.2),f(1);
variables:aa(0),bb(0);

If h-o>=e*range and o-l<e*range then aa=(c-o);
If h-o>=e*range and o-l>=e*range then aa=(o-(e*range));
If h-o>=f*range and o-l<f*range then bb=(c-o);
If h-o>=f*range and o-l>=f*range then bb=(o-(f*range));

If o-l>=e*range and h-o<e*range then aa=(o-c);
If o-l>=e*range and h-o>=e*range then aa=(o-(e*range));
If o-l>=f*range and h-o<f*range then bb=(o-c);
If o-l>=f*range and h-o>=f*range then bb=(o-(f*range));

If o of tomorrow>c and average(aa,n)>average(bb,n) then buy next bar at o of tomorrow+e*Range stop;
If o of tomorrow<c and average(aa,n)>average(bb,n) then sell short next bar at o of tomorrow-e*Range stop;

If o of tomorrow>c and average(bb,n)>average(aa,n) then buy next bar at o of tomorrow+f*Range stop;
If o of tomorrow<c and average(bb,n)>average(aa,n) then sell short next bar at o of tomorrow-f*Range stop;

setexitonclose;