Back to 800 with std dev+fibs

January 19, 2009

Theory: trading back to the 800 is a mean reversion trade and as such the ranges should be able to be found as well as the harmonic cycles to predict possible consolidation and failure points.  Goal is to find the analog ratio pattern so that each move can be predicted based on the backtested harmonic pattern which would indicate the pattern based on speed and range of the move.  Ex:  2:4::4:8

Using backdata exported from ForexTester into Excel, look at average range using standard deviation of the distance from the 800 sma.  Columns would include date, price at close, 800 SMA calculation column, distance from the 800 as a possitive number.  Std Deviations of the distance.  Also time calculation.  Will need to use a SMA of price and calculate on the SMA, for example if distance SMA within x pips, then count as 800 touch.  Since closing bar will not statistically close ON the 800, need a way to account for the bar ranges as they cross/touch the 800.  The formula for this in Excel should be IF (800 SMA) <= <Bar_HIGH> AND IF (800 SMA) >= <Bar_LOW> then <800_touch> = TRUE……  could also use a few pips buffer on either side of range to account for data differences and close enough movements. 

  • Is there a way to use Bollinger Bands to estimate 800 distance?  Can the MACD 800/1 EMA be used somehow?
  •  Once above is looked at, look at affect trend has on price once it touches the 800.  For example, on a trip back to the 800 in a Phoenix phase, how many times does price reverse and continue the trend? 
  • *** Using Fibonnacci retracement, is there a way to predict slowing / consolidation areas on way back to 800?  Do they correlate with standard deviations of distance?  Can this be used as areas to watch for continuation or reversals?  If reverse, liquidate until another move, if continue, add another possition? 

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