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Range Extension at Extremes


Theory: Range Extension trades at multi-day extremes are more profitable.

Summary: If the IBH is at the 20 day high then a RE to the upside is more likely to produce an up move in the market to the upside than a RE trade in the middle of the 20 day range. This comes from the theory that in the middle of the multi-day range everyone can be holding profitable positions while at extremes half the open interest are in losing positions.

Testing/Data: I will attempt to do a statistical sampling of this using a back testing system and output the following fields of data which can then be further analyzed in excel. These are the fields that will (hopefully) be produced by the test:
1. Date (can be used to generate a breakdown of year/month/day that this might have been significant in.
2. RF at time of RE.
3. IB size
4. RE equals or exceeds multi-day extreme (produce a number of multi-day-extreme results e.g. one for each of 5, 10, 15, 20 days etc.) - Yes/No flag
5. Subsequent market move above and below IBH/IBL after RE established.
6. More to come...
Recent PM about this post:

I did not find your back testing results regarding one of your following posts. Can you guide me to the link or your share your observations from back testing?


I don't believe that I ever ran that test. If I did, I do not remember what the results were and I don't have them anymore. My guess is that I did not run it because otherwise I would have put the results on the forum for everyone to read.