We have been doing some number crunching in Euro and some findings are
given below, for your benefit.
We examined Daily data from 3-Jul-95 till 7-Feb-03 (1975 observations). We
defined Uptrend Days to be when Close of Day 1 (C1) was greater than the
1st Daily MA on our Signal Sheet (called MA), and found:
In the cases where L2<= -0.0070, there was a 44.9% chance that the next
day, the High would be greater than the MA (H3>MA). But if L2<= -.0080,
there was only a 30.6% chance of H3>MA.
This means that in an Uptrend, there's only a 2.23% chance that if L2<=
-0.0080, the uptrend would continue the next day.
As a next step we examined to see how high the market went on Day 3 in an
uptrend, given that -0.0030<= L2 <= 0.0030. Findings:
In 91.7% of the cases, the uptrend continued on Day 3
In only 8.2% of the cases, H3
Thus we may say that if, during an Uptrend (C1>MA) we were to buy EURUSD
within +/30 pips of MA on Day 2, there's a 91.7% chance of the market
touching a high greater than MA on Day 3. How high could H3 be?
This means that if buying EURUSD within +/- 30 pips of MA during an
Uptrend, there's a 63.19% chance of the next day's high being more than 60
pips, with a decent 37.35% chance of a Reward/ Risk Ratio between 1 and
2
Please let us know if this was useful to you and you would like more
inputs of this kind.
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