By Penta-section what I mean is this: we divide the current day’s range into five segments. For example, assume high and low 100 and 105 respectively. If we were to divide the range between the high and the low into five segments, here is what we get:
- Segment 1: 100-1o1
- Segment 2: 101-102
- Segment 3: 102-1o3
- Segment 4: 103-104
- Segment 5: 104-1o5
Now, if current open is say 100.5 then it falls under Segment 1; likewise, if current close is 102.3, then it falls under Segment 3, and we thus call it as O1C3 ( as an abbreviation for this study )
as you can see the OHLC values for 7 Oct 2013 for $SPY OHLC being , 167.42, 168.45 , 167.25 , 167.43 , and both the Open and Close falling under the segment 1 ( from 167.25 to 167.49 ) , we can mark it as O1C1
Why are we doing this penta-section on $SPY ?
reason 1) data-mining under the possible hangovers carried from previous day’s night drinks / wild thoughts by reading one of those top 10 trading books
reason 2) inspired by “openings and closings that occur in various segments of a price bar” page 227-234 , of Day Trading With Short Term Price Patterns and Opening Range Breakout
reason 2-a) Empirically. the trading volume , constructed for various half- an hour intervals is observed to be U- shaped for the day. In other words, the trading volume is high at the first half an hour and the last half an hour, and are lower during the middle of the trading day, rest of the various hours . Under the assumption that Open is controlled by amateurs and the close is controlled by the professionals, the penta-section tool is trying to quantify the trading day’s range in to the emotions of the amateur’s and the professional’s emotions by giving them a rating on a scale of 1-5 ( 1 being the lowest and 5 being the highest )
below the three studies of $SPY penta-section
$SPY overnight odds for various Penta-Sections
assuming we go long at close and exit at next open , when $SPY forms a type of penta-section, backtest period is from Jan 200o t0 7 Oct 2013
$SPY Next Day Open to Close exits odds for various Penta-Sections
assuming we go long at next open and exit at next close when $SPY forms a type of penta-section, backtest period is from Jan 200o t0 7 Oct 2013
$SPY Current Close to Next Close exits odds for various Penta-Sections
assuming we go long at current close and exit at next close when $SPY forms a type of penta-section, backtest period is from Jan 200o t0 7 Oct 2013
whats your limn of the $SPY and penta-section studies ??
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