Inside Range Days in the S&P Report by Ryan Jones Using Quantum Charts www.QuantumCharts.com
The purpose of this report is two-fold. First, this report is going to give you some solid trading opportunities that are associated with inside range bars (daily) in the S&P. Second, this report illustrates the power of Quantum Charts to enable virtually any trader to quickly and easily uncover trading opportunities using Quantum Charts. Quantum Charts is unlike any other program out there in many ways. First, no other program allows users to uncover and create trading systems exclusively through a drag and drop technology. Quantum Charts requires NO PROGRAMMING SKILLS whatsoever. Recent studies show that only about 5% of all traders have proficient programming skills or better…which means the remaining 95% of us are at their mercy...either in the research they come up with, or in extracting untold dollars to program our trading ideas. If you choose not to be, then you are left to the frustration of doing it on your own, or not doing it at all. As you will see in this report, Quantum Charts gives you the power to research the markets without any programming skills and without paying someone to do the research for you. As one trader so eloquently put it: “This makes me think back to the thousands of hours I've spent doing what Quantum Charts does in seconds for each trading idea”. Well said. Quantum Charts is also unique in that it provides statistical data in a way no other program provides. Most programs require you to wrap a setup in between an entry and exit point. This is premature and wastes an incredible amount of time and causes traders to miss uncounted numbers of opportunities. Decisions on where to initially enter and exit a setup is a complete guess most of the time. Quantum Charts provides “market movement stats” BEFORE you wrap an entry and exit point around a setup. This information gives you a tremendous edge in knowing what kind of entry and exit rule should be used. The value of this information is going to be blatantly obvious as you read through this report. This report is 24 pages long. Most of it consists of screen shots taken from Quantum Charts, illustrating the process of uncovering profitable trading ideas specifically associated with inside range trading days. It took VASTLY longer to put
this report together than it did to find the opportunities with Quantum Charts. This is why I also put together a corresponding video with this report. In the video, I do not talk or explain anything as I am going through the process. (Instead, I explain various things throughout this report). The purpose of the video is to show you how quickly you can move through this process and go through literally dozens of different variations and trading ideas (without me explaining as I go). The length of the video is probably significantly less time than it will take you to read this report. In all, there are 32 different iterations in the report, but I went through an additional 6 – 8 iterations that are not included in this report. The video is only 12 minutes long. This means I can create AND quickly analyze approximately 1 iteration every 18 – 20 seconds! I challenge any programmer to do this on any other trading tool! Even if they could, they still wouldn’t have the market movement stats. In order to come up with similar information, they would have to apply some sort of entry and exit rule and then run an optimization process. Regardless, if you are not a programmer, all of these iterations this would take you hours to figure out on any other system development program, if you could at all. Just for kicks, I contacted two unrelated programmers and asked them to bid on providing me the code for each of these 32 iterations. It took me longer to type the explanation out for the programmers than it did to find them through Quantum Charts. The bids? $280 and $250 for any one of the major system development programs on the market today. What does that mean? It means that the information contained in this article would either cost you $250 to have it programmed, or you would spend a lot more time programming than the few minutes it takes to find them through Quantum Charts. Either way, the risk is HUGE considering you have no clue whether any of these iterations are going to yield any profitable trading opportunities. You may spend countless of these $250 fees to find nothing. This kind of puts into perspective the value you will be getting for only $97/month with Quantum Charts. Finally, just a side note, 70% of those who watched the video and answered the survey stated that Quantum Charts was clearly better than any of the competing system development software programs on the market. 15% said it was as good as any out there, 10% said there were better ones and 5% said most were better. “Better” can be rather subjective. Is Coke “better” than Pepsi? Depends on your taste. However, if you define a system development program by the following, the term “better” can be objectively proven through a process similar to the one I went through in this report. 1. Efficiency in creating a strategy (can be defined by time or effort, or both)
2. Efficiency in costs for a non-programmer. 3. Efficiency in helping you uncover strategies you would not have uncovered by traditional programming methods. These are make or break factors. These factors can be summed up in one goal…that goal is to give yourself the best chance possible for short-term and longterm trading success. I am convinced Quantum Charts is unmatched in helping traders reach this goal. As I stated, there are 32 iterations I go though, and this only scratches the surface. No doubt you will see some illustrations here and start to ask yourself…”I wonder what the stats would look like if this or that was added”. For example, I don’t address a gap before or after an inside bar. I don’t address volume. I don’t address seasonals. There are some opportunities that exist with all of these, but I had to stop the report somewhere…at least for now. Nonetheless, with Quantum Charts, you could easily do that research in only a few minutes. (Note – There will be other videos and reports that provide additional opportunities on Inside Range bars and a multiplicity of other strategies.) If you become a Quantum Charts subscriber, you will have free reign to look at and research almost anything you want. I sparingly used two different indicators with some illustrations. Even with these two, and the limited use of them, I have barely scratched the surface. The Process: This is not the most organized sequence of illustrations. The process I used would be a natural process that you might go through if you just sit down with Quantum Charts and literally start throwing things on there and let the stats kind of guide you in the direction to go. This is always fun to do. The other process would be to go through a very strict list of combinations and then go back and move in a direction that the stats dictate. Either way, this process simply does not and cannot exist with current system development tools for the most part, at least not efficiently, and not for 95% of us traders who are not proficient programmers. Inside Bar Stats: An “inside bar” is a price bar where the high is less than the previous bar’s high and the low is greater than the previous bar’s low. In other words, the bar’s range is “inside” the previous bar’s price range.
The inside bar has a lower high and a higher low than the previous bar.
I started simply with an inside bar and nothing more. Bar 1 is the close of the bar immediately after the inside bar. As you can see below, there were 384 times where the market closed higher after the inside bar and 396 times when the market closed lower. The average close was 6.00 points higher while the average close lower was 6.29 points. This means the inside bar in and of itself is neutral for market direction the following bar. The probability was 50/50 and the magnitude of the move was 1:1.
These two are the first two stats that you want to look at. Generally, I like to see a 65% probability one way or the other while maintaining at least a 1:1 magnitude of move. Conversely, if the probability is 50%, then I like to see a magnitude of move being greater than 1.6, as a general rule. If I get one of these or better, or any equivalent combination, then I will look at the stats a little closer. (Note – If you have 100 trades and win 65% of the time and win $1 on the average win and lose $1 on the average loss, you will end up a $30 profit. Same with a 50% probability and the average win being $1.60 compared to a $1 average loss. You will end up with a $30 profit. That is my threshold, 30 or better in this example. I call this stat the baseline ratio. 0 means completely neutral. Anything negative is losing. My personal baseline requirement is at 30. This stat will be added to the set of stats below prior to first release.)
Since the inside bar in and of itself did not offer anything, I began to get more specific and look at the inside bar where the close was greater than the open and then where the close was less than the open. Below are the stats for the close being greater than the open as you can see from the strategy box in the graphic. As you can see, neither offered any profitable trading opportunity.
I then looked at the inside bar where the close was greater or less than the previous close. The first bar favors the downside with a baseline stat of just over 22. Bar 2 and beyond don’t offer anything better than that, so we move on.
Below are the stats for the close being greater than the previous close. These stats are more neutral than the ones above.
I then moved on to looking at market action based on a 2-bar pattern. The first bar is the inside range bar, immediately followed by a bar where the close is less than the close of the inside range bar. Again, stats are pretty much neutral.
I then looked at the close being less than the previous low instead of just the close. Again, the stats are neutral.
I then went the opposite direction and required the bar immediately after the inside bar to have a close greater than the inside bar’s high. Shockingly, the stats were neutral.
Below I tested for conditions on the bar immediately prior to the inside range bar. The first test is with a close that is greater than the previous close followed immediately by the inside range bar. The stats are neutral with bar 1 carrying the greatest advantage with a baseline stat of 19.14, still neutral.
A close less than the previous close followed immediately by the inside range bar yields neutral stats again.
Requiring the close to be less than the previous low, followed immediately by the inside bar again yields neutral stats. (below)
When a bar has a close greater than the previous high and is immediately followed by an inside range bar, the stats to the downside are the best we have seen thus far. Bar 1 yields a baseline ratio of 37.87, Bar 2 yields a 28.75 and Bar 3 yields a 36.12. I require a 30.00 or higher to even give it a second look. Given the number of opportunities, this is not a bad situation. The total net profit from simply entering on the close of the inside bar and exiting on the close 1 bar later would be approximately 467 S&P points. This comes to a net profit of just over $23,000 trading 1-Emini. (All of this information and much more is included in the system report if you choose to insert an entry and exit rule and make a system out of the setup). This setup is certainly something to look at in more depth for a selling opportunity.
Below, I added one condition to the inside bar by requiring that the inside bar also have a close lower than the open. The stats are a bit better on Bar 1, but with far fewer opportunities. Bar 1 yields a baseline stat of 52.20 while using the same entry and exit example as above would yield an approximate profit of 381 points, or just over $19,000. This comes to 82% of the profit as the setup above without the additional condition on only 66% of the trades. The summary is that you are in the market 34% less while only giving up 18% fewer profits. Not too bad.
Reversing the bar prior to the inside range bar produces an interesting scenario. Requiring the close to be less than the previous low, immediately followed by an inside bar with a close less than the open has a % that favors the upside but a magnitude of move that is better than 2:1 favoring the downside. The
baseline stat sorts this out for us coming in at 29.19. on Bar 1. All subsequent bars yield even more neutral stats.
I then switched the inside bar close to be greater than the open instead of less than the open. The stats are pretty much neutral.
The next test kept the inside bar the same as the previous test, and switch the bar prior to the inside bar requiring a close greater than the previous high. Again, neutral stats.
The stats below keep the bar prior to the inside bar the same, but requires the close of the inside bar to be less than the close of the previous bar immediately before it. Bar 1 yields the best baseline stat yet at 62.51. The scenario also would yield approximately 511 points profit, or about $25,500 trading a single S&P E-mini. Many of these trades are the same as what we saw above with the bar prior to the inside bar having a close greater than the previous high. This simply offers slightly better stats.
Next, I threw in a basic triple moving average stat where the 8 ma is less than the 32 and the 32 is less than the 128. If this is true and the next bar is an inside range bar, the stats are neutral.
Below are the stats for the setup above. This adds two things. The first is the bar prior to the inside range bar is one where the close is greater than the previous high (along with the ma condition). The second is that the inside bar must also have a close that is less than the open. The baseline stat for Bar 1 here is by far the best we have seen at 239.45. You won’t find many better than this. However, the number of opportunities in comparison are also very small. The net profit comes to about 314 points, or $15,700. The strategy would have you in the market only 17% of the time of the first opportunity we ran across. This is another scenario looking at the previous bar with a close greater than the previous
high. Accordingly, we have located a scenario that contains 65% of the profits while having only 17% of the market exposure. Not a bad trade off.
The stats below switch the moving average condition from a “higher” trend to a “lower” trend. There are not very many opportunities, but when the market sells off, it sells off. Due to the magnitude of the move, the baseline stat favors the downside by 35.9 on Bar 1. Bar 2 has a move favoring the downside by over 3 to 1 and baseline stat of 79.68. Bar 3 is even better at 123.71. Profit at that point is at about 250 points, or $12,500 trading 1 E-mini. With only 19 opportunities, the only real problem is the higher potential for this to be merely a statistical anomaly, and not something that actually carries a lot of future probability.
With this situation, I removed the requirement for the bar prior to the inside bar to have a close greater than the previous high. That condition has turned out to be a fairly significant one in multiple testings. Stats are neutral after removing that condition despite the massive average close down stats after a few bars.
Here is a selling opportunity based on the “trend” being lower and the inside bar also having a close below the open. The baseline stats for Bar 1 are at 42.33. Net profit comes in at about 264 points, or just over $13,000 trading 1 E-mini. Stats become neutral after bar 1, so this is a short trade. Some of you might notice the 70% stat favoring the upside by bar 13. Despite that number, the baseline stat is still less than 30 (it comes in at just over 29 favoring the upside).
Here is a setup using a high greater than the highest high of the last (variable) 1 bar followed immediately by an inside bar with a close less than the open. The Bar 1 baseline stat is at 48.22. Not bad for a total of 213 occurrences. Net profit comes in at almost 440 points, or just under $22,000. Again, this is using some of the same logic with the prior bar being higher.
Below is group 1 condition with high greater than highest high of last 3 bars. Overall stats are not quite as good as with only requiring a high greater than the previous high.
Below is using the variable 10 instead of 3. Again, about the same stats but with fewer opportunities.
Here I added the “trend” condition of higher moving averages. Stats are pretty much the same as what we have seen only they exist just about across the board as far as length of time. Bar 16 is about the same as bar 1 after the occurrence.
This is the same as above only using a 3 variable for highest high condition. Nothing to write home about in these stats.
10 variable:
Here I am looking at the bar after an inside bar where the close is less than the previous low. I am also requiring the close of the inside bar to be less than the open. Overall stats are neutral.
With these stats, the only change from the previous setup is that I added the requirement that %K is below 20% the bar immediately after the inside range bar. These stats aren’t bad. Baseline favors the buy side at 30.54 on Bar 1, and 45.87 at Bar 2. With a lower number of occurrences, it is always better to have stronger baseline stats. Larger number of occurrences can get away with lower baseline stats because there is also a lower probability that those stats are simply a statistical anomaly.
This ends this report for now. The next report will be on the other type of process where we have a list of predetermined iterations and then go back through them and “branch off” looking closer at the iterations that might uncover a profitable opportunity. End.
