Inside Periods Offer A Marginal Edge
Over the weekend I decided to finally catch up with a chore I was planning for a while now and one that was long overdue: To sift through nearly 2500 CrazyIvan live entry logs and to separate the wheat from the chaff. Clearly sufficient statistical evidence was present and over the past 18 months we have gone through very distinct market phases. I was curious how some of the entry patterns responded and if perhaps some of them could be eliminated.
What I found out was rather interesting and unfortunately, as the system is proprietary, the exact details I must withhold. The most salient part however I am happy to share, which is that inside periods (on the 480 minute chart at least) have little to no edge. They also happen to be the most frequent trigger candle pattern in CrazyIvan. Over the past 18 months inside candles combined (short and long) banked a total of 45.58R assuming 0.015R trading cost per campaign. Which sounds fine until you look at the number of entries – 1043 combined! That means inside candles on average earned only 0.051R after cost per campaign. Hardly worth the effort.
There were a few other patterns and combinations of patterns which I plan to exclude going forward, thereby making CrazyIvan an even more solid but less busy system. The exact details I cannot share but let me show you what happens if you simply cut out inside periods and keep everything else:
As a baseline here’s the currently traded system – including the EC filter. It’s now at 153R – not bad at all! But it did take nearly 2500 campaigns to get there.
And here’s CrazyIvan as it was traded (not back tested) but without the inside periods. All in all it banked 114R – a bit less. But it did that with only 1421 campaigns – that’s only 57% of the original entries of 2477. Keep in mind that this is without the EC filter – I took this off the raw data as that one was used to do the candle trigger statistics. So it’s quite plausible the final system would have avoided more of the ugliness of the 2014 summer shake out.
Here is an interesting side note: About a year ago I was actually working on an inside periods system that would run on the 60-minute chart. It looked good at first but I quickly realized that the edge was marginal at best. Not one to give up easily I tried every possible entry combination/approach I could think of but no matter what I did the system did not hold up. What I did learn when sifting through the stats was that IPs had an excellent edge IF (and only if) the entry candle (following the IP trigger candle) closed in the plus. Of course by then it was too late – by that time you often had gotten stopped out (the reason why the system didn’t work). So if nothing else – this is a good take away: if an IP candle is breached and the next candle closes in the plus then the odds of continuation are very good.
In the coming days I will produce a version of CrazyIvan that ignores inside periods. After I return from Austria on the 25th I will then produce a more advanced filter based on the statistics I have collected. If you are a CrazyIvan sub then simply ignore inside periods moving forward. In a few days these alerts will not be sent to you anymore, so this is just a transitional phase.
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