- We started the day with a gap down and strong Market Internals pointing to a potential down trend day. We start Osi_PASRZ Zone1 with an up bar, and it is not a reversal: strengthening the notion that we may have a trend day down. Strategy goes short on the next down bar, as it closed below the Zone1 marker.
- Osi_PASRZ Zone2 starts with a down bar, and is overlaid on Osi_PASRZ Zone1. Now we suspect even more that we have a down trend day, as Market Internals are still indicating such. The next bar is an up bar that cannot get through the top of Osi_PASRZ Zone2, and then we proceed to fall.
- Osi_PASRZ Zone3 starts with an up bar. However, we have a trend day down, so it fails to hold as resistance, even as it is tested twice more, and we continue to fall.
After our profit taking time at the end of the day, the strategy exits on the first bar that ticks above the previous bar (ie., on a one bar retracement).
- The next day is a study in reverse, as we open with a gap up on Market Internals that are suggesting a trend day up. After the down bar that starts Osi_PASRZ Zone1 seems to fail to be resistance, because the next bar closes up and over the top of Osi_PASRZ Zone1, the strategy goes long.
- Market Internals are still showing a trend day up when Osi_PASRZ Zone2 starts with an up bar, then goes up, suggesting a continuation of the up trend day. We retrace briefly, then come up to retest Osi_PASRZ Zone2, and as expected on a trend up day, it fails to hold and we continue up. Osi_PASRZ Zone3 marks the end of the day.
We never hold overnight, so we exit on the close, as after profit taking deadline, we never had a retrace bar.
Do you notice the big gaps opposite the previous day's close and action on both of these days? That is why we never hold overnight. We are simply too risk-averse to take the chance. Does that mean that we miss those days with follow-through?
Yes, but we would rather be out of a position wishing that we were in, than in a position wishing the we were out. In other words, we prefer to control our risk, rather than to anticipate our profits!