A Price Action Based Strategy

The use of price action to make buy/sell is prevalent. According to many, price action is the fundamental thesis of practitioners of technical analysis.  Technical Analysis is the art of following price action.

I am presenting back test results for a simple price action based strategy. This is a "long-only" strategy

- If price goes down for three consecutive days
- If ATR (Average Trading Range) is lesser for three consecutive days

A entry typical is shown below:


DataSet : SP500
Period : 15 years

Long Trades
Net Profit$18,457.37
Profit per Bar$5.41
Total Commission($6,640.00)
Number of Trades1,660
Average Profit$11.12
Average Profit %0.26%
Average Bars Held2.06
Winning Trades982
Win Rate59.16%
Gross Profit$69,689.33
Average Profit$70.97
Average Profit %1.88%
Average Bars Held1.95
Losing Trades678
Loss Rate40.84%
Gross Loss($51,231.96)
Average Loss($75.56)
Average Loss %-2.09%
Average Bars Held2.21
Maximum Drawdown($2,383.78)
Profit Factor1.36
Recovery Factor7.74
Payoff Ratio0.9

It is amazing to note a simple strategy as stated above,
- has a win rate of 60%
- is profitable over a long period of time

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