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

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

TYPICAL SETUP
A entry typical is shown below:

BACK TEST RESULTS

DataSet : SP500
Period : 15 years

	Long Trades
Net Profit	$18,457.37
Profit per Bar	$5.41
Total Commission	($6,640.00)
Number of Trades	1,660
Average Profit	$11.12
Average Profit %	0.26%
Average Bars Held	2.06
Winning Trades	982
Win Rate	59.16%
Gross Profit	$69,689.33
Average Profit	$70.97
Average Profit %	1.88%
Average Bars Held	1.95
Losing Trades	678
Loss Rate	40.84%
Gross Loss	($51,231.96)
Average Loss	($75.56)
Average Loss %	-2.09%
Average Bars Held	2.21
Maximum Drawdown	($2,383.78)
Profit Factor	1.36
Recovery Factor	7.74
Payoff Ratio	0.9

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