THE THERMOSTAT TRADING STRATEGY（恒温器交易策略）.pdf

Trading Strategies That Work 119 THE THERMOSTAT TRADING STRATEGY We actually traded a strategy very similar to Thermostat. We named this sys- tem based on its ability to switch gears and trade in the two modes of the mar- ket, congestion and trend. This system sprung from our observations on the success of particular systems on particular market sectors. We thought that one system that also possessed a dual nature could be created to capitalize on the market’s two modes. We created a function to help determine the market’s mode. Based on the output of this function, the Thermostat switches from a trend-following mode to a short-term swing mode. The trend-following mode uses a trend following mechanism similar to the one found in the Bollinger Bandit. The short-term swing system is an open range breakout that incorporates pattern recognition. The function that causes the system to switch its approach is the same function that we described in Chap- ter 4, the ChoppyMarketIndex. If you have forgotten this function, here is a brief review. This function compares the distance the market wanders and the actual distance the market traveled (Abs(Close – Close[29])/(Highest(High,30) – Lowest(Low,30))*100). The function generates values from 0 to 100. The larger the value, the less congested the current market is. If the ChoppyMarketIndex function returns a value of less than 20, then the system goes into the short-term swing mode. Basically, the market is demonstrating a swinging motion and the system tries to catch the swings and pull out a small profit. Thermostat tries to accomplish this feat by buying/sell- ing on small market impulses. If the impulse is large enough, then the system jumps on and tries to ride the market out for the next few days. Through in- depth analysis of short-term swings,