Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis

15-MINUTE BAR SYSTEMS: RSI EXTREMES WITH 50-HOUR MOVING AVERAGE FILTER

The data displayed in Table 5.13 for the 15-minute bar time frame includes history from February 5, 2002, to January 30, 2004. Because our time frame was again shortened, we reduced our fail-safe stop-loss level to 1 percent of entry price for ND. In addition, because SP is less volatile than ND, we reduced its fail-safe stop loss to 0.5 percent of entry price.

Performance deterioration over this time frame was so dramatic that I had to include SP to show a profitable trading asset for our mechanical trading systems. Furthermore, such profits were achievable only with the trend-following mean reversion system, and even here the P:MD was only moderately successful. Although nondirectionally biased mean reversion systems can work with 15- and 5-minute bars, in general, I have found that mean reversion systems containing a trend-following filter tend to be the most robust over these time frames.