In the present article, we estimate the effectiveness of the “Profitunity” trading system by Bill Williams. We will assess the effectiveness of the trading system both as a whole and its separate signals.
The article discusses the figures of graphical analysis "Hanged man" and the reverse to it – "Inverted hammer". What are these patterns? How often do they occur? How effective is trading on them? In this study you will find answers to these and other questions.
In our study, we suggest examining the last of the listed types of oscillator signals: «overbought and oversold». And we explore this signal with a complex approach by using several popular oscillators in our analysis at once.
There are many ways to determine a reversal and correction in the motion of the quotes of financial instruments.
In the proposed research, we want to highlight and test such a well-known signal as the bounce from the 200-Day Moving Average.
In the proposed study, we will research the Harami graphical pattern. In his book "Japanese Candlestick Charting Techniques", Steve Nison characterizes this pattern as follows:
"The Harami model is a candle with a small body that is within a relatively big body of the preceding candle. 'Harami' is an ancient Japanese word which means 'pregnant'. A big candle is a 'mother', and a small one is a 'child' or 'fetus.' " This pattern is believed to be reversal. We will check if it is true by using a large volume of historical data.
The article will focus on the formation well-known among traders – the 1-2-3 pattern.
Its description as “reversal points” can be found in the book “Long Term Secrets of Short-Term Trading” by Larry Williams.
It is believed that the formation of this pattern predicts a market reversal.
Trading on the basis of 1-2-3 pattern can be carried out on any timeframe and on the charts of any financial instrument. The structure of the model is not complicated, that’s why it’s popular among traders.
Let's check the effectiveness of the signal’s work on this pattern using historical data.