Thread by @PJSmith

Hmmmm. I think it's code a crazy indicator time...

Bar retests - Every scalper should know these stats!?

I've always liked the 'random' trade. This is one reason it can do quite well. Do the stats support it? Let's find out...

There will be some filters to this, but, let's start, at the start...

Take a 1-minute #Nasdaq chart. What is the probability that the 'typical' (Typical price = (High + Low + Close) / 3) price of the bar is retested in the subsequent x (we'll use 30) bars?

Who says you can't make money in chop ;)

So, a 1-minute bar 'typical' price is generally retested in the next 30 bars, about 94% of the time...

If we ignore the next bar, and only look at those subsequent bars, the percentage drops to 85.8%

What about 5-minute bars? Typical price of a 5-minute bar is retested in the next 30 bars, >97% of the time.

Skipping the next bar, the stat falls to 89.5%

In fact, as you can see, the typical price is actually retested on average, 6 times, over the next 30 bars.

Kind of makes a case for not moving your stops to BE too quick, no?

It's also a fundamental part of how I trade, though I never put any stats behind it before like this

30-minute bars, just for giggles (I don't trade time frames that long, but was interested). 30 days though, to increase the bar count. Prior studies were 7 days.

Possible conclusion. Breakaway bars with no retest are the exception, not the norm? This explains why some strategies like scalping prior highs etc. have such a high win rate. I may add some filters like that, and see what those numbers are...

Yes, so, what if you apply this ONLY to breakout highs? Let us say, the highest bar in the last 10 bars? 5-minute. Pretty interesting. 1083 bars, 1027 bars retested. Almost 95%. That would be a trade at the close, back to the typical price of the bar. A retest.

What about large bars only!? Avoid the chop. 20 pts or larger on the 5-minute. 926 bars in 7 days. 845 retests. Over 91% and they in fact got tested an average of 5 times!

Hope this gives you something to think about. It'll burn my brain for hours! Just a note - One way moves can kill if you do not manage your risk, so consider that, too!