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Article Archive For Toby Crabel

  • The Principle Of Contraction/Expansion by Toby Crabel, CTA

    ARTICLE SYNOPSIS ...The Principle Of Contraction/Expansion by Toby Crabel, CTA I define the principle of contraction/expansion as the market phenomenon of change from a period of rest to a period of movement back to a period of rest. This interaction between the phases of motion and rest is constant, with one phase directly responsible for the other's existence. For this report I will use daily open, high, low and close data. I tested a trading method called opening range breakout--a trade taken at a predetermined amount above or below the opening range. A trend day is defined as a day when the first hour's tra...

  • Price patterns in soybeans by Toby Crabel

    ARTICLE SYNOPSIS ...Price patterns in soybeans by Toby Crabel In my search to determine whether price patterns signal the next day's market direction, I have tested all combinations of four closing prices followed by either a higher or lower open the day after the last close. I used the soybean market between 1970 and 1988 and studied 32 patterns based on open, high, low and close. The only criterion to determine the direction of the next day's trade was gross profits. The five-day patterns in Figure 1 are symbolized by a + for an up closing relative to the previous day and a - for a down closing, with the exce...

  • 2-bar NR and ORB by Toby Crabel

    ARTICLE SYNOPSIS ...2-bar NR and ORB by Toby Crabel Markets are in a constant state of flux; they are continuously shifting from movement to rest and back to movement again. This interchange is never ending -- from contraction to expansion to contraction -- with one phase directly responsible for the other's existence. A two-bar narrowing range (2-bar NR), a price pattern that is the narrowest two-day range relative to any two-day range within the previous 20 market days, reflects that market activity and quantifies the market concept of contraction. Thus, contraction is a relative condition that can occur even in...

  • Price pattern studies Part 1 by Toby Crabel

    ARTICLE SYNOPSIS ...Price pattern studies Part 1 by Toby Crabel Do prices tend to move consistently in one direction from open to close, given the previous day's price pattern, and do these patterns of intraday bias lend themselves to profitable trading systems? To answer these questions, I have tested all possible two-, three-, four- and five-day open-to-close patterns for the T-bond futures market from 1978 to 1987. My intention is to provide objective statistical data that can be used as a reference in trading. The price patterns in Figure 1 are referred to as ""systems"" because the custom software I used...

  • Trading close-to-close patterns by Toby Crabel

    ARTICLE SYNOPSIS ...Trading close-to-close patterns by Toby Crabel Do the relationships between day-to-day closing prices predict the next day's price moves and, if so, is it possible to isolate these profitable chart patterns and incorporate them as entry signals in a larger trading system? In pursuit of these answers, I have tested all two- through five-day close-to-close patterns in the T-bond futures market from 1978 to 1987 (Figure 1) and discovered the beginnings of some excellent low-risk entry techniques. My tests assumed that trades were entered on the last close of the pattern and exited on the next da...

  • Inside day patterns in the S&P by Toby Crabel

    ARTICLE SYNOPSIS ...Inside day patterns in the S&P by Toby Crabel Computer studies suggest that inside days-- where the high is lower than the previous ! day's high and the low is higher than the previous day's low-- provide very reliable t entries in the S&P 500 futures market. The basic trading pattern (Figure 1) is an inside day (ID) followed by a sale if the next day's market opens lower or a buy if next day's market opens higher. Entry is on the open and exit is on the same day's close without a stop. In computerized tests, this basic procedure produced 68% winning trades in the S&P between 1982 and 1987. To...

  • Opening Range Breakout Part 6 by Toby Crabel

    ARTICLE SYNOPSIS ...Opening Range Breakout Part 6 by Toby Crabel Two price chart patterns -- the inside day (ID) and the four-day narrowing range (NR 4) -- have proven to be reliable predecessors of trending action that can be profitably traded with an opening range breakout (ORB) system. (See Stocks & Commodities, February and April 1989.) What happens to the predictive power of these patterns when they're combined? My research assumption was that, because they were both individually successful, they would produce clearer ORB buy/sell indications when combined. I examined this assumption in several ways. First,...

  • Opening Range Breakout Part 7 by Toby Crabel

    ARTICLE SYNOPSIS ...Opening Range Breakout Part 7 by Toby Crabel Bear hook is a day in which the open is below the previous day's low and the close is above the previous day's close with a narrow range relative to the previous day (Figure 1). As implied by the name, there is a tendency for prices following a bear hook pattern to move to the downside. Figure 2 tabulates how this downward tendency after the pattern manifests itself in different markets and with a variety of opening range breakout (ORB) trades taken the day after the pattern appeared. Figure 3 charts the bear hook patterns for December T-bonds. N...

  • Opening Range Breakout Part 8 by Toby Crabel

    ARTICLE SYNOPSIS ...Opening Range Breakout Part 8 by Toby Crabel The bull hook pattern, as suggested by its name, is a bullish indication and, in most cases, will be followed by a price move to the upside on the day or days following the hook. However, as you will see from the tests I ran, this is not always the case. A bull hook day (Figure 1) opens above the previous day's high and closes below the previous day's close with a narrowing range. Tests of opening range breakout (ORB) trades taken the day following the bull hook pattern are shown in Figure 2. An ORB trade is entered at a predetermined amount abov...

  • Opening range breakout Part 4 by Toby Crabel

    ARTICLE SYNOPSIS ...Opening range breakout Part 4 by Toby Crabel Opening range breakout is a trade in which entry is taken at a predetermined amount above or below the opening range. I've set this predetermined amount (the ""stretch"") through observation. (See Stocks & Commodities, September 1988.) To trade the opening range breakout, a buy stop is placed above the high of the opening range an amount equal to the stretch and a sell stop is placed the same amount below the low of the opening range. The first stop that is traded is your position. An inside day is one in which the daily range is completely within...

  • Opening range breakout Part 5 by Toby Crabel

    ARTICLE SYNOPSIS ...Opening range breakout Part 5 by Toby A. Crabel A trade taken at a predetermined amount above or below the opening price of a given day is called an opening range breakout (ORB).A narrow range four pattern (NR 4) is a day with a daily range that is narrower than the previous three days' daily ranges compared individually. In my experience, trades using the ORB technique on a day following an NR 4 pattern tend to coincide with trend day activity--and, consequently, successful ORBs. Figures 1 and 2 demonstrate an ORB on the day following the NR 4 pattern. The table in Figure 3 shows the results...

  • Playing the opening range breakout Part 1 by Toby Crabel

    ARTICLE SYNOPSIS ...Playing the opening range breakout Part 1 by Toby Crabel Opening range breakout is one of the most important indicators of daily market direction that a trader can utilize. An opening range breakout (ORB) is a trade taken at a predetermined amount above or below the opening range. When the predetermined amount (the ""stretch"") is computed, a buy stop is placed that amount above the high of the opening range and a sell stop is placed the same amount below the low of the opening range. The first stop that is traded is the position and the other stop is a protective stop. The stretch is deter...

  • Opening range breakout: early entry Part 2 by Toby Crabel

    ARTICLE SYNOPSIS ...Opening range breakout: early entry Part 2 by Toby Crabel Early entry is defined as a large price movement in one direction within the first five minutes after the open of the daily session. A study of early entry is essentially a study of price action, and the type of price action that takes place on early entry shows that participants are urgent about entering the market. It is a distinct recognition of either a profitable or dangerous situation. It should be noted that directional moves of this nature are relatively rare and may occur only 10% of the time. Most days (70% to 80%), prices e...

  • Opening Range Breakout Part 3 by Toby Crabel

    ARTICLE SYNOPSIS ...Opening Range Breakout Part 3 by Toby Crabel In the opening range breakout technique, the heralds of an upcoming trend day are often inside days, narrow range days and hook days (see Stocks & Commodities, September and October 1988). I also have run across a new concept that categorizes price action and generally produces trending activity the next day. I call it Doji Lines. Doji is a Japanese word describing a comparison between the open and the close of the daily session. It is described in a book, The Japanese Chart of Charts by Seiki Shimizu. A Doji Line is a day that shows a very small...







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