A while back I wrote about a daytrading strategy in SPY. This one works pretty well on XLP as well, with some modifications:
- Calculate a 25 day average of the (High minus Low). That is the “ATR”.
- Calculate the Low of the last 10 days.
- Calculate the (C-L)/(H-L) ratio every day (IBS).
- Calculate a band 2.5 times above the 10 day low using the average from point number 1 (ATR).
- If XLP closes above the band in number 4, and point 3 has a higher value than 0.8, then go short at the close.
- Exit on tomorrows close.
Vice versa for long except the value in number 3 must be below 0.33.
Test period from 2005 until 2013. Here is the results:
By the way, this strategy has been horrible in 2013 on the short side (live trading).