The Sitcom System
- Daily charts
- End of Day is 5pm ET NY close
- Daily high is a boundary that buyers could not overcome
- Daily low is a boundary that sellers could not overcome
- You need:
- A trend
- A bargain day
- An S&R zone
- A profit target
- Trend is determined with a 13-period smoothed moving average. When price is above it, trend is bullish, when below, bearish
- Bargain days or pullback days are dips in a trend
- Defined as any day that closed against the trend
- Prefer ones that pull back closer to the MA
- Check S&R that may stop the pullback
- Wait for a double pullback
- Look for an even number above the high/low of a bargain day (eye rolling)
- Mark the high and low price and mark the high or low of the ‘turn’ candle
- The turn candle is the one immediately preceding the one that breaks out of a support or resistance zone (note the circular logic. You need the turn candle and the daily highs/lows to find the S&R zone, and to find the turn candle, you need the S&R zone)
- Stops above or below the buy and sell zone plus buffer of ‘10 to 15 pips’ (clearly ROK doesn’t like to measure volatility before picking numbers)
- Profit target is the high or low of the prevailing trend. Basically it’s targeting the difference between the local high/low and the pullback distance.
- Must be 3x larger than the risk required by the stop-loss
- Otherwise do not trade
“Discretion is required to trade support and resistance properly, and good judgment will come with time.” (blecch)
This almost seems testable, but then I start to attempt to mark buy and sell zones and there are a dozen considerations not mentioned in the book because it’s a discretionary system.
- When price is above the MA there is almost never a consolidated range to trade short from and vice versa
- Do we hold the trade if price switches sides of the MA?
- This system gets destroyed in long-term ranges. What failsafe is in place to determine if we’re in a trend? Does the MA need to have a slope?
- What do we do if there is never a ‘bargain day’ like in this trend?
The first bargain day is actually the beginning of the end of the trend. Just don’t trade these? Seems inefficient. Especially as this is quite common.
For all these reasons I dislike this system, and I don’t think I can objectively test it. I do think dip-buying is a generally cromulent way to trade, but there are plenty of smart mechanical ways to do it that don’t require so much analysis, and don’t require guesswork.