There are those who still do not understand and have doubts how this can work.
Look at the chart. It is a DAILY CHART.
See the dots.
The upper dot is 20 pips below the high of the day. If you go short above the dot, how many times can you exit with a profit?
The lower dot is 20 pips above the low of the day. If you go long below the dot, how many times can you exit with a profit?
The frequency distributions on the right hand side tell you how many times the daily wicks fell into the ranges. In this case it is for the last 5 days so you can easily count by hand.
"Now, 2 patterns of market behavior happen on a regular basis:
1) the price breaks to new high's (or low's)
2) the price reverses from new high's (or low's)
They happen regardless of time frame (with the obvious limitations explained above)
They are phenomena that can be exploited without the fear if found out by others, that they might cease to exist." - H. Rearden
The important part is to enter WITHIN 20 pips of the daily low. The RAT REVERSAL is only one entry method.
"The technique is so simple that just several lessons (or a few pages of explanations) cover it all. Now what? Now the student has to practice, practice and practice again to understand what he had been taught. The teacher DOES know much more than the student, but his understanding can't be "passed", "transferred" or taught in any way -- not even by reading books."
This is an excellent detail explanation of the theory and statistics behind the strategy. The problem for me has been when trading in realtime. During the day, one does not know where the daily hi or lo is, since price is still developing. The current hi at 12:00 noon, may be the middle price by the time the daily candle ends. Trading on the noon hi will yield stop outs.
I am incorporating ATR (Average True Range) to help with this. Are there any other suggestions on helping to guage where the HIs and LOs may be when the candle is still forming?