Zone Analysis

Here is an idea that could lead to a full blown trading system. Since we still have an opening time in the stock market this type of analysis should still be applicable. Here I have cut the day into 4 distinct zones based off of yesterdays trading range:

Zone1 = high of yesterday + minTick and above
Zone2 = high of yesterday down to midPoint of yesterday + minTick
Zone3 = midPoint of yesterday down to low of yesterday + minTick
Zone4 = low of yesterday and below

Refer to the chart. I wanted to see where the market closed in relation to where it opened. I was thinking that if the market opened in Zone1 (above yesterday’s high) then there would be a higher likelihood of it closing below Zone1. The following table illustrates the different open zones and closing zones.

Open Z1: Open Z2: Open Z3: Open Z4:
Close Z1: 0.175 0.108 0.043 0.005
Close Z2: 0.041 0.108 0.059 0.019
Close Z3: 0.023 0.062 0.086 0.032
Close Z4: 0.010 0.031 0.081 0.089

Would you like to see a system based on this analysis?

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