Figure 2.6 Increasing the number of rules decreased profits in the U.S. bond market from January 1, 1975 through June 30, 1995. Note that the horizontal scale is not linear.
The following trading rules were derived simply by visual inspection of the price chart in an attempt to develop a curve-fitted system that picked up specific patterns in this contract.
Rule 1: Buy tomorrow at highest 50-day high + 5 points on a buy stop (breakout rule).
Rule 2: Sell tomorrow at low -2 x (h-1) - 5 points on a sell stop (downside range-expansion rule).
Rule 3: If this is the twenty-first day in the trade, then exit short trades on the close (time-based exit rule).
Rule 4: If Rule 3 is triggered, then buy two contracts on the close (countertrend entry rule).
Rule 5: If short, then sell tomorrow at the highest high of last 3 days +1 point limit (sell rallies rule).
Rule 3: Robust Trading Rules 25