I trade intra-day (based on a 30 minute bar) and often find my system produces false signals (in terms of backtesting at EOD) as my stochastic values of the bar that produced the signal changes over time based on subsequent price changes.
For example, if I set a buy signal when my stochastic reaches 80, and the price action lifts the stochastic to 80, I enter a position. However within that same bar, price subsequently declines, as does the stochastic. So the bar closes out after 30 minutes having never reached 80 (I assume this is since stochastic operates using closing prices, not the high). So when I backtest at EOD, this position never materializes. This then invalidates any longer term backtesting I am using to verify the system. Has anyone come up with a methodology to workaround this problem, and does with work with stochastics? Or is there a way to have stochastics use the high, rather than the close. (I think this would resolve the issue, but not sure). Thanks in advance!
