Quote from ProfitProphet:
Breakout System for ES.
Wait 60 minutes after the open.
3 ticks above high of first 60 minutes is long entry.
3 ticks below low of first 60 minutes is sell entry.
If get signal, the other end is your stop. Ex: if get signal to go long, then whatever your signal would've been to sellshort, that is your stop price.
Exit on close of day or get stopped out; whichever comes first.
That's about right based on what I've been told, though it wasn't 3 ticks but a minimum of half a point before a signal is given.
I looked really hard at this type of one hour breakout system; for what it's worth, here's what I have found:
There is no definitive market bias based on breakouts beyond the one hour morning high or morning low; true, in long situations, more markets tend to follow the direction of the upside breakout than not, but I wouldn't bet the house on it. Often, there are substantial drawdowns before the market eventually turns around and gives you your profit objective. Are you comfortable trading a system that asks you to use 4 pt, 5pt or even wider stops which occasionally will come close to, or WILL stop you? I suppose if you have 50 grand to splurge and don't really care, then your tolerance will be high. But for the average trader, this doesn't sit very well.
Another problem has to do with different breakout scenarios which aren't addressed. For example, I found that when one hour morning ranges are 7-8 points wide, the breakouts are often less than a few points---if that---and often turn in to fading markets.
Another big issue is that while upside markets might move higher more often than not, the same rule can't be applied to short markets. Look for yourself and tell me if you see a strong downward bias with markets that breakout below the one hour low; it just doesn't happen. More often than not, those markets---which you are supposed to short---turn right around and bite your a@@. This is crap shooting and not logical trading.
I looked at just about everything possible to try and find a way to tweak such as system; linear regression, Bollingers, 65EMA retracements (ad infitum), using price lines instead of candles to look for bullish or bearish patterns before entering---you name it. I haven't found it.
Bottom line: you can probably make a little more money than not trading such a system, but not 20 points a week. If someone has done so, can you please tell me how?
