Target can be as high as 2 points but more often 1 point.
Michael B.
Michael B.
ES Overlap
- Thread starter ElectricSavant
- Start date
I named it, "The Overlap System" 6-8 months ago due to the retrace from the day before. I have just decided to trade it again in these low range day environments. I got dis-illusioned because it did not work a year ago, and got scared, after a few traders told me it should work with a minimum of 2 yrs back-tested results, which it did not. I was trading it with an obscene amount of contracts and I felt the risk was too great(I remember 29 straight wins). But it still works currently! so I will start again, we shall see it here live. One trader told me that it was not a system at all....he said you could enter randomly anywhere and probably get a point with that kind of stop. He said those days that you lose will kill any results you get. Since then I added the time stop and lowered the hard stop from 6.75 to 5.50. I also added the target adjustment option to get as much as 2 points. as long as the big stop does not hit and our time-stop gets us out...we could use bet-sizing and grow the contracts (I have done this before). Now, I do not want to take 1 step forward and 2 steps back...this does make a nice equity curve 
I would rather win consecutively using a wise money management plan and when we lose big it is just a rare event. So to coin a phrase....lets take two steps forward and one step back...then continue a little bit and repeat. I start getting real nervous when we do not get a loss after a while, as the contracts grow and grow. Sometimes it is better to take the money and run and start over.
I was searching to configure the session and get candlestick bars to form with odd session lengths to see if I could discover a probability for wickless candles, late one night when I discovered this. The overlap from bar to bar in the RTH session was noticable. I was not used to viewing the bars this way. It is very rare for the RTH session to open and go in one direction from the get-go. It will usually overlap the preceding bar with a wick or a body.
Michael B.
P.S. Perhaps that trader that scolded me was right. You will find that most slices of time will overlap with the parameters of 5.50 stop and a one point retrace. But I prefer to be correct more often than random entry gave me. I find Contra-open to be very powerful. If I were to use other time segments I would need to use an oscillator to "time" the entry for confidence. Wouldn't it be neet to create a program to form "oscillator dependant candlestick formations" Just think of it......a new bar forms at the STOCH-RSI 80 zone and then another one at the 20 zone. Naturally, the STOCH-RSI calculations would be working on traditionally formed bars, but we would have a second candlestick chart showing the price-candlesticks forming my way. Hey we have tick charts......why not Savant-bars. Lol
I would rather win consecutively using a wise money management plan and when we lose big it is just a rare event. So to coin a phrase....lets take two steps forward and one step back...then continue a little bit and repeat. I start getting real nervous when we do not get a loss after a while, as the contracts grow and grow. Sometimes it is better to take the money and run and start over. I was searching to configure the session and get candlestick bars to form with odd session lengths to see if I could discover a probability for wickless candles, late one night when I discovered this. The overlap from bar to bar in the RTH session was noticable. I was not used to viewing the bars this way. It is very rare for the RTH session to open and go in one direction from the get-go. It will usually overlap the preceding bar with a wick or a body.
Michael B.
P.S. Perhaps that trader that scolded me was right. You will find that most slices of time will overlap with the parameters of 5.50 stop and a one point retrace. But I prefer to be correct more often than random entry gave me. I find Contra-open to be very powerful. If I were to use other time segments I would need to use an oscillator to "time" the entry for confidence. Wouldn't it be neet to create a program to form "oscillator dependant candlestick formations" Just think of it......a new bar forms at the STOCH-RSI 80 zone and then another one at the 20 zone. Naturally, the STOCH-RSI calculations would be working on traditionally formed bars, but we would have a second candlestick chart showing the price-candlesticks forming my way. Hey we have tick charts......why not Savant-bars. Lol
Well....I have 511 views and 12 replies, many of them me...
This means the following:
I know human nature and most people would be interested to watch me fail.....this is what makes for an interesting journal.
Michael B.
This means the following:
- Folks are waiting to see what happens.....perhaps to see me fail.
- They view the thread and laugh and don't waste their time
- They are busy testing an idea that I gave them, and keeping their mouth shut.
- They feel that it is just too hard to read these long posts
- They truly do not have any comments, the thread is well written and covers most points
- I talk too much...there would be no replies if I would shut up.
I know human nature and most people would be interested to watch me fail.....this is what makes for an interesting journal.
Michael B.
Oh, contrair! I think most people here on ET are looking for ideas to improve their own trading. They are looking for successful traders to present some ideas that they can implement into their own trading.
Those who tend to slam others posting journals are just frustrated that they can't find anything useful for themselves to take away and/or have been down the path the journal poster is following only to find success has eluded them.
pspr,
Well, I like your positive twist to things. But in reality this is not true overall.
I find that there are so many ways to pull money out of the market.....It is just to get a good "fit' like a shoe.
I find following a system and defining a plan as a success.
But in the few words you contributed...I believe you are a successful trader.....
Michael B.
Well, I like your positive twist to things. But in reality this is not true overall.
I find that there are so many ways to pull money out of the market.....It is just to get a good "fit' like a shoe.
I find following a system and defining a plan as a success.
But in the few words you contributed...I believe you are a successful trader.....
Michael B.
Seems like a good idea Savant, I had tried something similar in the past and couldnt get it to work more than a few months in a backtest, so I didn't trade it (maybe I should've). Anyways, have you ever thought that if you are successful in your journal, others would start trading the same method? It would lose start losing effectiveness with much more than 30-40 contracts moving with you, imho.
There are not big enough players in here to effect the ES open. If every active Elitetrader traded this it would have no effect. The ES is trading in multi-BILLION dollars....
Michael B.
Michael B.
Michael,
I thought I would throw in my miscellaneous comments (whether or not they are worth anything I will leave for you to decide)....
1. Kudos to you for posting an idea that others may be able to develop into a system of their own....it seems to be becoming a rarity on ET!
2. The ATR over the last 100 days of a 15 minute bar is 1.56 by my calculation which should indicate that the odds of getting stopped out for your full 5.5 points is minimal.
3. You are not the only one using a wide initial stop. I have seen Chuck LeBeau say many times that a wide initial stop almost always works better. I am pretty sure that Linda Raschke still uses a 3 point initial stop which is almost 25% of the average daily range these days (yes she tightens it up quickly). Mark Cook does something similar as far as wide initial stops. Some people think a wide initial stop is crazy...I am not so sure this is the case.
4. If you are looking at the tendency of the market to repeat certain price patterns, then your objective in designing a system is to be able to pick an entry point where there is a high probability that the price will move in your favor initially so that you are able to tighten up your stop and limit your risk. I think your 15 min timed exit does this quite well in the current environment. Have you looked at tighter stops that the initial 5.5?
5. I would think that this system could be implemented at different times of the day other than just the open of the market.
6. My last comment is in regards to backtesting. I will probably take lot of flack on this.... The market is constantly changing as we all know so what the hell is the point of backtesting something for 2,3,5 or 10 years? This system may work for 6 months or 2 years...who knows! What matters is that is works now. What also matters is that you keep accurate records so that you can notice when it stops working and avoid giving back your profits. I think that people who are looking for the magic system that works through backtesting on mountains of data are searching for the holy grail. When I started pair trading 3 years ago I started with no backtesting trading 100 shares at a time. When I was comfortable with the results I started increasing the size. Then when the volatility decreased I took way to long to notice that it was not working and gave back way too much. Next time I will know better. My point is that if it's working for you now, trade it..make money...but play smart and don't bet the farm because at some point in time it will probably need to be adjusted or scrapped all together. Backtesting won't tell you when it will stop working.
Daryn
I thought I would throw in my miscellaneous comments (whether or not they are worth anything I will leave for you to decide)....
1. Kudos to you for posting an idea that others may be able to develop into a system of their own....it seems to be becoming a rarity on ET!
2. The ATR over the last 100 days of a 15 minute bar is 1.56 by my calculation which should indicate that the odds of getting stopped out for your full 5.5 points is minimal.
3. You are not the only one using a wide initial stop. I have seen Chuck LeBeau say many times that a wide initial stop almost always works better. I am pretty sure that Linda Raschke still uses a 3 point initial stop which is almost 25% of the average daily range these days (yes she tightens it up quickly). Mark Cook does something similar as far as wide initial stops. Some people think a wide initial stop is crazy...I am not so sure this is the case.
4. If you are looking at the tendency of the market to repeat certain price patterns, then your objective in designing a system is to be able to pick an entry point where there is a high probability that the price will move in your favor initially so that you are able to tighten up your stop and limit your risk. I think your 15 min timed exit does this quite well in the current environment. Have you looked at tighter stops that the initial 5.5?
5. I would think that this system could be implemented at different times of the day other than just the open of the market.
6. My last comment is in regards to backtesting. I will probably take lot of flack on this.... The market is constantly changing as we all know so what the hell is the point of backtesting something for 2,3,5 or 10 years? This system may work for 6 months or 2 years...who knows! What matters is that is works now. What also matters is that you keep accurate records so that you can notice when it stops working and avoid giving back your profits. I think that people who are looking for the magic system that works through backtesting on mountains of data are searching for the holy grail. When I started pair trading 3 years ago I started with no backtesting trading 100 shares at a time. When I was comfortable with the results I started increasing the size. Then when the volatility decreased I took way to long to notice that it was not working and gave back way too much. Next time I will know better. My point is that if it's working for you now, trade it..make money...but play smart and don't bet the farm because at some point in time it will probably need to be adjusted or scrapped all together. Backtesting won't tell you when it will stop working.
Daryn