Index Vol Breakout Systems

R

RhinoTrader

Hi guys - does anyone out there trade an intraday volatility breakout system on the eminis? I have been toying with a few ideas and here are some of my thoughts:

ORB style breakouts don't work. I have back-tested a number of varieties incl time-based (30 mins, 60 mins, etc) and pure vol (eg ATR) breakouts and various exits (trailing stop, exit at close, etc etc). On their own these strategies (no-longer) work despite some of the hype around them. I'm sure this is not news to most of you.

I am not suggesting that this type of breakout cannot be used as a component in a system. But it represents little more than an entry trigger. A setup is also needed - perhaps a struture on a larger timeframe (daily) to give us a directional bias or filter the low vol days. Indeed, I have a setup / breakout system that I use in the Bonds and an old model (out of production) that trades the European indices.

I am interested in generating a discussion regarding vol breakout intraday strategies. My interest is in a pure mechanical approach - zero discretion (this is how I trade). I already have models trading the indices but mostly these are mean-reverting in nature. Anyone out there want to share any thoughts either on or off-line?

Cheers
Mike
 
Quote from RhinoTrader:


ORB style breakouts don't work. I have back-tested a number of varieties incl time-based (30 mins, 60 mins, etc) and pure vol (eg ATR) breakouts and various exits (trailing stop, exit at close, etc etc). On their own these strategies (no-longer) work despite some of the hype around them. I'm sure this is not news to most of you.

I am not suggesting that this type of breakout cannot be used as a component in a system. But it represents little more than an entry trigger. A setup is also needed - perhaps a struture on a larger timeframe (daily) to give us a directional bias or filter the low vol days. Indeed, I have a setup / breakout system that I use in the Bonds and an old model (out of production) that trades the European indices.
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Hi,

You answered your own question. I traded ORB (but not on eminis), and lost money before learning the fact that the same thing does not and should not work every day.

There is a book dedicated particularly to this type of trading. "Day trading with short term price patterns and opening range breakout" by Toby Crabel. A quote at the bottom of page 251:

Code: 
Evidence clearly suggests that Opening Range Breakout trades are not something that should be taken every day.
Other information must be integrated when considering a trade of this type - a gap is just one of those considerations.
 
milehigh - sounds like you have truely mastered trading. any further details of your zero-drawdown trading strategy would be much appreciated (lol)

indrionas - thanks for the response. yes, I know about crabel's book, although have never read it. my investigations have carried me to look at some of his suggestions though - all the classic stuff like IDs, NR4, NR7, etc etc. Whilst Crabel's study showed that these filters used to be effective, my own studies show that their effectiveness has been hugely diluted (no surprises there). my intention was to explore some other ideas with some like-minded strategy developers. do you still trade an adapted vol breakout strategy?
 
Quote from RhinoTrader:

milehigh - sounds like you have truely mastered trading. any further details of your zero-drawdown trading strategy would be much appreciated
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I wish I had zero drawdowns!! I just was saying I wouldn't put my own money into your system unless it had zero drawdowns! I don't want to risk the hard coinage in some other slippery hands!

My system has 2% drawdowns. It uses a chart system that eliminates a lot of the market noise and then combines it with some volume/tick data and stochastic inforrmation to help me identify entry and exit points!
 
I tested a variety of ORB systems around a year ago and was disappointed by the huge drawdowns and the small profits. That said, I think orb PRINCIPLES can work when trading discretionally. I would NOT trade orb systems in an automated sense.

It takes DISCRETION to know which signals to take and which ones not to take, imo.

Brett Steenbarger's websites have some good insights on orb systems.
 
Quote from milehigh_trader:

I wish I had zero drawdowns!! I just was saying I wouldn't put my own money into your system unless it had zero drawdowns! I don't want to risk the hard coinage in some other slippery hands!

My system has 2% drawdowns. It uses a chart system that eliminates a lot of the market noise and then combines it with some volume/tick data and stochastic inforrmation to help me identify entry and exit points!
More...

Thanks for clarifying - but you seem to be under the impression that I am pitching / selling/ giving away some system. This is not the case. Actually, I am looking to develop new ideas. The systems I have already are proprietary and are not likely to ever be sold.
 
Quote from RhinoTrader:

Thanks for clarifying - but you seem to be under the impression that I am pitching / selling/ giving away some system. This is not the case. Actually, I am looking to develop new ideas. The systems I have already are proprietary and are not likely to ever be sold.
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Interesting point of view RT.

I gather that you want my input into ORB for which you are prepared to offer nothing in return.

regards
f9
 
Quote from fearless9:

Interesting point of view RT.

I gather that you want my input into ORB for which you are prepared to offer nothing in return.

regards
f9
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**sigh** it really can be hard work on here sometimes.

no - that is not my point at all. i have done a significant amount of work on this topic already. sometimes it helps to find other traders to collaborate on projects and bounce new ideas off each other. if someone else has a working ORB-style method then I would congratulate them. if they would like to offer the odd pointer then great. i do not, in my wildest dreams, expect anyone to gift me a system, as I would not do the same for anyone else.

research can get lonely at times. i am always interested in building dialogue with like-minded traders - i already have with a few people i have met on ET. perhaps you are not in this category but i find it helpful
 
Rhino-

Now if we could only figure out which breakouts to pass on. Would be nice, until then cut your losses ride your winners. With geometric progression (position sizing) and proper risk control, victory is almost a mathematical certainty even with a batting average as low as 30%. Is there such a thing as 100%? Haven't found it yet, but continual R&D is part of any successful business.
Looking at volume and momentum will help filter out the fakes to an extent.

best
 
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