Keeping It Simple II

Quote from ElectricSavant:

DB .......Thank you for this thread

I did not realize that 1% of the ES is 8.25 points and the NQ is 10 points. I wonder if this study by Brandon Frederickson was accurate for the ES? Do you see what I mean?
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I don't see why not, but don't take my word for it. He has a thread on Trading Gaps and Breakouts under the Trading forum, so why not ask him directly?

The only fly I see in the ointment is that the NQ is composed of far fewer stocks than the ES (i.e., the NDX and SPX). And the NQ has a much narrower focus than the ES since it's mostly technology. Therefore it behaves somewhat differently. I have seen gaps fill in the ES that haven't filled in the NQ and vice-versa, just as I've seen the ES make a double top when the NQ has made a 2B. But all of this is useful information.

For example, if you're short the NQ and haven't yet reached the target for the day, but you see that the ES has reached its target, made a double bottom, broken its trendline and looks to be advancing, there's not a whole lot of point in sticking around with your NQ trade waiting for it to reach the target. Odds are, you're done. Ditto with gaps. If the ES has filled its gap but the NQ hasn't, odds are it won't. Similarly, if the NQ has filled its gap but the ES hasn't, a fade is more likely to be successful on the NQ than it would if both were barrelling ahead.

The NQ and the ES are not Tweedledum and Tweedledee. If anything, they're more like Jack Sprat and his wife (the ES being the wife).

--Db
 
I'm moving the retracement and 2B stuff over here since it's so recent.

Retracements and 2Bs

03-11-03 07:51 AM

I'm posting this in the event that anybody wants to get into simple ways of trading retracements:

Here's one from Friday.

1. Price breaks the uptrendline.

2. Price retraces to the last reaction low (3).

A short can be placed under any of the bars in that little congestion zone.

Two other options:

4. Shorting the 2B (not a great 2B)

5. Shorting the failure to make a new high (one could short any of the bars in this retracement).

Attachment: http://www.elitetrader.com/vb/attachment.php?s=&postid=217273

03-11-03 09:58 AM

Here's one from yesterday.

1. Gap fails to fill, suggesting weakness in buying pressure.

2. Price drops below opening low, but not far.

3. Price rebounds above opening low, suggesting strength. However, it fails to penetrate the downtrendline. A short could have been placed below this bar, or below the bar two bars later which met resistance at the opening low level (the "whump" came one bar after).

Attachment: http://www.elitetrader.com/vb/attachment.php?s=&postid=217374

03-11-03 10:26 AM

Here's today's:

1. Trendline broken.

2. Price drops below previous high. A short could be placed two points below the previous high.

3. A short could also be placed below the "reaction" high. A short could also be placed below the reaction low at (1).

Attachment: http://www.elitetrader.com/vb/attachment.php?s=&postid=217396

03-12-03 05:54 PM

Quote from arzoo:

Since you've mentioned the 2B reversal in some of your posts, I've been trying to learn to spot them while they are forming (it's a lot easier to spot them when you look back). Based on your experience with 2Bs how well do they do in NQs?

I'm still having a difficult time in getting myself to get the 2Bs right because it seems like kinda 'jumping the gun' before the breakdown happens... but I'm sure this part is psychological on my part as I'm used to double tops/bottoms more.

A 2B is a type of double top/bottom, but is more "diabolical" in the way it traps so many more people on the wrong side of the trade. Today's chart provides an example of a 2B that fails and one that works. A 1m chart is used because my 3m is already marked up and I don't want to do it over, but there's no important difference.

1. The opening high.

2. After a retracement, a new high.

3. Price breaks the uptrendline and drops below the previous high.

4. Price rebounds, working its way back above the first high (1). By my rules, this nullifies the 2B, so I exit. This may have been a little early to take a trade of this type, but the risk is minimal.

5. Price advances past the second high.

6. Another 2B effort is made, and this one succeeds.

There's always the possibility that a 2B can morph into an H&S. The right shoulder should not come all the way back to the left, but it's important to define the risk ahead of time. You may choose to exit if you dip underwater, then short the right shoulder if price stalls. But it's not a good idea to wait for the neckline for entry.

Attachment: http://www.elitetrader.com/vb/attachment.php?s=&postid=218417

An earlier chart of a 2B:

02-27-03 11:21 AM
Since nothing's going on, I've uploaded a chart of yesterday's 2B.

Note that the uptrend is broken at "8:12". Price then makes a new high and drops below the previous one (1001).

What makes this particular 2B higher probability than usual is that resistance had been established at 1003 on three occasions during the previous two days. It could, of course, have wound up being nothing more than a retracement on its way to new highs, but that's what stops are for.

Attachment: http://www.elitetrader.com/vb/attachment.php?s=&postid=210679

And a link to a discussion of 2Bs:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=12573&highlight=2B

--Db
 
Quote from dbphoenix:


The target would also be less in pt terms: 16-18.
--Db
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16-18 ES pts? The daily range for ES these days is quite often less than that, so getting that much in one trade is simply impossible. 6-9 pts sounds more realistic.
 
Quote from wally_:



16-18 ES pts? The daily range for ES these days is quite often less than that, so getting that much in one trade is simply impossible. 6-9 pts sounds more realistic.
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The average daily range for the ES is 16-18 pts. No one in his right mind expects to make the entire daily range. As far as the target is concerned, that was addressed just a few posts back.

--Db
 
I have counted 7 instances of the ES gapping up or down by 1% or more since 12/03/02(max was 1.40% since 12/03/02).

Michael B.

Here are the dates and #'s.

12/04/02 ohlc-913.00 925.75 908.75 918.75. gap filled plus 10.50
12/06/02 ohlc-895.75 916.00 893.75 914.75 gap filled plus 12.75
12/09/03 ohlc-904.75 909.00 889.00 889.50 failed minus 15.25
01/17/03 ohlc-906.25 909.50 897.75 903.00 failed minus 3.25
02/04/03 ohlc-848.75 860.00 838.25 849.25 gap filled plus 9.50
03/07/03 ohlc-810.75 829.75 809.00 828.50 gap filled plus 10.75
03/13/03 ohlc-815.25 833.75 808.50 832.25 failed minus 17.00

Michael B.
 
Quote from ElectricSavant:

I have counted 7 instances of the ES gapping up or down by 1% or more since 12/03/02(max was 1.40% since 12/03/02).

Michael B.

Here are the dates and #'s.

12/04/02 ohlc-913.00 925.75 908.75 918.75. gap filled plus 10.50
12/06/02 ohlc-895.75 916.00 893.75 914.75 gap filled plus 12.75
12/09/03 ohlc-904.75 909.00 889.00 889.50 failed minus 15.25
01/17/03 ohlc-906.25 909.50 897.75 903.00 failed minus 3.25
02/04/03 ohlc-848.75 860.00 838.25 849.25 gap filled plus 9.50
03/07/03 ohlc-810.75 829.75 809.00 828.50 gap filled plus 10.75
03/13/03 ohlc-815.25 833.75 808.50 832.25 failed minus 17.00

Michael B.
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When you say "filled", do you mean filled on a tradable first swing, or just filled eventually that day?

You don't need to reply, it's just a question to provoke thought. After all, in the context of this thread at least, what's relevant is not just whether the gap ultimately fills, but whether it does so in a way that can be systematically exploited.

2/4 for example only filled on a death spike at the end of the day.
 
db, what have your results been like trading this strategy since you started the thread? Points per week, month, days, etc., any other performance stats you can share.
 
Quote from traderkay:

db, what have your results been like trading this strategy since you started the thread? Points per week, month, days, etc., any other performance stats you can share.
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The last time I posted these, several people said I was making it up and the usual flamefest followed. Now that a new thread is started, I really don't want to get into it again.

The rules are specific. There's no "I know something you don't know". There are chart examples galore. Therefore, anybody can take any emini chart from any source and calculate the win:loss and profit:loss for themselves. Unless the individual changes the rules in some way, everybody should come up with pretty much the same ratios.

I can tell you this, though, that I wouldn't still be using it if I weren't impressed with it. Anyone who isn't interested enough in it to go over six or eight weeks' worth of charts to see what their particular results would have been probably shouldn't bother with it.

--Db
 
Quote from traderkay:

db, what have your results been like trading this strategy since you started the thread? Points per week, month, days, etc., any other performance stats you can share.
More...

I would be also interested in results. Was this system ever backtested ? I saw several RB systems backtests and it would be interesting to compare.
Walter
 
I've been trading stocks with success for a couple years, and have been intrigued by all the talk about trading the S&P and the e-mini as a possible complement to my primary system.

Because I like to keep things simple, I was drawn to these threads. But....duh! You folks make space travel look like a cake walk!

If there is so much involved in pulling a few dollars out of trading a single instrument, I think I'll pass.

Or...am I missing something? Is there truly a decent risk/reward ratio here?
 
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