Keeping It Simple
- Thread starter dbphoenix
- Start date
1019, right. I haven't figured out yet what is the best way to exit these reversals. An obvious exit is the target, or perhaps a 100% retracement, but more often it brakes to a halt somewhere shy of that.
In this case, that little congestion zone after 1530 seemed like a logical place for a stop. Reaction highs/lows would also seem logical. One problem here was that it took place so late that there was a risk of not having enough time to reach the target unless there was a real whump! But jumping out just because it seems like a good idea doesn't work very well. Over time, the best exits seem to be the usual stop points.
--Db
In this case, that little congestion zone after 1530 seemed like a logical place for a stop. Reaction highs/lows would also seem logical. One problem here was that it took place so late that there was a risk of not having enough time to reach the target unless there was a real whump! But jumping out just because it seems like a good idea doesn't work very well. Over time, the best exits seem to be the usual stop points.
--Db
No, I didn't. I've found that reversals that occur without the price having reached the target usually don't have the necessary force. Or at least that's been the case over the last four months. But even if I had taken it, I would have wound up with nothing, at least according to the rules I've posted.
There's always the temptation to widen the stops. Or do without them altogether. But I've been there and done that. Don't want to do it again. If the market's going to continue to be this lethargic, though, I'll have to make some modifications.
--Db
Hey DB,
In the beginning of this thread, you described your breakout method and stated the following:
Just wonering what you did on Friday, (the 24th). There was less than a 1% gap and the market started moving down from the open. Did you trade? If so, did you still wait out the first 15 or 20 minutes? At what point did you decide a range had been established, (since it never really attempted to move up). Thanks for the reply.
In the beginning of this thread, you described your breakout method and stated the following:
Just wonering what you did on Friday, (the 24th). There was less than a 1% gap and the market started moving down from the open. Did you trade? If so, did you still wait out the first 15 or 20 minutes? At what point did you decide a range had been established, (since it never really attempted to move up). Thanks for the reply.
Coming up with statistics for these gaps is not an easy chore. If, for example, you want to see what price did if there were no gap at all, you wouldn't find very many days that began with no gap at all unless you went back to the point where market conditions were such that whatever lessons you might learn may not even apply.
The statistics that I do have from the work of others show that the smaller the gap, the more likely it is to fill. Conversely, the larger the gap, the less likely it is to fill. As a rule of thumb, this cut-off seems to be around 2%.
What I look for in gaps is some indication of intent. If, for example, we're up 10 pts, we are more likely to fill than not, so I'll look for an entry on the downside. But if we're up only a few points, and I don't enter until the opening low has been exceeded by two points, then the gap is practically closed by the time I enter.
The easy solution to days when the gaps are small or non-existent is to wait until a range is established, then take the breakout of that range. Unfortunately, there are days when price begins to move almost immediately, and if there's no gap, the only alternative is to bracket the trade and place an even bet. This may strike some as fairly aggressive, but it beats guessing on one side vs the other, and it sure beats waiting for a half hour until whatever move there may be is nearly over.
On Friday, it seemed to me that the intent was clearly down, though the big downbar took place just before/at the open. When price pulled back on the 0934 and 0935 bars, I used the low of the 0933 bar as my benchmark, and entered two points below that at 1020.0 (0943).
Unfortunately, I moved my stop to breakeven when I was five points ahead (those are the rules) and got stopped out of the position. Since the ES did not retrace, I could have just stuck to it and let the NQ go, particularly since 1020 was the high point of that retracement, but I elected to stick with the rules. When I tried to re-enter, I got stopped out again, also for breakeven.
Events like that are a pain in the ass, and depending on the character that the market adopts, I may have to widen my stops, or wait longer before moving them to breakeven, or trade the ES and NQ simultaneously, or or or. But for the time being, I'm leaving things just as they are at least until we get off the pot with regard to Iraq. After all, there were extremely few trades last week, but that turned out to be for the best. Friday was my only disappointment.
Trying to assess the "mood of the market" at the open may not be everyone's cup of tea. And it's not exactly in keeping with "simple". However, you could use some bar other than the 15m or 30m or whatever. You could backtest the 5m bar. Or a 7m bar. Something that would get you in earlier without whipsawing you to death. I haven't backtested a variety of bar lengths, much less coupled whatever results I might get with the degree of the opening gap, if any. But if anybody else has, or has started to, I'd sure like to hear about it.
--Db
Db, and others. I have opened an acc't with IB for ES trading. The plan I am using is based on resistance and support #'s. Using your setup ,Db. Traded for six days, down 2K. The first three days, I only tape read, using 30 Indus. Avg, TICK, and S&P cash index. When all three were down, I would sell the ES just by intuition. Traded only one contract. Forgive my small #'s...First day 8 trips, $212+; day 2, 15 trips, $375-; day 3, 13 trips, #275+, Day 4, I am sorry to say, 33 trips, $1234-, Paper traded the next day; Day 5 ,5 trips $112-, Today 10 trips $387-. I have been using a EMA crossover method past 2 days buying on up and selling on down of cross of 1 pt. Using Db method of buying on 2 pt. above opening or reaction Hi and selling on 2 pt. below opening Lo or reaction Lo. Am I being to simplistic on using those indicators? I know I overtraded on the big loss day trying to make up. When I look back at Db method, it works. My stops I feel comfortable with is 1-2 pts. Will the crossover method work with such a stop and with Db method?
I feel like I have rambled on...I am just frustrated. What help can you give me to make me profitable. Have I just been in a choppy market too often? Thanks in advance, and I welcome any private e-mail. Thanks. Tony!
I feel like I have rambled on...I am just frustrated. What help can you give me to make me profitable. Have I just been in a choppy market too often? Thanks in advance, and I welcome any private e-mail. Thanks. Tony!
I'm not sure how to respond to this, Tony. What you're doing has nothing to do with the strategy I posted. It doesn't use the DJ or the TICK or MAs of any kind or anything else other than the NQ or ES, nor does it use stops as tight as yours. And you should be making at the most three trades a day, if any. And God knows intuition should have no part in it. If anything, it's supposed to be a no-brainer strategy once you've decided what bar length you want to use to define the opening high and low.
Where did I say to enter on reactions?
--Db