Keeping It Simple

Quote from jstormbo:

what a day to fade the gap :)
More...

Awfully dangerous, though. If you're already in the trade (in this case, 71.5), that's one thing. But trading while important news events are unfolding, in this case Blix (Bloomberg said he'd be speaking at 1000, but after the spike, they updated that to 1030, then to 1045), can bite you in the ass, particularly if you use market orders to exit.

The spike here was pure luck (an unexpected arrest) and had nothing to do with strategy. But having been handed the money on a platter, it would be smart to get out at the fill rather than hope for a continuation, based on the probabilities of continuations versus faded of the fill.

--Db
 
Db,

While I was looking at the gap this morning, you fade the gap if it is > 1%. I was wondering what happens if for example instead of turning up, the NQs continued down from the low of 964.50 at 9:35. What would be done in this case?

I ask because I know that there are strong days when gaps open and continue going and was wondering what strategy is good to use for NQs when this happens.

Thanks.
 
granted but these days there seems to always be a dark cloud somewhere over the horizon. I find that I have to stick with my rules and the Blix report wasn't a show stopper in my mind. I took a break above the opening high at 11.75 with reduced size as I do on all gap trades which for me is 3 lot, got filled at 11.5, set my stop at 8.5 and loaded 1/3 offer at 3 points or 14.5 the 2/3 at 21.75, even before the news the trade was moving my direction and I had covered my 1/3 and had moved my stop on the rest to BE. I took the 2/3 at 21.75 and then once we blew thru the pivot I offered the last one at R1 which was 28.25 which was my target for that move. Got filled there and am done for the day. The capture rumor was a lucky break but I was ahead before that worse case or if it didn't pan out I was risking 3 pts/lot.
 
Quote from arzoo:

Db,

While I was looking at the gap this morning, you fade the gap if it is > 1%. I was wondering what happens if for example instead of turning up, the NQs continued down from the low of 964.50 at 9:35. What would be done in this case?

I ask because I know that there are strong days when gaps open and continue going and was wondering what strategy is good to use for NQs when this happens.

Thanks.
More...

I had been told that it's not a good idea to trade in the direction of the gap, but I found by chart review that that's not something that one can just accept prima facie. It just depends on why the gap occurred in the first place.

According to Frederickson's stats, the larger the gap, the less likely it is to fill. Since this was 1.5%, it was very likely to fill, and was well on its way before the Bin-Laden spike. If it hadn't, I would have gone ahead and entered the downside. However, I would have liked to see an aborted attempt to fill the gap, which would suggest a lot of downside pressure, i.e., a lot of supply and insufficient demand.

I haven't included gaps in the ORB strategy because too much depends on judgement, and there's nothing "simple" about that. But I suppose the simplest means of trading them would be to come up with a standard entry point, exit at the fill, then come up with criteria for fading the fill. Or, if fading the fill is not statistically worthwhile (determined by chart review), standing aside until the day's true trend manifests itself.

One difficulty I've had in coming up with real data on this rather than "feelings" is that there are so few gaps, particularly the larger ones, unless one goes well back into the chart record. But if one does that, the risk increases that one is comparing two dissimilar markets and that whatever data will be obtained will be irrelevant.

Therefore, if you can come up with specific criteria for trading these gaps, good for you. I hope you'll share them. If you can't, then just ignore them and allow the opening range to form itself before instituting the ORB strategy.

--Db
 
Quote from jstormbo:

granted but these days there seems to always be a dark cloud somewhere over the horizon. I find that I have to stick with my rules and the Blix report wasn't a show stopper in my mind.
More...

Given the reaction the last time, it was in mine. But that's what makes a horse race.

In this case, I got stopped out. But I've been noticing the past couple of weeks that 5pt stops often get hit exactly before reversing. Therefore, even if one is 5pts ahead, it pays to put the stop a point behind BE rather than at BE itself, at least until one is at least 6pts ahead. What I had planned to do, though, if I had not been stopped out, was to exit at the fill and then see what happened in terms of "thrust". But I thought it would take five or ten minutes to get there, not two. Regardless of the time it took, though, I would have exited at the fill.

--Db
 
This sparked no interest whatsoever on the thread I posted it to (perhaps because there's no indicator to tell you what to do), so I thought I'd repost it here in the event that anybody wanted 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).

--Db
 

Attachments

Quote from dbphoenix:

This sparked no interest whatsoever on the thread I posted it to (perhaps because there's no indicator to tell you what to do), so I thought I'd repost it here in the event that anybody wanted 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).

--Db
More...

Db...

I saw it and read it...I guess the guy that's vague about his own trade setups while wanting specifics to trade setups of others...

wasn't interested :)

Geeeshh...he could have at least acknowledge the effort you made to provide him the info he wanted :(

Db...your charts and annotations are clearly understandable...thanks for sharing...especially at this board.

NihabaAshi
 
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).

Sorry I don't have two stochastics, four MAs, and a MACD and Bollinger Bands in two timeframes.

--Db
 

Attachments

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).

--Db
 

Attachments

Hey Db, the charts are cool.

I really appreciate your willingness to share the stuff you've learned over the years, they're very helpful.

A question does come to mind, though, when following the trend and using trendlines, what signals a trend continuation (albeit the trendline goes at a lower slope after a TL break), as opposed to an exit/reverse?

Thanks again for all your help.
 
You must log in or register to reply here.
Back
Top