Rule of 10 Journal

[Pekelo]

Congratulation on finallly somebody starting this journal. I was thinking of it, but Volente should have done it. Anyway good luck, some observations:

Quote from MandelbrotSet:

Rule of Tend trades only happen intra-day, and usually are for 2pts ES for every 10pts it has moved.

This is not true. Actually, overnight the Ro10 tends to work even better, since the range is usually smaller than the day's range, so there is a better chance of trendchange after 10 points....

Now one thing to consider and I think the OP missunderstands the concept:

The Ro10 is an entry signal! It doesn't say it is going to move 10 points in your favour from your entry (although it might), it says after 10 points move from a previous low or high, there will be a reversal. That is it. The exit is completely up to the trader, it could be 3 points, 5 points, whatever. That's why it is hard to judge the concept, because it just gives one side of the trade. It could work for one and doesn't work for someone else.

Also a way of avoiding missing an entry after let's say 9.5 points move is to have half of the position at 9 points, another half at 11 points of the move...

Anyway, good luck...

P.S.: I assume you are not up all night, so we could assume that you have an automatized strategy that enters during the night after a 10 points move. Just an idea...

 

[SWhiting]

Quote from jagmot:

I'm bored of all the critics of Rule of 10...so I'm going to papertrade Rule of 10 to show it can be traded on a profitable basis. For journal/papertrading purposes, I will be using 1 contract.

Here are the rules I am going to use when trading

1 contract (so obviously no scaling out)
3 pt stop
10 pt target
No trailing stop (either target is hit or stopped out at initial 3 pt stop)
If stopped out twice in a row, done for the day and will wait till next day before entering a new order.

Today's high is 1291.75
Market is currently at 1281.75
Long 1 contract at 1281.75
Target 1291.75
Stop 1278.75

At this point we have been stopped out at 1278.75 around 8:30 EST on 8/7/08. This is a drag because the price went to 1289.0 around 5:30 EST before reversing. In other words, 2.75 pts. from the 10 point objective.

Jagmot, what trade is put on now?

 

[tortoise]

Quote from tortoise:

I couldn't disagree more. I think this has the potential to be one of the great journals, and I say that as one who thinks r10 is a sack of b.s. If I turn out to be wrong, I'll be the first to admit it.

So, I'll bite...

We're at a reaction low right now, correct?

Ok, then...

Long 1279....3 handle stop. 6 handle target.

I picked 6 handles 'cuz 2:1 reward:risk seems baseline healthy for this kind of approach.

Let the games begin

Obviously, this one didn't work, either.

Will someone tell me why this wasn't a "correct" r10 trade?

 

[Now is Now]

Am I understanding this correctly....this is basically a counter-trend trade? i.e high 89 ...buy when 79...stop at 76...profit goal +10.

If I am correct (not often) ....would it not have been of the high from yesterday?Say, 91.75.

Not trying to be a spoil sport , but it seems like a straight forward gamble unless there is some solid data that justifies this method of trading.

Good luck anyway.

 

[Pekelo]

Actually my entry would have been this morning 1279 long because the overnight high was 1289, but it still would have ended in a loss, because we went below 1276....

Edit: Just like Now and Now said...

 

[volente_00]

Any update on how the signals are working this morning ?

 

[Pekelo]

Quote from volente_00:

Any update on how the signals are working this morning ?

Yes, 3 points loss so far....

Now if we bounce up to 1283, that will be a short entry...

 

[tortoise]

Quote from Pekelo:

Yes, 3 points loss so far....

Now if we bounce up to 1283, that will be a short entry...

I have 1271.25 for the low....wouldn't that mean 1281.25 for the short?

 

[volente_00]

Quote from joeyata1:

the problem with the rule of 10 concept has been the line in the sand has constantly changed. for instance some people have used a 24hr running period to take entries when it suites them and at other times the rule of 10 has been based on intraday or some type of reaction lows. the rules have changed constantly to make it always look right. if changing the rules works for one thats fine but then it becomes that persons own trading style and not a firm rule most can use. for instance few stay up 24 hrs a day so use 24 hr periods make it tougher to follow. and many times the rule of 10 might now work so then you move to rule of 20 and on and on. and what are ones stops off the rule of 10? 2 pts? 3 pts? are you doing this on market hrs are 24/7? what are your stops/ what are your profit targets? i'll be interested to see how this works out

I have never changed my rules other than using a 3 point stop instead of 2. KISS, 10 point intervals, from either a reaction low or high. The reaction high yesterday was 91 ish so the next signal was 81. The last reaction low was 1281, so your signal was 71. This simple rule gets you in the trade, How you manage it is up to you. Please keep in mind this rule does not fare well on a trend day when a huge move is made. Luckily those days do not happen very often. With your 10 point target jagmot, you will probably see many winning trades turn into losers versus scaling out some at smaller gains and getting a much higher winning percentage.

 

[Now is Now]

Quote from tortoise:

I have 1271.25 for the low....wouldn't that mean 1281.25 for the short?

Yeah, it seems that that is the jist of it...until we hear otherwise.