Tons of trading signals!

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daniel_tysen

Hi guys,

I'm trading futures, the liquid ones, currencies, stock-indizes, crude oil, gold etc. I daytrade/swing-trade from hourly charts, mostly breakouts. So usually a trade lasts about a day, sometimes longer when I hit a big one.

I make money with this, but I still have an issue though. I always hesitate and wonder what to do when I get multiple signals at the same time in markets that I know are highly correlated. For example I might get setups in Gold, Crude Oil, AUD and CAD. Or in the JPY, ES, YM and NQ. Or in EUR, GBP, AUD and NZD.

I usually try to pick the "best ones" and skip the other possible trades. Problem with this is of course that I don't know which one will be "the best" and this is not a very consistant method. Another way would be to split the risk but this way I might get triggered on 2/4 trades only and have only 1/2 the risk I wanted...

Or take all trades but then I might have at least two times the risk I wanted if the trades don't work out (often for the same reason like some news).

So...how do you handle such a situation?
 
Try finding a way to quantify which trades are the best. For example, you might think the best trades have largest target compared to stop or target compared to bid/offer+commission or the best trades are in the most volatile markets (as these may come into profit faster realeasing risk for other trades earlier).
 
What I have found to work in the years I have traded, find one market to only trade and increase contract size. You will learn that each market has it's own personality. After you have mastered this instrument after a few years, then add another one. Too often of times doing mass instruments in long run, you cheat yourself out of good trades cause you were too spread out.
Or trade one market of each sector, trade the ones that have the most bang for the buck since you are doing breakouts.
 
Greetings,

Been there, done that,...but in the process, I created a procedure to resolve the problem for myself, in a somewhat fun way (at least for the engineer in me, its a little fun). The steps to the procedure I used are:

Step #1. Focus on only one contract, of the X numbers of contracts you are monitoring for a period of about 30 intraday trades. This should take about 2 or 3 days depending on your signal frequency.

Step #2. Be sure to maintain accurate data on all the other X number contracts during the 30 trade period. And since the trades you execute in the focus contract will oftimes occur coincident with the others, at the end of your 30 focus trades, you should have accumulated about 30 trades in the others as well (30 trades is considered statistically significant for test purposes).

Step #3. Then over a weekend with a hot pot of coffee, print out, or make JPGS, and review on paper all the other contract trades during the focus period. This is actually the fun and exciting part, its sort of like being on a technical analysis treasure hunt. Then determine which contract(s) offer the greatest ease, signal reliability, consistency, and bang for buck (ie X out of 30 were successful/failed). Use whatever criteria you deem significant for YOU. Then rank order the contracts, and select the top 2 or 3.

Step #4. Be professional in your approach, and do maintain a notebook of the previous test results. Then repeat this procedure every 6 months to a year, because things do change. This is especially true in the last few years.

In my case, the information and data I was looking for "stood out like diamonds amongst coal rocks", and the ultimate decisions were a piece of cake. The testing should take no more that a week or two at the most before you have your answer. Funny thing,....but I have been offered a little money for my Test Notebook, but it is obviously not for sale.

Hope it works for you as well.
 
Quote from daniel_tysen:
----trading currencies, stock-indizes, crude oil, gold etc.
----I get multiple signals at the same time in markets that I know are highly correlated.
----I get setups in Gold, Crude Oil, AUD and CAD. Or in the JPY, ES, YM and NQ. Or in EUR, GBP, AUD and NZD.
----I try to pick the "best" ones and skip the others
----I don't know which one will be "the best"....
----how do you handle such a situation?
More...
1) You can't eat everything at the buffet table without getting sick.
2) Focus on the most liquid markets in a sector and ignore altogether the others. Because of the correlation, you do not need to follow them nor their "confirmation" of a trade signal. :cool:
 
Thanks for your replies guys!

Well just trading one market doesn't make a lot of sense for me. I use daily charts for my signals even though I'm usually in and out within a day and trading just one market would give me not enough signals over the year and the odds that my edge doesn't play itself out would be worse than trading more markets and getting more trades.

But I'll reduce the number of markets I'm watching going with the most liquid ones.

I liked the idea to find a criteria I can actually write down on paper to decide which trade to take if I get many signals in similar markets. I'll think about that...
 
I wouldn't call all of those correlated, because some are leading. For example, the Nasdaq tends to lead, at least it has over the last 10 years. Sometimes gold is also a leader, or at least a good leading indicator. Some times it's oil. If you remember, just before the mega crash, every time oil went up, the market went down, like clock work. However, it was not market down and then oil up, so oil was the leading indicator at that time.


I always try to follow the leader, and as far as world markets go, the ES leads the way. So generally, speaking of Earth, the ES is the leader. However, from time to time, other futures are the leading indicator of the ES. When you see it happening, trade it until it doesn't work any more, because these trends tend to last for a month or more.
 
Quote from joe4422:

I wouldn't call all of those correlated, because some are leading. For example, the Nasdaq tends to lead, at least it has over the last 10 years. Sometimes gold is also a leader, or at least a good leading indicator. Some times it's oil. If you remember, just before the mega crash, every time oil went up, the market went down, like clock work. However, it was not market down and then oil up, so oil was the leading indicator at that time.


I always try to follow the leader, and as far as world markets go, the ES leads the way. So generally, speaking of Earth, the ES is the leader. However, from time to time, other futures are the leading indicator of the ES. When you see it happening, trade it until it doesn't work any more, because these trends tend to last for a month or more.
More...

What you are saying is that it is pretty much random who does something first :) It's only easy in hindsight to say something is correlated. If you're saying it for this moment is's hope and pray it stays that way.

It's like buying the dip every time until it blows up.
 
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