Registered: Apr 2002
Posts: 727

Most traders are familiar with the concept of trend following. If you're looking for a system in the SP or emini market, here's something to start with.

NOTE: This is based on the character of the sp market. It has no EDGE, so it could fall apart at anytime.

Overall rules:

1). Risk 2% of portfolio per-trade.
2). Only initiate trades when the 14 period ADX is less than 25.
3). Use 30 min. bars.

Entry Rules:

1). Buy at the highest high for the past 15 bars.
2). Sell at the lowest low for the past 15 bars.

Exit Rules:

1). Exit long trades at the lowest low for the past 5 bars.
2). Exit short trades at the highest high for the past 5 bars.

It's made money every year since 1990 and has had a max. peak-valley drawdown of 19% in 1996. So far this year it's up about 70k on a single contract basis.

Here's the 11 year results from 1990 - 2000 using continuous intraday data. The starting portfolio size was 150k and risk per-trade was limited to 2%. I don't have 2001 and 2002 folded into the continuous contracts, so I had to test them separately. Both years were profitable.

sptrend.gif
This has been downloaded 4453 time(s).

Registered: Sep 2002
Posts: 30

This system that you have thrown out has character but no edge. Hmmmm....

That means that the next step is to incoporate filters and screens?

Registered: Apr 2002
Posts: 727

Hi reverend,

I suppose you could put in some filters and such.
I got some PM from people that were having trouble finding anything to trade, so I decided to post this simple system. Sometimes it's easier to modify something than to find a starting point.

FWIW, I tried a filter of only taking the trades in the same direction of a longer term trend (40 bars moving ave. had to be higher than 16 bar moving ave. to go long, etc.). It improved the profit factor, but hurt the overall profitability. The problem with all trend following systems is when you become selective, you often miss some of the big moves.

My analysis of why this method works is that the distribution of trades is not normal. Experienced traders know the markets have fatter tails than a normal distribution. This simple system catches the big tail moves, while breaking even on all the chop slop.

Registered: Sep 2002
Posts: 45

Here's a longer term system after this bounce is over.

http://www.maui.net/~mauiben/dowlaststand3.1.mpg

Registered: Jun 2001
Posts: 1072

acrary, could you please elaborate on the difference between a system profitting off "market character" and one having an #@E-D-G-E@# ?? By the way, I read something like that posted on TraderClub Forum, was it you by any chance (emini daytrading thread)?

Registered: May 1999
Posts: 2218

acrary - is that buy on a BREAK of the highest high of the past 15 bars or just at the high of the past 15 bars?

Same question on the stops.

Did you test using a breakout of the 15 bar price channel or just a touch of the channel?

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