Another Very Simple Trading Strategy

Discussion in 'Strategy Development' started by ewile, Jan 12, 2003.

  1. ewile

    ewile

    HI,
    In the spirit of Simplicity that has dominated these boards for the past couple of months, I submit this for your consideration and critique: the Very Simple method that I've been using profitably for about a month now.
    My circumstance: I have a full time job at which I'm able to attend to the markets from 9:30 AM-10:15 AM (ET) and then in small segments during the day (I usually get on for about 5 minutes at 10:45, 11:30, 12:30, 1:00 etc.). Therefore I needed a strategy which does not require constant monitoring. My account is less than 25k, so I've been trading this strategy using the SMH on some days and the dia ssf on others (yes. I'm the guy buying those 2 contracts per day).
    Here it is: I wait until 10:05 and place a buy stop above the high and a sell stop below the low of the day (gives me a feeling of security that protective stops are in place). When I check back in at 10:45, if an order has been filled, I double the other stop (eg. if I'm long 100 smh I make the sell stop at the low 200 shares so that if the market reverses I have a chance to catch that move. I'll only take 1 long and 1 short in a day.
    As for the exit, most often, when I check in at 10:45 I have had an order filled, and generally show a small profit. On some days I just call it a day and take that profit. Other days I close half and hold the rest. However review of charts leads me to believe that the best strategy would be to simply hold the position for the entire day and close at 4:00 (of course keeping my stop loss in place). The gains from catching full trend days would compensate for smaller losses.
    I've been doing this for about 4 weeks now and have had gains each week. I'd add that on two days when I could not attend to the market, I whould have been whipped around for losses, so I've had that bit of luck.
    I welcome any comments, suggestions thoughts etc.

    Thank you.
     
  2. :D That's funny!

    ewile we have crossed paths before but I cannot remember where. Regardless, very nice work there. There are so many positives to your approach. I have put in a lot of thinking and research about an opening range breakout for the last six months and the scenario you describe illustrates what I have seen as well.

    If I may, I'd like to comment on some positives that I see and ask a question or two. Please, if the questions are too intrusive, say so, and I will delete them.

    First you have nailed simplicity. Bravo ewile. SImple, straightforward, one post and the strategy is laid out.

    I like the 10:05 stops. I presume you do this to preclude having to keep track of "numbers" coming out on certain days.

    The one trade each way makes so much sense, especially given your objective. Either it goes up, or down.... if not then out! That raises one question here though which is, what is the stoploss for the reverse trade?

    And I totally understand the idea of wanting to hold that baby all day. Larry Williams has done studies that show that is the best way to do it.

    Thanks for posting ewile. I am looking forward to the responses you get here.

    :)
     
  3. ewile

    ewile

    >>>>>>>>>>ewile we have crossed paths before but I cannot remember where.

    I've been around stock trading message boards for a while now, before here most notably the Motley Fool boards.

    >>>>>>>>>I like the 10:05 stops. I presume you do this to preclude having to keep track of "numbers" coming out on certain days.>>>>>>>>>>

    Yes. No formal backtesting, but my observation has been that it pays to wait those extra five minutes.

    >>>>>>>>>Either it goes up, or down.... if not then out!

    Yeah, what I really wanted was a way to ensure that I catch all trend days

    >>>>>>>>>>>That raises one question here though which is, what is the stoploss for the reverse trade?

    I knew that I left that out. I put the stoploss for the second trade at the other extreme high or low. I know that there must be a more efficient way to do this, probably using the volatility or ATR of the stock/future. I'd love suggestions.


    Again, thoughts suggestions appreciated.
     
  4. So it would seem that you have said the average 35 minute range is a value that I can live with losing if the reverse trade is triggered. Reversing or getting out at the opposite extreme of the entry is widely practiced and considered sound trading.

    And doing so has still given you some gains each week for 4 weeks, and I can vouch that there have been a number of days where the range of the first 35 minutes expanded in both directions so you are still good.

    In my own work, I am looking at 50-52% of my opening range bar as the reversal. I am also looking at the open and the close of that same bar as reversal or at least stoploss points.

    :)
     
  5. The strategy is simple and that's a big plus. It's been only a month since you started using it so it's hard to say if it will work in the long run. Did you backtest it? I would not trade a strategy that was not backtested. Of course, the fact it worked well in the past does not mean it will work well in the future, but at least you can hope it will not fail completely, particularly that it is simple. If it worked well in the past and is complex I would suspect that it was a one time event and may not happen again. But simple strategies are not optimized and so are more robust and less likely to fail completely over a long time.

    Your idea is somewhat similar to the first 30 min breakout that has been discussed here at considerable length in the case of index futures.
     
  6. Using Fibonacci retracements (FR) for stop-loss placements can be useful or for entries on pullbacks if you believe that the original trend will continue. You could then add to your position or exit it if you see any signs of weakness. This complicates things a bit, but I would say (just as inandlong just did) that 50% could be a good point for a stop-loss, but again, you may need to wait till the 61.8% FR is hit and then decide whether to exit or not. This could save you about 2 pts out of approximately 6 pts as far as ES is concerned, meaning about $100 for 1 ES contract.
     
  7. Agreed wally, the more complex the method is, the more market-dependent is. That's what I like about it.

    And it is very similar to the methods described by Girlpower and snosur4. I seem to recall that Oliver Valez discusses something similar as well.

    The beauty is that ewile has posted it, said it is working for him... why should we not believe him... unlike you, you vulture :D, and it can be transferred from one trader to another without volumes of monologue.

    And... for cryin' out loud... ewile is at work doing a real job to boot!

    Btw, just thump me on the head for not testing the FR too. Geez, you know... !

    :)
     
  8. So you are out with the kids at the zoo, or taking in the morning surf, or just coming off the tennis courts, and you look at the real time quote for the ES at 10:05 on your internet-enabled phone, place the trade via your phone, go back to the elephants. or catch a few more waves, or just one more set because your serve is smokin" today, and when finished you check your position and get a quote on your web-enabled phone....

    Now that's what I'm talking about!

    :cool:
     
  9. ewile

    ewile

    I claim no origionality here. This method was totally made from ideas posted the other "SIMPLE" threads.

    The week of Christmas and New Years I didn't trade so those 10 days is not included in my little sample.

    I've done no backtesting other than eyeballing charts.

    This system has really permitted me to be an active trader, but allows me to attend (almost) fully to my job.
     
  10. Substitute 'hot sexy babes' for your elephants and you will know what I am talking about!! :D
     
    #10     Jan 12, 2003