A fellow trader and my self have been playing with a simple system and would love the help of some people who could backtest this and tweak it a bit. It currently has a 60% + winning record. The trade: at 10M using 2 different futures accounts we take 2 positions in the ES. 1 long and 1 short. 2 point stops are placed on both positions (we have also tried 1.75). We also place a 4 point target on both. The goal is that sometime during the night or early AM one side will break out and continue in that direction. This of coarse results in the other side getting stopped out -2. The targets are one of the areas we want to play with. In the early trades we used a 4 point target and usually closed the trade near the mkt open. We have had some better success using a 5 point target and letting the trade run into the trading day a bit. There are those days that both sides get stopped out and there are days that you could have taken 8 points. I am in search of the perfect combination We have so far just tested this with 1 contract. I want to test this with 2 contracts with a target of 3 points on the 1st and around 5 points on the second. You can imagine the many options available. Example.. start trade at 11:30 PM use 1.75 stop? and 2.75 target on 1 st. contract and 4.5 on last contract. I also want to test this using a breakout method with only 1 account. Example.. at 10M lets say ES is at $900. we now would set a buy stop at $902 and a sell stop at $898.00 let the breakout choose long or short. We would of coarse be using a bracket set up with targets and stops in place but we would start out with only one leg in the breakout direction and not have the opposite side get stopped out every time. This trade works especially well when news or early morning earnings announcements might move the market strong in one direction. I hope the short explanation above will give any one interested in discussing or testing this a starting point. I trade using only IB and Sierra charting and have no way to backtest the different options that can be used on this trade. Lets have some fun with this ..... Nas
Why do you need two positions or two accts??? Just put a buy and sell stop 2 points above and below the mkt instead.
So far we have not done anything with moving the stop on a trade that is now in the money. The original idea was that this system trade would be automatic and simple with no discretionary moves on our part. On several days a 3.75 winning trade has turned into a 2 point looser because we just missed the target at +4. on the other hand a trade that felt like it was dead in the water at +2.5 has run up to the target and became a 4 point winner. I would prefer not to make any stop adjustments once the trade is in motion. I think that finding the optimum stops and targets and leaving it run is the best method. A rule might be to exit a winner by 10:am if the target is not hit. I want to keep it a strict but simple system.
Size.. using 1 account is the method we would like to use. just never tried it that way. It would make it easier for the average trader with just 1 futures account. I seems that on days that the system had a winner that we would at least save the commissions on side that got stopped out. On our current method, when the breakout happens the winning side is already up 2 points when the stop triggers on the loosing side. but we still pay the commissions on the looser. I posted this here on Et so we could take a good look at this thing. Thanks for any ideas.
It's the same exact net result (minus an extra commission) with one acct using buy stops. If you cannot understand this simple concept, you'd better study the basics before you think about trading.
Indeed, oh to be a broker!... If you buy and sell your net flat! so why bother paying the extra comish?...lol....Buy/sell on stop limits 2 points either side. Beter still buy a straddle (Long Put & Long Call option) before some data is due, and pray it moves somewhere significant!
Great. Intersting idea. The background of the idea is that the night sesssion is less choppy and more trendy, and once things happnes, it's likely to move toward a certain direction untill the next morning. Right?
Kap, I have tried the straddle play in past years but in my opinion in most cases you loose when you are a buyer of options. I agree that if you only did this on days that you suspected a large move in the market and went deep in the money on both sides you could make $. The problem is that if you suspect a large move, so do the option sellers. you wont find any puts or calls on sale that day. You would have needed to set up your straddle a bit earlier. I prefer to be a seller of options not a buyer. The overnight futures play that I mentioned is designed to be played every night and can be entered during the quiet period of the market. There is no time decay involved and the delta is the best you can get. Some day options may trade after hours on ecn's, that would help a bit but by the time that the market is open the meat of the move is often over. Some Options open even a bit later than MKT ( I hate that ) I think finding the best time to enter this trade is an important part of the success. You need to find the period when the breakout is most likely to start and avoid earlier chop that might trigger a fill and a stop out in both directions. This might be when overseas markets open or?? The problem is that this has to be able to be set up at a reasonable time. I don't plan on waking up at 3:am to set up the trade. An increased winning % may be achieved by only playing this during more volatile periods, Earnings season etc. but We have looked at it as an every day play. Would be neat to test every possibility. Try things like (avoid Mondays.) (trade only Mondays) (avoid worst loosing month) I want this to be a no brainer type trade. We just find the best stats. and play them every day. Make some small seasonality adjustments if necessary, (lower target by .5 during July and Aug.) You get the idea. The options in this kind of stuff is endless. I guess thats why some traders have no life other than trading, This is just too interesting Thanks all for the ideas.
Thanks for the info on this. I think you could have could have made your point with out your last remark, but thanks just the same. Everyone please understand that this Trade is just something that we have played with, Not studied in depth. But so far it shows some promise. I am looking for any and all input from the many wise traders that reside here at ET keep your comments coming. Happy trading All .... Nas
I agree with the other posters that 2 trades is just a waste of commission. In addition to this, you are restricting the amount you can trade with by having 2 accounts, should this method be successful. There is also the chance of getting stopped out on both positions as 2pts are hit taking out one stop, then reversing and taking out the second stop. However, there is no way to get a profit on both positions.