Day Pyramiding with NQ, ES, or YM

Discussion in 'Index Futures' started by MidwesternTrader, May 10, 2018.

  1. Just going to put this out there for anyone interested in trying something new with NQ, ES or YM. Been trading this live for 3 weeks now. It is an easy approach to add into a winning position using a limited risk amount for a daily trade. No overnight holds.

    Not interested if anyone thinks it good idea or if anyone thinks it sucks. This is a simple strategy to perform your own back test / forward test on to make up your own mind. Thought someone else might be interested in it and will be able to use it / improve it for their own trading.

    The basics –

    1. Use your favorite predictor with edge to guess whether the NQ/ES/YM index will go up or down for the day’s regular trading session: 9:30 – 4:00PM EST.

    2. Use four trade entries spaced out by 45 – 60 minutes each, but do not make your first entry until at least 10:00 EST to let the opening volatility shake out some. Example of entries could be 10:15, 11:15, 12:15 and 13:15. So long as you space them out, you will get entry diversification through a degree of randomness which is what you are looking for. We can call these entries E1, E2, E3 and E4.

    3. Use a defined stop loss on each entry. I am using -$300 per contract. So that will be 15 points on NQ, 6 points on ES or 60 points on YM for 1 contract.

    4. Your max daily loss is $-600 for 1 contract trading, the equivalent of two stopped out entries.

    5. You can use dumb entries – meaning execute market price orders at your designated entry times. Or you can use your favorite indicator on a 1 min or 5 min time frame to attempt price improvement near your entry times. Dumb entries are easier to program for automation.

    6. Always take your first two entries: E1 and E2.

    7. Take additional entries (E3 and E4) so long as you do not have two previous entries stop out at any point. So if E1 and E2 both stop out at -$300 each, you’re done for the day with a -$600 loss. If E1 stops out, E2 is active and in the money, then E3 stops out, then do not execute E4. If E1 and E2 are in the money and E3 and E4 stop out, adjust stops on E1 and E2 and attempt to let them run through end of day, etc.

    8. If you end up entering 3 or 4 entries during the day, you will need to make some decisions on how to adjust your stops on the previous entries as the third and/or fourth entries are opened so the daily loss limit stays near the -$600 maximum. You could raise stops on previous entries to break even as a simple method, but there are a many ways to do this. You’ll just need to pick an approach.

    9. Exit all positions by end of day so you are flat before the after hours session starts.

    I know most pyramiding methods add to a position as profit targets are reached. This is different in that it adds to a position on a set time interval, so long as no two previous entries are stopped out. This purpose of this is purely to diversify entry points to give your predictive edge method a better chance to make some gains. The goal of this method is to be on the right side of the market during strong trend days with one-way price action that will lead to oversized profit days, especially during periods of higher volatility.

    My back testing on NQ has shown this to have about 40% profitable days with 60% unprofitable days. About 90% of the unprofitable days result in the -$600 maximum risk amount for 1 contract trading. Obviously with the volatility that has been present since Feb. 1st, big profit days are possible. NQ has produced days up to $16,000 when all four entries are triggered with 1 contract and the trades hold through close.
    Spooz Top 2 likes this.
  2. This seems to violate the KISS principle to a very big degree.
  3. clacy


    Really? I thought the exact opposite, lol. It seems pretty straight forward to me. There aren't many strategies that can be summed up in 1 post.

    Granted, this is more of a money management strategy vs technical analysis strategy, but there's almost nothing complex about what he said.
    bpr and volpri like this.
  4. yiehom


    Sensible, overall.
    But if I am not profitable with the first trade, even with the stop still in place, what makes me think the second one will make profits ?
    comagnum likes this.
  5. You can back test that question to learn past performance.

    For the signal I use, my back testing shows if E1 is stopped out, E2 is net profitable and should be traded. Additionally for the signal I use, if both E1 and E2 are stopped, then entries E3 and E4 are net negative.

    But this will depend on your daily predictive signal you choose to use. You may use something that shows different back test results if E1 is stopped out.