Daytrading BOs in the ES/NQ

Discussion in 'Index Futures' started by dbphoenix, Jul 8, 2003.

  1. dbphoenix


    Has anybody been playing with this with emphasis on the ES and NQ?

    The Method
    This is not a mechanical system: it is discretionary, with guidelines/rules. The objective is to trade only once or maximum twice a day and to make a decent profit. The less time in the market, the better. People who try and scalp 20 times a day with 2 tick stop-losses are idiots. Boring is best.

    RULE NUMBER ONE: Times of day

    „h DAX & ESTX50: Trade only once between 03:00 ¡V 05:00 EST, and/or once between 09:40 ¡V 11:30 EST. No other trading times are permitted. If you like your sleep, just forget about the first time period and wait for the second.

    „h ES: Trade only once between 09:40 ¡V 11:30 EST and/or once between 14:00 ¡V 16:15 EST

    Will you miss some big moves by avoiding the other time periods? Yes you will. But more often than not, the middle of the day is shit with people scrapping over relatively minor price movement. Stay in the time periods where the institutions are more likely to come in and drive the market your way. The goal is not to be a clever dick catching every turn ¡V it is just to make some money.


    „h DAX: 15 points is 375 Euros (one point is 25 Euros, one tick is half a point i.e. 12.50)

    „h ESTX50: 10-15 points is 100-150 Euros (one point is 10 Euros, one tick is one point). This target be too little and is work-in-progress for me

    „h ES: 4 points is $200.00 (one point is $50, one tick is 0.25 i.e $12.50)


    Trail behind a recent pivot low when long, OR a recent strong up bar (open at bottom, close at top, range good), OR $200. Move it behind each strong up bar. Stop-loss placement is quite discretionary. But never initially risk more than you aim for. On occasion you may decide to exit early if you get a strong key reversal bar..

    ENTRY CRITERIA WHEN BUYING (rules reversed for selling short):

    Wait until a pivot high occurs within the correct time period. This is defined as a bar whose high sticks up over the top Bollinger line. Then wait for a lower high bar to occur, and a lower low bar ¡Kwhich can be the same or different bars. In other words, you must wait for a minimum of one bar after the pivot high. I like to see at least two bars but that¡¦s discretionary. Now buy one tick above the pivot high on a breakout. BUT, you must make sure of the following:

    „h No more than 15 bars should have gone by since the pivot high formed. The fewer pullback bars the better. 2-6 bars since the pivot, appears optimal

    „h You cannot reference anything other than the most recent pivot high

    „h The moving average line should be in a 45 degree upwards direction during the pullback.

    „h The breakout must be such that it¡¦s bar would also be pushing through the upper Bollinger line. If you have the Bollinger Band lines set to ¡¥update every tick¡¦ then this is easy to eyeball.
    „h The breakout cannot be coming off of a new intraday low.

    „h Check the other 3 symbols for agreement or disagreement.

    „h If this criteria is met in one symbol, you can choose to ¡¥execute¡¦ the signal in another market that may not have technically met the criteria, at your discretion. Example: if the ESTX50 has a valid spivot spike at 09:55 EST but the ES does not i.e. the ES bar did not exceed the upper Bollinger line (but is still a spiky pivot), then you can buy the ES above it¡¦s own 09:55 EST bar. Again, discretion is advised. This point emphasizes the importance of visually lining up all four symbols symmetrically.

    The above bullet points are a non-scientific way of saying the market must be strong. The stronger the better. The whole idea is to buy high and sell higher. Most people are preoccupied with buying low. This is the opposite philosophy. If it¡¦s all lined up ¡¥right¡¦, you will NOT see a pullback from one of these breakouts. So if you think you can wait for the breakout and catch the pullback: forget it. The last point about checking the other three symbols is extremely important. You must look at all four markets and see what their action is.

    Some people like to say ¡§don¡¦t bother with European markets ¡V they just follow the US anyway¡¨. But this is far too generic and simplistic. Particularly in these chosen time periods, you have no way of knowing which will be the ¡¥leader¡¦. As the day wears on i.e. after 11:30 EST I agree that the DAX & ESTX50 tend to become slaves, but from 09:40 ¡V 11:30 EST it is anyone¡¦s game. The ¡¥leader¡¦ can change from one day to the next. The point being, you cannot afford to trade without all four symbols on your screen. Even if you never intended to trade on Eurex, following the two Eurex symbols can assist your ES trading. Certainly when all four are pointing the same way at the same time, it¡¦s time to load the boat.

    So there it is. Lots of nuances and discretion are involved but it¡¦s a good starter for 10 on deciding which breakouts to trade. The profit objectives are always fixed. Get used to ¡§settle¡¨ with them and don¡¦t sweat it when the market goes on to make a $1000 move after you cashed in at $200. There¡¦s always tomorrow. And anyway, if you want to make more money, trade more contracts not more signals. The objective is just to make decent money, not to be a clever dick. I know this advice will be ignored by most people who will break all the above rules no matter what I say, which is how I know it¡¦s safe for me to post it! Successful trading is SIMPLE not complicated. That is not to say it is ¡§easy¡¨, but if you think you need to study complex mathematics just to trade well, then you¡¦re either a Guru or a Groupie - but that¡¦s another subject!

    And finally:


    „h ES: Enter on a stop-limit one tick above the pivot high (same limit price as stop price). Never use a plain stop because it isn¡¦t native on Globex. Profit objective is a Limit order. Stop-loss is a stop-limit order with at least a 5 point spread between the stop and limit prices. Never use plain stops because they are not native and you can get screwed with them.

    „h DAX: Enter via a stop-limit order with one tick (0.50) difference between stop and limit price. This is not a native order but since it¡¦s only Entry and we need to control slippage, it is safe to use. Profit objective is a Limit order. Stop-loss is a plain stop order (native). Do not move your stop more than 10 times when in a trade.

    „h ESTX50: Same as DAX except the initial stop-limit order should have the same limit price as stop price.

  2. Yes,
    trading NQ.watching ES and YM. No dax,estx50
    Morning only

  3. dbphoenix


    Are you using it to scalp or to trade the trend?
  4. I'm using that, the stochastic pop, and range trading, depending on the mood of the day. (Very discretionary). Doing OK too, especially considering I've been trading futures for a couple weeks. Been making as much as I do at work, just trading a few hours in the AM. I'm not going to get into the journal thing as I have found it distracts me. I recommend paying attention to this method, because it works under the right conditions.
  5. Currently,going for 10pts.and out. 1 contract. If I can reach my target consistantly(when setups occur) for 4 more weeks I plan on doing 2, 1 for 10 and 1 for the trend of the day.

  6. Sounds like you are all doing really well. Good show chaps
  7. Seems like there are loads of discretionary rules for Johnny Rotten's system is it really a good way of trading?

    The further the thread containing the system developed the more complicated it became. I thought it was supposed to be kept simple?

    Are you really making profit with this ever expanding set of rules?
  8. As the rules expanded, the less likely you were to enter a crappy market,and the more likely you are to reconize a market that was acting correctly or not. Much easier to make decisions.


    Oh, and yes
  9. Good answer.
  10. dbphoenix


    It's not for everyone. For one thing, you'll be making only one to three trades a day. Some days you won't be making any. But the losses are trivial and the profits are substantial.
    #10     Jul 9, 2003