ES Overlap

Discussion in 'Journals' started by ElectricSavant, Dec 26, 2003.

  1. Hello folks,

    I will post my live "once a day trade" and methodology for all to watch. Being a statistical type of system, that trades from the open, you will be able to see my trade in advance.

    I trade the ES from the open of the US RTH session (8:30 cst) and attempt to enter on the first tick of the open (timing a "market order" entry to hit on the 8:30:00 cst print). Sometimes I am off by as much as 4 seconds, but usually it still works.

    I do not trade this system, when the day before is an abbreviated session or Holiday. I never trade this system on Mondays.

    Hard stop is 5.50 pts or a time stop of 15 min from the open, which ever happens first.

    Target is 1 point/per contract

    or if this below is greater

    Open(day before)+High(day before)+Low(day before)/3-todays Open/7.7....use absolute values and always round down. I use a spreadsheet to calculate this after the open, but it must be quickly done. The initial entry will always use the 1 point and if you have time, you can adjust it higher according to your results from this calculation.
    (hint: the night before I just enter in values in tomorrows open to see what it would need to be to cause a change in the hard target of 1 point, to alert me to a gap in the morning that will require attention and a change in target after entry)

    Now, you say Electric where the H*** did you come up with this...LOL, I can say nothing, except it was an accident during a late just works. But it can stop working too.

    Now you might say....Electric, you are risking 5.50 points to make 1 point or maybe at the most 2 points.....YES, I say and watch me destroy my account here live in ET. I will not tell you the backtested results instead I will just post in advance ok? (hint:high winrate due to small target, also self calibrating due to range and gap.

    Backtesters I can also tell you this did not work with data more than 12 months old. Also to backtest this, you will need to use tick data requiring a huge history file. The only one that I know who has this sort of computing power might be Nitro, or there is a mac program named "Behold" that might be useful.

    Ok onward with the methodology.....

    We use the RTH session only(8:30cst- 15:15cst)so if you can set the candlestick bars in your charting program to reflect this it will help you understand. We do not use the standard session candlestick bars officially reported and recorded(13:30cst-13:15 cst following day)

    So, after a full day of RTH trading, we will trade the next open of the following RTH day in the opposite direction. Let me explain...If you have a red candle today...go long at tomorrows open....a green candle go short. Here is another explanation....C1>O1(RTH) = short entry on Open today and vice versa. I heard a trader call this the Contra-Open. I call it overlap.

    Thats it.....This is an execution intensive methodology entering with a market order and quickly entering in the 1 point target limit order and adjusting it using the advanced calculations above ...and one might benefit to use a front-end or a platform that utilizes bracket trading entries with one click. I use a waterfall/ladder type of trading platform and find it possible to execute this strategy manually.

    Some say that 1 point a day per contract is enough....just use more contracts. At the open you can even use more than 25 contracts and get filled. Being that the winrate is very high a bet-sizing money management system such as Kelly or FRM can be utilized. I use both but I modify them only to play with my winnings and not include my bankroll.

    I trade several markets, and this is just one of the systems I wrote for the ES. I work full-time and will try to answer your questions during the trade day when possible, but mostly will attend to this journal after hours. The 2 formats I will use for reporting will be as follows(one for night before and one for after the trade:

    Pre trade report:
    line 1= direction

    Post Trade report:
    line 1= direction
    line 2= target amt
    line 3= this trade win points or loss points
    line 4= cumulative points
    line 5= winrate

    For you higher probability traders who do not want to trade daily you can fade this system in the rare event of the 5.50 stop and enter a reversal trade with a 1.75 hard stop and a 1 point target. I will not report this.

    I will start the formal reporting on Tuesday 12/30/03

    Any questions?

    Michael B.
  2. I wish you luck, because you need to be 85% accurate just to break even.... so you must win 17 of 20 trading days to be even, 18 of 20 to turn a dime in profit. Even if you succeed at 90%, you still only make 7 points total for the month, minus any commissions.
  3. You forget the time stop my friend.....also the self calibrating target.

    I edited this in bold on the opening post to make it easier...sorry if my thread is confusing...

    Michael B.

  4. You can certainly make a nice living on 1 pt a day. My goal is 2 pts a week!
  5. Well, I have not worked up to that many contracts yet... :)

    Michael B.

  6. I do have signitutures on ignore. So, I forgot about my own....I better eliminate it while I am posting to this the risk:reward ratio on entries violates my signiture. ohhhh too funny ROFL....

    Michael B.
  7. Can you explain calibrating target ?
  8. The adjusted target considers an average of the range and the close a day before by dividing by 3. Then evaluating the gap gives sort of an adaptation to the current expectations to reach the contra-open target. The pattern identifies range, if close was at the top or bottom of the candlestick and the gap all in one number. This number is the target amount in ticks and I find if it increases from 1 point the probabilities of a winning trade is higher. I suppose one could just take those trades if he/she wishes to trade less.

    Now you say....well, anybody can enter anywhere in any direction and get a point with a 5.50 point stop or within 15 min. The contra-open seems to be very accurate in direction so the only question for me is how much and how long....

    Watch the journal and you will see.....but the first two trades are in a low volume environment. The system allows for these trades as they are not abbreviated days. Do not be too quick to judge if we don't get power in the contra-open that we need in these first 2 trades.

    I hope this answers your question....self calibrating or adapting...was just reference to the changing target. The direction is basically a locked rule that remains static based on the previous RTH direction.

    Michael B.

    P.S. I have not yet tracked those days where the previous RTH day "last hour" was strong in one direction. Some call this the "last hour indicator" and would contradict our Contra-Open strategy. It might keep us out of those few losing trades and increase the winrate even more. I will not tell you what the winrate is as nobody would believe me.

  9. Well, you risk 5,5 points to make 1 point?
  10. This is not is for the day they catch Osama and we are in the wrong direction......

    The true risk would be what the price was after 15min.

    I will add Average Win in points to Average Loss in points Ratio values to the formal report. ..... ok? But understand we need at least one win and one loss to get a the first trades will not give a value...

    Michael B.

    #10     Dec 27, 2003