Guessing Daily Direction of ES/NQ

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

  1. luxor


    It seems to me that if one can make a statistically educated guess by 9:30 am whether the day will be up or down, then half the battle would be won. One would focus on making long or short trades exclusively in the primary direction.

    Are there any methods traders here use to guess how the day is going to go in ES and NQ? I've found, looking back over a year of data, that if the 10am price on ES is higher or lower than the open, there's a 70% chance the day will close in that direction. I'm wondering if others have a method that is even more accurate.

  2. Lux,

    If you've done that backtesting via looking at a years worth of data...

    can you answer the following questions:

    1. What type of stop/loss protection are you using?

    2. What type of profit target your using if such is reached prior to the close?

    3. Have you tested this theory or guess you have with real money?

    4. If's it going so far and how long have you been trading with real money?

    Someone here at ET had said they had a better system than 70% and posted a journal here at ET in the past (I can't remember the name of the journal)...

    however...they failed when it came to actual trading via their posted results.

    I think I remember some days the trader would be at a +8 point profit and then by the close would only be up +1...

    would you call that a profitable day?


    Would you call that a well managed trading day?


    I can't remember if that trader was using a mechanical system or a discretionary system.

    I do know there are backtested mechanical systems about such with good results in backtesting...

    poor results in real trading.

    My guess (pun intended) is that the reason such fails is that trade management rules aren't clear...somewhat ambiguous.

    Those that do have such a successful system in real trading...

    are trading such and aren't going to share it with you nor anyone else because it is a mechanical system.

    Good luck (pun intended) because such type of a system is tough to trade with real money...

    regardless if its mechanical or discretionary because most traders...

    psychologically tough to trade via such a method...successfully for a living.

    July 8th: At 10am...ES is lower that the open...but closes higher.

    July 7th: At 10am...ES is higher than the open...but closes higher.

    July 3rd: At 10am...ES is higher than the open...but closes lower.

    July 2nd: At 10am...ES is higher than the open...but closes higher.

    July 1st: At 10am...ES is lower than the open...but closes higher.

    June 30th: At 10am...ES is lower than the open...but closes lower.

    Out of the is 3 that it works and 3 that it doesn't work...

    50%...guessing the direction via comparing the 10am price to its Open is a good word to use.

    P.S. A few of the above days had counter-thrusts of +8 points or more...reason why I asked you about the trade management issues and mentioning how difficult it is to psychologically trade such a system via such counter-thrusts.

    You need very deep pockets in your trading account to survive the drawdowns...especially if you hit such a drawdown when you first test your theory with real money.

  3. I think the direction depends on the market sentiment. If you got a feel for it than you will do as most other traders and take the right side of bid/ask, if you are wrong or something unexpected happens, then you are left holding the bag. Technicals is another way to estimate the direction. Best is to papertrade to see how often you are right.
  4. I'm assuming that the 70% is based on the direction from the open and not from the 10am close. If this is the case, do you have a % as to the direction from the 10am close. This is the point where you are taking your trades from and have to decide on the direction from that point forward, not from the open of the day. As an example, if the spoos are up 10pts at 10am, but only up 5pts by 4pm, your records will show that as one of the 70% correct direction statistics. However, the reality is that it has went the opposite way from the point forward that you made the decision that it is a long day.
  5. NihabaAshi, said most of it but here's a few more things...

    Having a 50% successful "guess" of future direction can be profitable with good risk management - meaning managing to get a 1:3 stop-lose / target. But in regarding to a days direction, where will you put your stop loss? A day can go down 8 pts before turning to end up on the positive side - In this case you will lose either direction you choose (assuming you do use stop loss). If you don't use any kind of stop loss you are playing a dangerous game and in this case you have 50% to be right about direction but no risk/reward leverage which eventually lead to a loss.

    Regarding your 10am statement. There are a few systems that try to predict how a day will continue or end according to the opening. The field of market profiling is indeed very interesting. The problem with your 10am "rule", is that in these cases the market probably already made most of it's move by 10am, so in order to enter a profitable trade you will have to wait for a recoil, which will not provide as much gains as it seems to you now.

    Tm Trader
  6. MVP


    Short ES signal.

    Shorting on any break.
  7. luxor


    Thanks for all the feedback.

    By 10 am, I meant that if the ES price at exactly 10 am is greater than the opening of that session at 4:45 pm the previous day, there's a 70% chance that the day will be up. In other words, if ES opened at 1000, and by 10:00 am the price is 1002, chances are the day will close over 1000. Of course, the price may have had a 10 point draw down that day. This is just based on a year's worth of data, so it's possible with more data the probability becomes 50%, or worse.

    I haven't traded this with real money, and I haven't thought of a way to trade this effectively using stops, etc. I'm still struggling just trying to trade 1 contract and trying not to lose my shirt.

    I just thought I'd mention my observation since there are successful traders here who may perhaps build on it, or shoot my theory out of the water.

  8. dbphoenix


    And this is appropos of what?
  9. MVP


    wave 1 down formed
  10. dbphoenix



    Are you starting a journal?
    #10     Jul 9, 2003