Help With Rather Simple System

Discussion in 'Technical Analysis' started by LeroyB3, Nov 3, 2005.

  1. LeroyB3

    LeroyB3

    Okay…need a little help here. I’ve got a system using the S&P500 Emini (ES). It’s a simple EOD system where I will go long the next day after the signals. The signals work well enough and I will work on them more, but the major problem comes in when I think about entry the next day and setting stops.

    Buying the next day at the open and setting a stop below the low of the signal day could mean a loss of 5-15 points in the ES. I don’t like the sound of that at all for obvious reasons. I could set limit buy orders at different levels of the signal day. For example if the signal day low was 1000 and the high was 1010, then I could set a limit buy for the next day for 1 contract at 1005 and another contract at 1007.50 and another contract at 1009 and just hope that one of those contracts gets hit. But, I fear that this will keep me out of the stronger moves if the next day opens where the signal day closed and the market takes off.

    Basically I don’t like the idea of risking 10 or so points and I am not able to watch the markets all day long because I have a regular 9-5 job. I have a good signal, but would like some input/ideas on getting in the next day and then setting stops. Thanks.

    Best,

    LB
     
  2. Keep your $Risk constant.

    So if you system tells you to set your stop
    5pts away then trade 4 contracts.

    So if you system tells you to set your stop
    10pts away then trade 2 contracts.

    So if you system tells you to set your stop
    20pts away then trade 1 contract.

    The actuall number of contracts will be based your chosen $$ risk level.
     
  3. Murray Ruggiero

    Murray Ruggiero ET Sponsor

    What you need to do is look at maximum adverse excursion versus final trade profit. Plot that on a scatter chart and put it up on the here. I will look at it for you.

    In addition also look at open profit on a bar by bar basis since you entered the trade , versus final profit.

    I wrote several futures articles about this methodologies to set intelligent stops. The Oct 1995 and August 1998 Futures magazines contain these articles.
     
  4. swcom

    swcom

    Dollar Cost Averaging, and scaling in are both good - but why not just place an order, set the stop at a point or two and cross your fingers?

    OR

    Trade options

    OR

    Move to the west coast where trading begins at 6:30 AM. That way, you can get two hours of trading in before work every day.
     
  5. LeroyB3

    LeroyB3

    Thanks for the help...I will look into each option. I wish I was a little handier with programming since I've been doing my backtesting by hand so far.

    Anyway, thanks for the suggestions and I am going to research this further.

    Best,

    LB