How's the ES lately?

Discussion in 'Index Futures' started by arzoo, Dec 29, 2005.

  1. arzoo


    I was just wondering how the ES traders are doing? I, personally, have been having a more difficult time the past 2 weeks due to the small range its been trading.

    To clarify things, i only trade the am session before going to work. It often averages at 4-5pts these days. I trade pullbacks and a bit of breakouts.

    I was hoping to get feedback from fellow ES traders on how they've felt the ES was for them and also which methods seem to be working better under these conditions.

  2. Seasonal changes to the ES happen each year. If you trade it "regularly" you know this.

    The correct adaptation is to change your approach to allow you to either trade the open, to catch the first move off the open or to trade the consolidation. The first two options offer the best risk to reward ratio in this market.

    Judging by your comments I am guessing that you dont have any of those tools available to you.

    Unless you are extrordinarilly good at it and have very low expenses, trading breakouts will bleed you to death. Trading pullbacks (in a consolidating market?) is a bigtime losing strategy. If you are to have a chance in hell of making money, you need to have a better risk/reward than that.

    You don't have an edge. This would be the time to start working on finding one.

    Excuse me please, I am going to go watch CSI.

  3. bronks


    OHh no...

    Steve done and went on to believe all the hyperbole written about him lately. Too bad. Yes seasonality trends happen every year in the ES (amongst other instruments), but how 'bout telling the poster exactly when and where it's going to happen. After all, don't we all know that volume dries up during the holidays? But then again, do we need volume to trade, or shall I say..confirm a trade? Or maybe we should dismiss him altogether since obviously, he doesn't get it.

    ...or does he.
  4. You know this old tactic of "tell us exactly when" is pretty boring.

    Why would I need to know the exact day, when I can trade whatever I see in front of me.

    If YOU really want to learn about forecasting volatility with that kind of accuracy, you first need to develop a math background that includes GARCH. Since I am guessing you don't know shit... you can start by looking up reference to Tim Bollerslev, George Levy, and Engle.

    If at some point in the decade you start to understand the Levy process and perhaps read even ONE book on the subject, we might have a conversation that YOU understand.

    Tell you what Einstein, lets cut right to the chase. Here's list of references. I am SURE that you have read most these. Come back to me with some intelligent questions and I will go back and forth with you.

    Anh, V. V., Heyde, C. C. and Leonenko, N. N. (2002). Dynamic models of long-memory processes driven by Lévy noise. J. Appl. Prob. 39, 730--747.

    Barndorff-Nielsen, O. E. and Shephard, N. (2001). Non-Gaussian Ornstein--Uhlenbeck-based models and some of their uses in financial economics (with discussion). J. R. Statist. Soc. B 63, 167--241.

    Barndorff-Nielsen, O. E. and Shephard, N. (2001). Modelling by Lévy processes for financial econometrics. In Lévy Processes, Theory and Applications, eds O. E. Barndorff-Nielsen, T. Mikosch and S. Resnick, Birkhäuser, Boston, pp. 283--318.

    Bertoin, J. (1996). Lévy Processes. Cambridge University Press.

    Bertoin, J. and Yor, M. (2002). On the entire moments of self-similar Markov processes and exponential functionals of Lévy processes. Ann. Fac. Sci. Toulouse Math. (6) 11, 33--45.

    Bollerslev, T., Engle, R. F. and Nelson, D. B. (1995). ARCH models. In The Handbook of Econometrics, Vol. 4, eds R. F. Engle and D. McFadden, North-Holland, Amsterdam, pp. 2959--3038.

    Bougerol, P. and Picard, N. (1992). Stationarity of GARCH processes and of some nonnegative time series. J. Econometrics 52, 115--127.

    De Haan, L. and Karandikar, R. L. (1989). Embedding a stochastic difference equation in a continuous-time process. Stoch. Process. Appl. 32, 225--235.

    By all means let me know when you want to start "discussing" the exact timing of changes in volatility for the market of your choice.

    Can't wait to "get it" directly from you.

  5. bronks


    Blah, blah, blah, blah,. Quote all you like, why didn't you give these to the poster instead of me? I could give a rats ass.

    Funny thing is, I never meant my post to be confrontational or aggressive. But since I don't know jack shit, I guess I don't what I was writing about. Ooops. Silly me.

    * Wow check out my posts number. IRON MAIDEN RULES!
  6. So?

    Dont you want to have that conversation about local volatility?

    Heres a good site where you can get an overview of the math for Levy process.

    By the way, this is just the first step. After you understand Levy, it would a good idea to look at the work of Torben Anderson with respect to both parametric and non-parametric measurement.

    Torben G. Andersen & Tim Bollerslev & Francis X. Diebold, 2002. "Parametric and Nonparametric Volatility Measurement," NBER Technical Working Papers 0279, National Bureau of Economic Research, Inc.

    Hey, man this where I live, so if you want to discuss it, boy howdy, I would be glad to go over the material with you.

    Come on back to me, Brrrrronks

  7. arzoo


    Thanks Steve,

    I felt that way which is why I made the post.

    I'm not much of a seasoned trader and definitely no expert, just hoping to learn as i go along.

    I would like to ask when you mention about trading the open, what does this mean? do you have some example parameters just so i could get a grasp of it. (is this similar to open range breakout?)

    With regards to the 2nd option, I hope someone can correct me if I'm wrong or dont apply it properly. or if you can help me improve.

    I've tried to test methods that trade during range-bound times. Pls correct me if i'm wrong, by this my understanding is using oscillators and bands to trade trade within the range between overbought and oversold.

    However, I've had 2 problems, hope someone can shed some light on how to solve them so I can add them to my repertoire.

    1. It's probably me, but I havent been able to find a consistent way to sell/buy overbought/oversold levels using oscillators. My problem is the signal itself since they stay at overbot/oversold sometimes for quite a while. Any tips?

    2. After a while, having a trend following style (my primary technique), then using one for trading a consolidation, I kinda get confused and take a few too many signals and start second guessing whether they are staying w/in the range or breaking out of the range.

    thanks again.
  8. bronks


    Holy crap! You're making me dizzy big fella. Slow down. I trade the SOMP method made infamous by the the infamously famous Mr. Sub. Hard to do harder to learn...but ohhh so satisfying.

    Anyways this ain't about me or you.

    But you drew me in so fire away.
  9. Yeah, what you wanted was to pull my chain without getting slapped.

    What you wanted was to take me down a notch, right.

    Problem is, I paid my dues. I studied this crap for years.. Now you want to come at me with the "OK exactly when" bullshit.

    The truth is nobody knows exactly, but with the aid of these kinds of math tools, some folks can give you a pretty good approximation. Problem is that these tools are difficult to obtain. It hard for most people to understand the concepts, and up to now, it has been so (the term people use is "computationally intensive") that almost no one can give you an answer that is accurate in real time.

    Now if you are talking about EOD data, and you ask me can I use these concepts to tell you whether tomorrow is going to be a big trend day or a consolidating day with a range of 3 points, once I have the math setup, the best I can do is give you a correct call about 3 days out of 5.

    So after all that, you have an answer of sorts. You can give odds that tomorrow will be a big day (range of more than 10 points on the ES or Russell). Approximating it for you I get odds of 7 to 1 that we have a trend day tomorrow. You can verify this yourself in the first hour. If we are going to have a trend day on wide range. The first hour range will be more than 5 points (90% of the time).


  10. bronks


    Actually your last post is more of what I expected from you...and the poster got the answer he needed. Mission accomplished everybody came out ahead. Now, I think that's what this website is all about.
    #10     Dec 30, 2005