Longshot when you have it distilled, please be so kind to post it. Not for me, I know the method, but for anyone else who either didn't know an ORB method, or who missed the concise discussion in "The Importance of Simplicity" thread. You would really be doing a great service and I'm sure it would be greatly appreciated. Thanks Longshot.
As I said, I'll be happy to answer any questions you may have, but if you're looking for a buy/short when a 5,3 stochastic crosses above/below 30/70 sort of strategy, this ain't it. Nor is this a strategy that will keep you busy. Just wanted you to know. --Db
Speaking of trading crossovers, this has been a favorite of mine throughout the bear market: http://www.theonion.com/onion3621/blue_line_jumps.html --Db
Db, Just a couple more points I would like you to go over if you don't mind. When you are 5 points ahead you move the stop to breakeven. Any comments on why you chose this rule? Also the gap issues. I'm presuming the gap would be calculated by closing price of the cash market to opening price of the cash market. If it gaps at least one percent, the entry opportunity is after the first five minutes, as long as the gap does not exceed three percent. So on a 2% gap, how do you determine which direction to trade after the first 5 minutes? OT: I read on another thread about lock limit days. I think I remember hearing about these somewhere, but I don't remember the criteria for E-Minis. Do you know offhand? It was suggested that one could use options to offset a position that is locked limit. Any ideas on how that would be done? This is the kind of thing I want to find out about ahead of time, instead of scrambling for a solution while under stress. (I'm new to trading this market). Banker
In case I lose connectivity. Don't make it more complicated than it is. If the gap is less than 1%, there's really no place to go. In other words, if the gap is only five points, and you don't enter until price exceeds the range by two points, that leaves a potential reward of three points. If the stop is five points, you're nowhere near a reasonable r:r ratio. Of course, you could just exit the position when the gap is filled, but that's more of a scalp than a trend trade. Or you could tighten the stop. But, again, that makes it more of a scalp. On the other hand, if the gap is 3% or more, price is likely to go nowhere afterward, so the probability isn't there, unless it's a Trap Gap, but these are rare. When those occur, forget about strategy and just climb on. Brandon Frederickson did a study on these and found that (if I remember correctly) 70% of gaps filled on the same day, but that as they grew larger, the percentage fell dramatically (I believe only 35% of gaps of 3% or more filled the same day, and only 10% of 4% or more). Therefore, the probabilities lie with gaps of 3% or less. If the gap is very minor, you have to decide whether you want to close the trade when you reach your price target, or tighten your stop and let it run. If the latter, then you have to calculate your r:r. If all of this is Greek to you, or sounds like too much trouble, then just skip it and trade the break of whatever range has been established as you approach 1000. I don't believe Mike or Natalie trade gaps at all. Rather they just let things run their course until 1000 or thereabouts rolls around. I do believe, though, that Mike commented that he doesn't like to trade in the direction of the gap, which is consistent with what I've found with gaps of 3% or more. My memory may be faulty here, though, and I don't want to have to go through all those posts to look for it. If you have a backlog of intraday charts, this all becomes very clear very quickly. If you don't, start maintaining a record tomorrow. That's one of the reasons I daytrade. I don't want to have to worry about that stuff. What I like about this strategy is that it requires so little thought. Few if any decisions have to be made (actually, the only decisions that have to be made at all have to do with the risk and probability of a reversal setup, but even there one can limit himself to only two or three). --Db
Db, Connectivity meaning your internet connection, or your connection to your data feed, or the connection to your broker, right? What is a trap gap? I will look through my historical data to see the gap situations you are talking about. Over 3% gap, unless it is a trap gap, is ignored. Smaller gaps are considered by risk reward, with the intention being to have prices fill the gap. That's what I understand. The original purpose to my question, was to determine what exactly the first 5 minutes of trading were telling you. Maybe the first 5 one minute bars are used to establish a mini range or something? I don't know. With the lock limit, I'm thinking of day trading as well. It may be rare, but think about a time when, for whatever reason, the exchanges are halted during mid day. You are in a trade. When they re-open, they re-open at lock limit. What do we do? Maybe this scenario is impossible, but it seems like that would be the very situation which could do damage to my account. Banker
Any or all of the above. Using the upside as an example, the previous day closes at its low, preferably a downside trend day. The following day, the open is above the previous day's high. This scares the crap out of the shorts (or scares the crap into the shorts' shorts) and they scurry to cover. This will, of course, also entail a substantial opening gap. If price is going to move, it needs to do so fairly quickly. Otherwise, you're getting closer and closer to the 0945/1000 report time. This morning, for example, the high for that very early period was set at 0936 (the low at 0930) and no entry was triggered above that point until 0954, which was only six minutes before the reports, which is pretty late. Plus the entry trigger was to the wrong side if one were going to fade the gap. In other words, if price were going to close the gap, at least at or near the opening, it would get on with it. It wouldn't drift lazily higher and take 25m to provide an entry which happened to be to the wrong side. What you do depends on the size of the gap, the reason for the gap, the balance in your account, how many contracts you're trading, your risk tolerance, etc. The worst thing to do, of course, would be to panic and either sell or cover at the first opportunity. But this is something you have to think about regardless of whatever strategy you're employing. Incidentally, this particular strategy is up 16 so far today, but that may be it. At least that's what I'm assuming 'cause I have some books to pick up at the library. --Db
Db, I think we covered every aspect of your strategy now. Or at least all of them that I could think of. I do want to thank you for your time, and your willingness to share what you have learned. Your strategy sounds very interesting to me, and I find the results you have posted while using the strategy to be rather impressive. It's definitely something I will look into for myself. I feel I have an ample understanding now, of what it is that you do, to go do some back testing and forward testing on my own. Thanks again for all of your help, Banker
Keep in mind that the key to success with this strategy - and the most difficult for many people - is to leave it alone. If you try to scalp with it or maintain tight stops or take every reversal without any discrimination as to probability, the success rate will plummet. --Db
Hi Db, thanks for sharing your strategy with others. With the risk of annoying some of the readers â¦..in your last post youâve stated that today youâre up 16 points by following your strategy. Probably Iâm seeing this nq late morning downtrend differently but â¦. There was a breakout at around 10:24 e.t. so going short at 1142.5. Then it pulled back just after 11:00 breaking the trendline at 1132.5 so I wouldâve thought you covered at 1133.5 for a 9 points gain. What am I missing then ? Thanks again for your willingness to share your thoughts