My strategy

Discussion in 'Index Futures' started by ctrader, Mar 27, 2002.

  1. ctrader


    Hi there,

    I'd like some feed back on my futures strategy. I will be trading with IB, and using the ActiveX interface to automate some aspects.

    Strategy goals:

    1. Be profitable.
    2. Be automated during the trading day, so I may continue to work at my job (programmer).
    3. Keep trading to a minimum. Time frame is days.

    My trading instrument is the big dow contract ($10 multiplier). Each night I perform medium term TA, similar to this

    and establish the level I want to be long above, and the level I want to be short below.

    So all orders are stop orders. I get stopped into positions, and stopped out of positions.

    Assume long for the following discussion, reverse for short:

    When an order is filled, a stop loss order is issued 10 points below market. If the market moves up 10 points, stop loss is moved to breakeven.

    If stopped out, the new buy stop is entered just above the high of day. If the dow is going to make a medium term move, this will eventually catch it.

    If I am in a position overnight, I set new stop loss order to capture some of the profit.

    I have been testing this, and so far it has been profitable, catching a 100+ move every 2-3 weeks, and getting stopped out at a loss rarely, usually at breakeven.

    For example today my level to go long the dow cash index was 10400...

    So far, I went long at 10400, dow moved to 10412, stop in at 10400.

    Stopped out shortly after.

    Went long at 10412. stop in at 10402.

    Currently long at 10445, 33 point profit or $330, stop is now in at 10414.

    So what do you all think?
  2. 10 points is an extremely tight stop for a multi day trade it would be like 2 points on the ES.
  3. Arbitrary stop placement (e.g., 10 points below entry) seldom works well in the long run (frequent premature stop outs). The market doesn't care about such arbitrary decisions. The ebb and flow of buying/selling pressure and the related support/resistance that results is generally all the market cares about.

    So you're usually better off setting your initial stop based on the support and resistance layout for the security in question and sizing your position accordingly rather than just picking an arbitrary stop size (in this case an almost certainly too narrow stop size). Depending on your setup, your initial stop may actual end up being a stop and reverse price.
  4. No more side-by-side trading for 10 $ contract with CBOT (A/C/E).

    Contracts left: YJ (2$), YM (5$)

    See info as given by
  5. ctrader


    Those mini sized contracts are not that liquid are they?

    I may have to see about trading nasdaq emini instead. I had preferred the dow because it is not as volatile.
  6. JayS


    Apparently the new DOW $5x mini-sized contract is going to have two electronic market markers and “a new CBOT arbitrage program, with multiple firms participating.”

    We shall see how this goes (won’t hold my breath).

    p.s. For those who care, the $5x begins trading April 5, 2002 (actually trading begins 8:15 p.m. on 4/4/02).
  7. ctrader


    Stopped out at 10412. For a net gain of 0.

    Not likely to re-enter today, but buy stop at 10450, sell stop at 10300.

    So why can't I trade the big contract in the pit with interactive brokers?
  8. Only access to electronic markets like Globex, A/C/E, LIFFE, EUREX, MATIF, HKFE

    Must have another broker (introducing broker) for pit trading that executes
    and clears thru a firm like Alaron, GNI, Man Fiancial, Refco, RGC etc.
  9. ctrader,

    I think ES will be more compatible with your tight-stop strategy than NQ. Also, support and resistance seems to be more important/reliable for the S&P than the Nasdaq.
  10. I think I would tend to agree that your stops are a little on the tight side..for this kind of position trading, but if it pencils out, then maybe..

    If you actually plan on trading the DJ, you will have to find a broker who is willing monitor your trades and enter stops after entry and move stops and reenter if neccesary and whatever else your system requires. It may cost you more than you anticipate; I would guess in the $50+ range.
    #10     Mar 27, 2002