Please Comment On My New Strategy

Discussion in 'Strategy Development' started by carltonp, Sep 6, 2011.

  1. Hello Traders,

    I have been working on trading strategy that I have been paper trading for a while. I will attempt to explain it in as much detail as I can - if I forget to add some crucial information let me know.

    Let me start by saying the overall trading style is based on comparative relative analysis.

    I'm going to first provide some of the detail in bullet point then elaborate.

    • I'm trading YM.
    • I am using the components of the Nasdaq 100 for comparative analysis.
    • I use On Balance Volume and Advance / Decline of the 100 stocks mentioned above.
    • I trade on 2 minute interval.
    • I have programmed the stocks into Excel.

    Now I will explain how I use the information and Excel.

    As I'm sure you're aware at this stage that I use the 100 stocks to assess the likely direction of YM.

    The data from the stocks are fed into Excel.

    I have programmed Excel to compare the OBV values over two intervals - in this case two minutes. So, lets say the value of the OBV for a particular stock was 100 and the price was 20 at the end of one minute. Now, during the following minute Excel would compare the OBV and Price of the stock and if both OBV and Price were increasing for that particular stock Excel would add it to a table. Excel would do that for all 100 stocks individually and if say 85 of the 100 were increasing in both OBV and Price I would use that as indication as to where I think the YM might be going.

    I have used the same calculation that is used for the NYSE Tick for the 100 stocks. So at any time I can see how many stocks are trading on an uptick vs how many are trading on a down tick over a two minute period. Again, this is achieved by programming Excel to compare stocks trading on an uptick and downtick over a two minute interval.

    What is a little more tricky is programming Excel to alert me when the price of YM has remained stagnant for 3 seconds. I have no reason why I chose three seconds - it just seemed like a good number to make a decision if the stock has remained at a certain price level for three seconds or more.

    So that is what is set up, now for my style.

    If say 85 or more of the stocks are increasing in both OBV and Price there will be a pullback. Sometimes the pullback will turn into full reversal, but 8 - 10 times no matter how strong the move there will be some form of pullback/reversal. I won't actually place a trade on YM when I pullback is identified on the chart but I will only trade a pullback when the pullback is accompanied with an increase in OBV and Price on the stocks in my spreadsheet (to be honest I only use a chart for visual affect, not for actual trading)

    Now once I've decided that the pullback is in full affect as described above I wait to see at what price YM has remained stagnant and how many times it has remained stagnant at a certain price. Let me give you an example:

    1. Pullback is in full effect.
    2. OBV and Price on stocks are going in the direction of the pullback.
    3. YM has remained stagnant at say 11000 for three seconds.
    4. After three seconds, the price has moved in the direction of the pullback or the direction of the OBV on stocks and is now 11002 and stays a further three seconds at 11002.
    5. The price then moves to 11004.
    6. I will then place a trade at 11004.

    While all this is happening the direction of OBV and Price for the stocks are either moving in the direction of the pullback or the price of YM.

    My exits are far simpler, but we can get into that another time.

    I'm really sorry for the very long explanation but I think if I want decent feedback then I should provide as much information as possible.

    It has been suggested that I forget about charts completely I use T&S. I've never used T&S but will learn if more people suggest its the way to go.

    I'm sure there are aspects that I have missed, but just ask me any questions you like. I just need good honest feedback and suggestions.

    I look forward to hearing from you all.

  2. pt199


    Why would'nt you use the Dow30 with the YM? Or the Naz100 with the NQ futs?
  3. What was the question?
  4. I was told there wasn't any edge in using Dow 30 because it was arb'd to death.
  5. Its not a question, as such, I would like someone to comment on it. Provide suggestions. Comment on the T & S recommendation.... etc.,
  6. If it is making money, then congrats.

    If not, you have more work to do.

  7. Lucrum


    That doesn't seem to make any sense. It's like watching the weather in Florida to predict the weather in California.

    And I wouldn't waste too much time on OBV either if I were you.
  8. Are you taking the individual stock weightings in to account?
    You might be able to simplify your list a bit by chopping off the lower half or third of the companies based on index weight. For example, Microsoft, Google, or Apple carry more weight than First Solar.
    Either that, or find all the sectors represented in the index and pick the biggest one or two representatives stocks of each.
    Are you watching Nas-100 because you feel it leads the Dow?
  9. BSAM


    Hey Carlton...

    You're trying to make life way too complicated, little brother.

    Don't predict. React.

    You do this by learning probabilties derived from years of studying price action.

    You owe me 5,000 dollars for this advice, but since we're both members of ET, I'm gonna let you make it this time. ;>)
  10. It was suggested I use NASDAQ as the Dow was arb'd to death.
    #10     Sep 6, 2011