Price Pause Strategy

Discussion in 'Trading' started by carltonp, Oct 12, 2011.

  1. Hello Traders,

    I'm trying to formulate a strategy that might take advantage of price pause after an instrument has paused.

    Let me provide an example.

    I have written a program that will alert me to when a price has paused for 5, 10 or 15 seconds. Also, the program will show me how many times a price has paused at the aforementioned seconds during, say a 5 min interval.

    The strategy that I deploy using the formula is as follows:

    YM (mini-dow) has reached an overbought/oversold stage on 5min chart. During the overbought/oversold stage the price pauses for 5 seconds at, say 11000. The price moves to 11005, and then 11008, but returns to 11000 and pause again for 5 seconds. The price then moves to various other prices but then returns to 11000 and then pauses for 10 seconds. This is all happening during the 5 min bar interval.

    So, my strategy is to wait for a pullback on the following 5 min interval a enter at 11000 in the direction of the current trend.

    So, my question is, can someone please tell me how I might improve on that stratey?

    Alternatively, can someone please tell me if they deploy a strategy using price pauses in their trade setups? And any ideas would be great.


  2. What do you understand “price pauses” to represent? And why do you believe they can form the basis of a trading strategy?

    What you describe sounds more like a means of picking entry points rather than a go/no go signal for entering a trade. How do you choose target(s) and stop(s)?

    [Not promising I can give you any help, but at least this may get the ball rolling ...]
  3. Thanks for responding mate...

    It is indeed a method of picking entry points.

    My thoughts are based on the theory that if price pauses at a certain price for a certain length of time during an overbought/oversold situation, that price might be a entry point after a pullback or correction.

    At the moment I'm just putting the theory out there, because I'm having some success with the strategy but not enough success to feel comfortable with it.

  4. Abattia,

    To be totally straight with you, I have nothing to base the trading strategy other than what I have observed while watching recordings of many trade situations where price has paused at certain level for a number of times. I watched prices pause on ES and YM for 10 seconds, 15 seconds at the same price a number of times during a 5 min bar.

    My thinking behind it is, if we're in a bull market and the price paused at, say 11000 for 10 seconds, and then paused for another 10 seconds at same price(11000) it would indicate there is major indecision with the current bull markekt and it might suggest that current market is about to switch.

    Again, I have nothing to base it on. I would dearly love the thoughts of other traders on this strategy - even if it is suggested it has no edge what-so-ever(but not in a nasty way)

  5. Gents,

    I really appreciate any comments you may have. If I don't respond to your queries immediately its because I'm out with dog and mulling over my career as trader.

  6. Traders,

    Anybody willing to comment?

  7. If it works, use it. You get paid to execute when you don't want to.
  8. have you done any back testing?