Interesting. I have watched volume on the indexes for some time and I am sure many here are successful in using this as a guide. I would like to start a whole new thread on this so I can have a better understanding of volume strategy. If I look at a chart of say the ER or higher volume ES....I have always seen a tendency for a short term price movement to snap back after high volume either up or down. What I mean is if volume is say 2X average and price closes down...then there is a counter move (snap back) in price. It is sort of like all the sellers dried up (at least short term) and there is an opportunity to fade this. Problem is that that is not always the case and many time the herd just keeps right on going down. I would be interested in knowing others strategies on this. Is there a reliable method of knowing when not to fade a move. Say if volume is 250-300% or something like that. I guess it would be like a runaway gap.
Yes! Thats vital. You have to define and limit your risk. Once I have moved it to breakeven (discretionary) then I dont protect my profits for the reasons mentioned in my earlier post (giving up responsibility, not watching the market for manual exit signals mainly).
It varies with market. I have a large binder with different statistics on various time frames for about a dozen markets. For instance, grains and meats work best with 30 min ORs, while indexes usually need 1.5 hours. The timeframe is the most discretionary part of the method. I may hold it for 10 minutes if I don't like the action. However, depending on the setup and how the trade worked during the day, I usually hold overnight. For instance, at these levels in the indexes, if I got a short signal tomorrow I would likely hold overnight in anticipation of a continuation of the short trend (however, the indexes are starting to move my bias to neutral, which means no overnighting), assuming I have a sizeable profit during the day. If I hold overnight, I move the stop to just over breakeven to lock in at least enough profit to justify my time and commission costs.
"How do you define the opening range. First 30 minutes?? and how long do you hold your postion?" I also use variations of the open range bar breakout/breakdown. although my work is derived from Tony Crabel's efforts...i think Jeff Cooper also does some analysis off of opening bar...i believe he uses 10 minute bar... I saw a link to fisher's seminar on the web a few weeks ago....my memory may be off, but i think fisher used a 20 minute bar...and i know it was discussed on ET
Hanseng1, I watched his 3 day course. The opening range methodology seems very much like a system from Wells Wilder. I forget the name, but his book, "New Concepts in Technical Trading" is a classic. Funny, there are stories on how Wilder is a "huckster", but many of his indicators are used by many technicians today. larryTAKEOUT@seldin.net
First I have to admit that I didn't manage to create a promising system on my own so far (for short term time frame at least). At the present time I watch a system which originates from an e-book: Three moving averages and a parabolic SAR are applied to a chart. Based on their behavior, trend-following positions are opened or closed. When I first read about this system, I thought it would be way too simple to have an edge. The indicators mentioned above seemed outdated to me. But when I applied the specific rules on the given time frame to an instrument similar to the recommended one, manually backtesting it for the last three weeks (maximum data available for me) showed profits. Problem was that the biggest loser was larger than the biggest winner, which I didn't like. Yet applying certain stops and targets seems to improve overall results. Besides that I follow a simple intra day breakout system propagated by a free web site, which made me good profits. OR is about 1.5 hours, which corresponds to a previous post in this thread. Then I got greedy, increased my position size and disobeyed some protective rules which cost me a four digit $$ amount within two days. I paused for the rest of the month and then restarted following the system, carefully obeying all rules this time. According to the system provider, the system has been profitable since 2003 in backtesting and real trading with about one losing month out of four. I also pay for system signals from a commercial site which initiate long only overnight positions in stocks after they dropped in price. This showed mixed results so far. Following several systems at the same time makes me feel more comfortable than following a single one, since profits and losses typically offset each other between the systems to some degree, which smoothes my equity curve.
Vision Trader (or anyone trading the ER2 Automated), Thanks for your posts... I am new at perfecting automated strategies and have finally cornered the best settings for our specific set of parameters in the ER2. I will go with either the 89 tick or the 110, but have tested 144, 55, 233 and several other timeframes. Here is my question. How much of a factor is slippage? I am using Tradestation and RJO as well, and have not actually started the automation process yet. I hope to do so this week. Do you use a factor for slippage in backtesting your strategies? I've heard everything from slippage being as bad as 1 tick loss per side ($20 loss per trade), to 1 tick lost in every 5 round-trips (about $2 per round-trip trade). So far our strategies are backtesting out with very smooth equity curves...some of them over $45K per contract over the past year (granted...this is not figuring anything for slippage...but does include commissions). They are built up of a lot of trades....between 3000 and 4000 per year. This is why slippage is such a concern to us. Would love to know what your experiences have been....and those of others also....Thank you! Frank