Hybrid Machine, What exactly is the strategy for taking a loss? How many trades do you avg. per a day? --MIKE
This simple system is easy to test with software like Wealth-Lab and intraday data. In my experience testing many trading approaches & systems, this method will not be profitable over time. With the method that you've described I'd be surprised if you had any more than a 55% winning percentage. You mentioned that you've just begun trading this method. Note that the kind of intraday swings we've been seeing the past 6 weeks have been the best 6 weeks of trading I've seen since 1999. Almost every intraday momentum, swing, channel breakout, & volatility breakout method has been making money. I recommend testing your approach on historical data. Using 1min charts, you have a ton of data to test with, across multiple timeframes. For a momentum-type system like this, I also recommend only trading the first 3 hours and last 2 hours. See if your results improve with that little tweak. Also, consider using tick charts vs. 1-min charts and see if your results differ. Good luck.
I risk 3 points, to give my self wiggle room. I have 3 exits. 1) 3 point loss 2) MACD crosses back across the MACD EMA 3) +2 points. Today, however, I did things a bit different. I got in early this morning when it started (ES) to turn up a bit, and held on till the MACD went back across the MACD EMA. I wanted to see what sort of result I would get if I just held on. It worked great, I got a +7 hit. However, I tried this two more times, and ended up loosing a total of 6.25. So, I backed away, waited till later in the afternoon, and made two more plays, for +.5 each. Because today was sort of sideways, I decided to get a couple of small wins in what clear trends I could find.
Yeah, that's my fear. Lately, we've seen some great volatility. My thinking is to apply this on a longer range scale, using 5 minute intervals. I need to backtest, like you say. Thankfully, globex posts its Time and sales data for free I'm in the process of writing a Perl script that backtests. I also think I need to expand to looking at breakout points from previous channels. The MACD + a breakout is usually a great way to find some good swings (So far as I have seen )
at one time i traded an MACD crossover system on a 3 min chart. it was profitable as long as i avoided trading 11:30- 2:2:30. as time went by i noticed other things about the market so i stopped using this system but i do believe you can make small but very very consistent monthly returns. the high leverage of futures is probably why you never see stock traders using this system. but for you trading the futures it is good.
Risking 3 points for 2 is not exactly conducive to building wealth unless your system is right 75% of the time which is unlikely. I think youve been lucky so far.
yeah hybrid, you've changed your system since original post. First it was 2 pt stop or whenever you got a crossover. That one will keep you alive. Now it's 3 pt stop or 2 pt profit. That one will eat you alive.
Yeah, I definitely feel the need to get back to the roots. Like you said earlier, tinkering can kill you.
Yeah, that would be better My thinking on the 3 point stop was that I wanted to let the MACD be my main exit point after the +2 profit, and that the -3 was a just in case, but I think that having it upside down like that is definitely dangerous, so I've gone back to my roots