Day Trading & Forex Forum

JayZ1966

Hi guys,

Sorry if this sounds as daft as i think it may sound but i'm going to put it out there and see if i'm totally wrong with this idea. I'm pretty new to day trading so im expecting criticism or to be shot down....

Ftse100 opens at 4050, Buy with a stop loss of 10 points at £10 per point and also short at £10 per point with the same stop loss. As i see it, which ever way it goes, recently at the start of the day it has been a dramatic rise or fall. If i had done this today i would have lost 10 points on the Buy but gained around 200 points on the Sell. 190 point profit? My idea was as soon as it starts to pick up again, cash in.

I haven't tried this yet as it seems rediculously easy and anything that looks too good to be true, usually is.

Joe

tomorton

You could backtest this - recommended as it sounds high-risk - but its one of those things that will always look good looking backwards. Using the open for your starting point allows objective backtesting, as does the exit point the close for the remaining position. But how would you objectively determine the closing point for the losing trade?

Masquerade

Your last statement probably answers your question.

JayZ1966

I will backtest it further, do you know where i could get historic charts to do this please? I have some time off work coming up so will look much deeper into this.

As for the losing trade, i would only have a 10 point stop loss so that would be my loss on the incorrect trade while if there is a sharp drop / rise as im hoping for, the winning trade will more than make up for it..... i think we'll see.

tomorton

Sorry, don't know about historic intra-day charts going back more than a week. And you do need them because if you're always sticking with a 10pt trailing stop, there will be many times your 'winning' position will also be stopped out. Widening the stop isn't usually the answer to problems like this, it just exaggerates your wins and losses. Don't be tempted to use the intra-day highs and lows as reference ponts either in back-testing - its normal to be unable to call the day's extremes while we are at that value, it only shows as the top or bottom of the range when looking back.

The doubts above notwithstanding, there are strategies that simultaneously give buy and sell signals - though not at the same level - for example, ID/NR4. This asks you to identify a day which trades inside the previous range and also has the narrowest daily range of the last 4 sessions. It then demands a buy order be entered at the close above the high, and a sell order below the low. The reduced volatility of price action is supposed to foretell a dramatic price move one way or the other. It would be unusual for both orders to be triggered in the next session, so whichever breaks out, you hope to be winning.

xxedrushxx

Hey Jayz

I had this line of thinking too, especially when big news is about to be announced. Such as when the US were making the votes on the bank bailouts. I thought why not go long and short with tights stops and which ever way it shoots you will stop out with limited loss for one but keep making a sharp increase in the other. In regards to when to close the latter, i would imagine that would be based on how far you thought the market would go in that direction, of course if it started making a sudden swing in the opposite direction you could just close the ticket manually

The obvious risk here would be if the market went one way suddenly and then went the other way closing both your positions for a 20 pip loss. When the second bailout bill attempt passed the price rose sharply before falling. Would be worth paper testing though

JayZ1966

Im glad someone else was thinking the same thing. As for when to close, i would agree that as soon as the sharp rise/fall levels out i would close. Today would have worked fine with tight stops earning around 100 points if closing when it levelled out.

Hoggums

The markets today are too volatile for this strategy. Chances are both stoplosses would be triggered before either of the trades would be significantly in profit.

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Hoggums

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