lurkerlurker
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could you please tell me what the ER2 is. t.i.a. albert.
That is the Russell 2000 Emini (ER2) futures at the CME.
could you please tell me what the ER2 is. t.i.a. albert.
This is what I have so far. Not my idea obviously, but I cannot find a fully comprehensive web source for this. I have taken various ideas, and am working on backtesting them right now. There are several ways of trying to determine whether a gap will be filled or not. However, I am having some difficulties with timeframes etc. I am going to do some more thinking and testing, but here is what I have so far.
Also, here are the sources I have used just in case anyone would like to check that my current interpretations are correct.
http://www.cbot.com/cbot/pub/cont_detail/0,3206,928+14719,00.html
http://www.trade2win.com/knowledge/articles/general_articles/trading-opening-gap/page1
Any further guidance would also be appreciated. I am going to tighten this up tomorrow, and backtest into Monday. The system does not trade following options expiry, a holiday, or a weekend for the time being, so the first signal can be given at 14:30 London time Tuesday if I have done it by then.
The degree of my backtesting will dictate whether I paper trade it or SB it at £1pp. I am trying to develop a system which is backtested, consistent, mechanical, and creates a maximum of 4 signals per week. This should help with my trading issues.
Thoughts?
CBOT Mini Dow Future – Opening Gap Strategy
Hypothesis
A statistically reliable number of gaps close within the intraday cash market session. This could form the basis of a partially mechanical gap fading strategy.
Definitions
Cash session: 14:30-21:00 London time. (open-close) Nothing to do with cash prices.
Gap: Futures price at 14:30 being greater or less than previous day at 21:00
Common gap: gap which is likely to close within the cash session
Breakaway gap: continuation gap which causes further movement in that direction
Range: High – Low (during the cash session)
Requirements
A mechanical system for defining the type of gap, along with a backtest of fading such gap to show the probabilities and risk / reward of fading the gap. When a valid gap is defined, the system should state the risk reward, stoploss placement, and trade direction. Discretion can be used for the entry providing that the risk / reward is not violated.
Factors
Gap size – large gaps are more likely to be continued than filled
Support resistance levels, including premarket (21:00-14:30) Low and High, previous cash session high, previous cash session low
Strength of premarket activity – do not fade gaps when premarket volume is high, or when large orders may have accumulated.
Major news, economic numbers, fundamental factors which may affect the validity of a suspected common gap
Specifics
A large gap is > 40% of previous days range
High premarket volume is > 120% of the average premarket volume for the previous 5 premarket sessions
Large orders accumulate before the opening on Monday, and after Holidays
No trades should be placed following a premarket number, or other major announcement (gov intervention, war, etc)
Setup
1.Check the trading day is not a Monday, or a day following a holiday
2.Check there are no numbers due before the open, or within the first hour of trading
3.Check there have been no major news releases within the last 24h
4.Check premarket volume – is it unusually high? If so, no trade
5.Make a note of premarket high and low print, and the previous cash session highs and lows.
6.Determine key S/R levels for the last trading week, including high and low of week
7.Before the open, determine the gap size. Is this a large or small gap? (percentage of previous days range)
8.When the market opens, did it gap up or down? Is this a buy or a sell signal?
9.Is there confirmation? Wait for an up (down) gap to stop making highs (lows), look for relative highs lows. Check tick – it should be above -300 and below 300 for gaps down and up respectively. If not, continuation likely.
10.Where would the entry be? What is the reward (target is previous days close)? What is the risk (where is the best place for a stop)? Is the risk:reward consistent with the average win/loss and win %? If so, enter.
Further suggestions
Research validity of the NYSE $TICK for confirming gaps
Consider better entry criteria – what timeframe for the relative lows / highs. Enter when price breaches the open in the opposite direction?
Where is the best place for a stop? Mechanically, or based on S/R? Percentage of range, or fixed amount?
This has got to be the mother of all systems... You make it work and you can be the daddy.
I tried following it and gave up after three sentences.
Good luck old boy...
A year is no time at all in all this. You seem still at the stage of lurching from idea to idea and - to my eye at least - overtrading like mad. That's fine if you just want to enjoy the excitement of the chase and not worry too much if you make or lose money (like my play account ). However, if you want to do this as a business then listen to what everyone's been telling you; forget trading for a while; sort out your precise methodology; test it; trade it small til you're satified with it; then stick to it and ignore all other temptations.
cheers
jon
We all seem to be pretty active at night lol
I replied in lurker's journal...
http://www.trade2win.com/boards/showthread.php?t=24886
I wouldn't call this "thinking out loud" a system, but each new approach has potential if one is willing to dig deep and test it thoroughly. Lurker has to find something that he feels comfortable with and a lot of people (including myself) have given him the basics of a system (if not more).
Just to get the ball rolling for the new week
The Dow trended steadily higher into the Close and eventually ended the day with a big 143 point gain. The Dow is now at a decision point at the key 13,400 level.
The Daily and 60 Minute Charts show the Dow has reversed course rather nicely after bottoming out at 12,500 last week. The index is now within a stone's throw from the 13,400 level, which is the point at which the major upper trend line crosses. This line has rejected the Dow in the past, so we will likely to it for direction next week. If the Dow can break through 13,400, we could see another run to 13,700. Otherwise, a failure to rise above this zone could make for another round of key selling.
Short Term Dow
The Dow closed the day above an intraday lower trend line, seen in the 5 Minute Chart. Watch this line closely for early direction Monday at 13,325.
Medium Term Dow
In the medium term, we are still out of the market and will hold off on Longs at this point. We will watch 13,150 for Shorts; using 20 point stops.
( Signalwatch )
Just to get the ball rolling for the new week
The Dow trended steadily higher into the Close and eventually ended the day with a big 143 point gain. The Dow is now at a decision point at the key 13,400 level.
The Daily and 60 Minute Charts show the Dow has reversed course rather nicely after bottoming out at 12,500 last week. The index is now within a stone's throw from the 13,400 level, which is the point at which the major upper trend line crosses. This line has rejected the Dow in the past, so we will likely to it for direction next week. If the Dow can break through 13,400, we could see another run to 13,700. Otherwise, a failure to rise above this zone could make for another round of key selling.
Short Term Dow
The Dow closed the day above an intraday lower trend line, seen in the 5 Minute Chart. Watch this line closely for early direction Monday at 13,325.
Medium Term Dow
In the medium term, we are still out of the market and will hold off on Longs at this point. We will watch 13,150 for Shorts; using 20 point stops.
( Signalwatch )
Short on the DOW from 13317. No SL. Target - any profit zone will do. 13160 for starters.
4 hour charts showing fall. MAs, MACD, Stochs, RSI all down. Pretty confident about this one.
1 hour charts showing BB breakout to the down side.
CountrySide received 2bn aid and still looks vulnerable. I reckon a number of big companies are probably worried and under-estimate their exposure. Call me a Mr Sceptical if you must... Trust no one..
Another .25% on the cards. Will it be enough?
Feeling very bullish about gold and the euro again.
Good trading everyone.
Thanks Pat, educational stuff.
sure is quiet here today, guess everyone took Oscar's advice about the upcoming holiday. i.e. don't trade this week
I was short from 12342 cash but I tightened my stop too much and got taken out on the last spike of the day .. grrrrr
I was short from 12342 cash but I tightened my stop too much and got taken out on the last spike of the day .. grrrrr
With not watching the screens all day now I'm preferring the leave SL out in most cases but I'm trading a lot less. I reckon the upside on the DOW is more limited than the downside abyss. :cheesy:
Markets an ass. I know I'll probably fall and die on my own sword. How many interest rate cuts and how much liquidity does everyone want?
I would say even if we have another rate cut I'll compensate my losses on the DOW with my short position on USDJPY.
If markets tank then I'm expecting USDJPY to fall further.
Interesting pair to trade at the moment imo.
With not watching the screens all day now I'm preferring the leave SL out in most cases but I'm trading a lot less. I reckon the upside on the DOW is more limited than the downside abyss. :cheesy:
not trading because of Labor day next week?
I think everybody's exhausted from the weekend lol
haven't you noticed we've been up all night to post here
I think you meant to say 13342 .. anyway although I don't see any particular reason to short there, a reasonable stop would've been placed above the high of the previous day (13390-13400) but considering your entry that would've been quite some risk exposure.
didnt know you liked the yen atilla. thought cable was enough.
got 108.90 as a target BTW :cheesy:
The carry trades reversal will be a double blow to the Dollar. If the markets tank as I expect they will it's going to be a big crunch.
don't feel familiar about the relationships of the AUDJPY or EURJPY instruments. I always like to understand the fundamentals before leaping into these trades. At least I like to think I do.
Doing well so far on the short. 114 is my immediate target but hey 108 looks especially cool. Maybe I'll incubate my trade see what hatches out...