has anybody any comments on using this strategy. I have observed that it shows potential. Going long on a breakout and short on thebreakdown (of the high and low of the first hour). I have been checking the Ftse futures, but i don't have enough data to do a backtest. I would go for a quick 10 points limit (profit) with a 15/20 points stoploss. no spread bet as spreads too wide. thanks
Hi adalat
Volatility breakout systems do work on paper, but SB spreads and biasses can erode completely whatever edge you may think you have when it comes to real trades.
But I would say persevere with strict testing before you jump in with large positions. I did try day-trading (before resuming employment - now swing trade) using the early volatility of the FTSE100 and though I was never good at it, there is an early pattern which can be identified appr 2 days out of 3. If first move after 0800 lasts at least 15 mins without correction, there will usually (2 of 3) be a correction and the early trend will then resume and usually (2 of 3) beat its extreme.
So if we open at say 4400 and go up continuously until 0815 or later, say to 4415, watch out for the correction back down. When the correction ends, the index will usuallly break through 4415. But it won't necessarily keep going until 1630, as New York and other factors come into play later. So this little game only works for the first moves of the day. But your 10 points should be there easily. Use tight stops. Good hunting.
Volatility breakout systems do work on paper, but SB spreads and biasses can erode completely whatever edge you may think you have when it comes to real trades.
But I would say persevere with strict testing before you jump in with large positions. I did try day-trading (before resuming employment - now swing trade) using the early volatility of the FTSE100 and though I was never good at it, there is an early pattern which can be identified appr 2 days out of 3. If first move after 0800 lasts at least 15 mins without correction, there will usually (2 of 3) be a correction and the early trend will then resume and usually (2 of 3) beat its extreme.
So if we open at say 4400 and go up continuously until 0815 or later, say to 4415, watch out for the correction back down. When the correction ends, the index will usuallly break through 4415. But it won't necessarily keep going until 1630, as New York and other factors come into play later. So this little game only works for the first moves of the day. But your 10 points should be there easily. Use tight stops. Good hunting.
adalat,
in strongly trending mkts a b/o strategy works a treat......its pretty obvious. Backtest as much as you like but it wont help if you start in a static/sideways mkt
if you are keen on ftse then I presume you follow the FTSE 100 thread. I do'nt trade or chart ftse so only read the thread occasionally but last month I read a comment from bonsai that said [I'm not sure of the precise wording ] ........."ok we all see the pattern now how do we trade it "
I was surprised that nobody commented on bonsai's remark because its really a gem !
How will you trade a break out ?
in strongly trending mkts a b/o strategy works a treat......its pretty obvious. Backtest as much as you like but it wont help if you start in a static/sideways mkt
if you are keen on ftse then I presume you follow the FTSE 100 thread. I do'nt trade or chart ftse so only read the thread occasionally but last month I read a comment from bonsai that said [I'm not sure of the precise wording ] ........."ok we all see the pattern now how do we trade it "
I was surprised that nobody commented on bonsai's remark because its really a gem !
How will you trade a break out ?
I was using P&F hilo 3x3 breakouts on 1min Ftse fut. Also kept an eye on MAs and a couple of Indexia tools. Worked quite well until, as qaza says, you go into sideways action. Then there're too many whips. In the end, you're bleeding too many small losses. When I first looked at Ftse a few years ago, the daily ranges were averaging 120 points.
You could, of course, trade against the signal :cheesy:
You could, of course, trade against the signal :cheesy:
Crossroads
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qaza said:
This is one reason breakouts make for good trading of stocks, because there are lots to choose from and in any given day there will always be plenty that are trending. With Futures I would suggest that breakouts are one setup for the toolbox, but if you want to get a good trade near the open each and every day then a simple breakout pattern may not be sufficient, you need other setups up your sleeve. With Stocks the opposite is true, one good setup can be applied to many stocks.
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Xroads
Breakout on Gapped Stocks
One method that I had some success with last year and may yet revisit in the future to work on more was filtering usa stocks for morning gaps.. setting the filter to be 1% or more greater than any market gap... and then moitoring the action on that shortlist for the first hour.. then a break of that range can be significant..
often gapped stocks will settle into a range for that first hour and then a break of either extreme can indicate a continuation of gap direction or conversely a gap fill attempt..
One method that I had some success with last year and may yet revisit in the future to work on more was filtering usa stocks for morning gaps.. setting the filter to be 1% or more greater than any market gap... and then moitoring the action on that shortlist for the first hour.. then a break of that range can be significant..
often gapped stocks will settle into a range for that first hour and then a break of either extreme can indicate a continuation of gap direction or conversely a gap fill attempt..
