Big Ben on the FTSE100

[tomorton]

Well bangkoker, this is possibly the key question As discussed elsewhere the last few days, a system based on random chance must eventually fail: in fact it doesn't really fail, it's just that it starts to, quite randomly, give outcomes poorer than they were in the preceeding period. And it will just as surely revert again to giving great results and the cycle will begn again.

The true Holy Grail system will be one which takes advantage of the mechanics of the market, which the market cannot change. I don't say Big Ben is this system, but it builds on rational behaviour of the market. It's hard to conceive that a market can see a dramatic increase in volume (on opening) without a dramatic increase in volatility: it's surely just as logical that this volatility will be driven to limits by tenative and testing trades by the market participants and these levels will amount to support and resistance. Break-outs should then follow the classic pattern of dramatic penetration, followed by support reverting to resistance and vice versa. Should be plenty of scope to play such scenarios as long as profit targets are not too far out and stops not too close in.

Anyway, a fun game so far.

 

[StephenMcCreedy]

something i've been working on that seems to do well is what i'm calling the change and test. i use a 5 min chart with a 20 simple moving average and wait for a change in direction of the 20sma and also the market to go from above it to below it or visa versa. i want to see a strong move crossing it not it hopping over by default over time. then once the market has had it's change i wait for a test of the 20sma and buy there with a 6 point stop and 12 point target. here is the chart from this morning. i actually got stopped on some ridiculous volatility but it still illustrates the set up that i would have expected to have worked most of the time. with a risk reward ratio of 2 you only need 33% hit rate to break even. my average over the last few weeks is 50/50 so i'm steadily building profits. i think taking some profit at +6, +12 and then leaving some to run would work even better as sometimes these form the basis of large moves. also i only like to take them on the first test. it seems that the first test can hold where as another test soon is a sign of weakness.

the trade i took was not long after 8am at 5350 i was stopped but it shows the premise that works well. filtering the trades through experience is probably the 'edge' ie knowing when the market is ready to move not just bumping in to the average.

 

[Lord Flasheart]

Going amazingly well at the moment tom'. I do wonder if Market conditions are just working particularly well for the system at the moment and how it will work in the longer term but following with interest as even if the edge reduces substantially an edge is an edge.

Had had happen many times. I used to backtest many systems for 6 months,see theyd work,go live and then have 8 losers in a row. This looks good with good money management

 

[Splitlink]

I see the markrt as firm, this morning, and entered at 0836 at 5353 with intended stop of 5341.If we have seen the low for the morning I accept that as a low risk entry.

 

[StephenMcCreedy]

you're doing well already spitlink. i entered again in the direction of the 20sma after being stopped the first time. i reckon the mistake most people make (other than discipline!) is that they look for the market to be above or below the mas they use where i find direction more useful. most software seems to struggle with this and my maths isn't up to it but i've often felt that gradient of moving averages is the key. when they are trending strongly and you get a sharp dip below, but not sharp enough to alter it's course, often these are the best risk/reward entries. anyhow here is my chart of the second entry. stop of 6, target of 12.

also i have hourly bar for the september ftse future since 1st of june if anyone wants to test out on it. ask me and i'll email it over.

 

[Splitlink]

you're doing well already spitlink. i entered again in the direction of the 20sma after being stopped the first time. i reckon the mistake most people make (other than discipline!) is that they look for the market to be above or below the mas they use where i find direction more useful. most software seems to struggle with this and my maths isn't up to it but i've often felt that gradient of moving averages is the key. when they are trending strongly and you get a sharp dip below, but not sharp enough to alter it's course, often these are the best risk/reward entries. anyhow here is my chart of the second entry. stop of 6, target of 12.

also i have hourly bar for the september ftse future since 1st of june if anyone wants to test out on it. ask me and i'll email it over.

We agree 100% on this. I am a confirmed trend follower, based on averages. Sometimes I change the time frame but don't do anything lower than 5M. I admit to being a bit of a chop and changer on TFs. At present my preferred is 30M.

I got from Piper's book the preference he has for low risk and a bit of MP and getting a spike, if possible. All of that, IMO, plus a trend direction based on my averages biases the trade and reduces risk.

 

[StephenMcCreedy]

can you tell me what MP in regard piper's book? is it market profile? i guess the essence is high risk/ reward entry combined with discpline and i guess there are many ways of identifying those points. i guess in a normal day on the ftse there must be 10-20 good entry points. we only need 1 or 2 of them. if you look at the weekly set up where we are now is really a massive poke through the declining 20sma on the weekly chart. the direction of the 20sma hasn't been changed by this thrust and to me it looks on a longer term view a good time to get in short. i'm thinking of getting in with a 200 point stop, which i know is large but i have a targets on the ftse of sub 5000 test, 4650 and even 4300 if things unravel. in this context 200 point to stay out of harm way looks ok on a rrr basis.

 

[tomorton]

Big Ben orders from the 0800-1000hrs range entered, 30pt range. In view of recent market rises, this could be a flat day today, so one or other could be triggered but not closed out at 30pt target. If an order is triggered, I hope to let it run until this evening but will be out and flat by US close at latest.

 

[StephenMcCreedy]

thanks, i have around 374 and 342 as range levels. this is my take on the longer term ftse. if i had more cash i'd take on a few out of the money dec puts.

 

[Splitlink]

can you tell me what MP in regard piper's book? is it market profile? i guess the essence is high risk/ reward entry combined with discpline and i guess there are many ways of identifying those points. i guess in a normal day on the ftse there must be 10-20 good entry points. we only need 1 or 2 of them. if you look at the weekly set up where we are now is really a massive poke through the declining 20sma on the weekly chart. the direction of the 20sma hasn't been changed by this thrust and to me it looks on a longer term view a good time to get in short. i'm thinking of getting in with a 200 point stop, which i know is large but i have a targets on the ftse of sub 5000 test, 4650 and even 4300 if things unravel. in this context 200 point to stay out of harm way looks ok on a rrr basis.

He draws a line through the bars. A line cutting 2 bars is an attractive entry, 3 less so, etc. Really, all it is is glorified pin-bar entry and I can see why he likes a spike. However, the whole thing, as in all trading systems, is trend and that is where the averages come in. The low risk entry is, as you say, a pin down through an average. Can't beat it!

He says that, if you keep the the entry risks low the profits on a winning trade can be enormous.

 

[StephenMcCreedy]

thanks for that. it looks like we have a big ben long entry

 

[StephenMcCreedy]

here is today ftse with big ben levels drawn on. interestingly after an attempt to get out of the range the fall back in and restest of the level would have been a perfect entry for a short. i saw it but didn't take it as not in my plan but shows the level for today at least has been important.

 

[Splitlink]

here is today ftse with big ben levels drawn on. interestingly after an attempt to get out of the range the fall back in and restest of the level would have been a perfect entry for a short. i saw it but didn't take it as not in my plan but shows the level for today at least has been important.

Yes, the problem is, to take profits, or not. I took profits yesterday and missed the rest of the rise, so I did not take profits to-day.
That is why no-one can trade exactly the same as another and why, IMO, systems do not work for the majority.

 

[StephenMcCreedy]

perhaps divide your size in to three lots, take profits on 1/3, hang on, take some more on the 2nd 1/3 when you can't hang on any longer and let the final 1/3 ride.

i know a guy who used to do that and it worked for him. he reckoned over time as he saw that he was better off for hanging on over time he learned to hold more of it for longer.

i think a defined procedure is best though as it takes away the urge to blame yourself. i would say on balance hanging on pays. imagine you get short a crash or long a day like yesterday. it cancels out a lot of 10-20 losses.

according to the system too you're not stopped out till the low is taken out which isn't the case yet. maybe the market will find it's feet again? i don't know, i don't trade this system just following it for interest as it's the ftse.

 

[Splitlink]

I'm out for 6 points. Perhaps I'll be sorry but I have to go to work and have an idea that I will end up stopped if I keep it open.

Another day tomorrow. Good luck to all.

 

[Wino]

I would appreciate some honest advice here.

I have three short positions open on the FTSE after badly misjudging the upswing, two are December spread bets and one expires September 17th. I am about 140 pts down on one Dec and one Sep respectively (quid a point so not megabucks), with the other Dec short bouncing around the 15 pt (against me) mark (at £2 a point). So I am currently bouncing around a £315 loss if I closed now (15:25 BST).

Here are several points to consider. One, I am not a professional trader, have no need for an urgent exit, and don't need the trading margin released. Second, I am playing with the house's money at the moment having been quite ('amateurly') successful to date.

What do I do? All opinions appreciated.

 

[StephenMcCreedy]

to be honest. you get out now take a few days off and make a plan.

don't trade without a stop in first. it might work for you for a time and then you'll get an upswing like yesterday when you're in big and lose big time. i've seen it happen to myself and everyone i know at some time or another. you don't start making till you start being strict with stops.

don't focus on the money, focus on the market, what is it doing? is it still going up etc.

if you can't pull the trigger on closing them now then look at the market and get some stops in above where we are now. if they get hit so be it. don't add any more and don't cancel those stops!

the market can do ANYTHING! we could be at 6,000 by next week, we could be at 4,000 by next week. no matter what recent volatility has suggested these are both possible. oct 87 wasn't meant to happen, sep 11th came out of the blue, the dow flash crash was only a few months ago. every penny is at risk in your account until you get stops in.

got man up and do it, and i want you to come back here and tell us you've set them and you're going to stick to them.

 

[pcrude]

I would appreciate some honest advice here.

I have three short positions open on the FTSE after badly misjudging the upswing, two are December spread bets and one expires September 17th. I am about 140 pts down on one Dec and one Sep respectively (quid a point so not megabucks), with the other Dec short bouncing around the 15 pt (against me) mark (at £2 a point). So I am currently bouncing around a £315 loss if I closed now (15:25 BST).

Here are several points to consider. One, I am not a professional trader, have no need for an urgent exit, and don't need the trading margin released. Second, I am playing with the house's money at the moment having been quite ('amateurly') successful to date.

What do I do? All opinions appreciated.

Agreed. Get out and start again. The fact that you don't need either the margin or the urgent exit is fine if you're a long-term investor, but not if you're trading leveraged products. Also, although it's good to have been quite successful, beware complacency. As soon as you start to think you're getting good at this game something comes out of the blue to hurt your wallet, which is a very humbling experience (though probably a good lesson to learn). Good luck.

 

[Wino]

Thanks for that sage advice. I have done it and set stops which will still leave me in a VERY modest overall profit from SB'ing, which I think will help psychologically as I'm going on holiday tomorrow!

You know it's a weird thing, even though the stops I have set are a greater loss than the one I am currently staring at on my screen, I feel emotionally better, calmer and more in control already. I know what my loss will be if I get stopped, and I think I have just learned an extremely valuable lesson.

Thank you.

 

[StephenMcCreedy]

good man, trading is about managing risk. if you don't manage risk you'll get wiped out one day. draw a line in the sand. if you get stopped take it on the chin, turn of your computer and have a break. i've ruined many holidays by being in the market. have a good break and when you come back come and check in here and you'll find plenty to help you get going.