Big Ben on the FTSE100

[ibetyou]

Hi Tom.No trades this week, could'nt seem to get a clear picture.My philosophy is if in doubt sit it out,so thats what i did and i'm glad i did as i would have surely got burned.

The week ahead is looking clearer, so i'm hoping to get swinging with you all shortly.
I like to keep things as simple as possable so have no fancy indicators to talk about which makes me feel a bit inadequate for this group really.

I use bollinger bands mainly, which i find useful for the range and rsi, fab macd just as a visual comfirmation as to what i'm thinking,so nothing you don't already know.
I workout the weeks range and then do a daily range at 6.30am each morning.
It generates three levels high middle low.my thinking is when its at the high its over bought and will come back to the middle and if it goes low its over sold and will come back to the middle.
The other indicators just gives me likely direction.
By doing the range each morning just before the market opens gives me key points in the day to look out for.

let me show you next weeks genarated range.
high middle low
6045 5934 5823

As the market is still bullish i would not exspect it to fall back past the middle number although remember this is a weekly range not a day range.
I have also found if it was to pass the middle add 5934+5823=11757 then divide it by two =5878
and you will see it hover there before it eather goes to 5823 or returns to the middle again.

With these figures in front of me i can see where to stick my stop where to get in and where to get out.
That gives me a clear area to trade.
Having said all that last week it broke the weekly range by about 48 points and was heading for the monthly range so nothing is perfect.
The range was 6082 for the week 6105 for the month and on tuesday the 4 of jan the day range was or would have been sell at 6042 stop at 6082 so i would have got stopped out as it went to 6090.
Better a plan than no plan at all.
So there you have it, you can all rip it apart at your leisure over the weekend or help me finetune it.

Look farward to your take on it tomorton as i do reading your outlook on the markets.
Thankyou all for your time, feeling more comfortable here now i have given something back which i hope is of some use to someone.

 

[tomorton]

Fairly mediocre first full week to 2011 for FTSE100 Big Ben traders. Monday stopped out for -32, Tuesday expired positive (+1pt), Wednesday orders not triggered, Thursday expired positive (+10pts) and today no trade due to excessive BB range.

Over the last 4 weeks of trading (excluding Christmas), my charts show 4 trades with targets hit, 2 stopped out, so that's some comfort.

Hoping for better results next week.

 

[tomorton]

Initial results looking at the last 2 weeks charts to see if earlier BB period, 0700-0900 London time, would be a more effective basis. Initial observations confirm what we might have suspected -
1. price action before 0800 is very muted and does not set either high or low - these are printed between 8 and 9;
2. 0800-0900 BB ranges are a little narrower than 0800-1000 BB ranges, so less likely to negate a trading session by exceeding the 80%ATR threshold;
3. also more likely to hit target;
4. also reduce risk of you're trading in fixed amount per point as opposed to fixed amount per session.

Using the early BB range, results over the 2 weeks are 2 trades hit target, 1 stopped out, 2 expired positive, 1 expired negative.

Encouraging results, even though on a limited run.

 

[tomorton]

As a result of the above preliminary results, I'm going to trade BB on the FTSE as a 0800-0900 breakout strategy until further data accumulated.

 

[jimmc]

I'm sticking with 08:00 -09:00 at the moment as metioned before. When the market looks like it's ranging further on a daily basis it may be worth re-evaluating.

 

[bangkoker]

I'm getting back into the FTSE this week also, I like the 9am idea, as I think any move is less likely to be exhausted on entry. We'll all see.

Good luck:clover:

 

[tomorton]

Many thanks jimmc for your encouragement. Seems that cutting the BB period to 1 hour from 2 suggests a narrower range, so more limited risk and a longer period before the close for price to hit target. The charts seem to confirm, wish i'd done this earlier.

Good luck bangkoker. I'm always puzzled by efforts by fellow traders to find more and more exotic commodities, new national indices and minor currencies to trade. The FTSE is right here on our doorstep.

 

[jimmc]

The least I could do tomorton, after all the good ideas and suggestions you have come up with in this thread already. As you said before, we are all in this to try to make money

Many thanks jimmc for your encouragement. Seems that cutting the BB period to 1 hour from 2 suggests a narrower range, so more limited risk and a longer period before the close for price to hit target. The charts seem to confirm, wish i'd done this earlier.

Good luck bangkoker. I'm always puzzled by efforts by fellow traders to find more and more exotic commodities, new national indices and minor currencies to trade. The FTSE is right here on our doorstep.

 

[george0]

Good work guys, I too did not do well last week. I may join you in trying the 8am-9am range.

 

[tomorton]

Forgot to post US is closed today for Martin Luther King holiday. Absence of US markets ususally makes BB not worth the trouble.

 

[bangkoker]

Sounds sensible what with the US holiday. I went short at 5990, with a 30 point range (about 9:15), at 3 o clock nothing of interest had happened (so it seemed sensible to cut my losses) well in fact, it was 2 pts my way.

Was a good practise run and lucky that I lost no points, so hopefully start properly tomorrow.

 

[Ted1983]

Benefits of diversification? Really?

Over 44 sessions, from 25/10 to 23/12, the FTSE100 is 14 targets hit, 6 stopped out, 11 expired +ve, 9 expired -ve, 4 sessions no trade. Net gain appr. 8 winning sessions.

Over the same period, trading EUR/USD and GBP/USD as well, resulted in 18 winning sessions and 8 losing, net gain appr. 10 sessions.

Assuming the same amount of capital is put at risk per session on both strategies, considering that the diversified strategy demands three times as many trades, the slight increase in net winning sessions from 8 to 10 is not significant. It would seem to be more efficient to simply trade the FTSE, as per the original objective of this thread.

Anyone like to challenge?

Hi,

Just been reading through this excellent thread and I would like to challenge this post.
Firstly a 25% increase in wining sessions from 8 to 10 is awesome. Although of course the sample is not statistically significant.
Secondly if the markets traded are not correlated you will achieve a smoother equity curve thus should be able to put a higher percentage of equity at risk without increasing RoR.

 

[bangkoker]

Well, with such a large range this morning a no trade for me then.

 

[jimmc]

me too - decided to skip it

 

[tomorton]

I saw the wide range but am risking it today. Will take profit and run given first opportunity though.

 

[tomorton]

Hi,

Just been reading through this excellent thread and I would like to challenge this post.
Firstly a 25% increase in wining sessions from 8 to 10 is awesome. Although of course the sample is not statistically significant.
Secondly if the markets traded are not correlated you will achieve a smoother equity curve thus should be able to put a higher percentage of equity at risk without increasing RoR.

Thanks for your message and encouragement Ted1983.
Yes, going 25% up from 8 wins net to 10 is good, but for 3 times the work involved and not greatly changing the winnners:losers ratio, I'm not convinced it achieves what I had hoped. Anyway, I am really short of time when entering BB orders.

After 2 months chart-checking and 4 months profitable trading, I have steeply increased my capital at risk for the 2011 Big Ben campaign.

All such thoughtful comments are most welcome on the thread. If anyone is going to trade the FTSE using Big Ben, just be aware its performance is not what purist traders would describe as exciting. It has a 1:1 r:r and the win rate is at best 65%. Looking back over 2010 figures recently, it looks to me as if you could draw the following rule of thumb - in an average month, 8 trades will hit BB target, 4 will be stopped out, 5 will not hit target but will expire in the money and 3 will expire in the red but not hit the stop. There could also be 1 or 2 no-trade days due to wide BB range.

Onwards and upwards.

 

[Ted1983]

Thanks for your message and encouragement Ted1983.
Yes, going 25% up from 8 wins net to 10 is good, but for 3 times the work involved and not greatly changing the winnners:losers ratio, I'm not convinced it achieves what I had hoped. Anyway, I am really short of time when entering BB orders.

After 2 months chart-checking and 4 months profitable trading, I have steeply increased my capital at risk for the 2011 Big Ben campaign.

All such thoughtful comments are most welcome on the thread. If anyone is going to trade the FTSE using Big Ben, just be aware its performance is not what purist traders would describe as exciting. It has a 1:1 r:r and the win rate is at best 65%. Looking back over 2010 figures recently, it looks to me as if you could draw the following rule of thumb - in an average month, 8 trades will hit BB target, 4 will be stopped out, 5 will not hit target but will expire in the money and 3 will expire in the red but not hit the stop. There could also be 1 or 2 no-trade days due to wide BB range.

Onwards and upwards.

Those numbers certainly do sound exciting to me. Having played a couple of hundred thousand hands of online poker has given a better apreciation for the meaning of the term "the long run", when it comes to applying an edge over and over again. I think even 60% at 1:1 is pretty hot tamales.

WRT trading this system on currencies such as EUR and GBP I have a feeling it might be better to start the range at 7am. As the German and French equity markets open the volatility seems to hit right about then.

edit:Also the fact that the entry rules for this system are simple means that it should be more robust than a conmplicated method with more degrees of freedom.

 

[Ted1983]

Hi Tomorton et al,

I've just been visually backtesting a slightly different entry method, using 15min candle swings to form an opening range (a lot of the time this is the same as the 8-10 rule).

Using Smart Live Markets demo data from November 1st to today I get;

25 wins
11 loses
8 breakeven/no trade
5 partial +ve
3 partial -ve


How does this compare to your results for the period, if you wouldn't mind dragging out the data?

Of the 25 winners 7 of them reached a maxium excursion greater than 2x risk, 1 trade even reached over 6x! This would suggest some kind of rule to hang on a bit longer might be beneficial.

Of the 11 losing trades 2 were stopped in by 1 point only implying that a 2 point+spread buffer zone might be correct.

I'm going to use a simulator to test a longer period hopefully to get some more meaningful data and eliminate my eyeballing mistakes; I'll report back with any interesting findings

 

[tomorton]

An interesting twist on BB Ted, thanks for this backtesting.

Your results of 25:11:8:5:3 look similar to the long-run averages profile I see with BB.

Discounting the 8 no trades/break-even session, your 'real' trades give percentage ratios of 57:25:11:7(%).

Over a longer period of the 94 sessions from 16/08 to Christmas, BB on the FTSE100 showed me 33:16:19:14 (discounting 12 no trades) converting to percentage values of 40:20:23:17(%). Actually,your results suggest a much better return, as the greater percentage of targets hit would make a big difference to the bottom line in points. The ratio of targets hit to stops hit is still 2:1, which I like, and the expired +ve to expired -ve ratio is also good.

The similarity of BB profile in your results against my own, similar again to what I have seen on GBP/USD and EUR/USD, suggest that BB is a phenomenon of market structure, not a product of trend, fundamentals or traders' analysis. I have suspected that, in any volume market with an overnight close (with much lower volume) similar results profiles will emerge and I wish I had time to test this on, say, VOD or the Nikkei.

Please press on with your research, this is so encouraging.

 

[tomorton]

PS - The 0700-0900 period is the classic period for BB traded on the GBP/USD. The principle was that the Frankfurt open followed by London's an hour later, allowed the market to set realistic resistance and support levels, the BB range. I'm not convinced that BB needs two slightly time-shifted markets to work b ut settled on 0800-1000 after studying my SB tick charts: I am now trading on just the 0800-0900 period, which should do slightly better actually.

PPS - Shouldn't really have been in a BB trade today but happy to get out at exactly b/e.

What doesn't kill you makes you stronger.