FTSE 100 intraday trading - JUNE 2003

kevin546

Established member
699 0
Hi Bonsai,

I agree that 50 points would have been very nice but those 100+ points were available and achievable, providing of course you have or are prepared to remain in front of your computer for the duration and you have the patience to sit it out and maintain your trading strategy. That's why I find also trading within the trends helps me otherwise it would be extremely boring. LOL

However while I admit to having done exactly that in the past being in front of your computer all day is an extremely long time and that is why I set myself a simple target of 20 points which can be obtained within a much shorter time. When I can I do sometimes spend the majority of the day trading particularly during the cold months or when I am in the right frame of mind but often and especially during the summer months I would not wish to spend more than 3 hours in the morning trading.

Kevin
 

Fluke

Well-known member
456 1
Kevin
Thanks for setting out your trading plan,I have been searching for some thing like this to bring it all together.I have tried day trading and at the moment,I am just not good enough.So I will be trading over several days and this method just suits me.
Is this your own idea or did some one put it together for you.
Also how did you arrive at the 13 and 34 ma's.
LOL. Regards
 

Lambchops

Active member
126 0
Kevin - Many thanks for taking the time to answer my question and in such detail. Your timeframe for trades suits me and I look forward to using your ideas.
 

kevin546

Established member
699 0
Fluke

The answer is yes, I put together my set-up to suit my own needs and it will most likely not suit many others. It has taken many hours of research and testing to get to where I am now.

There are other indicators and systems that produce better and quicker signals but they are no good if you cannot use them well. For example I know that many here make very good use of CCI and it does produce an earlier signal than the RSI that I am using but I have become so familiar with the use of RSI that I cannot get away from the signal it provides and found myself double testing the CCI when I use it with RSI so it does not work for me. What I am trying to say is just because I have used RSI as my lower indicator you could easily replace it with your own preference.

I would only say that I find 3D charting better for me so I would at least advise that you make use of one lower indicator to back up the upper chart selections. (That’s for those who trade just from upper indicators such as SMA's - still a good system).

The nuts and bolts of my system are that it should be both simple to apply and simple to see the entry and exit points on the chart. Each component plays its part, some acting as confirmation. For example the Bands are not essential because you can use the RSI for your overbought/sold indicator. However I find the Bands very visual and so I have become very familiar with the patterns they create and what to expect from both the RSI and price at certain stages of the bands development.

The 2 period SMA is close to the price and this is my main entry tool combined with the trend line formed by the SMA itself and not each and every move the SMA makes. The individual SMA pivots play there part when trading within the trends. This is where I may have originally entered at a trend change, taken profit if the price moved to far (got to far away from the 2 SMA or outside of the bands) then I would wait for the next appropriate move from the SMA or closing bar sequence for the next entry in the trend. These price moves do normally offer at least 2 or 3 entries before the trend changes.

The 34 EMA is another trend assessment and this was taken from another system used along with CCI. That system would not deal with reversal but wait for the price to move either above or below the EMA. A position would be taken when the EMA was sloping up or down in line with the current price trend. This would normally mean the price had already reversed and now fallen back a little to create a supporting pivot for the next move in the trend. This proved to be a very good return system (80%). However I like to be able to trade reversals but there is an element of risk, which is why I do not just trade all the Band or RSI reversals.

I have found to my cost that you have to be a very good trader to get these right all of the time because you are trading against the trend. Very often there will be a small reversal in a trend, which may only provide you with 4 or 5 points yet the next deal with the trend normally provides double, or more. I have found my set-up to be generally less risky because it encourages you not to trade individual price reversals in a trend (pull back) until you get a trend cut on the SMA. If in doubt at this stage, then all you need do is wait for the next lower or higher pivot to be formed and or by using an extending trend line you will often find if you use the existing SMA trend line when the price then moves back up or down after the trend change you will find that the price will go close to this expanded line and then continue with the new trend and this becomes another feature of the trend line for entry use. I will attempt to attach charts with examples.

As for the 13 SMA I was also using this from an SMA trading system where each time the price formed a pivot supporting the direction of the SMA an entry signalled would be generated. However with my adapted set-up I no longer feel the 13 SMA is required and the 34 EMA is very good for the 1 - 3 min charts. Because I am using the trend line of the 2 SMA it breaks up some of the data into trends that the 13 SMA would miss. The trend lines are again simple and clear the basis of this set-up. I believe that if you follow a clear strategy then without realising it you will be trading clinically and with discipline without trying.

With this system you must enter and exit as soon as a signal presents itself, second-guessing and you will get caught out if you are attempting to trade within a trend or using SB as your method of trading. However the positional trade is more relaxed and the entry is not so clinical if trading with the main trend of the day, however it might affect your profits LOL.


That should clear everything up.

Kevin
 

kevin546

Established member
699 0
A couple of charts re last post, 5 min for today with first few hours missing (again) and the 2 min with more data.
 

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Fluke

Well-known member
456 1
Kevin.
I do appreciate the time you must have spent to day typing up a very detailed answer to my simple question.You have helped me sort out some of the thoughts and idea's that have been going round in my head lately.I have been suffering from information over load and wanted to set out some sort of trading plan,but did not know were to start.
I presume the green line is 34 SMA and the blue line is 2SMA.

I hope my simple thanks are enough for your hard work to day.
Kind regards. Jon.
 

bonsai

Veteren member
4,106 11
Ftse like to close its gaps ! This alone is worth many points and
more often than you might think.
That was my only trade today for +10. After that off to the tennis.
But it seems that once again, nothing was missed.
I dont know if this is a rounding bottom/reverse H&S or what.
But it was unlikely we would break the bottom line of the channel without some pause or correction. So far the correction seems weak.
 

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kevin546

Established member
699 0
Bonsai

When you refer to the gap today do you mean after the fall or the remainder of the session being :LOL: taken up with recovering what the FTSE had lost before 10. Your 10 pts did this come from the reversal or the early fall. When you have time could you explain your gap theory in layman's terms. You know me I just put everything into trends.

By the way what FTSE data are you recording for your 15 min charts, is this from D4F and if so is it the bid or offer price.

You must be a past master now as you got the floor trader trainee's target in 1 deal. LOL When I discovered this fact It made me sit up and think. (trainee's target not your deal LOL)

They did not want the FTSE tp go lower than 4050 today, I had a couple of sells and each time the sell price stretched to 4045 moving away from the buy price they would not budge the buy price. The move down eventually came after several attempts but did not stay under for long and finished above after hours.

Kevin
 

kevin546

Established member
699 0
Jon & Lambchops

Re SMA and EMA you have stated them correctly, 2 close to the price good for reversal, 34 EMA lagging price better for trend analysis.

No problem. I had time on my hands today, still in holiday mode and the market was'nt being very dynamic this afternoon. Along my trading journey many have provided me with advice and so it is only fitting that I offer some of my own because without others experience and guidance I doubt I would have got this far and persevered for so long. I still like to look at new ideas and possible alternative strategies but when you have one that works it is best not to change it so I only consider different strategies for now. The only thing I might add is to take an early position against the trend (before trend line change) if I have a good divergence (CCI speak - or Failure Swing RSI speak) but from a 5 min chart (nothing less) and following a good long trend or price range. There were a couple on the 5 min chart I posted today and it is something I have used before. My reservation is that I like to remain with a trend following strategy and do not want to start hunting false signals so I will have to set certain filters such as those I have already mentioned.

If you are going to trade just the trend changes then the system is simplicity itself and you will have no problem apart from when to take the best profit. Obviously waiting for confirmation of the trend breaking you deal will mean you miss out on some of the gains but at the very least it gives you a clear signal to close. I would look to something that suits you for your exit before trend change, either an indicator you are comfortable with or a set target being satisfied with a percentage of the available gains rather than all of them.

However if you are going to use both methods and trade the smaller moves within the trend then you will need to be more precise when you close. I do reasonably well taking 5 points (often taking 5 points means your done and dusted and ready for the next one) or waiting for 2 movements from the SMA starting at the point of trend change. As the trend continues be aware of the danger of entering near the end of the trend, this is where the combination of bands and RSI can help, where a divergence or failure swing is developing. If SB I would not play the moves within the trends and beware of a non trending market, this is where small points become essential or moving to a longer frame chart.


Good luck and go easy until you have given it a bit of a test. While it works well for me it may prove not to be your cup of tea but all the best. Its about 3 yrs in the making so its had a lot of testing and like you I just needed to get it all together I call it my complete strategy because it allows me to play virtually all the price moves in a day. Along the way I have forsaken 3,4,5,10,13,20,30 SMA's, MACD, MACD Histogram, Stochastics (although they work really well with RSI) Money Flow Index, CCI, On Balance Volume and a few others. Keep an eye out for flags, wedges double tops and bottoms and triangles all popular with the FTSE intraday. There are other patterns but I stick to the common easy one's, when I started I said this system was based on simplification but you can add other things as you see fit it all depends what is best for your own individual trading style.


Kevin
 

Lambchops

Active member
126 0
Kevin - This stuff wants putting together on its own thread. It will benefit a lot of people (first steps) but come July nobody will ever bother to look on this thread and it will be lost. You have spent a lot of time both developing your method and writing this for us and it would be a shame to lose it.
 

ZigZag

Active member
123 0
KEVIN: I endorse what other members have already said about your good posts. It takes a genourous and confident personality to share with others.It also takes guts. I salute you. My method is similar with the addition of support & resistance lines to establish swing trades. Using yesterdays High and Lows and the previous 4 days Highs and lows. I have found greater consistency which allows less intraday trades but gives me confidence to increase my stakes when ther following condition is met. In your example charts when the 34 sma on the 5 min chart is moving in the same direction as in the 2 min chart. ( actually I use 5min and 1 min charts) Both smas must be trending. I would not enter(if I did it would be with low stake levels) as the sma has levelled out on your 5 min chart at 1240 thru to 15 10. I would assume a trading range is developing. Similarly at 1610 on your 2 Min chart. Of course if the trading range is wide enough after deduction of stake money it can still be tradeable. Hope you dont mind me adding to your excellent trading plan. Good luck. P.S. I use the above on the DAX
 

kevin546

Established member
699 0
Jon & Lambchops

Because you have mentioned that you may use my approach I felt I should add a couple of things to consider and expand on the system. First if all you are going to do is trade the trend changes then you need no further explanation; although some information on pivots may be of help just to understand what is going on before the trend line breach appears.

If you intend to trade within the trends then a sound understanding of pivots is essential because you are applying this sequence to the 2 SMA. If you wish to apply it to the price then only do so with the strong trend and remember that I tend to rely on the SMA pivot or in a continuing price trend the break of the closing bar position, ideally from several bars. (You will see this more clearly on the 5 or 3 min chart, the 2 min tends to stutter a little), I take this precaution as a filter to the price action producing whipsaws but in a strong trend and in the earlier stages of a good trend you may find that you can react to the first move by the price.

One example to help with this feature would be the position of the 34 EMA. If this has a nice slope to it because the price has moved away from the line then it tends to suggest a strong trend is in play, in fact this is what I touched on before when I mentioned SMA traders and the 13 SMA. Basically they would use an SMA to establish the long or mid term trend on a daily chart, having established which trend they were after they would apply the 13 SMA to the intraday chart. The 5 min was a popular time frame but not essential, and each time the price moved in accordance with the SMA they would treat this as an entry signal. It is quite good but does not in my opinion provide a complete daytrading approach as it misses the reversals, but as a system goes providing as in all strategies you stick to the rules it wins out more than it loses and has a good return rate.

Anyway I recommend you have a look at www.snapdragon.co.uk, select the 'Tricks of the trade seminar'. Its is an interesting read and explains what is actually going on in the market when the pivots are being created. I have produced attachments for the main pivots to illustrate up and downtrends (you will note in 3 of the examples all I have done is reverse them however I have reproduced Snapdragons N0 4 by turning it upside down but also around as well).

If you trade this system you will become an expert of pivot formations and a tip that I can give you concerning the FTSE is that number 3 (Snapdragons N0 3) appears a lot of the time when the US markets is in the first 30 mins or so. In fact if you go back to yesterday's chart you will see a good example of this where the lower price is tested pulling the price outside of the previous range appearing to start a new down (or uptrend) only for the price to quickly pull back to the original range and then gain strength to push on and outside the old range in the opposite direction. As I said this is explained in the notes from the seminar.

The other feature that I touched on briefly yesterday was the RSI and failure swings for a reversal position. I know I said this system concentrates on placing trades only in line with the current trend and this still holds good. I have recently been concentrating on CCI as my main lower indicator and so my focus has not been on RSI and therefore my concentration with CCI not working as well as I would have hoped for I have tended to focus on a system that only trades in line with a trend, with the lower indicator being used as confirmation and exit points rather than entry. However earlier in my trading I did use RSI to very good effect and now see no reason why this should not be added to the system with certain filters. My set-up general set-up will be seen as delayed when you compare it against other systems or separate indicators. I feel that with certain conditions YOU CAN ADD 2 ADDITIONAL ENTRY SIGNALS from the RSI for early entry to reversals especially if they are also in line with the trend or main daily trend. They will get you in before the SMA , closing bar sequence or the trend line change.

I would only advise using a ' Failure Swing' (Divergence) on the 5 min chart, I find lower time frames can produce to many signals and sometimes do not produce the results, maybe after more testing you could move down to a 3 min setting but the 5 min time frame appears to act as a filter in its own right. The other signal is only consider RSI extremes, if you look at my 5 min chart from yesterday the RSI was plotted close to or below the 30 setting 3 times and close to or above the 70 setting twice.

Backing up these signals with further confirmation is the price position in relation to the bands, most of the day the price did not venture out of the bands by more than a couple of points yet the best results from the RSI signal came when the price broke outside of the bands by 7 points. Each of the RSI signals generated a minimum of 4 points on the Futures prices, so 4 x 5 = 20 points and that was the minimum available gain from these signals. This of course does not account for all the other signals that were generated throughout the day from trend changes and SMA pivots this is why I like it because there are enough signals during the session to ensure you do not have to wait to long for some action and so you can select when you wish to trade according to your lifestyle.

If you apply this to the 2 min chart then the signals go up to 7 and from memory 1 or 2 of these may not have worked out. From my experience I would consider a setting of under 35 and above 65 as a possible deal and on or past 30 or 70 on a 5 min chart as a confirmed deal when the price then starts to move in the direction you are waiting for. You will need to test the different levels for shorter time frame charts. I just find that in some cases the 2 min chart would produce a failure swing to early or it would only produce a price reaction of about 3 points which does not give you much room to profit from.

When following the RSI Bands combination signal in these circumstances the other signals from the SMA or the trend line change become confirmation of the RSI signal. Of course if you are happy with a different lower indicator then you could adopt the same process as I have with the RSI. I just find the RSI easy to follow.

Right I think that covers it all.
 

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