Help Improve a FTSE Intraday System

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Bacchus85

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Hi All,

I have been daytrading the FTSE 100 index for several months now with a reasonable net profit to show for it thus far. However, my trading experiences & record amply demonstrate to me that profitability could be higher. To this end I'd appreciate anyone's suggestions for improvements to my method. In return I can offer a description of my system and a willingness to answer all queries:

1. The method daytrades the FTSE 100 index, chosen for reasons of familiarity (for me) & low costs, but I don't think the market selection is a vital factor in and of itself as long as there is sufficient volatility and low costs.

2. It is essentially a breakout-from-consolidation method that looks to follow the immediate trend in the market. All trades are short term (generally measured in minutes rather than hours) and trading times are daily from the 8.00am open to around 12.00 noon London time each day. This half day window is deliberate to allow focus without fatigue and to avoid playing in Wall Street's shadow in the afternoon (I'd sooner trade a US index directly in that case).

3. Trading is off a real time tick chart and is 100% technical with no fundamental input as my belief is that price moves before the news gets to me. Equally, however, I have not found any technical indicators which appear to work ("work" defined as beating random entry) reliably in all market conditions so trading is 100% based on price action alone.

4. Entry is discretionary, based on observing a breakout from consolidation. Generally, I like to use the breakout as a setup and watch it extend some distance first so as to reduce the chance of being trapped by a small false move, actual entry being on a retracement back towards the extreme of the consolidation range.

5. The initial hard stop is placed where the market should not retrace to if the breakout is valid, generally the other side of the consolidation range. This stop is always adhered to and is never moved further away.

6. The initial target is set so as to offer a 1:1 risk:reward profile for the trade based on the initial hard stop. This is to ensure the target is not too greedy and should have a high probability of being reached if the breakout is indeed valid.

7. The actual achieved risk:reward profile is nearer 1.5 : 1 as the initial stop is moved up on a trailing basis if the trade moves favourably. Also, the target is flexible and will be allowed to run a little further if the move being played seems to have energy left it in once the initial target point is reached. Both elements contribute to the improvement in the achieved risk:reward profile but the trailing stop adjustment is currently the main contributor.

8. The achieved success rate, i.e. wins vs. losses, hovers around 50% so the system edge is coming exclusively at present from the achieved risk:reward profile.

9. Money management is essentially to risk 1% of the account at the initial hard stop. Trades are fully opened and closed in one go with no subsequent adding to position, averaging down, or scaling out applied.

10. The system typically trades 1 or 2 times per day with the average initial stop being about 20 FTSE points from the entry point.


That's about it for the system description. Please say if anything needs further clarification.

I'd welcome all comments and suggestions, especially any relating to improving the success rate, running & taking profits, and reducing trading stress.

Many Thanks
 

Aspire

Active member
171 60
Have you thought about restricting your hours to just 8am to 10am? The ftse generally quietens down a lot after 10 and before the figures/Americans turn up. The moves do not extend as much and there is a greater chance of you falling into peoples traps going for these sort of breakout directional moves. Have a look at how your profitability compares between 8 and 10 with between 10 and 12. Just something to think about and have a look at.
 
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Bacchus85

0 0
Have you thought about restricting your hours to just 8am to 10am? The ftse generally quietens down a lot after 10 and before the figures/Americans turn up. The moves do not extend as much and there is a greater chance of you falling into peoples traps going for these sort of breakout directional moves. Have a look at how your profitability compares between 8 and 10 with between 10 and 12. Just something to think about and have a look at.


Hi Aspire,

Many thanks for the idea.

This is something I've looked at in the past as I started trading with the notion that the market activity during the day is "U" shaped, i.e. peaks in the morning and afternoon and quieter in the middle. This led me to trading only in the first couple of hours - as you suggest - but my record actually shows a worse outcome than trading for the more extended period!

I think this is due to various reasons:
1. Psychologically I felt more pressure to get a trade on given the limited window so I rushed into trades, with the inevitable poor results.
2. Though there is more action before 10.00am I found there also tends to be far more aggressive whipsaws, presumably as the market is trying to find a first level for the day, and I often got stopped out.
3. It seems to be a tendency of the market quite frequently to jump around for the first couple of hours, settle a little into a consolidation range, and then make a good break one way or the other later in the morning. This clearer consolidation + break I find much easier to trade and it has been more profitable for me.

All that said, I do essentially agree with you and in fact I am presently working on how I can trade better at the start of the day in an effort to boost profitability because, as you say, the potential is most certainly there.

Many thanks for the comment
 

cofton

Member
82 15
Hi Aspire,

Many thanks for the idea.

This is something I've looked at in the past as I started trading with the notion that the market activity during the day is "U" shaped, i.e. peaks in the morning and afternoon and quieter in the middle. This led me to trading only in the first couple of hours - as you suggest - but my record actually shows a worse outcome than trading for the more extended period!

I think this is due to various reasons:
1. Psychologically I felt more pressure to get a trade on given the limited window so I rushed into trades, with the inevitable poor results.
2. Though there is more action before 10.00am I found there also tends to be far more aggressive whipsaws, presumably as the market is trying to find a first level for the day, and I often got stopped out.
3. It seems to be a tendency of the market quite frequently to jump around for the first couple of hours, settle a little into a consolidation range, and then make a good break one way or the other later in the morning. This clearer consolidation + break I find much easier to trade and it has been more profitable for me.

All that said, I do essentially agree with you and in fact I am presently working on how I can trade better at the start of the day in an effort to boost profitability because, as you say, the potential is most certainly there.

Many thanks for the comment

Hi Bacchus85
I would certainly agree that a good time to trade the FTSE is between after 8.15am to 10.30/11.00am maybe 12.00 depending on your results. I have found that most of my good trades are after 8.15am. If I do trade for the whole day then I have found that around 2.30/3.00pm have brought me good results also.
I know it is unfair to generalise but looking at my results then these are the times that have brought me good results.
Personally if I have made 20 pips then I stop trading for the day but if things are quite in the morning then I have found that by 3pm (ish) I have either made my 20 pips or I call it a day and accept a miss (or negative feedback as I prefer to call it (n))
Not sure if I have contributed or not but maybe the time thing is a contributory factor in your method.
Be happy
Cofton
 
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Bacchus85

0 0
Hi Bacchus85
I would certainly agree that a good time to trade the FTSE is between after 8.15am to 10.30/11.00am maybe 12.00 depending on your results. I have found that most of my good trades are after 8.15am. If I do trade for the whole day then I have found that around 2.30/3.00pm have brought me good results also.
I know it is unfair to generalise but looking at my results then these are the times that have brought me good results.
Personally if I have made 20 pips then I stop trading for the day but if things are quite in the morning then I have found that by 3pm (ish) I have either made my 20 pips or I call it a day and accept a miss (or negative feedback as I prefer to call it (n))
Not sure if I have contributed or not but maybe the time thing is a contributory factor in your method.
Be happy
Cofton



Hi Cofton,

Many thanks for the comment.

My experience is pretty much in line with yours - these days I hardly ever trade in the first 30 minutes as the combination of sharp and short opening volatility and often a lack of obvious trend make it difficult for me despite the lure of quick profit potential. As you say, loss of opportunity is preferable to loss of capital! Actually, it's 8.10 right now with the market opening down 145pts on Lehman Chapter 11 news and I'm using this reply as a way of keeping me from the temptation to jump in!!

I also agree around 2.00pm is a fruitful time as you often get a nice clean break in anticipation of the US opening. The problem here for me is that I've generally had enough action by then and like to have the afternoons free. Maybe I'll work on having a decent lunch break and then back into the fray later on.

Equally, I agree with the notion of making your target for the day and then calling it quits, it certainly helps to beat overtrading urges. My personal rule is no more than two losses a day before calling a halt as then the worst daily damage is pretty much recoverable with one win tomorrow (hopefully!). I find you can't get too far behind that way. More optimistically, I also call a halt once I've had a good winner and go off to enjoy the rest of the day. All tricks to maintain a psychological equilibrium, I guess, but it does allow me to enjoy my trading rather than being perpetually fearful.

Many thanks again
 
 
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