Intra Day Dow Trading

[lurkerlurker]

I am working on developing a system for intra day trading of the YM futures.

I would appreciate if others who trade this market could post suggestions for the formulation of a trading method for this market.

Which indicators seem to work well on this market. Which timeframe is best for low risk/ high reward trades? I am not interested in trying to catch tops or bottoms, and do not wish to risk more than 20 pips per trade.

Here is my existing system which isn't working too well at the moment. Comments, suggestions, and revisions would be appreciated.

Also, has anyone had any success trading Chartman's Dow strategy on the 1 min chart, and if so what constitutes a "confirmed break"?

Thanks in advance

~LL

 

[firewalker99]

Which indicators seem to work well on this market. Which timeframe is best for low risk/ high reward trades? I am not interested in trying to catch tops or bottoms, and do not wish to risk more than 20 pips per trade.

Here is my existing system which isn't working too well at the moment. Comments, suggestions, and revisions would be appreciated.

Also, has anyone had any success trading Chartman's Dow strategy on the 1 min chart, and if so what constitutes a "confirmed break"?
~LL

Imho, you are asking questions which shouldn't be asked. "Which indicators seem to work well on this market?" is different for everybody. I am convinced you can make anything work. By looking for the one thing that works the best, you are searching for the holy grail. If you wish to walk the path of indicators, you have plenty of choice... just pick one, watch it for a couple of days, formulate a hypothesis, test that hypothesis and refine it. Repeat the process until you have something that you can test and analyze. Dbphoenix once made these excellent posts which are still a beacon of light:

http://www.trade2win.com/boards/showpost.php?p=202729&postcount=5
http://www.trade2win.com/boards/showpost.php?p=202765&postcount=8

As for the timeframe.. personally I trade of 5-min bars, almost all the charts I posted on trade2win are 5-min charts. There's no reason why you can't make something work on a 3-min or 15-min timeframe. I would advice against going to anything smaller however than 3-minutes because the number of signals you might be getting will increase and I believe most traders will agree that's it's best to stick to a certain amount of trades per day (say 3 to 5 - have a look at the poll http://www.trade2win.com/boards/showthread.php?t=21260).

 

[firewalker99]

Here is my existing system which isn't working too well at the moment. Comments, suggestions, and revisions would be appreciated.

~LL

You say it's not working very well. If I may be blunt, you can't decide if it's working well or not if you haven't tested it or papertraded it for at least a couple of weeks (20 days is what I would find suitable). You've also made some trades and did some things that weren't part of the plan... which pretty much renders the results you've acquired useless.

 

[lurkerlurker]

Perhaps I am asking the wrong questions. I just wanted to get some input about trading the YM. I'm not particularly bothered about the "best" indicator. I was wanting to invite discussion about trading methods in general. I dont see me using more than MACD, RSI, CCI, and a few EMAs. I understand how they work, and how they talk to price.

Thanks for the links to the Cartman guy posts. I read a few of his the first time I visited T2W, and enjoyed them as much then as I do now. Love the avatar though!

Regarding my existing system. Yes, I need to test it more. On that point, I'm really quite limited in my charting software. Do you know of a decent (free if possible) historical intraday data source for the YM and a decent charting package to put it in (preferably free and Linux compatible, though I'll take plain free happily).

I think a criticism of that system is the complexity- it is not keeping it very simple now, is it? I will forward test it on paper from Monday, posting trades in the Dow thread.

Oh, and if you could suggest some good books / web articles in addition to my current reading list, I would appreciate it:
Trading in the Zone - Mark Douglas
Trading for a Living - Elder Alexander
Come into my trading room - Elder Alexander
Entries and Exits - Elder Alexander
The Art of War - Sun Tzu
Reminiscences of a Stock Operator - (forget the author)

 

[dcraig1]

You can get free historical data, including tick data from http://www.opentick.com

I've not looked at the futures data, but I am using the historical stock data. There are some gaps. The more recent data seems cleaner.

Stuff that will run on Linux:

http://www.prorealtime.com/en/ - I haven't tried it.

The easiest path is to run Windows in a VM.

For backtesting you might have a look at these open source projects. Truetrade seems to have been received quite well by various posters on ET who are not fools.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=93630&highlight=truetrade

http://www.elitetrader.com/vb/showthread.php?s=&threadid=77554

Both are Java based.

I'm sure that somebody will contradict me, but IMHO it is next to impossible to develop a fully mechanical system for any of the major SIFs that has enduring quality using the garden variety technical indicators. No doubt it is relatively easy to develop something that looks like it works, but most likely will fail fairly quickly in forward testing.

The areas I would look in would be market profile, market delta and order flow, quite possibly in conjunction with some conventional TA. I think some volatility measure (possibly VIX) is almost certainly needed.

And it wont be easy.

 

[firewalker99]

Interesting books

Oh, and if you could suggest some good books / web articles in addition to my current reading list, I would appreciate it:
Trading in the Zone - Mark Douglas
Trading for a Living - Elder Alexander
Come into my trading room - Elder Alexander
Entries and Exits - Elder Alexander
The Art of War - Sun Tzu
Reminiscences of a Stock Operator - (forget the author)

There are loads of books available on trading. Some for free, others not. It's difficult to say which ones you will benefit from most. There are books on psychology, books on technical analysis, books on chart patterns, books on risk/money management, books on developing a system, books on studying the tape, books on price, volume,...

However it's my experience that none of the books will teach you what the market can learn you by watching it live. Watching how price reacts, how the bars form. It's really difficult to say which books I would recommended but here are some that I found most interesting:

Justin Mamis - How to Buy
Amazon.com: How to Buy: An Insider's Guide to Making Money in the Stock Market (Fraser Publishing Library): Justin Mamis: Books

Justin Mamis - When to Sell
Amazon.com: When to Sell: Inside Strategies for Stock-Market Profits (Fraser Publishing Library): Justin Mamis: Books

Caution: these two books won't help you develop a strategy for futures trading, and they have been published originally about 30 years ago. Most likely these books won't help you make any headway soon, but the information contained is really a good insight into why markets act the way they do. The author writes about stocks most of the time, but the principles hold for any instrument that has charts. If not immediately, I believe after time these books will give you at moments a real Aha-erlebnis.

Other books on my recommended reading list:
R.d. Edwards & J. Magee - Technical Analysis Of Stock Trends
Thomas N. Bulkowski - Encyclopedia of Chart Patterns

You can find a bundle of free articles on trader's psychology on the website of Brett Steenbarger Ph.D:
Brett Steenbarger Trading Psychology

 

[lurkerlurker]

You can get free historical data, including tick data from http://www.opentick.com

I've not looked at the futures data, but I am using the historical stock data. There are some gaps. The more recent data seems cleaner.

I used the command line interface of opentick (the perl script) under linux, but struggled to find a decent program to import stuff into. AIOTrade/Humai Trader is a decent app, but doesn't work well with CSV imports.

Thanks for the advice - it is pretty difficult to find Open Source users here.

Stuff that will run on Linux:

http://www.prorealtime.com/en/ - I haven't tried it.

The easiest path is to run Windows in a VM.

I have Win2k in a VM for CMC MarketMaker.

For backtesting you might have a look at these open source projects. Truetrade seems to have been received quite well by various posters on ET who are not fools.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=93630&highlight=truetrade

http://www.elitetrader.com/vb/showthread.php?s=&threadid=77554

Both are Java based.

Thanks - I'll try them.

I'm sure that somebody will contradict me, but IMHO it is next to impossible to develop a fully mechanical system for any of the major SIFs that has enduring quality using the garden variety technical indicators. No doubt it is relatively easy to develop something that looks like it works, but most likely will fail fairly quickly in forward testing.

The areas I would look in would be market profile, market delta and order flow, quite possibly in conjunction with some conventional TA. I think some volatility measure (possibly VIX) is almost certainly needed.

And it wont be easy.

That isn't the goal. I would like that, but I don't expect an algorithm to make money for me. I am more than happy to trade the markets myself (in fact, having a computer execute would make me feel uncomfortably redundant). Do you know where I could get a NYSE TICK feed? Does OpenTick have $TICK support?

Regarding your analysis, I am looking for a setup much like this (Brett Steenbarger's blog) which has TICK data and ES price/volume. I am looking to use TICK and the ES as leading indicators of the YM.

Thanks again for a top quality informative post!

 

[dcraig1]

I could get a NYSE TICK feed? Does OpenTick have $TICK support?

I just had a look in the log for my OpenTick interface code, and I found these amongst listed NYSE instruments. I guess they should be available.

New York Stock Exchange: $ADVN NYSE Advance
New York Stock Exchange: $DECN NYSE Decline
New York Stock Exchange: $DVOL NYSE Down Volume / 1000
New York Stock Exchange: $ISSU NYSE Issues Traded
New York Stock Exchange: $TICK NYSE Tick
New York Stock Exchange: $TRIN NYSE Trin
New York Stock Exchange: $UNCN NYSE Unchanged
New York Stock Exchange: $UVOL NYSE Up Volume / 1000
New York Stock Exchange: $VOLU NYSE Volume / 1000

 

[lurkerlurker]

I just had a look in the log for my OpenTick interface code, and I found these amongst listed NYSE instruments. I guess they should be available.

New York Stock Exchange: $ADVN NYSE Advance
New York Stock Exchange: $DECN NYSE Decline
New York Stock Exchange: $DVOL NYSE Down Volume / 1000
New York Stock Exchange: $ISSU NYSE Issues Traded
New York Stock Exchange: $TICK NYSE Tick
New York Stock Exchange: $TRIN NYSE Trin
New York Stock Exchange: $UNCN NYSE Unchanged
New York Stock Exchange: $UVOL NYSE Up Volume / 1000
New York Stock Exchange: $VOLU NYSE Volume / 1000

Thanks - I've paid the $1/month exchange fee for the NYSE. I have a TICK chart now - but I don't know what to do with it!

 

[TRADINGXYZ]

as far as picking a time frame, you probably should figure out what kind of trader you are first...if you need a lot of action each day, go to a lower time frame...if you are looking for less action, move up in time frame...as far as books...they can only provide ideas...you just have to plug through it..watch, test, and try different ideas, play small positions at first...maybe you will succeed...i agree steenbarger's site was very useful for ideas and advice...good luck...