Trading Dow Futures.. Is my system +EV?
 

Ive been trading dow futures for about 6 months now. I started off with a system I bought over the net and was doing really well then the dow got real volatile and I kept gettin stopped out and lost most my profits back. So I quit the system.

I'm now working on my own system. It's very simple. I have read 1 beginners day trading book and it said how half hour before the close the market tends to pick a direction and go with it. Of late... this has been very true. I decided to closely watch the candlestick chart on DIA around 3:30 to see which direction it looks to be heading. I then go long or short and close the position seconds before the bell.

I made 4 trades in the last week all winners and profiting $15,000 on 10 contracts of the $5 mini-dow. I know they all can't be winners but I'm really trying to figure out if this is +EV. Like if there's a way to backtest it or something. Any ideas/comments from anyone with more experience on wether they think this strategy can be profitable?

Re: Trading Dow Futures.. Is my system +EV?
 

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I started off with a system I bought over the net

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-EV. Don't go looking for making a system like this -- there's no free money out there

Re: Trading Dow Futures.. Is my system +EV?
 

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half hour before the close the market tends to pick a direction and go with it.

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I didn't read any book about this but have found it to be reasonably accurate barring any drastic unforseen news. I also use this to exit some positions and add to others. I trade individual stocks of which most of them either track closely with the DOW or NASDAQ. I also like to see increased volume during this period which only increases my confidence in the indicator.


Jimbo

Re: Trading Dow Futures.. Is my system +EV?
 

Problem is you're not using any stop losses just closing at the bell so this system is destined to fail once you have a trade that runs significantly away from you.

Re: Trading Dow Futures.. Is my system +EV?
 

Well, if the public caught wind of this "profitable" trading strategy, the strategy would eventually defeat itself. This should have also been in in your beginner's day trade book.

Re: Trading Dow Futures.. Is my system +EV?
 

You haven't completely defined your system, but it sounds like it would be easily backtestable if you had the data. i would save yourself the effort. it will be noise+trading costs.

Re: Trading Dow Futures.. Is my system +EV?
 

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Problem is you're not using any stop losses just closing at the bell so this system is destined to fail once you have a trade that runs significantly away from you.

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I know there will be days where it runs against you and I will probably close out if the trade is acting unfavorably. But even if I didn't I'm wondering if the trade runs significantly for you more often then against making it +EV.

Re: Trading Dow Futures.. Is my system +EV?
 

You need to be more specific about every aspect of your system. The best way to see whether it's +ev is to do some backtesting. It sounds like it would be quite easy to test.

Re: Trading Dow Futures.. Is my system +EV?
 

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half hour before the close the market tends to pick a direction and go with it.

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I didn't read any book about this but have found it to be reasonably accurate barring any drastic unforseen news. I also use this to exit some positions and add to others. I trade individual stocks of which most of them either track closely with the DOW or NASDAQ. I also like to see increased volume during this period which only increases my confidence in the indicator.


Jimbo

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From a trading perspective..the best/most volitile price movements are 9:30-10:00am......and then 3:30pm to the 4:00pm close during normal market hrs.If however a specific event(Fed rate cut,many IB's recently warning about their sub-prime exposure,EPS warnings/surprises,any related global incidents,terrorist activity,oil spike,etc),the volitilty can last all day ...every day ...as we have just witnessed

In regard to your original Dow "system"...it worked because the market was in a one way steady incline and not much can go wrong if you were on the LONG side of the market ..I assume.

Once the market started to peak last month.....intra-day swings shook most players out who used stops ...and the wild swings became extremely tougher to trade without a thorogh market understanding,alot of experience,good order entry software/broker.....and a STRONG stomach.

Using a STANDARD/traditional broker the last few weeks would not be optimal to just trading IMO...as just from a higher commission POW ,...as well as a too much TIME standpoint to enter/execute trades...many of the opps would be missed by the time these nit brokers get your order processed.However,if you were looking over a swing-trade type longer time frame horizon...then you would be fine I guess.I still would NEVER OVERPAY a broker if I did all the work...and BTW if you listen to just your broker recos'....lol...you should go see a doctor and have your head examined.

But my feeling is if YOU are doing the research...you are putting YOUR monies at risk...you are making the buy/sell decisions,....and you are sweating the trade,I would not be paying for a Full Serice broker.

In this day and age with advent of discount/online brokers....if you keep your upfront costs managable,do your research,and have a disciplined hardcore set of rules,and firm BR management...you will have a great shot of making
solid yearly returns

With this recent volitilty ,the last few weeks, I have had one of my( as well as some of my talented colleagues/friends that I still consult and share ideas with ) most profitable trading months in a few years.

I still trade TWO hedge funds I own,as well as family trust accounts,even though I retired from "dealing" with the public two yrs back when I sold my shares in my firm...so I am just trading MY OWN money at this time

I havnt seen trading opp's in years like I saw the last 20 calender trading days and love times like these [img]/images/graemlins/smile.gif[/img]

GL,
Stephen [img]/images/graemlins/cool.gif[/img]

Re: Trading Dow Futures.. Is my system +EV?
 

The end of the day is when all the daytraders exit their positions. This phenomena causes there to be increased volume/volatility in the last 20ish minutes of the market day. For good traders, volatility = profit, so often this is a good thing. Some days though the day's ending is very range bound, so this is not always the case.

Your "system" makes two assumptions, one of which is completely valid, one of which isn't.

1) There is increased volatility in the last 30 minutes of the market day, and volatility is easier to profit from

2) A beginner will always know which direction to pick, how to handle their position, and that this will be easy money.

Re: Trading Dow Futures.. Is my system +EV?
 

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The end of the day is when all the daytraders exit their positions. This phenomena causes there to be increased volume/volatility in the last 20ish minutes of the market day. For good traders, volatility = profit, so often this is a good thing. Some days though the day's ending is very range bound, so this is not always the case.

Your "system" makes two assumptions, one of which is completely valid, one of which isn't.

1) There is increased volatility in the last 30 minutes of the market day, and volatility is easier to profit from

2) A beginner will always know which direction to pick, how to handle their position, and that this will be easy money.

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You replied to me in the header.....but I am assuming you are talking about the OP's system... being a BEGINNER ,with your 2nd comment regarding "easy" profits at the close....as I NEVER said or implied any such potential results?

[img]/images/graemlins/confused.gif[/img]

Re: Trading Dow Futures.. Is my system +EV?
 

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[ QUOTE ]
The end of the day is when all the daytraders exit their positions. This phenomena causes there to be increased volume/volatility in the last 20ish minutes of the market day. For good traders, volatility = profit, so often this is a good thing. Some days though the day's ending is very range bound, so this is not always the case.

Your "system" makes two assumptions, one of which is completely valid, one of which isn't.

1) There is increased volatility in the last 30 minutes of the market day, and volatility is easier to profit from

2) A beginner will always know which direction to pick, how to handle their position, and that this will be easy money.

[/ QUOTE ]

You replied to me in the header.....but I am assuming you are talking about the OP's system... being a BEGINNER ,with your 2nd comment regarding "easy" profits at the close....as I NEVER said or implied any such potential results?

[img]/images/graemlins/confused.gif[/img]

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I clicked the quote button on OPs post. Don't know why it defaulted to your name - probably b/c you're the last poster. I am talking about OPs system, specifically [ QUOTE ]
it said how half hour before the close the market tends to pick a direction and go with it

[/ QUOTE ] which seems to imply some sort of intuition rather than objectivity. He didn't mention how he determines that direction - just that it's there, and somehow you are supposed to find it and "go" with it.

Re: Trading Dow Futures.. Is my system +EV?
 

OK Thanks
Stephen [img]/images/graemlins/smile.gif[/img]

Re: Trading Dow Futures.. Is my system +EV?
 

Your system sounds like a simple momentum one. The problem with momentum systems is timing entry/exits, and dealing with whipsaws (I guess this could be said of any system, but particularly momentum ones).

You're relying on the pile on effect that happens when price starts moving in a direction. You have to get in early enough to see this, which means you have to have the foresight that no one else has about the momentum of a move. But in those cases, the move is weak, and could easily be pounced on by large traders. Its difficult to explain all the dynamics, and I have no doubt you could, in theory, design a profitable system using some sort of timing mechanism. But its extremely difficult to do so, because market conditions often dictate if these systems work, and with no tests for that, your system is a shot in the dark at hoping a momentum pattern holds up.

Today, for example, I'm seeing a bracketed market, and I just went short at the upper level on a volume surge for a 24 pt winner on the YM. Coincidently, your system would suggest the same thing. From my point of view, its luck that your system worked; mine was waiting for a bracketed extreme, which only coincidently came at 3:30pm.

Re: Trading Dow Futures.. Is my system +EV?
 

Well at 3:30 today there was a long black candlestick pointing in the direction of another sell-off and sure enough it did. Got me another +$6k trade.

Re: Trading Dow Futures.. Is my system +EV?
 

These responses are a little depressing. I hope they don't lead you to believe that it is as simple as some have made it sound. It isn't just about your ability to handle the volatility; it's first and foremost about whether you have forecasting power. That is highly unlikely, but testable. Do yourself a favor, be thankful for your gains to date, then back off and test your trading hypothesis. If you do the test properly, you will learn a lot and also probably find that you have no signal.

Sorry

Re: Trading Dow Futures.. Is my system +EV?
 

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Well at 3:30 today there was a long black candlestick pointing in the direction of another sell-off and sure enough it did. Got me another +$6k trade.

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This kinda of post/thought is what sucks in DT'ers

[img]/images/graemlins/frown.gif[/img]

Re: Trading Dow Futures.. Is my system +EV?
 

Well, he made more money then I did today, time to switch to his system!

This sell off was weird and on very high volume considering most of the day was range bound. From experience, this won't happen very often, if ever.

Re: Trading Dow Futures.. Is my system +EV?
 

Apparently according to what the tone of most responses say... isn't the "weird" sell-off exactly as to what should happen. It seems everyone's claiming there are no patterns and things are unpredictable. SO if you expect it to never happen... it will.

Many of you have said it would be easy to backtest. How? Like how could you get something to calculate the trend at a certain point of the day 3:30-3:40 then have it take the position and calculate gain/loss.

Re: Trading Dow Futures.. Is my system +EV?
 

you haven't fully defined your strategy, so we can't say exactly how to backtest. you may need some tick data.

please, do this for the education and only for the education. take your money and leave the table.

Re: Trading Dow Futures.. Is my system +EV?
 

why everyone so pessimistic? I really don't think back testing is a viable option because I use a lot of "feel" when deciding whether to jump in the trade or not. Isn't the market mostly psycology? How many of you are successful poker players?

Re: Trading Dow Futures.. Is my system +EV?
 

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why everyone so pessimistic? I really don't think back testing is a viable option because I use a lot of "feel" when deciding whether to jump in the trade or not. Isn't the market mostly psycology? How many of you are successful poker players?

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Dude, this would be the simplest thing to back test ever.

And 'feel' in poker is not the same in trading. Group psychology vs individual psychology is so different. Thats why poker players suck at trading.

Re: Trading Dow Futures.. Is my system +EV?
 

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why everyone so pessimistic? I really don't think back testing is a viable option because I use a lot of "feel" when deciding whether to jump in the trade or not. Isn't the market mostly psycology? How many of you are successful poker players?

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Dude, this would be the simplest thing to back test ever.

And 'feel' in poker is not the same in trading. Group psychology vs individual psychology is so different. Thats why poker players suck at trading.

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But they sure dont think so...lol

SF [img]/images/graemlins/cool.gif[/img]

Re: Trading Dow Futures.. Is my system +EV?
 

ok then back test it for me. I've never seen how a backtest works but how do you get the computer to understand what kind of trend is occurring. Like a long black candlestick doesn't necessarily mean a downtrend.. however when it breaks below recent support it usually does. Seems like an awful lot of variables to have recognized.

So if good poker players make bad traders do good traders make bad poker players? I think a good poker player is versatile and can maneuver as needed. He learned the game of poker well. To do so shows a certain type of intelligence that I believe a good trader would consist of.

Re: Trading Dow Futures.. Is my system +EV?
 

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ok then back test it for me. I've never seen how a backtest works but how do you get the computer to understand what kind of trend is occurring. Like a long black candlestick doesn't necessarily mean a downtrend.. however when it breaks below recent support it usually does. Seems like an awful lot of variables to have recognized.

So if good poker players make bad traders do good traders make bad poker players? I think a good poker player is versatile and can maneuver as needed. He learned the game of poker well. To do so shows a certain type of intelligence that I believe a good trader would consist of.

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I will tell you this with a strong conviction:

Good poker players usually fail at trading,as many of them think its the same game...and its not even close

However..without a doubt,a GOOD trader,is much more likley to succeed at being a good/solid poker player from his aquired trading skills alone

SF [img]/images/graemlins/cool.gif[/img]

Re: Trading Dow Futures.. Is my system +EV?
 

I'm not going to waste my time backtesting it, just download any backtesting software like esignal or tradestation, plug in some simple variable likes enter at time X, use some kind of CCI momentum indicator I guess to determine which way price is headed, make a few clicks and hey presto you can analyse all the data dating back to whenever you want.

Hell, you could do it by hand if you wanted too, shouldn't be too hard.

Also on the poker player thing, I have no doubt poker players could be become good traders. I just see no statistical correlation that would be present that makes successful poker players having a greater chance at succeeding then anyone else.

Re: Trading Dow Futures.. Is my system +EV?
 

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You're relying on the pile on effect that happens when price starts moving in a direction. You have to get in early enough to see this, which means you have to have the foresight that no one else has about the momentum of a move.

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Not really, during the recent volatile market I have been using both straddles and strangles on stocks with a pretty high beta. I am also very familiar with the normal trading ranges and patterns of these few stocks. Using today as an example: GS opened much higher than the prior close, I immediately bought 240 puts (already had some 230 puts from late yesterday) The price dropped pretty quickly so I then bought 240 calls. By the end of the day I sold all my 240 puts and the profit covered the complete cost of my remaining 230 puts and 240 calls. These are all Nov options so I have only two more days for GS to either get near or higher than 240 or near or lower to 230. Another volatile today or tomorrow and I should be able to profit on both sides of my remaining positions. The last 30 minutes of today was pure heavan. [img]/images/graemlins/smile.gif[/img]


Jimbo

Re: Trading Dow Futures.. Is my system +EV?
 

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why everyone so pessimistic? I really don't think back testing is a viable option because I use a lot of "feel" when deciding whether to jump in the trade or not. Isn't the market mostly psycology? How many of you are successful poker players?

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Most people posting here really have no idea, they're just spouting off.

Tradestation.com would probably be the best one to use to backtest it. For such a simple system, there are a number of cheap tools that would work, except most work only on daily bars, not intraday. BTW, it's not unusual for a futures system to pick a direction and go with it till close. You should consider a stop loss though, so your loss is limited on days it goes against you, but you benefit from the full move on days it goes with you. Backtesting would give you an idea of how big a stop to use.

Re: Trading Dow Futures.. Is my system +EV?
 

It's almost 3:30.. which way you going?

Re: Trading Dow Futures.. Is my system +EV?
 

I went short at a minute or 2 past 3:30 as there was a nice star that had formed 2:25 and the next bar became black... what a hit it was as the market just fell off hard and I was raking in some nice profits. It then bounced back pretty hard and I gave most of them back but it closed slight lower then my short price and I made about $600.