Trading Dow Futures.. Is my system +EV?

[wickedgoodtrader]

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?

[skierdude1000]

[ QUOTE ]
I started off with a system I bought over the net

[/ QUOTE ]


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

[Jimbo]

[ QUOTE ]
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

[dudeoflife]

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.

[thing85]

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.

[ImBetterAtGolf]

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.

[wickedgoodtrader]

[ QUOTE ]
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.

[/ QUOTE ]

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.

[kimchi]

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.

[stephenNUTS]

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

[/ QUOTE ]

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

[/ QUOTE ]

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]

[pr0crast]

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.