Trading Emini using Overnight High/Low

Hi, I'm considering trading the emini based on overnight High/Low levels (ONH/ONL).

I backtested this for the last 6 weeks and it seems to work with an approximate 55% success rate. OFC, that doesn't tell the whole story with managing winners/losers as some days the trading range can be quite wide, and if there's a reversal day where there's a fakeout and trade reverses, then Stops can be costly.

There's obviously a wealth of data on trading the emini but thought I'd start with a methodology first in the hope that I could then sculpt an approach.

Basic Strategy:

- wait 15 mins after open at 0930 ET to enter if price is above ONH/L with Stop just above/below the ON levels.

- Exit strategy is to wait for market movement in first 3 hours and move Stop to break even once the trade moves in your favour i.e. when it's broken a short term S/R level from the previous days. Then it's a case of trailing the Stop and exiting exiting by the end of the day.

With today's activity, where the price opened in the middle of the range but now is trending down, I'd wait for price to go below ONL and enter after a close of the 5 min candlewith a Stop just above the day's (post open) high.

Anyway, that's my first draft. Hope to hear your feedback.

P.S. I've had a look at sites like Optimus Futures and Emini-watch. Both seem to have good content but as soon as you start reading they just drop more TA on you and I'm trying to condense rather than expand.

TheDoge 

Anyway, that's my first draft. Hope to hear your feedback.

Welcome TheDoge.

You mention you backtested your idea for the last 6 weeks. How many resulting trades did this correspond to?

xplorer 

Welcome TheDoge. You mention you backtested your idea for the last 6 weeks. How many resulting trades did this correspond to?

My backtest was an approximation of whether the idea basically worked, or not, and it seems to but the exact details are more complex obviously. I have no idea how I'd deal with the volatility of the market or whether the Stop would be targeted once it's entered into the market.

Anyway, these were the results (cumulative totals at the bottom)


Total = +417

So the question is whether overnight patterns yield continuation patterns for the trading day and the answer seems to be YES. However, the exact way to trade this is the real question and here I am.

If backtested, where would I place the stop? Initially, the strategy I posted suggested just outside the ONH/L.

So, when the trading day starts and the first few 5 mins candles are filled, and you enter in the direction of the trend, does one then start moving the Stop closer to entry? If so how close?

To what extent do MMs gun for your stop?

Looking at the charts, I'd always start closing out parts of the trade in stages. Clearly, some days PA is cleaner than others.

Some days an entry could close down on the opening entry price but not hit the Stop of the overnight level.

Clearly lots to consider.