Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
Tonight's entry has to be quick as it is late, I'm tired, and still have work to do.
Running the system I have been developing today produced the same results as the prior days: lots of wins.
+365, -195, +320, +195, and +2150. I even had a profitable long trade in there, amazingly. Here is today's chart with the trades:
Just for perspective, If I had run this system from the beginning of the month, I would be at +2625. If I had been running it since the beginning of January, I would be at -95. Just this week is tracking at +6040. So if you're paying attention, without these four days, the system is crap, at least running 23/5. There is no time of day, nor day of week, that I have analyzed over 3 years of date over 4 index futures, that performs better or worse.
Now, one thing I am certain of: I have at least one system I can run during a market 'correction'.
The main takeaway for me is the my resolution is too fine, with respect to timeframe, for this strategy (or rather, set of strategies). 15 minute and 30 minute has more promise.
I worked on some other strategies, as well. I have been reading a couple of trading books, but will share that tomorrow if I have time.
I'm knackered, as the Brits say. See you all tomorrow!
I am doing my daily entry very early, mainly because I am actively (live) trading, I need a momentary distraction from the market to let my position ride. I took off my algo hat this morning.
I mentioned yesterday two trading books that I'm reading, both of which I highly recommend to all traders.
Entry and Exit Confessions of a Champion Trader: 52 Ways A Professional Speculator Gets In And Out Of The Stock, Futures And Forex Markets
Kevin Davey's books (@kevinkdog) have impossibly long titles. Aside from that, he writes very practical, useful, and valuable books. I got this on Kindle for $2.99 (free if you have Kindle Unlimited, and $6.99 dead tree version). Anyhow, this is a book of 41 entries and 11 exits that traders can use in their systems. Although it is geared towards algo/system traders, there is value for the discretionary trader, too. There are plenty of novel ideas, most of which have been traded actively by Kevin. He includes EasyLanguage code and plain English explanations. Entry #14 kind of points to my big bar problem. Anyhow, you might want to check it out on Amazon. For 2.99, it is a great value and pretty easy read.
Trading Sardines
This book by Linda Raschke is awesome. I heard Linda on the Better System Traders podcast ( How to Achieve Long Term Trading Success, where she mentioned her book. Her site has a sample first chapter, which describes her baptism by fire. If she can survive that, I'm sure anyone can. The book is funny and timely (or timeless...whatever you prefer). From Chapter 2:
Anyhow, the book is a hoot. I can't wait to finish it. You can buy it over on her site (click the title above).
Full disclosure: I don't work for Kevin or Linda, I'm just a fan. Just sayin'.
Anyhow, more work to do on strategy building. I hope you all have a safe and enjoyable weekend.
One quick note: I believe Linda's book is self-published, so you can only get it on her site as far as I know. To paraphrase her from the podcast, Amazon didn't write the book so why should they get money for it.
I missed yesterday's entry, mainly because there was nothing new. I just have my nose to the grindstone, diligently working away.
I am, as mentioned last week, reading Trading Sardines by Linda Bradford Raschke. This book is a great resource for traders. The big thing that I get from this is that no one has the markets figured. Also, a trader can never know too much. She is an avid student of trading, which shows through her depth of knowledge. I love the little snippets of wisdom that are set in bold, so you can just flip to a page and get some market wisdom. This book is like a trader's devotional, at least for me. If you are serious about trading successfully in the long term or for a living, this one has to be on your shelf. It is pretty humorous, too.
I have been torturing a strategy that I developed for NQ. It is based on John Ehler's MAMA (MESA Adaptive Moving Average, or Mother of All Moving Averages.... you decide) and FAMA. TradeStation has these two calculations built as functions, so I built a strategy around them. After several days of torturing my strategy, trying to get the short side to work, it dawned on me that it might just not work on the short side. After going back to some of Ehler's writings on MAMA, I realized that the examples I saw were only taking long entries (S&P and stocks). So torturing my strategy (and doing a lot of scanning of the chart and indicators), did nothing. I need to be happy just to work the long side.
So that one passed feasibility and back-testing, so now I have to do the optimization and walk-forward testing. That should be a hoot. Thankfully, at a glance, it only needs to be lightly optimized.
My Favorite Indicator
Okay, hyperbole aside, this is a favorite indicator. I am going to show in one simple image why this is a favorite:
ADX has a number of uses, but for me, identifying when to stay out of a trade is very valuable. The general idea is that if the ADX line is above your trigger line (I use 19-25, depending on the strategy and instrument), then there is a trend happening. The larger the number, the stronger the trend. In the example above, if I had applied an ADX filter, three of those trades would not have been made. It is not the best for exiting, such as when you get in on a long, slow trend, but it is pretty useful.
One additional use that I have just started exploring is using the reversal of the ADX value for exits, or reversing my position. If the number is high (>35 or so), then comes back down, there may be a reversal. It doesn't happen all the time, but I am looking deeper into this. If you aren't using ADX, you might want to check it out.
Other than that, I am working on an OBV strategy inspired from some work my wife did on one of her strategies. It looks good on multiple instruments, but I am focusing on NQ, ES, and YM for the moment. I will be able to test this on MES at some point.
This is a supplemental entry, but one that reflects how much I do not know. I did a quick search last night for micro e-minis, mainly because I wanted the contract specs for MES (micro e-mini S&P). I ended on the CME micro e-mini page and was stunned: where did all of these micro e-minis come from? I guess I haven't been paying attention, but now there are a whole bunch, and with good volume.
Yeah, so that happened. I am thrilled, since one of my strategies only performs well on NQ, and I don't really want to have it go live (if it passes walk-forward) on such a large contract. It is one of those with a low win %, but plenty of large wins to offset the losers.
Micro E-mini Transaction Costs
I traded my first ES micro e-mini last week, so I wanted to share the cost of trading, versus the ES. This includes commissions and fees:
The % column shows the percent given to the broker for a 1 point profit. I know others here at FIO have done similar analysis, but this is mine. I think it is enlightening from my perspective, particularly when deciding what and how to trade, and how to allocate our capital across instruments.
I am forward testing another of my strategies on MNQH20 and MESH20. I ran it overnight and it looks good thus far. I am used to running a strategy in simulation overnight and having it drain the sim account. This one did not. It is a strategy that uses range bar charts and uses OBV to signal both entries and exits, with only stop losses. I tried adding some ADX filtering to it yesterday, but that made it perform worse (will work on that). Anyhow, now it just has to run and prove itself over many, many trades.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
Thanks Received: 10,208
Maybe obvious but there are also some mini's that may be more attractive than trading the full size contract. QM is Crude Oil (500 bbls / half size), QG is Natural Gas (2500 MMbtu, quarter size). There are others (eg Corn, Soybeans) but the volumes are low. Common practice when trading Micro's or Mini's is to plot them as data1, plot the fullsize/most liquid contract as data2, make all your decisions based upon data2 but execute in data1.
Yeah, great advice. I have analyzed the relationship between the micros and e-minis a little bit, but haven't developed an idea or strategy around it. We have several strategies that reference data2 (I also use ADE from time to time), which open a lot of new trading possibilities. I am happy to see new MeM's introduced, as it allows for a lower risk incubation period for automated strategies that are on the bubble.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
Thanks Received: 10,208
High frequency arbitrage keeps them in line tick for tick - at least in the prompt month. For MES/ES I would think the charts will look identical. For things like QM/CL they will look different. That isn't because they trade differently it's just that QM doesn't trade as often as CL but the bid/ask is there and will be virtually identical.
I don't have much time, so here is my update from yesterday's sim trading of one of my newer strategies:
MNQH20: -542
MESH20: -342
Total: - 884
Yesterday there were a lot of consolidation periods that killed. Also, my entry is hypersensitive, so consolidation periods are the worst. I have two ways to adjust sensitivity, but lag comes into play. This system is a pain, since it does not produce accurate backtest results. I just have to gather a ton of data from sim and then see what works.
I hearken back to yesterday's Raschke quote: take every signal. So I made a little graphic for myself (backtest equity chart), printed it and put it on my trading wall:
If the system is solid, it can still have a $5,000 drawdown period. I can have (as seen above), 100 trades during that period. Do I have the intestinal fortitude to continue forward during these times? You can see what would have happened if I discarded the system too early. The trade you fail to take is the trade that makes your week, month or year. This morning I am back in the green. So I press forward.
I ran my strategies in sim for a 23 hour cycle. These are strategies that I have to forward test only, due to their nature. Four instruments: NQ, MNQ, MES, and M2K (RTY micro). -$5883. Ouch. But I learned some interesting things in the past 27 hours:
This strategy does well in the quiet times (read: low-moderate volatility). At 700 ET, I was +$1500.
The micros got killed, probably because my signals were too sensitive.
NQ held it's own until early this afternoon, when all heck broke loose.
Consolidation periods killed any profits, primarily during the high volatility. I have a couple of solutions in mind for this.
Micro ES ended up being the 'best' performer (still losing), at -$200 for the day. It had less sensitive entry signals than the rest.
My exits suuuuuck
I only have two days of data (but a lot), but some patterns and themes are starting to emerge. I have dialed back the entry signals and the first couple of hours tonight are doing well. I shall have to see what this looks like in the morning.
It was a slaughter and trial by fire, but I am learning a ton by watching the tape. The most interesting thing to me at the moment is the pullback from a peak in ADX. If ADX is over 35 and reaches a peak, it will signal a reversal a majority of the time. The greater the value at peak, the stronger the reversal signal. It is at least 1-3 bars earlier than nearly any other signal that I regularly use.
That is all for tonight. I will probably post a couple entries tomorrow, just so I can report overnight results and EOD results.
