BBSqueeze, PBFSqueeze, CounterTrend

[BBSqueeze, PBFSqueeze, CounterTrend]

now i've attached a screenshot.. it seems like there is alot of lag in this indicator.. my other question is what isthe difference between the pbfsqueeze bbsqueeze and countertrend and how is it read? and how would one suggest to adjust the parameters to reduce noise..

 

Although I wouldn't go as far as to say that 'squeezes' are a complete waste of time, there are far more useful things that you could be looking at. All markets move through volatility cycles, but only certain markets demonstrate directional volatility.

 

If you do want to trade with this type of indicator then have a read through "Bollinger on Bollinger Bands" first. It's widely available as a free pdf online.

 

Hope that helps.

 

Bluehorseshoe.

[Why Trading Moving Averages Fail? Nr. 1 Loser Indicator]

We are getting interesting results on the vote, but it is still open.

If you have an opinion on this subject put your vote in at Forex Learn Profitable Trading Without Indicators | A Unique Forex Trading Course | Forex Trading Strategies | High frequency trading | Daytrading for dummies | Day Trading | Scalping | Best Forex Secrets

The poll is in the right top corner. We will put the total count here after we close the poll.

 

And by the way, Friday 13th had fantastic moves, congrats too everyone who was able to catch that drop in markets.

good weekend to everyone

 

I have been using the following MA Crossover formula with tremendous success:

 

If average(vendorpost,3) crosses over average(tolerancelevel,8) then exit thread at market;

 

I think perhaps it works so well because the MA lengths are both fib numbers - what do you think PipBanker?

 

Bluehorseshoe

[Anyone Has Better Setups Than These....?]

Tut-tut - have you been stealing John Carter's indicators again?

[What's Your Experience with 'renting' Strategies]

The second one searches only for patterns and the resulting strategies don't have any optimizable parameters.

 

 

This is a nonsense statement.

 

All strategies have optimisable parameters. Just because something doesn't include, say, a moving average with a variable lookback does not mean that it is not optimisable.

 

All patterns are patterns in price data, and you will always be focussing on some data and ignoring other data. Price patterns such as "if today is an up day and yesterday is an up day then sell short tomorrow at today's low" is a heavily optimised pattern. Why use the past two days and not the past twenty? Why sell at today's low and not at today's close? Or the close eight days ago? Or the high eight days ago?

 

All price data patterns contain optimisable parameters.

[What's Your Experience with 'renting' Strategies]

Either way, as long as I make 10% on my money after all fees and commission I am not going to complain

 

You have a refreshingly healthy and realistic attitude - I like it!

[Market Environment Filter For Adaptive Trading Systems]

Thanks for a useful post - I always find something of benefit in your system development threads.

 

When adapting the exit criteria to the market condition, what made you decide to adjust the RSI lookback rather than the exit level on the RSI itself?

 

Bluehorseshoe

[Buy My Trading Strategy - It's Brilliant!!]

I challenge any professional, profitable day trader, to come forward and declare in this forum he /she paid less than $10,000 for trading education …. I don’t believe such a person exist

 

My advice (and I am not a professional trader) is as follows:

 

- Read/watch lots of stuff by lots of different people. Spend lots of time thinking about what you read/hear/see. Basically expose yourself to as much input of ideas as possible.

 

Spend lots of time testing these ideas. Some may work. Some may be so poor that doing the precise opposite could be profitable. Some will have bits of worthwhile information that can be combined with other bits of worthwhile information.

 

As you test hundreds of different ideas on your chosen market you'll slowly build up a 'toolbox' of things that work and things that don't. You'll develop the kind of intuitive knowledge of how your market moves that discretionary traders develop through thousands of hours of screen-time.

 

A critical part of this process is understanding how to test your idea properly. As well as the well known pitfall of curve-fitting there are a whole host of other things you need to beware of. You aren't likely to find this information in most trading books, however - you'll need to read books on statistical inference and data mining.

 

If you're smart enough you should eventually reach some valid conclusions that will enable you to trade a market profitably.

[Ensuring a Fill at Limit Price - How Early Must an Order Be Placed?]

The fact is that if you are backtesting then by default you are sim trading ie. with a strategy. In the sim mode and live trading mode the order within a strategy will always be resident to the computer until hit by price. If TS filters ticks this would be an issue when backtesting. If you are live trading manually and create a bracket or limit order within the matrix window or DOM then the order is resident to the exchange and not your computer. Unfortunately there is no way of knowing just how far in advance you must place the trade to be first in queue as there are to many variables as to lot size and so forth. You may get a partial fill if touched and wait as the other contracts are filled as the market trades through the price. I trade the Russell and I have been filled when the price of my limit is just touched and not traded through ( a trade that I placed sometimes seconds earlier). I would say when trading 1 lots ( live trading ) I have experienced a fill rate of 60+% on the Russell when price just touches my limit without trading through it this never happened for me on the ES.

 

Hi Pittrader,

 

Thanks for your reply. TradeStation can be set up so that the a strategy order is resident to the exchange rather than sitting on the computer (resident to the TS servers is a third option). In other words, the order is placed exactly the same as if it were placed manually on the DOM.

 

Your information on the order fills for the Russell vs ES are extremely helpful.

 

Cheers,

 

Bluehorseshoe

[Using Fear To Time The Market]

Thanks for another great thread. I have read the book you reference, but never got as far as testing this particular strategy.

 

An interesting idea with the Connors methods is to use them to filter one another, for example requiring that both the VIX and the 3 Down Days condition you discussed in another thread are both met for an entry.

 

I think that the major issue for most traders here will always be the lack of a hard stop set at the time of entry. It would be interesting to know Connor and Alvarez's own views/research/methods for managing risk.

 

Bluehorseshoe

[The Little Book of Trading - Michael Covel.]

However, didn’t get into that because across time I’ve found it best during development not to co-mingle edge work with mm work … best to limit the ‘edge’ concept to the systemic – entries and exits... then, post edge establishment, to layer money management models (sizing, compounding, etc.) onto the strong ‘edge’ footing .

 

That's interesting - I completely ignore money management when developing a system as well. If something doesn't work well with a single contract approach, then there is no edge there for the MM to improve.

[How To Exit a Profitable Trade]

I look for 1 point in each 15 minute candle. my risk reward is 1:1 .

 

Hi Steve,

 

This might be me being a bit stupid, but could you clarify the above sentences for me? Do you mean that your profit target and stop are both 1 point (pressumably four ticks in the ES for instance)? Or do you mean something else?

 

Thanks

[A Question for Price Action Traders]

I can only react to the question you post...to me using a 15 min chart, implies an intraday framework...on that time scale, a market can remain overbought or oversold all day (and the next day as well)...again its called "trend". If you want a comment based on a longer time frame, it would be helpful to indicate that in the body of your question.

 

My comments on the subject of reversal patterns are posted in the emini daytrading thread. Quite a few chart examples posted there as well.

 

Good luck

 

Steve

 

Hi Steve46,

 

Just to be clear, I am talking about trading on an intraday timeframe (but using an adaptation of the strategy that I am already using to trade from a daily timeframe).

 

When a market remains overbought or oversold all day then I would be trading back in the direction of that longer term trend. So when it was overbought all day (uptrend), I would be looking to buy brief pullbacks to oversold levels within that uptrend. So in as far as my definition of trend is correct, then I would never be trading against the long term trend, but rather looking to trade corrections to this trend in favour of it.

 

I hope that makes a bit more sense than what I originally posted.

 

If you wouldn't mind pointing me towards your posts on chart patterns then that would be greatly appreciated. Thanks for your reply.

 

Bluehorseshoe

[A Question for Price Action Traders]

Oversold markets don't usually have "V" bottoms. Depends on timeframe/periodicity. Usually a low followed by a higher low shows a rebound, especially if you can measure how oversold you are eg distance frm an MA,BolBand/keltner.

 

Some testing will show you the probabilities of different setups.

 

EL

 

Hi ElectronicLocal.

 

Thanks for replying. I'm trying to gather ideas such as the ones you suggest, and then I will test and mechanize them and see where I end up.

 

One of the problems is that I am looking for predictive rather than reactive ways to refine entries. So your suggestion of awaiting a reversal would most likely mean that my entries came too late for the strategy to be profitable. For instance, on an oversold down bar, I could buy on the close in anticipation of a reversal to the upside, or I could place a buy stop at the high of the bar so that I am only taken into a position if the market actually reverses to the upside. Unfortunately the performance of the buy stop is far worse than that of the buy on close (which, in turn, is worse than that of a buy limit at the low of the bar!).

 

So, around the time that I observe an oversold close, I need a method that encourages me to either buy on the close at this level, or to anticipate even lower prices on the next bar. What I cannot afford to do is buy at a level above the close by awaiting a reversal.

 

What you say about 'v' bottoms is interesting. Does this mean that a reversal to the upside should be considered more likely if price has spent a significant amount of time consolidating in a sideways range around the oversold level, where as a sharp rebound from the oversold level should not be bought?

 

Many thanks,

 

Bluehorseshoe

[A Question for Price Action Traders]

In your first scenario, relying on overbought/oversold indications means nothing....markets can remain overgbought/oversold for extended periods of time...its called trend...there's your first problem...and nothing in your statement "tells" me that you have bought the low tick....

 

In the second scenario, having acted on data that is meaningless you have a position based on random chance, so you're screwed...either it works out (by chance) or it doesn't....bad position to be in, but thats what most retail traders find themselves doing....typically your account bleeds to death fast or slow depending on your stop size. Most retail traders are risk averse (because they don't have a system that works), so as they see price move adversely they get out and try it again....rinse and repeat.....until the account is gone...that is the usual scenario...

 

Hi Steve46,

 

Thanks for your reply.

 

You seem to be making a fair few unfounded assumptions though.

 

Relying on overbought/oversold indicators doesn't mean 'nothing' when they are used in an appropriate fashion (such as to buy pullbacks in longer term trends, which is what I do). What it has meant for my swing trading account for the past two years is a happy profit, and this would have been true for each of the prior twelve years that I have backtested. I know that my system has worked well historically, and I am not risk averse (I trade without a stoploss, relying on underleverage to manage risk).

 

A market cannot remain overbought/oversold for extended periods of time in the trader's perception if they don't allow it to. For instance, a trader might have a rule that says something like: "three consecutive down bars in an uptrend is oversold, but a fourth consecutive down bar indicates serious downside momentum - await an up bar and then re-commence the three bar count". A similar analysis can be obtained by using standard indicators such as an RSI with a very short lookback - try setting up a 2 period RSI on your chart, now can you really find many examples of where it remains at extreme overbought/oversold levels for sustained periods?

 

So what I am doing now is exploring the possibility of adapting this strategy to intraday trading, and looking for ideas from other traders on the forum for how to refine entries by watching the DOM etc.

 

You talk about looking for reversal patterns in sub minute timeframes, an idea that I find interesting - can you expand on the type of thing that you'd be looking for?

 

Many thanks,

 

Bluehorseshoe

[A Question for Price Action Traders]

Here are two different scenarios from a 15min chart of the ES:

 

1) Price is in a longer term uptrend, and makes a pullback. When my indicator shows that price has pulled back to an oversold level, I buy on the close. Having been oversold, I have bought the market right on the low tick of the pullback, and the market now takes off back in the direction of the long term up trend.

 

2) Price is in a longer term uptrend, and makes a pullback. When my indicator shows that price has pulled back to an oversold level, I buy on the close. Having been oversold, the market continues to become more oversold. Eventually, at a point significantly below my entry, the market turns back in the direction of the long term uptrend.

 

Now, as a price action trader sitting watching the DOM , Time and Sales etc, what would have told you in the first instance that I was about to buy the low tick (or thereabouts), but in the second instance that the market would continue to fall? What specific signs would you have been looking for in terms of other trader's orders and the market's behaviour?

 

Any thoughts would be greatly appreciated.

 

Bluehorseshoe

[How To Exit a Profitable Trade]

Do you trust your backtested signal 5 minutes before the news comes out?

 

Yes/no/neither. As a system trader you neither trust or distrust your backtested signal in any individual instance. Maybe you'l win, maybe you'll lose - who knows?

 

What you do know is that, with a profitable system based on historical probabilities you'll win more than you lose. Your backtests, if adequate, will already have factored in many examples of signals taken 5 minutes before news came out. Worrying about how every permutation of circumstance will affect each individual trade is the province of the discretionary trader; the systems trader already knows this information in terms of net outcome asssuming that the future roughly corresponds to the past. And of course the bit in italics is what the systems trader worries about . . .

[How To Exit a Profitable Trade]

Question For Those with Target Exits..

 

Do any of you use ATR to adjust your targets dynamically based on market volatility as it relates to your timeframe?

 

Tx

 

Although it's frustrating to work out why (surely a volatility based target makes perfect sense?), volatility targets don't normally do anything to enhance performance in my experience. They just add in another complicated and potentially curve-fitted ingredient.

[What TimeFrame Dayrader Are You & Why?]

I have that issue myself and have accepted that this is not about surgical precision but good trade location within specific risk parameters - of course it doesn't take away the satisfaction of a well timed precise entry - just I have not prioritized it over the overall outcome..

 

Thanks for the post..

 

Hi Roztom,

 

This is just an idea that may be useful or not . . .

 

What would happen if you found your precise entries from the micro timescale, but used the same stop-loss and target that you would use if entering from the 15 minute chart? In theory this would mean that your actual risk:reward (in terms of a hard stop) wouldn't be reduced, but that the likelihood of an uncomfortable adverse excursion would be reduced (assuming your micro timescale entries are actually good).

 

Without wanting to be insulting, this would allow your ego to 'play' with the entry, without any possible negative impact on performance, and with the possible 'reward' of reduced intra-trade drawdowns. By sticking with the higher timeframe stop and target but still entering from the micro timeframe, the micro-timeframe entry would become more of a fun game, where 'winning' with a to-the-tick entry feels good, and 'losing' doesn't hurt your actual dollar performance - a bit like trading in sim!

 

Of course, all of the above assumes that your strategy shows a positive edge when traded in the higher timeframe with that stop and target.

 

Hope that's helpful and makes sense!

 

Bluehorseshoe

[Ensuring a Fill at Limit Price - How Early Must an Order Be Placed?]

I think thats the best you can get.....somewhere in between as JoshDance says its all a guess and you need to make assumptions.

Plus while take profit levels and entry levels can certainly be fairly accurately guesstimated, any stops might be a different story....so there is likely to be slippage - how much an impact is debatable (and later measurable)

Additionally there is the issue of missing trades - both winners and losers, unless you have 24 hours IT, trading and other support, you will go on holidays, your computers will crash etc; etc;....hence backtests are a guesstimate of what to expect - or at least thats the angle I take from them.

 

So yes - its one of those things where you have to understand the limitations of the system and expect the worst - then and its probably only a slim chance - you might be pleasantly surprised

In regard your first question - some brokers purge old orders as well, so placing some orders years in advance may still not be enough. There will be the additional issue of being able to replicate the assumptions in any test in the reality of not just the markets, but also the broker system.....eg; can the broker handle longs and shorts separately, will the system be able to know its 100% filled - what about partials, will the broker allow you leeway to offset hedged instruments or is margin, margin calls and increasing margin calls a possible issue.....etc; etc; etc;.....the never ending joys

 

Hi SIUYA,

 

Thanks - that's a really helpful response. I was of course ignoring IT/technical issues, and hadn't really considered the brokerage issues that you mention (although my suggestion of placing orders years in advance was just an extreme example - but it is interesting to know that old orders can be purged). Nor have I really considered anything beyond a single contract in backtesting intraday - I've been making a rather lazy assumption that compounding will be beneficial, although I haven't really wondered about partial fills on large orders, so that's plenty to think/worry about. Cheers for your help!

 

Bluehorseshoe

[How Do You Scalp?]

yes.....maybe.

that would be your choice of hedge, no market maker is going to put on a texas hedge to help you out of your stop

and ultimately that is a lot of what bigger funds/prop desks do - they hedge one large position with others a lot of the time, or they diversify, whereas a single individual position in one instrument as a day/retail trader is very different.

Or people do spread trades in the same underlying with different options strikes or series (different months) to minimize risk.

One issue will obviously be that often you may end up having two positions on with double the risk, or the opportunity window to quickly hedge something else when a gap occurs is very small.

If you like start another options question thread....

 

Thanks for your reply - I won't start a new thread as I'm only casually interested to be honest - it just seems ignorant of me not to have a better idea of how options work. In fact, I'll buy a book, I think . . . Cheers, and apologies for the diversion.

[Ensuring a Fill at Limit Price - How Early Must an Order Be Placed?]

they will always be worse. ....how much will largely be depandant on number of trades, magnitude of wins v losses v costs v slippagge etc;

backtesting only gives an indication of what would occur- what you would expect- if the same conditions where to occur in the future and the reality is you by adding extra volume into the live market then actually do affect the market.

All you can do is be conservative, overestimate slippage and then tweak systems once live by benchmarking the results of the continued backtested system v live trading to compare and see where improvements can be made. It might be the one or two trades that a missed that completely throw off a system.

 

Hi SIUYA,

 

I agree that future system performance is likely to be worse, but accurate backtesting should closely resemble what would have been achieved trading that exact same historical data in real time. Slippage is not an issue - there is only positive slippage with limit orders.

 

When I backtest a strategy and require price to trade through my limit, then the result would be the absolute minimum that could have been achieved were I actually trading that market. And when I require price to trade only at limit, then that is the very best that could be achieved. The question is, how can I estimate what would actually have been achieved? Obviously this must lie somewhere between the minumum and maximum performance possibilities (it is likely to be the product of trades executed when price traded through the limit, with just some additional trades thrown in that were executed at limit because I was near the front of the order queue.

 

Bluehorseshoe

[Ensuring a Fill at Limit Price - How Early Must an Order Be Placed?]

Unscientifically based opinion: with an order placed this far in advance, assume the fill.

 

Hi Joshdance,

 

Thanks for that. This is my suspicion also, and it has been confirmed by both the negligble difference in results when testing with the at/through fill requirements, and also in live trading. I'm just curious about where this starts to change really - I know that orders placed minutes before are are unlikely to be filled unless price trades through the limit. I was hoping that someone might be able to point me towards some information from the exchange or an independent report on this.

 

Thank you for your reply.

[How To Exit a Profitable Trade]

MAE and MFE stop and targets are well worth adding to your list, I think. Provided market conditions don't differ wildly from the test data then they often hold up suprisingly well. A cruder version of this is simply an optimised dollar stop and target, though all the usual caveats about over-optimisation apply, and you want to see acceptable results across a broad range of parameters, not just one dollar stop/target that happens to work well when neighbouring parameters don't.

 

A fast moving average can work very well for targets for mean-reversion style trading, but this leaves unanswered the question of where to place a stop. Actually, although price always reverts to some mean, but we can never know which one, then multiple MA targets may be an interesting idea to explore for scaling out. I might try and investigate this and report back . . .

[Ensuring a Fill at Limit Price - How Early Must an Order Be Placed?]

I'm not sure what the point would be to want to assume you might be filled at your limit when the probabilities are you won't be..at least for system design you should always assume you won't.. As far\as the Que, that is not quantifiable...

 

If you are designing a system it must work under adverse conditions not ideal ones...

 

Hi Roztom,

 

I'm probably not doing a very good job of explaining myself. When I develop a strategy I do assume the worst case scenario. So my question about fills is for 'information' only - I just like to be aware the range of possibilites surrounding what I'm doing.

 

Bluehorseshoe

[Ensuring a Fill at Limit Price - How Early Must an Order Be Placed?]

It is odd because I was going to ask the same question too. In the last two days I placed orders to buy or sell the SPemini about two hours prior to the price arriving at that location

 

I could not get filled unless the price went through my bid/offer location. I have trade station as my main execution platform but I have also Transact as my secondary platform

 

In the past I noticed that even when I placed the same price order but first I entered my order at Trade Station the order from Transact was executed first even though I placed the order last

 

I have each platform on a different computer I wonder why it has happened does anyone had the same problem?

 

Reflecting back on the situation I think since Trade Station “filters” the tick data this might be the reason why it is lagging, the second reason might be since Transact does not “filter “their tick data the price jumps back and forth so fast that I could not see it going through my bid /offer price

 

Do you have any reasonable idea to why this is happening I would like to hear from you as well?

 

This is just a guess, but going on the fact that there is a difference between the two platforms, I would guess that this may be to do with how you have the TS platform set up. There are options within tradestation whereby the limit order can be held on the exchange's order books, or where it can be held on tradestation's server until the limit price is hit, or where it can be held on your own computer until the limit price is hit. I'm guessing that you are set up with one of the latter two options and not the first. This means that your order doesn't reach the exchange until other limits at your desired price have begun to fill, and you get thrown in at the back of the queue.

 

I hope that's correct/helpful.