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suby

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Posts posted by suby

  3. Posted

    I would agree that making a living from flips would be a tough game - as someone that trades the ES morning session every day (as a position day trader), it's pretty rare I play them.

     

    When I do see them, I'm more inclined to think "OK - let the big boys have their fun" and step aside.

     

    Part of this is because from a trade location perspective, flips occur in a God-awful place UNLESS we have been in a fairly tight range and hit the bounds of it 3-4 times. In that case, a little gameplay to break the range is to be expected but it doesn't mean there will be any follow through - did I mention I was a position day trader?

     

    If I have some directional bias on a range, I'd play the flip but I'm much more likely to just buy the bottom of a range if I am overall biased upwards.

     

    Playing what appears to be a flip on the ES without good trade location is not something I would do and then you come back to the issue that all of this needs experience. I'd say that if you want to scalp the DOM and get profitable fairly quickly you need to....

     

    - stick to thicker markets - FESX, US Treasuries

    - consider spread trading

     

    Its not every day you see someone say there a "position" day trader. I was wondering if you could define position day trader and give a little bit of insight to your methodology towards taking a position intraday on the ES.

  4. Posted

    Seems like you've pretty much got it.

     

    Basically, I think there are 2 types of edge.

     

    1. Hard mechanical edges based on pricing distortions. These have very low risk. Typically involving some kind of arbitrage, like basis trading, delta neutral trading, structure against structure. Due to the low risk, they are the most competitive - but there are still opportunities. So, generally your transaction costs need to be quite low to exploit them.

     

    2. Softer edges involving inter-market cycles and correlations. You mention a good example. These don't last as long - some longer than others. I used to trade a similar one you mention when I traded Euro futures. Examples include CL & ES, seasonal calendar spreads, etc. They will work more often than not, but the relationships shift over time.

     

    The point is, is that you can define each one, and state why it works, how it works, when it will work etc. They arent subjective. The less subjective, the better the edge IMO.

     

    Sometimes the edge is a one off - such as the news of a pipeline being build that has altered the relationship between Brent and WTI. That spread will trend for days/weeks as it takes the refineries some time to put their trades on accordingly. The point is that the trade is not subjective. The pipeline has increased supply, so there is an extremely high probability the spread between them will change. It kind of almost has to. You wont see much looking at the outrights though. Yield curve shifts (flattners and steepners) are another example. Understanding bond maths takes a lot more effort than learning a few clown patterns in TA - so few will bother - instead they try to get rich quick - ending up spending years thinking they are learning not to lose. lol.

     

    Intraday edges are more likely to be one-offs, but you can spot the same ones recurring if you understand market structure through MP and how to read DOM. This is almost a 3rd type of edge as it is perhaps the vaguest, and definitely more subjective. This isnt TA though. It's understanding how large orders interact with the market. It's becoming harder due to algos breaking up large orders. A chart will never show you this due to the games played though. It's also the hardest to learn - so most pro's wont bother with it.

     

    Thanks for clarifying between the two different realms dude.

     

    The majority of my labor is spent specifically in the first school of thought. I won't reveal all of my magic bullets but one of my favourite trades is a divergence trade between the indices and the vix (the model has recently incorporated bonds into the mix)

     

    In regards to correlations and shifts (what i like to refer to as regime shifts), this is something i am spending a lot more time into lately. I'm not sure what kind of window you use to determine your correlations but I suggest using no longer than 60 days maximum since these things are constantly changing (as i'm sure you already know)

     

    Just recently have I been putting in serious efforting into learning the latter (i.e. intraday edges through the dom). If i ever trade intraday, I will never look for a scalp... I like to go into the trading day with a general outline of areas of interest and then i'll use the dom/tape and other moving parts in my models to help identify if a trade is on or off. HFT does not make this easy by any means but with time, practice and patience I believe one can build an edge in this style of trading as well.

     

    Happy to see your applying a strict logic to the madness rather than a trendline/fib retracement/or bear/bullflag

  5. Posted

    Key Steps to Building a Successful Game Plan....

     

    All fairly vague stuff.

     

    You need an edge to be successful.

     

    If you go to an investor seeking money for ANY type of business, the investor is going to DEMAND to know how you will make money. What value will you be adding to your product that allows you to sell it for a higher price? Or in trading parlance, how can you demonstrate that over time, your strategy WILL return profit based on changing asset prices. This is usually based on knowledge of intra or inter market interactions, or observable and demonstrable external factors and their impact on the markets. TA is too vague and subjective to offer this. TA does not offer any edge in itself.

     

    So,

     

    What edge can be found in the FX market? What time frames are these edges occurring in?

     

    This is what should be addressed in my opinion.

     

    Political factors, economic releases, fiscal policies, rate markets, repo transactions, seasonality such as tax cycles, commodities, option mechanics, etc, etc....

     

    Forget your 5 min chart. You'll need to do a lot more work than back testing basic pattern recognition to find any edge.

     

     

     

    Political factors, economic releases, fiscal policies, rate markets, repo transactions, seasonality such as tax cycles, commodities, option mechanics, etc, etc....

     

    Forget your 5 min chart. You'll need to do a lot more work than back testing basic pattern recognition to find any edge.[/

     

    I agree with you dude, but if you were to get even more specific, what part of that framework can and do you quantify?

     

    Price is nothing more than the heartbeat of the markets; however, (in my opinion at least) trading ideas should be based off of hypothesis that play on a behaviour or external factor, like what you have listed.

     

    Something that has recently come to light...

     

    The day before any important economic release, if the day ends positive, the odds are high that the following day will also end positive

  7. Posted

    Well, its not so much the "analysis" that I feel is archaic, it's the raw data being analyzed, specifically tick data aggregated by time.

     

    Econometric tools can be very useful, but in the same light, there are quite a few technical indicators that are actually very useful when you use them in a more realistic, and controlled manner.

     

    Data snooping is something I know very little about. It's not an avenue I choose to explore, mainly because for me, I like to build the trading process up from the concept, while data snooping is more like building the process and trying to work backwards to determine a concept.

     

    Add,

     

    Thank you for clarifying that for me. It's a common saying in the quant community "I'll sell my kids before i'll sell my data and my kids are not for sale" - The type of data used for research an analysis plays a key role in any strategy.

     

    I havn't used econometric methods yet in a trading model; however, I have been able to develop some robust models using simple MA's and RSI.

     

    In regards to data snooping, i'm not sure if you have heard of Jaffray Woodriff but read up on him if you have not...

  8. Posted

    Hi Suby,

     

    As promised, an example of what I was trying to explain.

     

    The first image shows strat applied with signals from primary market only (buy dips in uptrend; sell rallies in downtrend). Over a ten year test period . . .

     

    Profit Factor is 2.50 (Longs: 2.3, Shorts: 2.93)

     

    The second image shows strat applied with signals from primary market filtered with data from three additional related markets (only buy dip in uptrend when related markets either have not dipped or are not in uptrend etc).

     

    Notice how five trades drop out over the period shown? Over the course of the test period this is sufficient to have the following effect:

     

    Profit Factor is 5.97 (Longs: 10.80, Shorts: 4.32)

     

    This is just an example, so I put no effort into selecting the markets used as filters.

     

    I hope that's enough to get you thinking and researching if this is something of interest.

     

    Regards,

     

    BlueHorseshoe

     

    BlueHorseshoe,

     

    Sorry for the delay in reply but thanks for this, defiantly got my thinking cap going

     

    Hope you are getting ready for apple earnings tomorrow, PUTs on the indices are looking so cheap right now

  9. Posted

    A few thoughts above. I also thought AddChild's comments were extremely helpful.

     

    BlueHorseshoe

     

    Bluehorseshoe,

     

    Thats more or less what I try to structure in my trades - a one sided ERM pair trade. It's one thing to look at charts or prices and notice that things are out of wack but its another to know with certainty through testing that a one sided pair trade under that hypothesis has statistically significance. I've been doing all my work with EOD data because its easiest right now so I have no idea what to look for using EOD data to structure these kinds of trades but I would imagine that one should use intraday data to structure these kind of trades

  10. Posted

    Suby,

    Sorry to see your having trouble carving out your niche. So I'll offer up some of my thoughts on your statements above,

     

    ADDchild,

     

    Thank you for your insightful reply. I took a lot of of that.

     

    In regards to time series analysis being archaic, what methods do you recommend one to use in the modern world? The only thing I can think of would be econometric tools or data mining (specifically data mining), is that what you were referring to ?

  11. Posted

    I have tried doing so in the past with intraday stuff, but without any success. I also went through all the $tick, $trin, $vix "market internals" stuff years back (before I was backtesting - so I lost real money trying that stuff out), and then the Larry Williams indicators based around bond/stock index relationships . . . There was nothing there for me.

     

    One thing I have noted, but have yet to properly investigate, is that when a group of correlated markets are trending (and they need only be loosely correlated), and one market pulls back where the others don't, then an entry in this market has better probability of a successful outcome than when multiple markets undergo a correction together. Not only is such an instrument reacting against its own long term trend, but against the trend of the broader market. A reaction that will become a reversal is more likely to unify behaviour ("when the shit hits the fan, all correlations go to 1 . . . !").

     

    What I am describing is possibly an aspect of what OneSmith has in mind with the 'M' of CANSLIM.

     

    BlueHorseshoe

     

    BlueHorseshoe,

     

    Can you give an example of something you've seen with this? What your describing is more or less how paul tudor jones trades from my understanding and even victor niederhoffer, only he quantifies everything and uses some next level voodoo that only him and his team understand.

     

    In regards to correlations reverting back to 1 when shit hits the fan and the M of canslim its interesting you mention that. I havn't had much success (yet) in determining leads/lags or arbitraging intermarket relations; however, I have noticed 2 things of interest. 1... I find the eurodollars will almost lead the american opening or at the very least give a lot of insight into where the price will be heading for the next hour on the american indices and 2... I've noticed a lot of arbitrage opportunities specifically midday/late day when the 3 indexs are out of line

     

    Example Nasdaq and S&P are both down and so is the dow but in relation to the two its still higher. More times than not, if the downward trend or upward (whatever the trend is for that moment/session) will allow the trader to take advantage of this anomalie. Yesterday was a perfect example of this. After 2 oclock both NQ and ES were down substantially but the Dow was lagging. Anyone who caught onto this going into the close made a boatload of money

  13. Posted

    Thought it was obvious. Blue/long red/short.

     

    First bar with red dot is yesterday's opening bar. Not much of a downmove next five minute period but I wait for opening ranges to be established before I trade anyway.

     

    But since I don't trade equities C is not something I'd be looking at and note also I don't use the showme indicator by itself. Other factors add confidence.

     

    It is very predictable to me though like anything else not 100%.

     

    It's obvious but its also very subjective in my personal opinion. I realize that in trading there is no gaurenttee. But the reason i started this discussion was to get a feel for who is doing really well day trading and what kind of objective methods they are using. The core of that Citibank price range defiantly defines a lot of high probability entries; however, this is hindsight right.

     

    Suntrader what is the showme indicator and what others factors would you use to give you a strong buy or sell signal?

  16. Posted

    Sure about that - zero?

     

    Citi 5 min chart:

     

    I'm not sure if the red dot on the first bar is the opening price but as i said in my post about citi look at the OHLC as they'll give a lot of clues into trading it. under that graph its clear that price consolidates and bounces off of that bar all throughout the day. I'd argue the reason being is 2 reasons. 1) citis correlation to the broad markets behaviour and 2) the specific range that citi trades in is due to etf repurchases or sales. If you want to watch madness. Watch Citi/BAC or any major etf that has to rebalance at 2:30 everyday

  19. Posted

    Cory,

     

    When i initially posted, I was somewhat ranting but let me clarify. Day trading/intraday trading is a shorter time frame than one who swing trades with EOD data. Many will argue with me that there is no differnce (all good). Intraday trading has way more noise than swing trading and I can back that up to anyone who wants to disagree with that statement. I posted this thread to generate discussion to those who have had success trading intraday (consistently).

     

    The fact of the matter is day trading/intraday trading is a lot harder than swing trading in my opinion atleast and I'm curious to hear some of the methods that the community deploys to take advantage of these anomalies. Am I saying that market is random...? no. Due to the market structure (specifically in the equities space) theres a lot more noise in intraday trading as i;ve said a million times before. With that being said... Take a stock the Citibank ©. Take its OHLC prices for its previous days, and closely watch what happens when it hits these levels. You can thank me later for the free ATM

     

    And one more thing, I boldly stand by what I said earlier that technical analysis has ZERO predictive power when one is applying it to a 1/5/10 min time frame. I stand by that

  20. Posted

    suby,

     

    Commissions, spreads, and slippage have nothing to do with the predictive power of TA on smaller time-frames vs longer time-frames. Your original statement was not addressing lower profitablility on lower time-frames due to higher costs...you boldly stated that there is no predictive power on shorter time-frames.

     

    Cory,

     

    When i initially posted, I was somewhat ranting but let me clarify. Day trading/intraday trading is a shorter time frame than one who swing trades with EOD data. Many will argue with me that there is no differnce (all good). Intraday trading has way more noise than swing trading and I can back that up to anyone who wants to disagree with that statement. I posted this thread to generate discussion to those who have had success trading intraday (consistently).

     

    The fact of the matter is day trading/intraday trading is a lot harder than swing trading in my opinion atleast and I'm curious to hear some of the methods that the community deploys to take advantage of these anomalies. Am I saying that market is random...? no. Due to the market structure (specifically in the equities space) theres a lot more noise in intraday trading as i;ve said a million times before. With that being said... Take a stock the Citibank ©. Take its OHLC prices for its previous days, and closely watch what happens when it hits these levels. You can thank me later for the free ATM

  21. Posted

    Re: being in the market all the time - that is actually not necessarily what day traders do.. The defining activity for day trading is entering and exiting within the same day; trading every day is not implicit. May want to look into why some days are more attractive to trade than others.. :2c:

     

    I'm not naive and oblivious; however, many active traders (especially new ones) end up treating their trading like accounts like a slot machine at the casino.

  22. Posted

    None of that shows on a chart.

     

    The point is that whether a daytrader or swing trader "makes more" has absolutely nothing to do with whether the trader is daytrading or swing trading but rather with the competence of the trader.

     

    Actually has a lot to do with it Db. If your flying in and out of positions, commisions and slippage can easily eat someone up.

     

    the purpose of this thread as mentioned is who is more profitable swing or day trader with the use of a hypothesis.

     

    I understand that you are a daytrader Db and you are also fond of the NQ (also my contract of choice).

     

    Can you give me an example of how you would enter into a trade? What criteria are you looking for? whats the avg duration of your trades? On avg how many points do you aim for on a day trade? most importantly out of 100 trades, how many of them are profitable?

  23. Posted

    You're setting up a false dichotomy. There is no difference between day trading and swing trading except for the bar interval, if one is using bars. Remove the X and Y axes and you'd be hard-pressed to tell the difference. That you've been unsuccessful at daytrading may mean only that you've approached it in the wrong way.

     

    DB,

     

    How should one approach day trading?

  24. Posted

    I recently just finshed the classic novel "reminances of a stock operator" and there was a quote in the book that really struck me.

     

    "No man has any business being in the market all the time"

     

    Immediatly I thought to myself, thats what DAYTRADERS do! For anyone who has read the book knows the story but for those who havn't I will shed some light.

     

    Jesse Livermore began trading (day trading in bucket shops). He would trade according to his system, but his results were truly abysmal. Sure the man made money but the real money came when he started to swing trade. And by swing trade he developed an idea (hypothesis), waited for certain conditions to materalize, and then bet. Really that simple.

     

    The reason why I am writing this is because I have recently revisted some threads on this forum (i.e. Don't be fooled by randomness) and it has become apparent to me that the majority of traders on this forum are day traders. I could be very wrong, so please correct me if I am.

     

    In my short trading career thus far I can admitt that trading without a plan/hypothesis is gambling. Better yet its a waste of time. There is ZERO predictive power from the patterns of 1/5/15min bars (bullflag,S/R, etc). All of my success has come from swing trading.

     

    I will stop my rambling at this point and open up the thread. Who day trades and who swing trades? Whats your personal preference? If you are a day trader, what do you do to make yourself a winner? If your a swing trader, how do you develop your hypothesis before entering into a trade

     

    Disclaimer: I am not disregarding the valdity of technical analysis - This is a thread dedicated towards Noise/Randomness/DAYTrading Vs being able to quantify something/Swing Trade

     

    Suby

  25. Posted

    BP's Rise To Profitability And Beyond

     

    I have been analyzing big oil stocks that offer a good return on investment for a value investor. My analysis here is based on the profitability ratios in the financial statements of BP PLC (BP) over the last 5 years.

     

    When a firm has strong profitability ratios, it portrays to an investor that it provides a good return. The profitability numbers that I came across for BP were very encouraging. Keep in mind, however, that this is just one of the many ways to analyze a stock.

     

    Individual project risk is something that can do severe damage to an energy company. BP and its Gulf of Mexico oil spill is a prime example of just how bad it can get. As a result of the disastrous oil spill, BP had to fight just to stay in business by shedding assets and changing its structure and outlook materially.

     

    The Return on Investment ratios also aren't as impressive when compared to the industry as a whole. BP is now completely exiting the renewable energy sector and this could help boost profit margins and return on investment ratios. It is the high-margin oil and gas projects that BP is hoping will generate higher returns.

     

    BP shares are trading at 5 times 2013 EV/EBITDA and 8.5 times 2013 P/E. Equity analysts agree that BP is undervalued. I am going to have to agree with this sentiment even though the profitability ratios aren't particularly impressive and the price action is bearish.

     

    Read more here: BP's Rise To Profitability And Beyond - Seeking Alpha

     

    Vinayak,

     

    I don't mean to sound like an A-hole as i said before. This is a trading forum. The notion of buying oil stocks, is really a no brainer in regards to value investing to be honest with you. As i'm writing this you actually just reminded me i should probably buy up some cheap oil stocks lol. But your approach to this is value vs trading.

     

    Do you trade or invest? thats the real question

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