|
PureBytes Links
Trading Reference Links
|
I have listed below some points that I and others consider when day trading
the S&P futures contract. I would appreciate you sharing your comments about
these points and adding other principles, rules of thumb, cardinal rules,
etc., that you couch your S&P day trading in. These are in no particular
order.
1. I use a BMI satellite feed and just trade the day session, but I use the
SP8M (day and night session combined) symbol, for example, rather than the
DSP8M (day session only) symbol. I do this because it makes the charts and
indicators more continuous at the beginning of the day session, and to me,
the data more relevant to whether things are really more bullish or bearish
at the beginning. For example, if you were just looking at the day session
only, and it gapped open 200 points higher, you would think things are
definitely bullish from looking at the charts. But if were displaying the
night and day session together, you might have a different view. Maybe in
the night session an hour before the day session opens, the S&P was actually
500 points higher and the last hour before the close of the night session,
the market slides from +500 to +200 points higher than the close of the day
before. Now your chart pattern is more bearish than bullish. To me, being a
short term day trader, this last view is more reflective of the current
sentiment when the market opens for the day session. The one concern I have
about this point of view is that the night session is much thinner, so maybe
its movement shouldn't be given much weight. Agreement or disagreement or
other views please...
2. George Angell indicated most recently at OmegaWorld that there is usually
a morning trend, an afternoon trend, and that "lunch hour" is from noon to
2:00 PM EST, so trading is thin and inconsistent then. My own general
observations bias me towards thinking that in the morning there is a general
trend that is usually fairly choppy, an afternoon trend that is usually more
efficient and larger, and I haven't seen any patterns in the "lunch hour"
time, but it seems that opportunities are still available. Do any of you use
time of day rules that override any other signals that you use? For example,
if you get a buy signal during lunch, do you not take it because of the time
of day?
3. There was some good discussion awhile ago on the smallest time frame you
can actually trade without logistics or noise getting in the way. I know one
good trader that uses 5 or 8 tick charts to trade from. For the way I trade,
that seems too noisy. I have found 13 tick charts are tradable. Any
comments?
4. Related to 3., there were also discussions about looking at a longer time
frame than the one you are trading to get the trend of the market. Alexander
Elder suggested a 4 to 5 times greater time frame than the one you are
trading to get the trend. Walter Bressert also uses that idea. I agree with
this concept, but there are different ways of observing it. It seems that
most people talk about having multiple charts displayed showing the
different time frames to see the trends of the longer time frames to filter
their trades in their trading time frame. For me, looking at multiple charts
confuses me and makes me less confident in taking the trade, but I agree
with the concept. So, instead of looking at multiple charts, I display
appropriate moving averages to reflect the longer term time frames. So, for
example, if you look at an 8 bar moving average in your trading time frame,
you could display a 40 bar moving average also, to reflect what an 8 bar
moving average would be in a 5X greater time frame. For me, this gives a
less confusing picture of the market.
5. There is usually a lot of noise the first few minutes of the trading day.
Fills are very inconsistent. Do any of you have rules about the opening? For
example, do you wait 5, 10, 15, 30 minutes before taking your first trade,
or do you take your first signal no matter when it happens? Also, if you are
watching the SP8M, and you got a signal the last 15 minutes of the night
session, do you enter the market near the open if it confirms the direction
of the signal, or do you wait for a signal in the session. I do the latter,
but many times I watch the market go the direction of the signal that
happened at the end of the night session. Any thoughts?
6. One last question. I would be interested in your opinions on two popular
ways of entering the market. Let's say you have determined the trend is
bullish. One way to enter is to go one tick above a swing high which is
above the trend. Another way is to wait for a retracement and but as soon as
it turns back up. The first way seems to generate fewer false entries. The
latter way has lower risk but more false entries.
I hope these questions are of general interest to the lists. Please respond
publicly or privately.
Thanks,
Neil
|