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Hi Neal:
These are all excellent questions and very pertinent to my trading style as
well. I'd like to suggest that any responses be addressed to the list
instead of privately so that we may all glean something of value here.
1. If nothing else, the inclusion of the night session helps to smooth out
the otherwise-gapped opens so that my indicators don't have to run several
bars before normalizing to a usable state.
2. I don't actively search for entries during the lunch hour, but will
obviously stay with a trade if I'm in one during that time.
3. I bought a system once that traded the 11-tickbars and it was too fast
for my blood. I did, however, switch to a 17 tickbar and it traded much
easier. More profit size with the expected larger stops. The difference was
less commission and slip.
4. I've spent much time the last few years attempting to write indicators
that will give signals confirmed by multiple time frames. I think the 5X
ratio is probably a decent setting, however nothing is infallable. The
obvious goal is to avoid the cross-currents in the market and trade with
the trend within the larger trend. I'm trying to ride the ripple on top of
the wave. Other than trying to avoid a catastrophic move, I usually don't
monitor the direction of the tide.
5. On trading the early signals, the more risk, the more potential reward.
A large part of the real opportunity is presented in the first 30 minutes
of the morning session. It's hard to get aboard the train after it's left
the station. I find that waiting about 5 minutes will let the fluff out of
the open and then try to get onboard the next train out, if I can decide
where it's headed. I'm usually not influenced by the price action of the
night session unless I suspect there has been some earth-shattering
overnight fundamentals develop.
6. Your number 6 question has to do with buying weakness or buying
strength. I have traded both ways and all I can do is agree that buying
strength provides less false signals. In a very short-term trading method,
my goal is to avoid as many false signals as possible, so strength works
better for me.
Best of luck,
Randy Murphree
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From: Neil Harrington <njh@xxxxxxxxx>
To: ATI List <ati@xxxxxxxxxx>; omega-list@xxxxxxxxxx
Subject: Some S&P Ideas & Questions
Date: Monday, June 01, 1998 12:24 PM
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
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