Pitbull Three Strategy
Here is a strategy which I did not originate. Perhaps some of you have seen or heard about various forms of this. It was taught to me by a self proclaimed “old Timer” who I happened to meet about 5-7 years ago in a commodity site chat room. This was before Paltalk and Hotcomm was popular. I present it here mostly as it was taught to me for free. I “watched” him trade this for about 9 months in real time. It was designed for the big S&P contract so I have modified it slightly for the emini. The man who taught this was gruff, sometimes abusive ( especially when the future vendor Kingfish came in the room) but always answered questions…
Originally I thought he was going to turn out like the Army Sargent played by Lou Gosset Jr. in “Officer and a gentleman” but this mentor just disappeared and I never found him again. Perhaps he started his own service and markets this but I haven’t seen it. His idea on stops was the following….”You can either take the loss and try again or trade your way out”. He always tried to trade his way out and would sometimes lose on trend days… as it is a counter – trend strategy……a few other things….he would call in for the official opening range…( it is not the one minute high or low as some think but we can use that for exits)..I am using the opening price on the emini to set the levels . He would trade up to 50 contracts if he needed to so he was at times adding to a “losing trade” as some might say……he always took a 1.5 point profit target…….he didn’t alter this….I’ll think of other things as we go. He also thought that if the rumors where true and the floor traders where moving to screen trading then this strategy would become less effective…….it is only traded in the first hour and he only broke this rule if he was trying to “trade out”…..keep in mind this was designed when volatility was higher and 5 minute bar could have a range of 5 points…unlike today's markets……I think the levels are most important and although I don’t snap them on my own personal charts I have them written down on paper after the opening….He believed that at 10:30 EST you should close your business up and end for the day…unless he was trying to recover... ok enough of the history
ok first we take the opening price and add and subtract the following numbers
The strategy tends to capitalize on the floors ability to push the market in one direction to sucker in the public for it to then only snap back towards the opening range…I have noticed that it works best when the market is pushed to an extreme of either an overnight high or low or the previous days high or low…so we can relate this to an “open-test-reject” as per Market profile concepts……
+- 2.5
+- 4.0
+-5.5
+-8.0
This sets up our WINDOW of trade entry points….For today Friday January 5th I have the opening price at 1424 so the downside numbers would be 1421.50, 1420, 1418.50 and 1416..and here are the rules.
1) If we open and drop down to the minus 2.5 number then rally to the open you buy
2) If we open and drop down to the minus 4 you then buy at the minus 2.5 on the way back up
3) If we drop down to the minus 5.5 you buy the minus 4 number
4) If we drop to the minus 8 you buy the minus 5.5
This is all reversed for the upside.
Anything beyond a plus or minus 8 meant the market was too risky too initiate from down or up from the opening so he avoided it…in general he believed that the further out into the WINDOW you went then the riskier it became…so buying a minus 2.5 after a hit on minus 4 is a safer trade then buying a minus 4 number after a minus 5.5…He didn’t use stops but his target was always 1.5 off the window number ..not your fill price...
You would stop trading if the markets dropped 2.5 points below the opening and then traded 2.5 above the opening…..this would be called a COMPLETED WINDOW RUN and the floor was done doing it’s business…you would be finished also…just one or two good trades a day……for now think about how you can incorporate the Pitbull One and II thread ideas into this……did you see the singles band with the first and second one minute bar today
The Market opens at 1424 and drops down to slightly below the minus 2.5 number at 1421.50…since we didn’t trade back to the opening at 1424 there is no long trade…..The market then drops further and goes to the minus 4 number at 1420 so we are a buyer at 1421.50……which is the minus 2.5…If you use stops then this trade would not have hit 1.5 points of profit and you lose if you are using stops….The market drops further to the minus 5.5 number to the tick at 1418.50..so you are a buyer at the minus 4 which is 1420….this achieves it’s target and rallies up to test the band..see pitbull thread II at the first and second one minute bars…not shown on this chart. ok...this is a lot so I will work on trying to clarify what needs to be clear…the second long was better because we had Tick divergence to support the trade…may seem complicated but it’s not..I’ll highlight the important stuff…..and ask questions...it helps me too to get this stuff in words
Bruce
Originally I thought he was going to turn out like the Army Sargent played by Lou Gosset Jr. in “Officer and a gentleman” but this mentor just disappeared and I never found him again. Perhaps he started his own service and markets this but I haven’t seen it. His idea on stops was the following….”You can either take the loss and try again or trade your way out”. He always tried to trade his way out and would sometimes lose on trend days… as it is a counter – trend strategy……a few other things….he would call in for the official opening range…( it is not the one minute high or low as some think but we can use that for exits)..I am using the opening price on the emini to set the levels . He would trade up to 50 contracts if he needed to so he was at times adding to a “losing trade” as some might say……he always took a 1.5 point profit target…….he didn’t alter this….I’ll think of other things as we go. He also thought that if the rumors where true and the floor traders where moving to screen trading then this strategy would become less effective…….it is only traded in the first hour and he only broke this rule if he was trying to “trade out”…..keep in mind this was designed when volatility was higher and 5 minute bar could have a range of 5 points…unlike today's markets……I think the levels are most important and although I don’t snap them on my own personal charts I have them written down on paper after the opening….He believed that at 10:30 EST you should close your business up and end for the day…unless he was trying to recover... ok enough of the history
Click image for original size
ok first we take the opening price and add and subtract the following numbers
The strategy tends to capitalize on the floors ability to push the market in one direction to sucker in the public for it to then only snap back towards the opening range…I have noticed that it works best when the market is pushed to an extreme of either an overnight high or low or the previous days high or low…so we can relate this to an “open-test-reject” as per Market profile concepts……
+- 2.5
+- 4.0
+-5.5
+-8.0
This sets up our WINDOW of trade entry points….For today Friday January 5th I have the opening price at 1424 so the downside numbers would be 1421.50, 1420, 1418.50 and 1416..and here are the rules.
1) If we open and drop down to the minus 2.5 number then rally to the open you buy
2) If we open and drop down to the minus 4 you then buy at the minus 2.5 on the way back up
3) If we drop down to the minus 5.5 you buy the minus 4 number
4) If we drop to the minus 8 you buy the minus 5.5
This is all reversed for the upside.
Anything beyond a plus or minus 8 meant the market was too risky too initiate from down or up from the opening so he avoided it…in general he believed that the further out into the WINDOW you went then the riskier it became…so buying a minus 2.5 after a hit on minus 4 is a safer trade then buying a minus 4 number after a minus 5.5…He didn’t use stops but his target was always 1.5 off the window number ..not your fill price...
You would stop trading if the markets dropped 2.5 points below the opening and then traded 2.5 above the opening…..this would be called a COMPLETED WINDOW RUN and the floor was done doing it’s business…you would be finished also…just one or two good trades a day……for now think about how you can incorporate the Pitbull One and II thread ideas into this……did you see the singles band with the first and second one minute bar today
The Market opens at 1424 and drops down to slightly below the minus 2.5 number at 1421.50…since we didn’t trade back to the opening at 1424 there is no long trade…..The market then drops further and goes to the minus 4 number at 1420 so we are a buyer at 1421.50……which is the minus 2.5…If you use stops then this trade would not have hit 1.5 points of profit and you lose if you are using stops….The market drops further to the minus 5.5 number to the tick at 1418.50..so you are a buyer at the minus 4 which is 1420….this achieves it’s target and rallies up to test the band..see pitbull thread II at the first and second one minute bars…not shown on this chart. ok...this is a lot so I will work on trying to clarify what needs to be clear…the second long was better because we had Tick divergence to support the trade…may seem complicated but it’s not..I’ll highlight the important stuff…..and ask questions...it helps me too to get this stuff in words
Bruce
quote:
Originally posted by BruceM
...any questions regarding "statements" or "did you actually trade this?" will be viewed as an attempt to discredit me and to Thread-jack these ideas...so this last chart is for my detractors.....IN YOUR FACE...lol
I agree with Bruce that comments not discussing this strategy would be inappropriate here. Please can everyone stick to comments about the specific strategy that is being discussed in this thread. This does not mean that you cannot criticize the strategy. If you feel that it does not work then by all means discuss why you think that, post your figures and charts etc.
Bruce: Try not to goad your "detractors" in these threads. Let's keep it strictly strategy.
Excellent point! I will take your advice...thanks
Bruce
quote:
Originally posted by day trading
Bruce: Try not to goad your "detractors" in these threads. Let's keep it strictly strategy.
seems to have worked this morning as well........
open 23.50
2.5 level was 21
4 pt level 19.50
traded to 19.50 and then through 21 during the first hour initiating a long signal........struggled to get throough 21 a little, but worked out nicely.......
open 23.50
2.5 level was 21
4 pt level 19.50
traded to 19.50 and then through 21 during the first hour initiating a long signal........struggled to get throough 21 a little, but worked out nicely.......
Hi Pem,
MY data may be off but I have 1423 for the open on the emini but even so you understand which is cool...for my open they missed the minus 4 by two ticks and the market stopped at 1419.50 so there would have been no buy at the minus 2.5 at 20.50 but you would have bought the open price at 1423 and that would have hit the 1.5 target.
The important thing is that you understand the trade concept and you do so thanks for posting that
Bruce
MY data may be off but I have 1423 for the open on the emini but even so you understand which is cool...for my open they missed the minus 4 by two ticks and the market stopped at 1419.50 so there would have been no buy at the minus 2.5 at 20.50 but you would have bought the open price at 1423 and that would have hit the 1.5 target.
The important thing is that you understand the trade concept and you do so thanks for posting that
Bruce
yeah, there was a discrepency in my data on esignal right at the open, sorry for any confusion.
No Problem..I think that it would be a mistake to look at these levels as an "absolute" .this isn't directed at you PEM....If you see a set up and it comes close to say a minus 4 and you have Tick, Volume, or other market divergence then I wouldn't let it hold you back.........It would be a mistake for anyone to expect these levels to hit to the tick all the time.....They should ideally be used with other zones...Like today I beleive the Point of control was around 1419 also...so this just becomes another tool in the arsenal..It would also be interesting to watch what happens if we can't even get 2.5 points above or below the open etc..that may be implying something too
Bruce
Bruce
quote:
Originally posted by pem06081971
yeah, there was a discrepency in my data on esignal right at the open, sorry for any confusion.
Well I was hoping to have this last chart posting for this thread be an example of a sell signal but we take what we get....Today the Market opened at 1415.25 and dropped down to the minus 2.5 ( slightly below) so we are to be a buyer at the open price when we trade back up...It should be noted how you can almost "see" how the floor or someone went "fishing" if you look at where the overnight low was...
Anyway, on this chart I have horizontal lines at the plus and minus 2.5 and the plus 4..which stopped the market dead when this screen shot was taken...you will also notice where the POC is for today so it's an interesting zone which is being tested again as I type this.....This will conclude the chart postings unless there are specific questions. You just reverse the logic for short trades.
Bruce
Anyway, on this chart I have horizontal lines at the plus and minus 2.5 and the plus 4..which stopped the market dead when this screen shot was taken...you will also notice where the POC is for today so it's an interesting zone which is being tested again as I type this.....This will conclude the chart postings unless there are specific questions. You just reverse the logic for short trades.
Bruce
Click image for original size
For a short trade example we can use the following from todays chart...once the plus 4 number hit you would be looking to sell the plus 2.5 and use the usual 1.5 point target.....Now the person who taught me this "Window Run" strategy would not have taken this trade nor would have he taken a sell at the open price after the plus 2.5 number hit......this is because he beleived that the Day was "over" once a plus and minus 2.5 number was traded to.....so take that for what it is worth..good luck with this and post any questions you have
Bruce
Bruce
has been working for me, Thanks BruceM, you have introduced and equitys trader to the future lol
Good for you High Rollin....cool..there are ways to improve upon it and let me repeat when I say that for me the levels are more important than the actual entry method described here....yesterday ( thursday ) we had a drop down near the minus 8 with a cool divergence for example.....to get long...hope this inspires you to investigate more and welcome to the Future (s)
Bruce
Bruce
Originally posted by BruceM
big mike...is this one of bitmans ideas u r using on weeklies
http://community.livevol.com/index.php/articles.html/_/options-trading/spx-weekly-credit-spread-strategy-r3205
Yes it is.
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