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
I know this thread is a couple months old, but has anyone been watching or trading this method since it was last discussed? Just curious....
I may be partial to these trades Jmi88 as the originator of this thread..I obviously trade these levels. As I have mentioned before the BEST trades come after a significant infection point is take out like the previous days high/low, the overnight high/low or the Value area high / low. You want a point that suckers in the "wrong" crowd. And don't beleive for a minute that there are days when trading this method you will be the "wrong" crowd. With that said here is how they where handled the last two days.
Here is Friday ( Today):
1)They ran out the overnight high of 48.25
2)They hit the plus 4 number at 49.75 ( 1445.75 + 4)so you where a seller. They missed the plus 5.5 by one or two ticks
3)You collected your profits in intervals on the way back down
Here is thursday
1) They hit the minus 4 number at 1443.5 (1447.5 minus 4)
2) They ran it down to take out the overnight low at 42.75 ( significant inflection point)
3) They hit the minus 5.5 as they traded into Single prints from Wednesday ( Learn MP for single prints concept)so you are a buyer
4 You take your profits on the way back up
I think most people won't trade this way because it doesn't have enough " flash". I beleive most want to see the oscillators, moving averages and all the fancy bells and whistles. They will dismiss these simple concepts because it seems too unbeleiveable. Now don't get me wrong, you obviously need a healthy dose of risk management but what method doesn't.
Even on the biggest Down day of year this method made money. Watch this on Gaps too. The best trades on gaps will come in the follwoing way.
1) We open higher then the previous days range and go up first to a plus 2.5 or plus 4 - 5.5 number - so we sell
2) We open lower then the previous days range and move down first to a minus 2 or minus 4 - 5.5 number - so we buy
Ok - Go make some money now...hope these help
Bruce
Here is Friday ( Today):
1)They ran out the overnight high of 48.25
2)They hit the plus 4 number at 49.75 ( 1445.75 + 4)so you where a seller. They missed the plus 5.5 by one or two ticks
3)You collected your profits in intervals on the way back down
Click image for original size
Here is thursday
1) They hit the minus 4 number at 1443.5 (1447.5 minus 4)
2) They ran it down to take out the overnight low at 42.75 ( significant inflection point)
3) They hit the minus 5.5 as they traded into Single prints from Wednesday ( Learn MP for single prints concept)so you are a buyer
4 You take your profits on the way back up
Click image for original size
I think most people won't trade this way because it doesn't have enough " flash". I beleive most want to see the oscillators, moving averages and all the fancy bells and whistles. They will dismiss these simple concepts because it seems too unbeleiveable. Now don't get me wrong, you obviously need a healthy dose of risk management but what method doesn't.
Even on the biggest Down day of year this method made money. Watch this on Gaps too. The best trades on gaps will come in the follwoing way.
1) We open higher then the previous days range and go up first to a plus 2.5 or plus 4 - 5.5 number - so we sell
2) We open lower then the previous days range and move down first to a minus 2 or minus 4 - 5.5 number - so we buy
Ok - Go make some money now...hope these help
Bruce
Bruce, very interesting thread. In your first post, you said "he would call in for the official opening range…( it is not the one minute high or low as some think)". Do you know what the "official opening range" is based on ?
Sorry but I cannot really answer for sure but the person who taught me these ideas said that it was just the first few seconds based on the big contracts.....
quote:
Originally posted by trader416
Bruce, very interesting thread. In your first post, you said "he would call in for the official opening range…( it is not the one minute high or low as some think)". Do you know what the "official opening range" is based on ?
...I should also add that they where on the phone with there broker as the market opened so they had the "opening Range" right away..I think the approximation of the levels are more important and I wouldn't get hung up on this
Bruce
Bruce
Hi,
This is great stuff! Question, say it falls to -3.5 off open. It would then have to rally to open for the buy and then the profit point would be the 1.5. This means to hit the profit it would have to go 5 pts off the low.
How would you deal with that?
John
This is great stuff! Question, say it falls to -3.5 off open. It would then have to rally to open for the buy and then the profit point would be the 1.5. This means to hit the profit it would have to go 5 pts off the low.
How would you deal with that?
John
Hi John,
Hopefully I would get a signal to get long near the minus 2.5 but it doesn't always come. These areas need to be looked at as "alert" zones like you would use the value areas or the floor trader pivots. Sometimes you will see a volume "flush" where, in this case we get a nice strong volume push down and then the selling stops. So we would get long above the high of a one minute volume flush down bar.
Like everything else it's best to put it in context. For example, did we trade back to the previous days close ( a gap play), did we sucker in the folks who trade breakdowns of the overnight lows ( for a long trade), did we bump up against a known reference point ( Va High, Low, Previous days high or low, Pivot number etc..)
I have one person who I have been in contact with and this is how they do it. In this case they would buy into the minus 2.5, the minus 4 and the minus 5.5 if needed. At minus 6.25 points they would take the loss if it kept dropping. If it goes back up then they profit. Somedays they only need to buy the minus 2.5 and no additional add-ons. This idea should be tested over time and I don't suggest everyone just run out and trade the numbers this way
I hope that helps. Some days you just don't get a good signal. I personally like when they run out known reference points and then reverse the market.
Bruce
Hopefully I would get a signal to get long near the minus 2.5 but it doesn't always come. These areas need to be looked at as "alert" zones like you would use the value areas or the floor trader pivots. Sometimes you will see a volume "flush" where, in this case we get a nice strong volume push down and then the selling stops. So we would get long above the high of a one minute volume flush down bar.
Like everything else it's best to put it in context. For example, did we trade back to the previous days close ( a gap play), did we sucker in the folks who trade breakdowns of the overnight lows ( for a long trade), did we bump up against a known reference point ( Va High, Low, Previous days high or low, Pivot number etc..)
I have one person who I have been in contact with and this is how they do it. In this case they would buy into the minus 2.5, the minus 4 and the minus 5.5 if needed. At minus 6.25 points they would take the loss if it kept dropping. If it goes back up then they profit. Somedays they only need to buy the minus 2.5 and no additional add-ons. This idea should be tested over time and I don't suggest everyone just run out and trade the numbers this way
I hope that helps. Some days you just don't get a good signal. I personally like when they run out known reference points and then reverse the market.
Bruce
quote:
Originally posted by jficquette
Hi,
This is great stuff! Question, say it falls to -3.5 off open. It would then have to rally to open for the buy and then the profit point would be the 1.5. This means to hit the profit it would have to go 5 pts off the low.
How would you deal with that?
John
quote:
Originally posted by trader416
Bruce, very interesting thread. In your first post, you said "he would call in for the official opening range…( it is not the one minute high or low as some think)". Do you know what the "official opening range" is based on ?
according to steve64 at elitetrader, it is just where floor think it will be open at.
I think that the official opening range is obsolete now. In the past when there was only the pit then the brokers would receive a bunch of orders to be executed at the open and based on the bias in those orders an official open could be calculated.
Now, considering that the value traded in the E-mini version of the contract dwarfs that of the pit the pit's official opening price no longer has any significance.
This is of course my opinion.
Now, considering that the value traded in the E-mini version of the contract dwarfs that of the pit the pit's official opening price no longer has any significance.
This is of course my opinion.
I would class the open for emin futures at 9,30EST ... when the cash markets opens...That is if you want to base a method on the open I would have to pick 9.30 anyone with me on that?
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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