My Trading Plan

Here's a 'detailed' explanation of my trading plan. Please tell me what you guys think of it.

Foreword: The whole thing is based off of the theory that if something is profitable beyond a reasonable area of slippage and errors (such as computer problems) then it will likely be profitable for at least the near future. It's also based off the theory that the market will likely move at least 2 points in either direction from the open in any day before making any huge moves. (The exception to this is a trend day.)

Background: I back-tested this system starting January 1st 2010 and found that it is profitable by 72 points as of this writing.

How it works:

I look at the open price compared to the close of the previous day and decide whether to trade towards the close or away from it. I make this decision minutes before market opens at 9:30 and take a position at as close to open price as possible (usually slippage means one or two tick difference). I then set a 2 point target and 10 point stop and I don't do ANYTHING until either one is hit, at which point my day is done.

Please leave ANY questions of feedback. I've live traded this for almost all of May now and it has been profitable. I am looking for validation, especially from the people with years of experience because I don't know if I'm on the right track or not.

Christ. So i spent HOURS trying to find a reliable way of predicting which way the first 30 min bar will move and I came up with nothing. Sigh. I do enjoy this problem solving stuff though...for now.

I also backtested with a 1 hour stop instead of the 30 minute. It's much more profitable in volatile markets such as May but the 10 point stop is clearly the winner in previous months when volatility was very low.

Bruce, I looked at which days of the week my losses were at and also which part of the month. The first of the month MIGHT be more of a loser than others but since there's a lack of losses in general it's hard to say.

Tuesdays had a higher loss rate than other days of the week when using the 1 hour stop for the last two months. The results differ when using a 10 point stop though. I don't do statistical analysis because I don't know how but I wouldn't bet too much money on these probabilities because of lack of data and shifting volatility.

Ok. Here's what I have now:

Stop = 1 hour
Target = 2 points

Directional bias: Away from the last immediate (BruceM's) level before market open.

E.g. If we opened at 1102 and the market touched 1106.25 right before open then we go short. If we opened at 1102 and the market touched 1100 prior to open then we go long.

Comments? Questions?

Originally posted by day trading

Originally posted by ak1

feng456 the gap is always filled but may take days sometime.

More often than not that is correct however there are some gaps that are never filled.

Well DT we can atleast say that it is correct till 666 level.All previous unfilled gaps are now filled

When Paul had you retest your strategy taking the opposite side of the trade you said the results were exactly the same.

This is stating that you are basically betting on the "flip of a coin" that you added a stop loss to that is saying "double or nothing".

If you were betting myself (or any other member on this forum) in an ACTUAL coin toss would you give us 5 to 1 odds or any other advantage? Of course not!

I'm not trying to be sarcastic. It sometimes helps to look at things in a different light.

You seem determined in getting this to work. If it were me I would consider that I might be Barking Up the Wrong Trade.

You continue to have no understanding of how my system works. I wouldn't have the same results if I didn't have this big stop. It's not a coin toss because the system was designed so that whichever direction I made the call to go, I would win because of volatility. It's like saying I bet there will be 2 heads in the next 5 coin tosses. It's possible that it won't happen but the chances are small.

Also may I suggest less sarcasm and more constructive suggestions, like all the other people have done so far? Why is it that you haven't made a single post in the forum for months and all of a sudden decide to be a troll on a thread I started?

Originally posted by myptofvu

When Paul had you retest your strategy taking the opposite side of the trade you said the results were exactly the same.

This is stating that you are basically betting on the "flip of a coin" that you added a stop loss to that is saying "double or nothing".

If you were betting myself (or any other member on this forum) in an ACTUAL coin toss would you give us 5 to 1 odds or any other advantage? Of course not!

I'm not trying to be sarcastic. It sometimes helps to look at things in a different light.

You seem determined in getting this to work. If it were me I would consider that I might be Barking Up the Wrong Trade.

Originally posted by feng456

Ok. Here's what I have now:

Stop = 1 hour
Target = 2 points

Directional bias: Away from the last immediate (BruceM's) level before market open.

E.g. If we opened at 1102 and the market touched 1106.25 right before open then we go short. If we opened at 1102 and the market touched 1100 prior to open then we go long.

Comments? Questions?

Looks promising Feng !

What if the market get's stuck between Bruce's numbers and neither of those two criteria are met before the open ?

For example, the market opens at 1104, then trades to 1100 three minutes after the open and comes back to 1104, is the entry at 1104 still valid, just three minutes late ?

If the market opens without any of Bruce's numbers being hit overnight OR if it opens exactly on one of Bruce's numbers then I use the old fade gap method to determine direction.

If the market open at 1204, and I went long, then it goes to 1200, my target remains the same. Basically once I'm in, I'm in till either target gets filled or the 1 hour stop is hit.

I was thinking about this a bit Feng and why focus on the market open to initiate the trade?....why not buy or sell attempted breaks of the 15 minute high or low, the first hour high or low, the previous days high or low or the Overnight High or low...these are amazing fade points in general so why not use one of these. If you use the first hour as the point to initiate then you will miss those nasty reports at 10 a.m.

Just an idea as in the room we are fading those all day.....perhaps initiate when you see an "air pocket" on the 5 minute and then take the trade...those fill in so often....u almost can't lose...LOL...just some ideas

I agree too.... Such a large SL can give you amazing results. For a 2 point gain the possibilities are endless. So why risk your neck at the open. For the 1st 30 min the market is like a storm. Can reach amazing level......

Bruce I scanned your old posts the other night and I never understood what you define as air. Care to elaborate or at least link me up?

the reason i trade the open is i like the speed at which things happen. also having such a defined point makes backtesting more accurate and precise. the final reason is i dont have the focus and energy to be able to sit all day like you guys and make calls. i have a tendency to overtrade and make bad calls when i do that. just my personality.

the specific criteria data ur looking..of course noone else here has done backtesting for it. something u need to spend time doing urself.

gaps are good though at fading. just gotta find something that works and be disciplined enough to follow it.