swansjr

That is an interesting observation. I'll have to run the test from July 31, to today and see how that holds up. I'm all for knowing when NOT to trade so, is ignoring long signals the way to go? Or do we adjust the RSI for longs? These are ideas to keep in mind. Thanks.

Day 45 September 14, 2009 One trade. One Loser. Not my day today. I was watching the market in the early morning and found it choppy so I stayed out. Around 730 (central) I thought I saw a short opportunity so I entered. I was stopped out within a few minutes and that was a clue that the market wanted to go higher. The market did eventually trend upward, but I was unable to trade by that time. P&L: ($100)

Point well taken. I was tempted to order the e-book several months back to see what it had to offer but from what you posted either I'm really stupid or the ebook is poorly written. Maybe it's both. In short, I'm glad I did not order it. Here is a video of a recorded trade from November of 2008 and it sure looks like the same method. So, I don't think he has changed his method at all, or at least not much. [ame=http://www.youtube.com/watch?v=b1WpFJQSbQw]Emini S&P Day Trading To Win 11/07/2008 - Profits Again WOW[/ame] Thanks for sharing.

I just finished reading your PDF you posted. I have to say, this looks nothing like the DayTradeToWin videos posted on the web site or at youtube. 1) The PDF says use 250-tick charts yet, the videos use 5-minute charts. 2) The PDF uses 2-3 tick targets while the videos use 2 or 4 POINT targets. 3) The PDF is a trend fading strategy, while the videos are a trend following strategy. 4) The PDF states that you can trade many times per day. Yet, the video only trade once or twice per day max. 5) The PDF uses horizontal lines every 2 pts as reference points while it sure seems to me the videos use a breakout of the pre-market range. 6) The course is $597, not $400. My question is, where did you get his PDF? Are you sure its "At The Open" from Day Trade To Win. It looks like a completely different method. Just wondering....

Trading Summary No trading on Friday. The price action was just not looking very tradable so I did some other stuff. Below are my horrible trading statistics. I now have 69 trades recorded since starting this thread. You will notice, I'm just holding above my break even point. This tells me a couple of things. First, I'm not making a lot of stupid mistakes that are going to blow out my account. That is, my risk management is working, I'm not over trading and I'm largely sticking to my plan. However, I'm not taking every signal and I'm still not comfortable with taking larger swings or runners. To make money scalping I have to take my signals and get my %wins well above 60%. However, if I can sprinkle a few runners within my trades that will help a lot - bring that average dollar/trade up! ah, in time! I still need to document my trading setups that I have informally bouncing around my head. I've found the 445-tick chart a big help when I use Al Brook's principals to help pin-point where to take my trades. I've defined several scalp locations and reversal locations. Trendlines on the 445-tick also seem to be a great method to determine when to exit swing trades. In other words, hold a trade until the trendline is broke. Makes sense, right? Anyway, I'm happy because I'm surviving this game and determined to get this equity curve moving up, up and away! Come to think of it, this was a week of winning days. Ok there was only three days I traded but they were all positive.

Day 44 September 10, 2009 One trade. One winner. I did not have a lot of time to trade this morning but a setup occurred right away. Price was in a downtrend and I waited for price to retrace to the trendline on the 445-tick chart. Most breakouts or trendline tests fail thus, I was planning to go short. On my 89-tick I took the first Watts setup once price reached the trendline. It was a textbook trade. Attached is the video. P&L: $100 Live_Trade_2009-09-10.swf

Session #11 is the morning session and the afternoon session. In other words, skip lunch. I probably also failed to mention that I tested the RSI key concept on a 5-minute chart.

Day 43 September 9, 2009 Three trades. One winner. One loser. One break even. Today was basically another break-even day. Price was contained within a channel and I was looking to take trades on my higher timeframe. As price was coming off the top of the channel I shorted, twice. Both did not work out. Later price would break through the channel and I went long. Attached is a video of my first two trades (shorts) where the first trade is stopped out after missing my profit target by a tick. I then entered my second trade and did not like how the action was taking so long to move in my favor, so I closed it early for a tiny profit. Yeah, that's not in my rules but in this case it helped me out as price did move against me. My last trade (long) hit its profit target but I did not record it simply because the setup cam so quick I did not have time. This was due to me being away from my computer as I was taking my daughter to school today. In retrospect the price break above the channel was a great place to use my runner methodology. That is, let it run and don't scalp! Anyway, I'm feeling good because I was taking trades without much, if any, hesitation. P&L: $20 Live_Trading_2009-09-09.swf

Step One - Testing Your Key Concept One of the very first steps I perform when developing an automated intraday trading system is to test which market session will likely produce the best results. We are all aware that different sessions exist for any market. For example, when dealing with the emini S&P we have a pre-market session, the morning session, lunch time session and an afternoon session. Often you can see distinct characteristics within each session. So, when I have a new idea I don't want to develop it to blindly trade during every session. I want to be more targeted in my approach. When designing an automated system there is basically two methods to trade. Trend Following or Trend Fading. It makes sense that a trend following system would work best when the markets tend to trend, right? Likewise, a trend fading strategy would work best when a market is trendless or choppy. For this example let's create a simple a trend fading strategy for the S&P (ES) market on a 5-minute chart. We'll use a extreme readings on the RSI indicator as our signal. That is, short at the oversold region (70) and go long at the lower region (30). If you code this basic concept up and test it from 8:30am to 3:00pm on the ES market what do you think you'll get? That's right, a losing concept. So, what market session is best for this RSI trend fading system? Or are all market sessions hopeless for this simple trading concept? Lets find out. After I've come up with a simple concept for a trading idea (in this case our RSI fading idea) I will test it upon the various sessions to see which session (if any) holds the most potential. This is where my "Session Testing" code comes into play. Session Testing is an EasyLanguge Strategy that I wrote to help me in this task of testing various intraday sessions (See attached: SESSION_TEST.ELD). Using TradeStation's optimizer I can test my idea across 10 sessions that I defined. Here are the sessions: 1. "Pre-Market" Between 530 and 830 2. "Morning" Between 830 and 1030 3. "Lunch" Between 1030 and 1230 4. "Afternoon" Between 1230 and 1500 5. "Post-Market" Between 1500 and 1800 6. "Night" Between 1800 and 530 7. "Morning & Lunch" Between 830 and 1230 8. "Lunch & Afternoon" Between 1030 and 1500 9. "Daily" Between 830 and 1500 10. "Night & Pre-Market" Between 1800 and 830 The 10 different sessions I came up may not please everyone. Perhaps you have a different idea on how to break the different session up and with the code provided you can simply change them to your liking. Within in the code you'll find a location to put your key trading idea. This is where I placed the RSI rules. I picked a value of nine for the RSI computation because I wanted it to be more sensitive than the default 14 that is often used (The value of nine really has no significance. It was not optimized and I could have very well picked seven or ten. I just simply picked it). Also notice I have no stops or targets within my test code. Instead the strategy simply alternates between long and short trades based on the RSI reading. The only other exit is to liquidate all positions at the close of the session. That's it. Remember, I'm not testing a trading strategy. I'm testing a key concept vs. different market sessions. Our goal is to locate the best possible market session(s) for my key concept. Only then will I continue to develop a complete strategy (containing stops, targets and other rules) tailored to the top session(s). Next lets see what happens when I run TradeStation's optimizer over each of the sessions. In doing so TradeStation will execute my key trading strategy systematically over each market session and record the trading results. After all the sessions have been analyzed I will have a graph representing the P&L for each session. Below is the Net Profit graph which depicts the total net profit from our testing. By the way we were testing this strategy from January 1, 2009 to July 31, 2009. Net Profit For Each Session Notice that sessions one ("Pre-Market") and ten ("Night & Pre-Market") are clearly the best performers. Session ten is the best with $11,000 in profit, right? Wrong. Most people would pick session because it has the best net profit. But another statistic is even more important in my opinion: Net profit per trade. Net Profit Per Trade For Each Session In session one you have a net $56 per trade while session ten has a net profit just above $20 per trade. Session one produces more net profit per trade. It produces few trades. A net profit of $56 per trade is more likely to cover the cost of slippage and commissions. In short, session one more efficiently produces money. Oh speaking of slippage, the RSI code I'm testing reverses between long and short with limit orders. Only the exit at the close of the session is a market order. This will help reduce slippage. Equity Curve For Session 1 There is no optimization here. The code simply trades based off un-optimized RSI signals and the results look promising. Here is the Trade Summary Report There you have it. This type of RSI trend fading concept should be developed for the Pre-Market sessions. This makes sense. The big volume and big trends often appear during the "normal" trading hours. But in the quiet of the pre-market hours trends don't often take hold. In fact, fading those moves seems to produce a profitable edge. What's next? First I would expand the backtesting for about another six months. In other words, back test for a year. Then I would see what it looked like through the month of August 2009. Did you notice how I left August out of our original test? This was done so I could do a quick "walk-forward" test to see if the equity curve held up for the given session. After I'm satisfied my key concept held up for a year in session one I would start to develop this into a tradable system by using the basic session test we just created as a baseline. I would test the impact of a a hard stop. Then test various entry methods. Finally, I would test various exit methods. Summary: 1. This simple trend fading concept appears to have potential if executed on the correct market session. 2. This is not a trading system but a proof-of-concept. Further research and development is needed for a final system. 3. When choosing a session, look for best net profit per trade - not simply total net profit. Many people will try to develop an intraday system without taking into account the different market sessions. However, if you test your key trading idea across all market sessions and narrow it down to the most productive sessions, I think this will help jump start your development of a profitable system. If you like this article please let me know and I will post follow-ups on how I develop trading systems. In fact, we can continue with this one and see what we can develop. Oh, I've recently started a blog where I will also be writing about my system development and other market related items. Enjoy. P.S. Since I wrote this I added another session to the EL code. So, now it goes to 11.

Here is a start. Input: Day_Loss(500), // Maximum risk ($) per day Profit_Target(600); Variables: intrabarpersist Trade_Flag(false), // Enable/Disable trading flag PLB4Today(0), // P&L total before today ProfToday(0), // P&L total for today (NP + OPP - PLB4Today) OPP(0), // Open Position Profit NP(0); // Net Profit + Open Position Profit If ( date <> date[1] ) Then Begin PLB4Today = NetProfit; Trade_Flag = true; End; // Track Today's P&L NP = NetProfit - PLB4Today; OPP = OpenPositionProfit; ProfToday = NP + OPP ; If ( ProfToday <= -(Day_Loss) ) OR ( ProfToday >= Profit_Target ) Then Begin Trade_Flag = false; SetDollarTrailing(0); End; If ( Trade_Flag ) Then Begin // TRADE LOGIC HERE End;

You might be right. My best performing automated strategy uses both a fixed profit target and a fixed stop loss. Both parameters have not been modified in over 18 months. I've yet to find a dynamic target or stop that produces better performance on a net per trade basis. In short, it's important to test all options.

Sorry, can't help you with this. I only know EasyLanguage.

You are most welcome. I'm really pleased to hear you are gaining something from this thread. The basic setup is rather simple. But I found, at least during the summer months, that it was not always a great way to enter a trade. With the choppy summer action I found by combining my higher timeframe with my lowest timeframe I could pin point high probability entries. This may be unnecessary if EC starts to move this fall. I should be more diligent in recording my live trades and I should make videos describing my setups exactly how they exist today. Creating videos has helped me explain, refine and solidify my own trading rules. Thus, they seem to be a win-win between me and those reading this thread.

Day 42 September 8, 2009 Three trades. One winner. One loser. One break even. Today I was taking long positions off my 445 time frame and was able to scape by with a small gain. It seems I was trading long near the top of a great bull trend that was taking place all morning. I know I've been sloppy with recording my trades and will work on that this week. P&L: $44

Day 41 September 3, 2009 Three trades. Two winners. One Loser. Today I decided to jump back in as it appeared opportunity was before me. Now, it's been weeks since I traded and to be honest, by confidence has been bruised. Anyone, who has followed this thread, knows I've had difficult time pulling the trigger. I've spent the last few weeks casually reviewing my setups and watching the market. My first trade I actually tightened my target to only 5 ticks. I did this purely for psychological reasons. I felt it was important for me to have a "win" more than anything. I then proceeded to take another trade with my full target. It was hit within seconds. My final trade was stopped out, by two ticks. Then the market rolled over. Seen that before. Not a problem. I can happily state my three trades were all in the correct direction (short) and all were good trades. Overall I'm very happy. I was able to determine the trend and find my points of entry. I scalped all trades and was not focusing on runners. I still can do it. I feel really good about today. P&L: $62

I do have a lot of ideas. I wish I had more time to experiment and build systems. But let me say this… In my limited experience attempting to create a trading system with moving averages is very difficult. You can make strategies from basic indicators, but it's hard to do and can result in curve fitting. Try using common indicators in a different way - ways in which most people don't use them. For example, RSI is often used to highlight overbought and oversold conditions. Try using it as a trend indicator. This is just an example. Price patterns are another way to go. Price breaking out from trading ranges or price behavior around opening day gaps are examples of trading without indicators. In short, to make money in automated systems you are either 1) trend following or 2) trend fading. Decide what you want to do and focus on markets and market sessions that are favorable to those conditions. Your trading system does not need to trade all day or even every day. My best system trades about once a month as it fades extreme moves on a 5-minute chart. So be picky. I think it's interesting to note that you stated " This didn't make sense because having a faster average slower than the slow (inverting them) would effectively inverse all the signals. So I got suspicious. " Sounds like fading your original signal is a better idea. In other words, using your moving averages in a method that is "unusual" may produce better results than your original concept.

I use step 1. Don't optimize together. I always test different "indicators" or rules in isolation then I bring them together one at time. If one rule does not contribute to making the system better I don't re-optimize it - I dump it. Good systems, in my humble opinion, only need a 2-3 basic rules. Your key trading concept shouldd work well without much, if any optimization.

In my previous post I was talking about using Al Brooks setups with my Watts trading. Attached are two flash videos where I talk about two price action setups that are seen on my 445 tick chart. Watts_Brooks_Setups_1.swf Watts_Brooks_Setups_2.swf

I've been getting sloppy with my trading discipline. It all started with the fading volatility over the summer. The EC market was just not trending much in the early morning. Then the kids are home which means, early morning soccer practice which distracts me from my screen time. I then got lazy about posting here at TL. Then lazy about practicing my trading on historical data. Next was laziness about video recording my trades…and so on… Well, time to get back on the horse. I need to bring back my focus and discipline. I've not been trading over the past few weeks since I don't feel confident. I'll first need to practice on historical data and reviewing my setups. During this hiatus from day trading I've also been reading "Reading Price Charts Bar by Bar" by Al Brooks. It's a difficult read but full of great information. It's defiantly not a book for beginners however, if you are interested in day trading I would recommend it. I've not completed the book and Al recommends to only study small chucks of his work at a time. Take it slow, in other words. What's interesting are some of the price patterns he points out on the ES market (which is his primary market to trade) can also be seen on my EC charts. This is of no surprise but it is my hope that a merger of these two trading styles may be of help to me. At times the Watts system gives me too much info. There are many indicators on the screen and I find I'm looking at two or three time frames. This causes second guessing of signals. Brook's strictly uses one time frame and identifies excellent patterns based largely on trend lines. Again, my hope is I can simplify my trading by using a handful of Brook's concepts in addition to a single EC chart with the Watts signals. Brooks price action explains a lot more of what I'm seeing and as potential Brook's patterns play out, Watts create wonderful entry signals. In a very crude summary this is how I picture it: Watts nails down great entries while Brooks paints a bigger picture, locates key trading points and explains the "why". At least, that's how it looks now in hindsight. To some it may sound like I'm still looking for the holy grail. I'm not. I'm simply finding out what works for me. Anyway, I'm still alive and working hard to become a successful discretionary trader.

Well thanks much. Happy to hear you are enjoying the thread.

It's an Adobe's Flash file. If you have this application installed on your browser you can simply download the file to you computer, open a new browser window and select file->open. At least that's how I can get it to play. It works well with firefox.

I'm no expert but I did incorporate as an LLC this year. I now perform all my trading activities under this LLC. I did some research and an LLC seems good for my needs. If you are serious about trading I would think forming some type of legal entity to trade under would be beneficial. My main reason was to treat my trading as a business. Under an LLC all trading related expenses can be written off (computer, trade shows, books, classes, and ebooks) immediately against your profits - which is not true for trading as an individual. For most people an LLC seemed like the choice to go. If I remember correctly I picked an LLC for the simplicity of the paper work, simplicity in tax reporting and I will be making withdrawals from the company for my salary. On the other hand, if I recall correctly, a major reason to choose a corporation (instead of an LLC) was to build wealth - that is if you were not going to be taking money out of your trading profits as regular salary but instead building a nest egg, then a corporation had some benefit over an LLC. Again, you'll want to do more research. However, you'll probably find an LLC is the way to go. ou may also find these links interesting: Green Trader Tax Traders Accounting

Would love to see your results and/or your code. I have experience in developing systems, but I've not had much luck with developing scalping systems.

I'll often code Boolean variables to act as flags. For example, if I want a day trading system to trade within a given time range I'll do something like this. TradingTime = ( Time >= Start_Time ) And ( Time <= End_Time ); If ( TradingTime ) Then Begin // Trade logic End Else Begin // Close all open positions End;