Dogpile

I am using the minimum -- 6 bars -- since it only needs to reference the highest high and lowest low of last 5 bars. yah, I added the volume code just to only create signals on an active contract. another way to cross-check it is do it is to confirm it using the ETFs since they don't rollover (SPY, QQQQ, IWM) and the futures are based on these ETF's as the underlying. Range expansion off opening price seems to be very valid idea for the long side. The short-side is tougher -- it is profitable and adds to returns but you can take a ton of heat along the way -- this could be because in a multi-year bull market -- or have something to do with just market dynamics where market falls fast and rises in relentless fashion (take a lot of pain but rewarded occassionally in a big way on short side). Breaking down the strategy results you can see the effect the short-side drawdowns have on the overall result. It is still profitable but painful at times.

today we had a gap up which potentially began a new up auction coming out of yesterdays 'balance' (VWAP=PVP=closing price yesterday). market formed a ABC-down pattern but was building higher value (VWAP>VWAP[1]). This is a bullish continuation pattern. price climbed above 1498.00 -- a key prior pivot. price had been above this level a few times before only to form selling tails. thus while price had been above 1498.00, value (VWAP) had yet to breach 1498.00, until today. the difference this time was that VWAP pulled above 1498.00 as mid-day approached. this signals price being 'accepted' above a known point of excess -- above 1498.00 had been an 'excess high' as the market had gapped down from this level last Thursday. The FOMC cut fed funds 50 bps which surprised the market and sent the futures into a vertical move up. Very strong volume and an elongated profile are characteristics of continuation -- and we got this. The day after a trend day often finds a good flush in the opposite direction of the trend move but this retracement should find support at some point as there is very likely residual upside momentum that should last into tomorrow if there is a good flush down. Typical day-after-trend-day action would be for the market to also 'balance' mid-day and should eventually break-out from this balance -- with the likely direction being up. One caveat to the environment now is similar to what happened in Feb-March of this year. The market had drifted up on weak volume until today. Now the volume comes in after price had already been marked up 40-50+pts. Thus, many longs have entered at relatively bad prices. While there should be residual momentum for tomorrow, we might need to shake these 'late-to-the-party' longs out of their positions at some point -- perhaps Thursday -- this is expiration week after all and these weeks tend to be volatile... Such a downside flush might then set-up a good buying opportunity for Friday or Monday. But this is all looking a few days out. For now, the auction is up. Notably, XLF broke to a 20-day high today. We will need a down move at some point but this 20-day high is significant longer-term, IMO.

End of a wild day update. We are buried in ES but this is offset by NQ net gain, and RUS is absolutely nuts. How our account stands on paper at todays close: ES -568.75 NQ +670 (net gain including 1 unprofitable short and the todays paper gain) ER2 +2,080 (entered 788.30 today and it closed 813.80 - paper gain of +$2,550, less the -$470 loss on initial short) Net Standing as head into tomorrow: +2,181.25 -------------- Outstanding positions: Short 1 ESZ07 Long 2 NQZ07 Long 1 ER2Z07 -------------- (note, since NQ is only $20 per point, assume using 2 NQ contracts vs 1 each for ES and ER2)...

New NQ Order Triggered Long NQ 2027.00 ----------- Existing Positions: Short ES Long NQ Long ER2

New Order Triggered Long 1 RUS 788.30 ----- Existing Positions: Short 1 ES Short 1 NQ Long 1 ER2 (will try to follow this for all 3 contracts) in looking at historicals --- the time this strategy gets nailed is when it is short into a relentless multi-day climb like 6-8 straight up days. even including those, the performance has been quite good -- but you have to be able to stomach some occassionally serious drawdowns.

nickm, could you comment on this: I show the Russell contract in 2002 trading under 1400 contracts per day. (ie er2h06)... and under 10,000 contracts per day in 2003 (ie er2h03).... 2002 had good 'range' as the market was in freefall but 2003 & 2004 show about 1/2 the range (ATR) of that achieved by the completed Sep 2007 contract (15 pts vs 6-8 pts)... tick values are the same so todays contract is quite juicy compared to just 5 years ago. pretty amazing. in you opinion, is it valid to use strategy results from 2002 when the market dynamics (virtually non-existent volume and 'dollar value range') were so different? seems to me like growth of futures contracts traded changes the futures market quite fundamentally. you simply couldn't have many traders operating with only 1400 contracts traded per day to work with.

thx. so if I were to run my strategy for each individual contract and sum the results, you are saying that would equal the ES.D for the same period without much error? I was thinking of test-running this on a few contracts and seeing what the results were. Part of writing this thread is to work out the kinks in executing a mechanical strategy and these technical execution issues of how to handle rollovers are part of this.

<<"I realize now that Tradestation continuous contract information is faulty." ?>> If you run the same strategy on ES.D and ESZ07.D -- I get different entry prices. That is a problem. I think the solution is just to look at individual contracts and then link them geometrically. I had heard recently that Tradestations continuous contract was no good -- now I have my own discovery to go with that so I am placing zero trust in it. This only really pertains to strategies that use historical days for their inputs at contract crossover points (as far as I know).

Market gapped down and attempted a further downside move today but eventually ran out gas. We ended with yet another day of miserable volume. The profile shape/volume distribution was yet again fat and symmetrical -- indicating the down auction has no real conviction. PVP, VWAP and closing price all ended relatively close together, singalling a state of 'balance'. Note that we did build lower value for the second consecutive day. LEH earnings in pre-market tomorrow. Tomorrow is another 'go-with' given the symmetrical profile and lack of volume today. I prefer the short-side still but will likely join in on an initial break higher and monitor for signs of continuation (elongating profile and volume). ant, are you around? would love your take....

there is a problem with your code. the entry should be below the opening price. I get 13485 as an entry on YMZ07.d with an opening price of 13505 today. looks like this strategy was awesome on YM for the Sep contract... but looking back a year ago to the last 'Z' contract (Dec 2006)... YMZ06.d lost money in that slow, steady creeper-up market move we had.... here was the life of contract results for last time we had a 'z' contract: ER2Z06.d made +6,360 NQZ06.d made +7,840 (I use 2 NQ contracts vs 1 for others since NQ is so cheap) YMZ06.d lost -655 ESZ06.d made +1,250

ok, last post as I am getting obsessed with this... added this to the code a 'condition' so that it will only calculate trades when there is at least 100k contracts of volume. this has nothing to do with the strategy and is not any kind of change to the underlying concept -- that is the exact same -- this condition only has to do with looking at past data to view results. This filter will ensure that the strategy results are only using 'current contract' data and not just back-filling orders that you wouldn't have taken. so here is the new full code: vars: mp(0),hc(0),lc(0),xx(0),aa(0); hc=highest(h,5)-c; lc=c-lowest(l,5); if hc>lc then xx=hc; if hc<lc then xx=lc; condition1=volume>100000; mp=marketposition; if condition1 and mp<1 and hc>lc then buy next bar at o of tomorrow+(0.66*lc) stop; if condition1 and mp=1 and barssinceentry>0 then sell ("Stop Loss") next bar at entryprice-(1.32*xx) stop; if condition1 and mp>-1 and lc>hc then sell short next bar at o of tomorrow-(0.66*hc) stop; if condition1 and mp=-1 and barssinceentry > 0 then buy to cover ("StopLoss") next bar at entryprice+(1.32*xx) stop; ------------- note the excellent results of the completed September contract for Russell. a single contract generated a $12,420 profit over 19 trades. this equates to a 62% return on account over a 3-month period (not an annualized number) trading just a single contract on a $20k account. this strategy was on fire on the russell contract.... despite taking a -$4k loss on a long trade initiated on 7/25... sick

btw, the other thing I remember now that you mention it is that Art kind of has an inherent hedge by trading ES, NQ & ER2. 1 contract might trigger a really bad entry and another a good entry -- and so he has some diversification. On those really nasty whipsaw days where price surges in one direction off the opening price --- only to reverse and go in a trend move the other direction --- you hopefully don't get filled across the board (though that can certainly happen). here were todays RUS & NQ entries today which are both in the green as we head into tomorrow.

I am not an expert in the nuances of Tradestation back-testing... apparently it is not as easy as sticking in ES.D and observing the results. But that said, Art Collins is an expert back-tester and he back-tests this strategy in his book. It is very nicely profitable in S&P's, Russell and Nasdaq -- he didn't test YM. (note that art uses 9-days in his back-testing). This is partly why I posted the Tradestation code, to be transparent and let others back-test it as well if they want -- and maybe we all learn something while doing this. Right now, I am just pulling the 'life of contract' for each contract of 2007 and 2006 and checking them out. The strategy has its flaws and nuances but it still beats the market. It is good example, in my opinion, of the power of 'range expansion off opening price'... historical contracts: esu07 esm07 esh07 esz06 esm06 esh06 esz05 etc... so far looks consistent with the book results since art wrote it. and yes, the trade is underwater. might get squeezed hard tomorrow off the FOMC stuff... will be interesting to watch the pain of a mechanical system as it will be impossible to trigger a long tomorrow (per the strategy rules) and bail this trade out.

First Strategy order executed today: Short 1487.75 Calculation for a Short is (as described in original post code): Opening price - 0.66*(5Day High - Yesterdays Closing Price) 1492 - 0.66*(1504.25 - 1498.00) = 1492.00 - 4.13 = 1487.88 Trigger was 1487.75... Holding a short from this level until either a buy-stop triggers or the coded stop-loss hits.

Thought it might be fun to track a mechanical strategy that looks highly interesting and do it as a journal here. I am not a mechanical trader -- but I definitely think there are some interesting aspects to mechnical trading. This strategy is one from Art Collins book: "Beating the Financials Futures Market" The strategy that I really want to investigate is from Chapter 41 and called 'The Continuous 66 Percent Momentum System' (coded in the appendix as 41.3) The book uses a 9-day range for its triggers. I prefer a 5-day range. Here is the Tradestation code for it (to be run on a daily chart): -------- vars: mp(0),hc(0),lc(0),xx(0),aa(0); hc=highest(h,5)-c; lc=c-lowest(l,5); if hc>lc then xx=hc; if hc<lc then xx=lc; mp=marketposition; if mp<1 and hc>lc then buy next bar at o of tomorrow+(0.66*lc) stop; if mp=1 and barssinceentry>0 then sell next bar at entryprice-(1.32*xx) stop; if mp>-1 and lc>hc then sell short next bar at o of tomorrow-(0.66*hc) stop; if mp=-1 and barssinceentry > 0 then buy to cover next bar at entryprice+(1.32*xx) stop; --------------- essentially, the strategy is fading the daily trend while using some momentum off the opening price to potentially capture a new short-term daily trend. We just began the December futures contracts so I will try to do this for the life of that contract. I will explain the entries as they come. Attached are the results for the Sep 2007 completed S&P contract. The strategy triggered 29 trades during the life of the September contract (1 was left outstanding at the end and isn't included). It produced a record of 20-9 for 69% win/loss%. Long trades produced +$2,400 in profit per contract, Short trades were +$425 profitable. Tradestation calculates a 14.125% return on account (not annualized) using a $20,000 starting balance. No costs have been attributed for trading costs and no interest has accrued on cash balances. $20 per trade in costs would amount to a -$580 cost against this result. Note that Art Collins wrote this strategy in 2005 and it is still working today. I think there is something interesting about this style of using momentum off opening price as a trigger to capture short-term momentum while fading multi-day trends.

yes, please. will start a new one.

I realize now that Tradestation continuous contract information is faulty. I will re-start this thread as the calculations are off. this is already a useful journal as I would have had a faulty entry today if I had taken it. I have never traded mechanically before so this is all new to me. nevertheless, trade information for the last completed contract (ESU07 -- the Sep futures) shows results very much in line with what I posted in this thread -- therefore the concept embedded in the strategy appears to be valid. Art Collins wrote the book in 2005 and the Sep 2007 futures show very nice results. I will do a new journal with the December futures contract. --------- This thread has officially been ended.

btw, here is the equity curve for the '5-day ES strategy' I am following here...

the thing that is most interesting about this strategy is that of the 'concept' behind it. it is basically using a simple strategy of 'momentum off opening price' as its core principle. traders should try understand the power behind this concept. sometimes, this trigger will just be a 'bad price' as the momentum won't carry and you will be whipsawed big-time. I actually was in a chat room with Art Collins earlier this year and I saw him act in real-time for a few months (the chat room no longer is in existence due to lack of subscribers -- not failure of his system). I watched him absolutely crush the market sometimes --- and then I watched him get absolutlely nailed with horrible entries and big-time drawdowns. He would agree that 'systems trading is not pretty to watch' --- but good systems do work. The system I picked here seems to be best aligned with what he was doing -- using 'momentum off opening price'... you will catch all those trend days with this system -- and you will get nailed in those whipsaw days -- that is the volatility of this system.

waveslider, cool -- I hope you stick around to offer some ongoing commentary. <<The chart you put up has the system going sideways (commissions included?) for over a year. Most people would drop the system or over-ride it in that time.>> a good system is probably cyclical. it might be a 'go-with' after it draws down for a while -- especially following the significant run it had earlier <<I think the problem is where you said "I may even skip signals if Market Profile context or something else strongly favors it". >> This is why I stated that I am not a mechnical trader. Let me elaborate. I believe in discretionary trading whole-heartedly. I am a 'pattern-guy' --- but I do like statistics. Obviously, I could build 5 filters into Arts code and try to have various switches and end up with a super complex system which I wouldn't have to override much... But that wouldn't be consistent with what I believe in. If I see something like a downside 'breakaway gap' -- I am not going to go long the next day because the system advises such -- its only doing so because you are 'low in the 9-day range.' The idea here is to just think hard about what the system is saying and whether given the 'structure' of the market, it is a 'go-with' or not. In my opinion, the market is just too complex for someone like me to build some supersystem. That said, I do think their are exploitable statistical biases. So I am doing this experiment. I am keeping the system super simple and using right-brain thinking in conjunction with it. I freely admit this goes against what Art advises. I just don't agree with Art that being 100% mechanical is the best way to go. Art suffers very, very significant drawdowns -- but his returns are excellent. I wouldn't mind increasing my drawdowns a bit for incremental returns. This is why I am doing this... attached is todays 'system entry'.. I actually covered my own short for a 3.5 pt profit just above where this system went short --- so goes to show how I am using this so far...

esz07 I am not actually trading this yet... actually got short at a better level than this strategy... but the strategy gives me some addedconfidence given its excellent results....

Decided I am going to use the S&P's for this. Fits better with my focus on that contract in general... Also, I like the 5-day mechanical system... (this is a learning exercise -- reminder, I am not a mechanical trader -- I may even skip signals if Market Profile context or something else strongly favors it). The 'system' is currently long... will start on next short-signal. Today will have an entry (short) at 1485.50 on a sell-stop. This calculation is computed as (Opening Price - X) where X = 0.66*(5-day high - Yesterdays Closing Price) So, 1492.00 - .66*(1507.75 - 1498.) = 1492.00 - 6.44 = 1485.56 Short 1 ES Contract on Sell Stop (good until 4:15): 1485.50

link to Jim Daltons weekly comments: http://www.marketsinprofile.com/seminars/II-091607.html "What we are showing is that since the excess low, the market structure resembles the letter “Pâ€Â; if you combined all the daily profiles into a single long-term profile, this is the structure (shape) you would observe. The interpretation is that shorts were buying to cover (old business) versus new money longs entering the market (new business), which would likely cause the structure (long-term profile) to become elongated. We think that there were numerous shorts that expected the market to retest the excess lows and the failure to accomplish the test began to try the patience of the shorts, who then began to cover. " "For the week beginning 9-16-07. Earlier I asked you to remember the 1.4 billion volume number from Friday’s downward auction. None of the up days last week equaled the low volume seen on Friday. This does not leave the market with a strong underlying support structure as we await Tuesday’s interest rate announcement from the Federal Reserve. As we finished the week at the top of the trading range (there are two ranges, we are at the top of the lower range), this is the main reference to begin the week. Bonds have backed off a little in price in case there is a surprise in the announcement; however, stocks have continued to trade as if there is no risk. Market Logic would question stocks prudence." --------- Interpretation: Dalton seems to be favoring short-side here but not with conviction.

This topic has been posted over and over again in the Tradestation support forums and there just isn't anything good at doing it precisely like the market profile books depict. Personally, I use the 'Matrix' window in Tradestation for the volume distribution and combine it with a 30-min chart to get the overall visual impression. I never liked the letters much anyway -- it is not intuitive to me to look at letters --- I find myself always trying to rebuild the letters into what the intraday chart would look like. The 'profile shape' is the volume distribution anyway (in Matrix)... just can't chart it over many days -- that is the bummer. To me it isn't crucial, I think Market Profile is for 'context' much more than anything like a normal 'indicator'... just my opinion.

Thought it might be fun to track a mechanical strategy that looks highly interesting and do it as a journal here. I am not a mechanical trader -- but I definitely think there are some interesting aspects to mechnical trading. This strategy is one from Art Collins book: "Beating the Financials Futures Market" The strategy that I really want to investigate is from Chapter 41 and called 'The Continuous 66 Percent Momentum System' (coded in the appendix as 41.3) Not sure how long I will stick with this journal but thought I would start the thread anyway. For Tradestation users, here is the code (copied exactly from the book): ----------------- vars: mp(0),hc(0),lc(0),xx(0),aa(0); hc=highest(h,9)-c; lc=c-lowest(l,9); if hc>lc then xx=hc; if hc<lc then xx=lc; mp=marketposition; if mp<1 and hc>lc then buy next bar at o of tomorrow+(0.66*lc) stop; if mp=1 and barssinceentry>0 then sell next bar at entryprice-(1.32*xx) stop; if mp>-1 and lc>hc then sell short next bar at o of tomorrow-(0.66*hc) stop; if mp=-1 and barssinceentry > 0 then buy to cover next bar at entryprice+(1.32*xx) stop; ---------------- The reason I chose this one was because of its robust results and interesting methodology. In this system, you are exposed to the market 95%+ of the time (sometimes long, sometimes short) and the vast majority of the time you simply reverse your position at the same price when the rules trigger it. The concept is simply that of buying/shorting a reversal using the last 9-day range. If you are low in the 9-day range, you will have a buy-stop order to go long. If you are high in the 9-day range, you will have a sell-stop order to go short. The order-entry system needs to know the opening price in order to calculate the next entry. Here is an example, you are trading low in the 9-day range and therefore looking for a buy signal. This signal occurs when price moves away from the next days opening price to the upside. In the strategy, you first calulate yesterdays close minus the lowest low of the last 9 days. You buy if price trades above the opening price in an amount sufficient to trigger a 'reversal' -- which is calculated as 66% of the distance from yesterdays close to the 9-day low. Attached are some Tradestation screen shots of the Russell 2000 Futures using this strategy (using a single contract). The idea here is to ultimately see how I can use something like this in my own trading. Mechanical strategies have a tendency to do really well and then "drawdown" badly (ie, blow-up). This one has beaten the market without big drawdowns. Let's see how it does going forward.