Floor Trader Strategy for Futures Trading

[Vinayak 10]

Alright guys, so I made a poor call on AAPL and I'll clear that up later. I'm still long AAPL, by the way. Today, I want to talk to you about a great trading system that I utilized to bring me gains in futures trading. It is called the floor trader strategy and you can read more about it right here: http://www.trading-naked.com/FloorTraderMethod.htm

 

There are 3 things to remember with this method:

1. The first is to watch out for retracements; a minor rally in a downtrend and a minor decline in an uptrend. I have always loved retracements as they are so easy to identify and trade on.

2. Exponential Moving Average (EMA) is vital and it involves the 9 and 18 EMA lines.

3. Identify entry level or trigger.

 

 

 

[BlueHorseshoe 10]

There are many variations of this type of approach (see Optiontimer's thread, for example) and very good reasons to believe that trading pullbacks in trends can be a great tack.

 

If you want to trade in this way you have two distinct tasks to undertake (which is really far less than many other strategies demand), both of which are more difficult than they sound - here they are:

 

1. You need a method to identify whether the market is trending and, if so, whether the trend is up or down.

 

2. You need an objective method to identify a pullback, and you need to know how deep a pullback needs to be to provide you with an optimal entry.

 

In my opinion one of the keys (and it's market specific) is knowing whether to 'buy into' a pullback using a limit order, or to await a 'confirmation' thrust back in the direction of the underlying trend as is shown in the examples above (where a buy order is presumably placed at the prior bar high).

 

I hope this post is of help to someone.

 

BlueHorseshoe

[Colonel B 10]

This thread should be renamed "The RETAIL Trader Strategy for Futures Trading." Because that is what it is.

[DbPhoenix 42]

Alright guys, so I made a poor call on AAPL and I'll clear that up later. I'm still long AAPL, by the way. Today, I want to talk to you about a great trading system that I utilized to bring me gains in futures trading. It is called the floor trader strategy and you can read more about it right here: The Floor Trader Method

 

There are 3 things to remember with this method:

1. The first is to watch out for retracements; a minor rally in a downtrend and a minor decline in an uptrend. I have always loved retracements as they are so easy to identify and trade on.

2. Exponential Moving Average (EMA) is vital and it involves the 9 and 18 EMA lines.

3. Identify entry level or trigger.

 

While I have no doubt you've done well with it, the approach is over a century old. It's been detailed in the Wycoff Forum for years, though without the MAs.

 

But details aside, this is not a "floor-trader strategy". It may have been back in the 90s when the charts on Jim's site were drawn, but it's difficult to believe that a floor trader would be fooling around with candles, much less MAs, much less charts.

 

Granted that "buying/shorting retracements in an uptrend/downtrend" is clunkier than "floor-trader strategy", but at least it's accurate.

[BlueHorseshoe 10]

While I have no doubt you've done well with it, the approach is over a century old. It's been detailed in the Wycoff Forum for years, though without the MAs.

 

But details aside, this is not a "floor-trader strategy". It may have been back in the 90s when the charts on Jim's site were drawn, but it's difficult to believe that a floor trader would be fooling around with candles, much less MAs, much less charts.

 

Granted that "buying/shorting retracements in an uptrend/downtrend" is clunkier than "floor-trader strategy", but at least it's accurate.

 

Hi Db,

 

Ignoring the misnomer and the details of how it may be implemented (MAs and all that jazz), what is your take on the underlying concept here - ie "buying/shorting retracements in an uptrend/downtrend"?

 

Is it viable as an intra-day approach? Viable but sub-optimal?

 

Also, please could you give a link to where it is detailed in the Wycoff forum?

 

Thanks for your thoughts,

 

BlueHorseshoe

[DbPhoenix 42]

There are three basic strategies: breakouts, retracements, and reversals, all of which are viable intraday.

 

As to charts and discussions, there are hundreds in the WF. Just search the forum or individual threads using "retracement" or "retracement*".

 

You may want to start with the stickie on Auction Market Theory.

[Vinayak 10]

There are many variations of this type of approach (see Optiontimer's thread, for example) and very good reasons to believe that trading pullbacks in trends can be a great tack.

 

If you want to trade in this way you have two distinct tasks to undertake (which is really far less than many other strategies demand), both of which are more difficult than they sound - here they are:

 

1. You need a method to identify whether the market is trending and, if so, whether the trend is up or down.

 

2. You need an objective method to identify a pullback, and you need to know how deep a pullback needs to be to provide you with an optimal entry.

 

In my opinion one of the keys (and it's market specific) is knowing whether to 'buy into' a pullback using a limit order, or to await a 'confirmation' thrust back in the direction of the underlying trend as is shown in the examples above (where a buy order is presumably placed at the prior bar high).

 

I hope this post is of help to someone.

 

BlueHorseshoe

 

Definitely a big help for me anytime a master trader such as yourself finds any of the strategies I outline here useful. Really liked the way you simplified things here.

 

This thread should be renamed "The RETAIL Trader Strategy for Futures Trading." Because that is what it is.

 

After further research on this, I guess your right!

 

While I have no doubt you've done well with it, the approach is over a century old. It's been detailed in the Wycoff Forum for years, though without the MAs.

 

But details aside, this is not a "floor-trader strategy". It may have been back in the 90s when the charts on Jim's site were drawn, but it's difficult to believe that a floor trader would be fooling around with candles, much less MAs, much less charts.

 

Granted that "buying/shorting retracements in an uptrend/downtrend" is clunkier than "floor-trader strategy", but at least it's accurate.

 

Interesting. I had no idea how sophisticated floor traders have become as of late. I'll see if I should use the clunkier version so that I can get more trader's opinions on the strategy's name.

 

Hi Db,

 

Ignoring the misnomer and the details of how it may be implemented (MAs and all that jazz), what is your take on the underlying concept here - ie "buying/shorting retracements in an uptrend/downtrend"?

 

Is it viable as an intra-day approach? Viable but sub-optimal?

 

Also, please could you give a link to where it is detailed in the Wycoff forum?

 

Thanks for your thoughts,

 

BlueHorseshoe

 

I am backtesting it right now and I will do some demo trading and then live trading with small amounts of money using this misnomer strategy :haha: and I will surely let you know the results and percentages.

[BlueHorseshoe 10]

Definitely a big help for me anytime a master trader such as yourself finds any of the strategies I outline here useful. Really liked the way you simplified things here.

 

Hi Vinayak,

 

I'm glad the post was helpful, but I would advise you not to pay too much attention to the "Master Trader" tag - it's very definitely another misnomer! The tags seem to be based purely on post count, and much of what I post is nonsense . . .

 

Will look forward to seeing the results of your tests.

 

Regards,

 

BlueHorseshoe

[Niko 10]

This is a 11/29 EMA setup with a three crows pattern or three white knight pattern (depending on direction) for retracement identification. Is traded on a 15 min chart.

 

Although it was a good strategy for most of 2010-2011, it did not work very well last year.

 

Backtesting Results

 

Off course, one could argue that I am using the wrong EMA combo, just in case, after an optimization with 2000 different scenarios the best I got was 11/39, and the account balance looked like this in back testing:

 

 

Not so promising...

 

I gave up on magic MA holy grails and started studying Price Action.

 

My two cents

Edited February 9, 2013 by Niko

[Vinayak 10]

There are three basic strategies: breakouts, retracements, and reversals, all of which are viable intraday.

 

As to charts and discussions, there are hundreds in the WF. Just search the forum or individual threads using "retracement" or "retracement*".

 

You may want to start with the stickie on Auction Market Theory.

 

Hey DbPhoenix,

 

I really enjoyed reading "The Trading Journal" thread on the WF. It was a nice way to realize how important individual trader mentality and comfort zone is to each trader in their success timing the markets.

Thanks for putting it up and I am going to use it as sort of a guide that I'm going to keep coming back to from time to time. It was an hour well spent indeed.

[Niko 10]

For some reason the two charts on my post look the same, the first backtesting results are here: