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Boomerang indicator system at

  #145 (permalink)

Dallas, TX
Trading Experience: Intermediate
Platform: NinjaTrader, IB
Favorite Futures: GC, CL, ZS
Posts: 13 since May 2013
Thanks: 5 given, 41 received

Boomerang Trader

I have the original Boomerang trader, have used it for several years, and was considering whether to upgrade to the new version. Have not been able to get any real information from Mohan about what the differences are, so am not sure it's worth throwing another $1000 at it to get some small additional functionality.

The problem I have with Mohans' "system" in particular is the very limited risk to reward that he aims for. First of all, trying to trade 6E during the day trading session is pretty much a waste of time. Almost all the major moves are now made overnight, and all you get are crumbs during the day. Trading for 8 ticks while risking at least 8 or more is also counter-intuitive. 8 ticks is random noise, most of the time. Same for ES trades of 3-4 points. When the ES is running 20-30 points on some days, scalping for that small amount is very risky, I think.

The key to making Boomerang work is watching it on different time frames. For beans, I look at 7Range, 13Range and 20Range. For Gold, it's 7R, 13R and 30R. If you're in a big trending move, down for example, in gold, you need to be watching the 30R to see when the move really stops. On a 13R or 20R chart, you'll get a Boomerang buy signal as the downtrend nears its end, get a small rally, get a new divergent low, and that's what you need to be buying. So, in many cases, particularly in a strong trending market, a Boomerang signal is a signal not to buy or sell at the signal, but to buy or sell the next new high or low. It's very counterintuitive, because you'll often get the rally off that first signal, but it will usually fail, and then make a new low, and THAT'S the low you want to be buying. Using a Divergence indicator such as D3 helps a lot in seeing these. The QQE also is helpful.

But other times, all the time frames line up, you get a Boomerang buy signal, and away it goes, with no retracement, no divergent lows, nothing. So the setups are not very consistent, I have to say. You can get a perfect 20Range sell signal in an uptrending market, and it gets steamrollered after a $2 pullback in GC, as the 30Range indicators are not ready to turn around yet. Sure, you can sell based on the Boomerang signal, and it will pull back $2-3, but then take out the highs and get a new buy signal there. So you'll either take the $3 loss and be done, or try to reverse and hope that the momentum on the new buy will get you enough return to offset the $3 loss you just took. Sometimes that buy signal just kicks it up to a new high by a few ticks, and then it fails, with a new sell signal, so you get double chopped.

So it can be very ambiguous, and does not give consistent indications, by itself. With other indicators, it can be more useful. Now perhaps for what Mohan does with 450Tick charts, or 4 Range on the ES, 8 ticks in the Euro or 2-4 points in the ES is all the momentum that the indicator can be relied upon to give on those charts.

Generally, if you wait for a QQE or MACD change on a longer term chart, such as a 20R or 30R to establish the new trend, and then take boomerang signals with that trend, you'll do fairly well. Using it to try to catch real trend changes, particularly on a short term chart, will chop you up severely.

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