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Intraday spikes, trading the pull-back/reversal
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Intraday spikes, trading the pull-back/reversal

  #1 (permalink)
Trading Apprentice
La Crescenta, California / USA
 
Futures Experience: Beginner
Platform: NinjaTrader
Favorite Futures: eminis - CL, ES, NQ
 
Posts: 7 since Jul 2018
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Intraday spikes, trading the pull-back/reversal

I am currently sim-trading eminis - CL, ES, and NQ. Intraday/scalping, 1-5 minute candles.

I'm working on a strategy that involves watching for sudden big moves/spikes (up OR down) and wait till that move is over, then enter to catch a few ticks of the reversal/retracement. Big sudden intraday moves usually reverse themselves by almost 40-50% of the original spike. But obviously the REAL trick is, how to confirm (to the greatest certainty possible) that original move is definitely over and is reversing.

This is basically a "peaks & slams" strategy, riding the reversal/retracement.

So, any suggestions on a set of indicators that could confirm (to maximum degree possible) the reversal of that original sudden spike? The signal/confirmation can be based on indicators, OR chart patterns or candlestick patterns - whatever works best. And certainly volume would also be a factor.

Ardubya

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  #2 (permalink)
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  #3 (permalink)
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Ardubya View Post
I am currently sim-trading eminis - CL, ES, and NQ. Intraday/scalping, 1-5 minute candles.

I'm working on a strategy that involves watching for sudden big moves/spikes (up OR down) and wait till that move is over, then enter to catch a few ticks of the reversal/retracement. Big sudden intraday moves usually reverse themselves by almost 40-50% of the original spike.

Instead of jumping in front of a big move or spike and trying to fade it why not wait for the 'usual reversal of 40-50%' then try and join in to go with the momentum looking for continuation of the break/trend. The reason the big move happened in the first place was because a lot of contracts were aggressively bought or sold. Why fight against the buying or selling pressure instead of having that pressure on your side.
Just a thought as you are sim trading and trying strategies.

Trading, ideally structured, is a vehicle for expanding consciousness, not damaging it. - Brett Steenbarger
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  #4 (permalink)
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matthew28 View Post
Instead of jumping in front of a big move or spike and trying to fade it why not wait for the 'usual reversal of 40-50%' then try and join in to go with the momentum looking for continuation of the break/trend. The reason the big move happened in the first place was because a lot of contracts were aggressively bought or sold. Why fight against the buying or selling pressure instead of having that pressure on your side.
Just a thought as you are sim trading and trying strategies.

----------

Thanks for that reply matthew28. I agree about not trying to get in on that original big move/spike, but I've never had much luck with trying to wait for the reversal then getting in on the trend. I've actually had better luck getting in on that REVERSAL - in other words, waiting till that big spike is over, then riding the reversal for about 30-35%.

What I'm wanting to fine tune is a good way to "confirm" that the spike is over (to the greatest certainty possible). I'm looking for a good indicator / combination of indicators that show a reversal.

Just hacking around with riding that reversal strategy I've been getting it right about 50% of the time, breaking even $-wise. I'm thinking surely there MUST be a good combination of indicators that will help me pick the reversal point. Got any ideas?

Ardubya

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  #5 (permalink)
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You could try looking at order flow on a DOM or a footprint style chart. Look for heavy order flow when price breaks down say followed by flush through they large volume on the Bid where passive buyers are absorbing, followed by aggressive buying and enter. Or wait for that and price to push back up, then another attempt by the sellers to push down but when price reaches that buying level that people were selling in to heavily, there is a lack of selling and price moves up again.

You could try oscillators such as the MACD or RSI and look for divergence like price making a new swing low but the corresponding drop in the RSI doesn't make a new low so the divergence suggests the most recent down move has less strength behind it.

You could use a small time frame chart like a one minute with a volume histogram and look for volume spikes which you quite often see on stop run blowouts then look for the price action in the candlesticks to show that the move is over and the sellers have run out of steam.

Be careful about spending too much time trying to find the best combination of indicators. Investigate a few methods and when you find a methodology that makes logical sense to you as to why it should work then stick with that and try using it and giving it a fair attempt without changing things further. Accept that some trades will be losses (keep them small), and some days will not suit your methods and you might not trade, or again take a small loss and learn to stop early when it just isn't your day.
(And remember to take any advice you get on an internet forum with a pinch of salt until you validate it yourself)

Trading, ideally structured, is a vehicle for expanding consciousness, not damaging it. - Brett Steenbarger
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  #6 (permalink)
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Volume Spikes...

@Ardubya
First, get a FIO Elite Lifetime Membership for $100; then, check out this recorded webinar

Published on 10 Jan 2018
Presented by: Peter Davies @ Jigsaw Trading, topics include:
- Learning about Market Characteristics
- What is a Volume Spike?
- Differing Emotions of participants in a spike
- Identifying the Tipping Point
- Timing your entry

Discussion thread for Q&A:
https://futures.io/trading-reviews-ve...
Visit https://futures.io for more futures trading webinars and strategies.

IMHO... after spending years of screen times, you really can predict where a spike will appear. Take it from me who has master the art of Volume Spikes in 1M chart (I use 3M chart now) throughout eight years of trading "Drama Queen" E-Mini ES. Sometimes, I can even spot the spike from corner of my eye; the trick is you need to screen 30-60 minutes before and after Open/Close or FOMC announcement. Ask yourself, WHERE and WHY Price stopped there? Was it because of Fibs level? PVT? Yesterday High/Low. If you find more than three reasons, then likely it's valid "spiking" and not fake-out. Furthermore, Volume Spikes in Asia or European Open is not the same as in NYSE session; so don't assume this level holding again. Therefore, you MUST do homework!
Speaking of homework... more than haft is already done for you because of some amazing, awesome indicators from FIO Member "Downloads/Indicators" section.

Enjoy!

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  #7 (permalink)
Trading Apprentice
La Crescenta, California / USA
 
Futures Experience: Beginner
Platform: NinjaTrader
Favorite Futures: eminis - CL, ES, NQ
 
Posts: 7 since Jul 2018
Thanks: 3 given, 3 received


matthew28 View Post
You could try looking at order flow on a DOM or a footprint style chart. Look for heavy order flow when price breaks down say followed by flush through they large volume on the Bid where passive buyers are absorbing, followed by aggressive buying and enter. Or wait for that and price to push back up, then another attempt by the sellers to push down but when price reaches that buying level that people were selling in to heavily, there is a lack of selling and price moves up again.

You could try oscillators such as the MACD or RSI and look for divergence like price making a new swing low but the corresponding drop in the RSI doesn't make a new low so the divergence suggests the most recent down move has less strength behind it.

You could use a small time frame chart like a one minute with a volume histogram and look for volume spikes which you quite often see on stop run blowouts then look for the price action in the candlesticks to show that the move is over and the sellers have run out of steam.

Be careful about spending too much time trying to find the best combination of indicators. Investigate a few methods and when you find a methodology that makes logical sense to you as to why it should work then stick with that and try using it and giving it a fair attempt without changing things further. Accept that some trades will be losses (keep them small), and some days will not suit your methods and you might not trade, or again take a small loss and learn to stop early when it just isn't your day.
(And remember to take any advice you get on an internet forum with a pinch of salt until you validate it yourself)


Thanks matthew28. You've given me quite a bit of homework here. But you've pretty much pointed in the direction I was thinking. A friend of mine just raves about how valuable "Order Flow" is. I need to find one that's less expensive than the one NinjaTrader sells though. Preferably free. (Any suggestions?)

So anyway, I'll start looking into all these. Thanks.

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  #8 (permalink)
Trading Apprentice
La Crescenta, California / USA
 
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Platform: NinjaTrader
Favorite Futures: eminis - CL, ES, NQ
 
Posts: 7 since Jul 2018
Thanks: 3 given, 3 received


TraderTS View Post
@Ardubya

IMHO... after spending years of screen times, you really can predict where a spike will appear. Take it from me who has master the art of Volume Spikes in 1M chart (I use 3M chart now) throughout eight years of trading "Drama Queen" E-Mini ES. Sometimes, I can even spot the spike from corner of my eye; the trick is you need to screen 30-60 minutes before and after Open/Close or FOMC announcement. Ask yourself, WHERE and WHY Price stopped there? Was it because of Fibs level? PVT? Yesterday High/Low. If you find more than three reasons, then likely it's valid "spiking" and not fake-out. Furthermore, Volume Spikes in Asia or European Open is not the same as in NYSE session; so don't assume this level holding again. Therefore, you MUST do homework!
Speaking of homework... more than haft is already done for you because of some amazing, awesome indicators from FIO Member "Downloads/Indicators" section.

Enjoy!


"....you really can predict where a spike will appear."
-----
Well no, I'm not referring to predicting any spikes. No need to DO that. I'm referring to just watching for when spikes occur, waiting till the spike is over, then riding the reversal/retrace for a few ticks (30-35%). Like I mentioned earlier, just on my own I've been getting it right basically half the time. The times I do NOT get it right is when it appears the spike is over, I get in, then it goes back on me in the direction of the original spike and stops me out. I'm just wanting a good set of indicators that will help me confirm that the spike is over and the real reversal has begun. It'll never be right every time, but I just want to improve my batting average, right more often than wrong. A couple of indicators that work well together, confirm a reversal.

I'm thinking matthew28 is onto something. I always figured the volume would be key. I just need some good indicators as a visual aid.

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  #9 (permalink)
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Ardubya View Post
"....you really can predict where a spike will appear."
-----
Well no, I'm not referring to predicting any spikes. No need to DO that. I'm referring to just watching for when spikes occur, waiting till the spike is over, then riding the reversal/retrace for a few ticks (30-35%). Like I mentioned earlier, just on my own I've been getting it right basically half the time. The times I do NOT get it right is when it appears the spike is over, I get in, then it goes back on me in the direction of the original spike and stops me out. I'm just wanting a good set of indicators that will help me confirm that the spike is over and the real reversal has begun. It'll never be right every time, but I just want to improve my batting average, right more often than wrong. A couple of indicators that work well together, confirm a reversal.

I'm thinking matthew28 is onto something. I always figured the volume would be key. I just need some good indicators as a visual aid.

Hi Ardubya,

From what you are saying, I think you might be searching for context.

Something like a methodology for identifying pre-market areas of potential interest (S/R, previous highs/lows, value area, vpoc, etc..) and see how the market interacts with these areas.

Then there is also developing market generated context from the current day's data, things like vpoc shifts, mid, new highs/lows, large impulse moves, etc..

A volume spike into one area of context might be either a reversal or flag a pull back for continuation, keeping a journal of your pre-market plan and then adding an end of day journal to record how successful each trade/interaction with your key identified areas will build a dataset for you to identify (hopefully!) a source of edge.

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  #10 (permalink)
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Ardubya View Post
Thanks matthew28......A friend of mine just raves about how valuable "Order Flow" is. I need to find one that's less expensive than the one NinjaTrader sells though. Preferably free. (Any suggestions?)

I understand the new Ninja orderflow suite has a footprint chart. I can see there are a couple of footprint charts available in the Elite downloads section of this site for Ninja 7 or 8. You would need to be an Elite member obviously but that does give access to all the webinars. I haven't used the indicators so don't join just for those in case they aren't great.
Have you also looked on the Ninja Forum as they have an indicator section and I am sure there must be footprint type charts produced by people before Ninja created their orderflow suite.
Any free indicator is going to be more basic than a paid for one and probably be a lot more computer resource intensive than something bought, but good enough at least to try out some trading ideas and see whether it is a direction you think is worth following.

Trading, ideally structured, is a vehicle for expanding consciousness, not damaging it. - Brett Steenbarger
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