This is a little study I did back in January of 2010 when I was interested in demonstrating which popular futures markets exhibit more trending behavior. Maybe a few readers on this forum will find it interesting.
Anyway, I devised a simple trend following strategy that consisted of a single 50-period simple moving average on a daily chart. The system only takes long signals. It enters a new trade when price crosses above the moving average and closes that position when a daily bar closes below the MA. I'm not attempting to create a trading system per say, but creating indicator that measures a market's trending characteristics.
The rules are below:
Buy close of bar when Close > SMA(50)
Sell close of bar when Close < SMA(50)
Because this is a trend following system, it should perform better on markets that exhibit trending behavior. I tested this system on some popular stock index futures markets and currency futures markets. The chart below is organized from left to right with the best producing market. Notice which markets are grouped to the left and which markets are grouped to the right.
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2000 - 2009
Daily Bars – No Commissions – No Slippage
I think this provides some evidence that the stock index markets do not have nearly the trending characteristics of the currency futures markets. More specifically, the Euro really shines as a trending market. I know from personal experience that I generate consistently better results when I trade my trend following strategies on the Euro currency futures as apposed to S&P Emini. In fact, I no longer trade S&P Emini with my trend following setups.
If you have a trend following system and trade the stock index markets maybe you will want to take a look at the currency futures.
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I gave up on the ES too. I like using limit orders to get in & out of the market but with the ES, the market would hit my limit price a bunch of times, not fill me, and then race to my stop loss order. Sounds Familiar ? : )
I'm very risk adverse so my stopes are usually no more than $125 or $150 per contract. This is not enough for ES but appears to be OK for EC. My profit target is based upon prior support or resistance and can be 1, 2, or 3 times risk.
I do have two swing setups on ES that require a $250 or $300 stop per contract. These work fine.
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When able would you please tell more about your swing set up in EC. I would love to know a bit more. How do u enter? Where? at what time? I have been looking at Daily chart and having hard time to see how to enter swing trade with only 6 ticks stop.
I also trade EC and do use the same stops as you do but most of my trades are scalping trades. Most of the time I can get 8 to 16 ticks on my trades. In some cases 24.
As I said would love to learn more from you if you would like to share.
Well, I don't have a swing setup for EC. I'm usually in for only a few minutes. At most a couple of hours. However I'm working on holding longer and finding key entry points that might lead to holding for several days. Not there yet.
My two "swing" setups on ES can last several hours. I call this swing, but I know many others would not. Sorry if I'm sloppy with my terms.
Very interesting study! I been debating myself lately which instrument is best for momentum/trend trading and your study is confirming what I'm seeing.
If its not too much of a hassle, I'm curious to know how your results would change if you use intraday timeframe (like 1hr) instead of daily bars. I only like to trade during RTH and don't want to hold positions overnight. Also, can you include /6B (GBP futures) since its a popular instrument?
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