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The Italian Job
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The Italian Job

  #451 (permalink)
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Linds View Post
Quite a Journal and quite a nice application of a contrarian method.

A bit too scary for me to try ( a bit to close to martingale approach for me at times) but very impressive and a nice demonstration

thx


Thanks for your comments, it is a martingale indeed, don't be afraid to mention it, my intent is to demonstrate that with a correct approach and know how even unconventional methods can be profitable, as with any strat it is rather a question of mastering the technique and its PA and TA.

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  #452 (permalink)
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Some conclusions

My NT crashed and I had to reinstall it with the consequent loss of my SIM data, I will therefore not be able to update my cumulated profits on the quick summary. For the time beeing, I will keep the Italian Job running, as I am not yet to the 60 days of trades (around 50 have been reported). As most of the topics have been touched, I take the opportunity to make some conclusions about the method. The Italian Job reveals some dark sides which need to be taken into consideration, it might not fit for most of the traders, the experience level and capital capacity are key issues (please refer to quick summary 10 reasons for not trading this method):


Although the cum profit is showing an interesting result, IMO three months are not enough to blindly trust a method. These are some points which are not convincing me:

- Martingale with potential risk reward to ruin levels
- High Stop management (5000$) with consequent risk of High draw down and fast sacrifice of cumulated profits due to market condition changes
- Limited action to UK session due to low volatility
- High winning profitable trades with the risk of not accepting a loss and taking higher risks on stop management (not following stop rules or increasing the risk)

Based on the knowledge acquired during the IJ, I would like to build a trend following method with a tighter stop management. The basic concept is to rely on a lower profitability and at the same time take advantage of big moves, in simple words be strict with the stop managements and let the profit run.
Besides the IJ's counter effects there are some good ideas to be taken, the concept is to use some techniques from the IJ and to adapt them to the trend following (TF) strat.
In terms of charting I will use the same setups as the IJ:
- 60 min charts for S&R
- 5 min charts for the 2SD
- 12 R and 6 R for TA
Volatility is a key factor, as the IJ is working fare well with low volatility, whereas TF with high volatility, a combination of the two could be the ideal solution. Sometimes a counter trend can turn into a trend, both methods could be used in the same session. A way to localize volatility is to use the VIX index related to ES (driving instrument), and therefore run one method and stop the other according to the slope of the sma10 VIX and its 25 level. On a shorter time frame like intraday volatility can be measured with volume and range analysis devoleped by Fat Tails. The use of one strategy or the other or both together should be calibrated around these indicators.
In the TF the position should be entered in a different way than the IJ, as the stops are really tight, I am thinking to enter with 3 contracts, with 2 solutions:
1) 2/3 at 50% Target and let the rest run based on S&R and TA
2) 1/3 at 25% T , 2/3 at 50% and the rest run as above
A money management should be running, that means more or less contracts according to the cum profits.
In terms of indicators I would keep the same indicators as the IJ:
- Vwap and its SD to locate trends or counter trends
- Better Volume
- Gom CD to identify the intentions of the trading partecipants
- Auction bars to identify trends or reversals bars
- Fibonacci Zones to identify important S&R

Altough I am strongly convinced that larger stops mean higher probability, I will start with a stop loss of 1000$ with 3 contracts entries. No scale in or scale out.

In order to limit the draw down of the IJ the scale in should be limited to 3 contracts and Stop to 1500$. At the beginning to better test the efficiency of the system the number of trades will be limitless, the instruments 6E and CL. On a regular basis the number of daily trades should be 3-5; open trades with just one instrument.

These are just a few thoughts gathered during my summer vacations, more details and charting will come along as soon as I figure out how to translate words into executions.

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  #453 (permalink)
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Something else to possibly consider, if you traded forex EUR/USD and say equities/ETF USO for oil, you could trade smaller size (or more granular position size) so that a full stop isn't so large ($5,000). Unless your account is $500,000, then a $5,000 stop is probably going to dissuade you from making proper decisions during a live trade.

By trading spot forex or ETF's, you could lower your risk.

Mike

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  #454 (permalink)
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Big Mike View Post
Something else to possibly consider, if you traded forex EUR/USD and say equities/ETF USO for oil, you could trade smaller size (or more granular position size) so that a full stop isn't so large ($5,000). Unless your account is $500,000, then a $5,000 stop is probably going to dissuade you from making proper decisions during a live trade.

By trading spot forex or ETF's, you could lower your risk.

Mike


Thanks Mike that is surely something to consider, I am open to any solution and I consider these tests, as any teaching method or journal on futures.io (formerly BMT) a sane and constructive part of my trading path to intraday trading. I don't think there are bad or good solutions; each and every one has something to give and is a part of the learning puzzle.

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  #455 (permalink)
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redratsal View Post
Based on the knowledge acquired during the IJ, I would like to build a trend following method with a tighter stop management. The basic concept is to rely on a lower profitability and at the same time take advantage of big moves, in simple words be strict with the stop managements and let the profit run.
Besides the IJ's counter effects there are some good ideas to be taken, the concept is to use some techniques from the IJ and to adapt them to the trend following (TF) strat.
In terms of charting I will use the same setups as the IJ:
- 60 min charts for S&R
- 5 min charts for the 2SD
- 12 R and 6 R for TA

Will be interesting to see how you develop into more of a trend capturing system.

With that in mind, had you ever read JPerl's thread? A lot of it is similar to what you do, save for his method being mostly an attempt at trying to trade IN the direction of VWAP as opposed to it. I think I remember it being entering at maybe the ±1 standard deviation initially, again at the VWAP if it goes against you, with a big stop at the POC.

My buddy and I would rather scale in from the ±1 stdev, with a scale-in at the VWAP, and a stop at the opposing ±1 stdev. As once it goes that far, its likely chop or a trend reversal. If all that makes sense?

Also, I have to ask especially since you seem to have done so well with what you started with, why are you wanting to change the method? Is it just as you mentioned the risk you incur with the averaging down? Something that would be easier to stomach with FX as you and Mike mentioned, and given the spreads in FX, seems like it wouldn't effect you too much since your method doesn't seem to really require precise entries.

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  #456 (permalink)
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forrestang View Post
Will be interesting to see how you develop into more of a trend capturing system.

With that in mind, had you ever read JPerl's thread? A lot of it is similar to what you do, save for his method being mostly an attempt at trying to trade IN the direction of VWAP as opposed to it. I think I remember it being entering at maybe the ±1 standard deviation initially, again at the VWAP if it goes against you, with a big stop at the POC.

My buddy and I would rather scale in from the ±1 stdev, with a scale-in at the VWAP, and a stop at the opposing ±1 stdev. As once it goes that far, its likely chop or a trend reversal. If all that makes sense?

Also, I have to ask especially since you seem to have done so well with what you started with, why are you wanting to change the method? Is it just as you mentioned the risk you incur with the averaging down? Something that would be easier to stomach with FX as you and Mike mentioned, and given the spreads in FX, seems like it wouldn't effect you too much since your method doesn't seem to really require precise entries.

I did read JP's, although he is covering different setups there are some similarities with the entries using vwap and its SD's. As far as trade management, I went my way according to my own trading style and experience. I do not intend to change method but rather to implement new setups, as the market conditions might change. For instance during those volatility days I beleive a trend following method (or something combined) might be more fruitful compared to a counter trend one. I am trying to cover as much scenarios possible in order to take the right decisions at the right moment; as I mentioned in one post, with this method it is easy to make money, the hard part is to keep it. I also think that 3 months of tests are not enough to have a victory yell.


Last edited by redratsal; September 7th, 2011 at 02:51 PM.
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  #457 (permalink)
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First trade of the day CL long 2 contracts, target below R +561$

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  #458 (permalink)
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I'm probably gonna look like an idiot here, but can you point me to a place where I can download the VWAP bands you use?

I searched the downloads section of this website in both the ninjatrader section and the elite section and I didn't come across it.

I used the search function as well on the homepage and couldn't find it...

Is it called just Vwap? or Vwap session bands?

Thank you for your time

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  #459 (permalink)
~R!$K~
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@r3algood

Here you go...

https://futures.io/free_downloads/ninjatrader-7/indicators/674-download.html?view

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  #460 (permalink)
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Wow... Silly me

Thank you for taking your time to help me with that dakine.

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