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Rich's ES intraday strategy
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Rich's ES intraday strategy

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Rich's ES intraday strategy

OK so my strategy is based almost entirely on that used by jwdixon, posted in a journal competition a few years back called 'my ES Scalping Strategy, 2+ pts/day'.

My aim with this journal is exactly as Big Mike described the purpose of journaling - to try to force myself to be as honest with myself as possible. I've not been trading this system for long, but have already had one 'meltdown' day, where I abandoned the rules of the system after a few losing trades and attempted to get back to profitability by swinging for the fences

Today I traded the system on sim and was up $358 by the end of the day, so a great day for me, just wish it was a real money day

Look forward to sharing and getting feedback from the community.

RJ

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My trading strategy

Here are the basics of the trading strategy that I have been looking to employ:

"For my set up, I tend to FAVOR the FIRST pullback after a TREND CHANGE. Depending on how the day is shaping up helps me decide if I will take the 2nd or 3rd set up in that trend. Please REMEMBER when I am Scalping, a TREND might last only 5 minutes, so don't get married to any 1 trade.

Money management: I hate to teach this, that is up to you, I will give you the guide lines that I tend to follow. I like to get in and out fast, I like to take money off the table when I have profit. I tend to exit 2/3 to 3/4 of my trade at 2-3 ticks, hold the rest for 6 ticks after a BE stop....That's me, as you get a feel for this you need to see what works for you.

Charts: "Trend Chart", I use a Renko 2 tick size box
"Trading/Entry Chart", I like the 350 Tick

Trend: If the Renko Bars are Above the the Dark Brown 21 Donchian Channel "Mean" line = UP TREND
If the Renko Bars are Below the the Dark Brown 21 Donchian Channel "Mean" line = DN TREND
You should be able to "SEE" this, when bars are trading around the line, be careful, just wait, the trade WILL come!

Pull Back = Renko price bars are trading back near the orange 10 DC Mean line and the 21 Mean line

Long Entry = When the Renko chart breaks out from below the line to above the line, then shows a pullback to towards the lines look at your 350 tick chart......IF the upper Donchian Channel (DC) has moved up, AND you can SEE SPACE between the price bars and the DC mean line then enter your trade entry at or a tick above the 21 Mean line for your entry. Picture are worth 100 words so I will try and teach off the charts.

Short Entry = When the Renko chart breaks out from above the line to below the line, then shows a pullback to towards the lines look at your 350 tick chart......IF the lower Donchian Channel (DC) has moved down, AND you can SEE SPACE between the price bars and the DC mean line then enter your trade entry at or a tick below the 21 Mean line for your entry."


Credit to jwdixon, here is the link to his stuff: https://futures.io/index-futures-trading/11126-my-es-s-p-500-futures-contract-scalping-strategy-2-pts-day.html#post123365

I have mostly stayed faithful to Dixon's original explanation of his strategy, although I also keep an eye on a 3 min chart, and at the moment use my discretion to judge whether enough of a trend is in play to justify a trade.

I am in the process of writing this strategy up in a more detailed format, but I thought it appropriate to give Dixon's original thread, partly as a way to pay homage to him for his work.

More to follow soon...


Last edited by RichJamo; October 3rd, 2014 at 05:26 AM.
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Preparation for trading, Wed 1 Oct

I am trying to build a habit of preparing for every trading session in a systematic, disciplined way.

One of the things I check is any scheduled news releases likely to affect the US markets. I do this on Forex Factory's Calendar. I only look to trade between 10am and 12pm CET, so the news items relevant to me for Wed 1 Oct were:
9.45am Final Manufacturing PMI
10.00am ISM Manufacturing PMI, Construction Spending m/m, ISM Manufacturing Prices
10.30am Crude Oil Inventories

Please note that I'm not looking to predict what effect the news will have on the markets, it's just good to know that if I'm in a trade at 9.59am and there's news coming at 10.00am I should close out my position or at least tighten my stops because the price might spike.

The other thing that I like to check is the average daily range of the S&P500 index over the last 30 days, as well as the standard deviation: Av Range = 14, std dev = 6.

I use this to give me a sense of how much movement I can expect in price today. I find it a very useful guide.

Finally, my preparation for trading should also involve a few moments to ground and centre myself so that I see the market as clearly as possible and make the best decisions possible. (I say should because I don't always get around to this part)

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Wednesday 1 October Trades

Wed 1 October I traded on Market Replay as I had to unfortunately be at a meeting during the time I usually trade.

I obviously didn't look at any market info ahead of trading this, as that would defeat the point of the learning exercise.

I took three trades in total, each time 2 contracts. The first contract I look to get a quick 3 ticks, the second contract I look to run with a breakeven stop and see how much I can get out of it. At the moment I'm trying to get 21 ticks out of it, and moving a 6 tick trailing stop behind it as it moves.

The four things I look for before entering a trade are (per the strategy detailed in an earlier post):
  1. a recent trend change
  2. Donchian Channel upper line moving up (or vice versa for short trade)
  3. "space" between candles and DC mean line
  4. An entry 1-2 ticks above the DC mean line

As mentioned in the strategy post, I do also keep a 3 min chart open to get a different view of whether the market is trending, and this informs whether I take a particular trade or not. Also, I sometimes 'chase' price if it touches my entry point without filling me. I have to watch this, though, as I sometimes get too aggressive and chase unnecessarily, only to see price drop to my original entry point.

As you can see in the attachment below, on trade 1 I made 3 ticks on the first contract, 0 ticks on the second. I actually failed to notice that one of the news items was coming up (the 10am one), although it wouldn't have made much difference as my stop was at breakeven anyway.
On trade 2 I made 3 ticks on both contracts, which was actually a mistake, as my intention was to let the 2nd contract run. However, I put in a limit order for 2 exits at 3 ticks instead of for 1, and the market was moving fast so I was out before I knew what hit me.
On trade 3 I made my 3 ticks on the first contract and managed to get 6 ticks out of the 2nd contract.

So, combined I was able to extract 18 ticks, in just over half an hour. This was enough for me so I ended my trading day there.

Trading Results Wed 1 Oct 14.xls

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Trading Preparation Thur 2 Oct

So, here's the news for Thursday:
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Since I trade from 10am-12pm, the two items that affect me are at 10am and 10.30am.

S&P500 average range is 14.4 and std dev is 6.3.

I had to rush home to be in time to start trading, so I didn't have time to ground and centre.

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Thur 2 Oct Trades

Here are my trading results for Thursday. I was trading real time, but still on SIM at the moment. I was trading this system with real money last month, but took a few knocks, so have decided to go back to SIM for a while.

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Overall, I managed to end the day up 3.50 points, so happy with that, especially after going down 4 points on my first trade of the day. I made a lot of trades (20 contracts in total), so commissions would have eaten into my profits. I made some execution errors, and also took a couple of 'experimental' trades where I started thinking too much instead of just following my system.

Here are my comments:
Trade 1 - I didn't put in my stop (sometimes I'm a bit careless about that, thinking I can just close if it drops). In addition, this was possibly still a bit too early to trade as the market was showing that it was very undecided about what direction it would go in. I should have trusted my gut and stayed out until it started to settle and show a direction.
So, those two factors combined meant I made a bigger loss than I should have - would normally limit the loss to 3, but it was 4.

Trades 4 & 5 were my 'experimental' trades, i.e. outside the parameters of my strategy. I thought I had noticed that price would often pull back by 3 ticks very early on in a directional move, so I thought I'd try and enter on those 3 tick pullbacks with a single contract and look to make 3 ticks. It worked once and it went against me once, and then I regained my focus and decided to stick to my strategy.

Trade 7 was a runner, and I got 2.25 ticks out of it. Was wondering whether I should have held on for more, but it turned out not to run much further.

Trade 11 was also a runner, and I exited at +1 tick because it made a higher low and I looked at the stochastic and thought it was going to go against me. A case of thinking too much. If I'd just trusted my stop and let it run I could have made around +12 ticks!!

Trades 12 & 13 I was a little bit nervous going into, as the upward trend was definitely a counter trend in the context of the day. Perhaps I should have just gone for 1 contract and 3 ticks.

Trade 14 was another loser for me. In retrospect the renko bars were probably still too close to the DC midline, meaning that I was still very much in 'chop' territory.

Trades 15 & 16 got me + 3ticks and a breakeven on the runner. I was very close to hitting the daily low here, so in framing the trade I perhaps should have noticed that and exited the runner at +6 ticks when it hit the daily low. Then again, sometimes price goes through daily low and keeps going, so...

Trade 17 was an execution error - when I exited trade 16 my stop was still for 2 contracts even though I only had 1 in play, so I ended up with one contract long that I didn't really want - closed it out for -2 ticks.

Trade 18 I just took 1 contract and went for the 3 ticks, as I was close to the daily low. However, if I'd taken a runner I would have made money, and worse case broken even on the runner, so...

Trades 19 & 20 were a great way to end the day, got +3 on the one and +12 on the other. However, it turns out that I could have ridden the runner MUCH further, easily to my 21 tick profit target. I exited because there was a pullback of 6 ticks, but after that it went smoothly down again. I have to give more thought to how and when to exit the runner...

OK, so that was Thursday. It might also be useful if I post some pics here of the charts that I'm using and how I'm identifying the setups, entries and exits. Will look at doing that...

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Fri 3 Oct Trading Preparation

OK, so here's the upcoming news for today that might affect my trading:

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I sometimes start trading just before 10am, so will have to watch that incoming news item at 10, especially since it's in red (high impact). Interestingly, the news coming in earlier in the day is also in red and looks like major news for the US economy, so will be interesting to see what unfolds today.

Average range for S&P 500 is at 15 now, and std dev is 6.6.

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Fri 3 Oct Trading Results


OK, so here are my results for Friday:
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Overall, finished with +1.75 points, so relatively happy with that. Had several opportunities during the session to close out one of my runners and hit +2 points for the day, but I tried for more and on almost every occasion saw the runner come back to breakeven. After a while I started to see that the price had become somewhat range-bound, so I'm thinking hard about how I can spot that in future and let it inform my exits in some way.

See below for the two charts I look at (with entries and exits shown):
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Trade 1: Once again, my first trade of the day is an outright loser (both contracts stopped out at -6 ticks). This has happened to me a few times now, and it makes the session feel like hard work because I have to claw my way back to profitability for the rest of the session. I'm not sure what to do about this, other than perhaps to wait until 4.15 pm before I start trading, or perhaps have some way of determining that the volatility of the market opening has subsided sufficiently to start applying my system.

Ignore what I just said, I've had a look back at it now, and I see that there was no real trend change to speak of. There was a pullback from a big move up, then a resumption of that move up, and I took the trade at the 2nd pullback of that second move up. Which then went against me. (I did actually try and get in on the 1st pullback, and was touched but not filled ) In addition, there was stochastic divergence ahead of my entry on the 2nd pullback, which should have been enough to convince me to keep my powder dry...

Trade 2/3: 1st contract got 3 ticks, 2nd contract got stopped out at breakeven. Lesson: Don't be too quick to move stop on second contract to breakeven, rather move it to -1 or -2 ticks. (which is still better than breakeven on the trade as a whole, given that we've already got +3 in the bag - even taking costs into account)

Trade 4/5: Taking a bit of a chance here, as this was the 4th pullback of this down move. However I managed to get +3 on the 1st contract, and then the second one got stopped out at +3 (I was trailing by 6 ticks).

Trade 6: Execution mistake: I didn't change my stop from 2 contracts to 1 contract when the first contract was exited. Cost me 3 ticks

Trade 7/8: Trade by the books, except I chased quite hard, ended up entering at 2.5 ticks above DC mean (on 350 tick chart). I do this often, only to watch price come back another tick or two, meaning that I needn't have chased. Got my +3 on the first contract, second contract went all the way up to 2.75, and then came back down again and I eventually stopped out for +3. Should I have taken the +2.75 when I could have?

Trade 9/10: Got +3 on first contract, but -2 on second. Not much to say about this one, I think it was a fair trade to make, but they can't all go your way. The only thing I do notice is the double bottom formed when I took the profit on the first contract, with stochastic divergence suggesting that an up move was likely - I could have listened and exited the 2nd contract at breakeven or small profit. Then again, if it had reverted to the down move I would have felt silly.

Trade 11/12: Got in at +2 above DC on 350 tick chart, again could have waited at DC or DC + 1 and would probably have got filled. Fair trade, was just after a trend change. If I'd entered at the DC I might just have been able to ride out the reverse move and enjoy the big up move afterwards. It was at this point that I started to suspect that the price had become range bound.

Trade 13/14: A losing trade. This is where the range bound behaviour can hurt you on this strategy - just as you're getting in, price is not pulling back, it's actually bouncing off the bottom of the range and heading back up. My clue was that the BB30 mean on my 3 minute chart was flat at this point, so I'm going to keep an eye on that in future, and when it is the case, wait for price to break out of the range that's been established - see next trade.

Trade 15/16: Price broke through the range high, so I figured the long trade was on when it pulled back. I got +3 on the first contract and then +8 on the second contract. As it turns out I could have got more than +8 out of the runner, but I chose to exit 1 tick below the high of the day, which hadn't been touched since 4pm. I've been thinking about how else I could have played this. Perhaps put in a limit order to exit 1 tick above the HOD? Or move my stop up to 1 or 2 ticks below the HOD as soon as it gets breached? I've observed that when price reaches the HOD it usually goes through by 1 or 2 ticks, but then can be quite unpredictable - i.e. might come bouncing straight back down, might push up quickly. Any comments / suggestions / thoughts welcomed.

OK, that's all from me. I'm realising that this way of journaling is quite wordy, so perhaps I'll start making screencasts to talk through my trades. However, already feeling like this process is very beneficial to me, both because it bolsters my discipline to actually do the reviewing, and because I feel a level of accountability to this community, which keeps me a little bit more honest (i.e. more likely to stick to my strategy) when I'm trading.

Happy Trading

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