Broker/Data: Advantage Futures, Ninja/TT and InvestorRT/IQFeed.
Favorite Futures: Treasury futures
Posts: 275 since Nov 2010
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@Jeff Castille, @shodson, & @cunparis: I've been through about the first 20-25 pages of this thread and I have a question about the risk/reward profile of the three setups. I'm looking at the time period you originally tested when you started this thread over a year ago. Profit targets were +8 +16 and the stop was one tick outside the setup bar. Jeff says the win% of the set ups was over 90%, which I haven't verified but which I don't question.
The 100 bar ATR of a 15 minute bar chart for the period in question ranged from about .30 to .60. (I calculated this using only day session + (45 minutes before the open) on IQFeed CL ##-## data).
I didn't try to calculate the average range of inside bars, but if it was anywhere near ATR for the period in question, it seems the asymmetry between stop and profit targets could account for much of the win %. (If the profit target had been one or two ticks, I'll bet the win% would have exceeded 99%). Linda Rashke once said in a seminar I attended that any S&P trade you made had over a 90% chance of being a one point winner if you were willing to wait long enough. Several contributors to the thread raised questions about this and were going to test ATR based targets and stops. I'll run my own tests, but I'm curious what they found out and whether any of the statistically inclined on this board could calculate the odds of a random trade being a winner based just on the profit/stop targets if there was a 50% chance prices could move up or down from any given price.
"You don't need a weatherman to know which way the wind blows..."
I have studied and backtested the IB setups quite extensively and found that they best work when you consider IB range relative to other bar ranges (NR4s, NR7s, etc) and if the trade is managed properly with reward > risk. Also, you have to look at volume as well. Using the BetterVolumne indicator, the "Normal" or "Low" volume IBs are more profitable.
Last edited by shodson; September 11th, 2011 at 03:18 PM.
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Just found this thread and have read my way through 50%. First thanks to Jeff for the thread and to all contributors. I do have one question and I hope that all those who have had some experience with the 15M CL IB setup can respond. Altho the method seems have a relatively high win ratio the Risk/reward is the opposite of what most traders recommend. For example I have read that most professional and successful traders have a win ratio of no more than 40%. The reason they are profitable in the long run is they set targets of 2,3,4 and some times more than their stop-loss. A 100 tick win in CL makes up for many 10 tick stopouts. In light of the large stoploss position dictated in using a 15M chart, is this setup really profitable in the longrun? Does the realtively high win ratio compensate enough for the inverse risk reward I see many are using? Thanks for any insights you can offer this newbie.