Big Ben on the FTSE100

tomorton said:
Yes, that is my thinking at present as a basis, and today's limited range of 40pts played along well with that idea. 40pts is well within the FTSE's usual daily range (and would be a happy daily reward for me personally).

However, other possibilites will certainly arise, as has been suggested -

1) Very wide early range, e.g. 90pts. Surely it's expecting too much that price should break out of there and travel another 20, 30, 40, let alone another 90? And if the stop is set at the further extreme of the early range that could lead to a 90pt loss. I suspect it could be more prudent not to take such a trade at all.

2) Very narrow early range, e.g. 10pts. It still seems reasonable to take the further extreme of the early range as support/resistance and to use it as the basis of a stop. But surely there is the opportunity to set a target much further out, at say 40pts from entry, thereby improving the r:r? On the other hand, the stop is that much closer to entry and more easily hit by volatility in a false move.

Maybe the decision to trade might be based on the ratio of the early range to the ATR? e.g. if more than 0.8, or less than 0.2, ignore the trade. Does this sound rational?
Click to expand...

Yes, it does.

Thanks
 
bedsit said:
Yes, it does.

Thanks
Click to expand...


OK. My focus is on reducing risk, so I'm going to attend to the possibility of a wider range first as that puts the stop further away from entry. Today's Big Ben range was 40pts, the ATR at Friday's close was 71, so we only hit 56% of the ATR. So, adding a new rule - no trade if BB Range = >80% of ATR. This percentage may need tweaking, but thanks guys, one day in and we have a new rule already.
 
tomorton said:
OK. My focus is on reducing risk, so I'm going to attend to the possibility of a wider range first as that puts the stop further away from entry. Today's Big Ben range was 40pts, the ATR at Friday's close was 71, so we only hit 56% of the ATR. So, adding a new rule - no trade if BB Range = >80% of ATR. This percentage may need tweaking, but thanks guys, one day in and we have a new rule already.
Click to expand...

why tweak it,it looks ok as a stand alone.Next there will be a ma and rsi etc.
 
Thanks M'Lord, my reading around this system and my visual FTSE backtesting took no account of ATR, prevailing trend or anything else and it still should pay.

But reducing the number of high-risk trades seems good (as long as a disproportionate number of winners weren't in this category, and this seems unlikely).
 
Yeah I suppose it can be monitored both ways (with ATR rule and without) anyway it sounds interesting. Laters
 
the only way to get serious is to backtest it. excel will do. my contact is away now for a week but when he is back, if you get in touch with me at my name at yahoo.co.uk i will try to get you some ftse futures data (liffe) if you want to automate this at some point you'll have to move to the futures market and it's a good way to find out what slippage and costs you're going to experience. also you can test if confirmation buffer makes a difference or not. in my work in the past it didn't and turned in to something that got chopped and changed all the time. placing an order to buy or sell at the exact top or bottom of range made extra points every time i was in, reduced risk and improved rrr. over all this outweighed the odd occasion where i got in to something and it reversed. that was my experience but i'd encourage you to backtest it and like i say, i can get you some data if you are ok using excel. good luck for today.
 
StephenMcCreedy said:
the only way to get serious is to backtest it. excel will do. my contact is away now for a week but when he is back, if you get in touch with me at my name at yahoo.co.uk i will try to get you some ftse futures data (liffe) if you want to automate this at some point you'll have to move to the futures market and it's a good way to find out what slippage and costs you're going to experience. also you can test if confirmation buffer makes a difference or not. in my work in the past it didn't and turned in to something that got chopped and changed all the time. placing an order to buy or sell at the exact top or bottom of range made extra points every time i was in, reduced risk and improved rrr. over all this outweighed the odd occasion where i got in to something and it reversed. that was my experience but i'd encourage you to backtest it and like i say, i can get you some data if you are ok using excel. good luck for today.
Click to expand...


Thanks Stephen - I aim to adapt this system sufficiently for some meaningful backtesting, whilst wringing some profit out at the same time. I don't plan to automate it at any stage but thanks for the offer and I will come back to you if my situation on this has to be revised.

Confirmation rules are a tricky bunch - I have devleoped a simple set of rules for price/MA cross-over trades and developed what I thought was quite a clever set of rules that allowed me to allocate a points system to the cross-over pattern: then I could igniore patterns with a low score, go over-weight on those with the best score and ignore or go under-weight on the counter-trend positions.

All this read really well until some more detailed backtesting using these rules, when I found that I had eliminated the best trades, which were unexpected counter-trend reversals. These were great earners and removing them meant the system was b/e at best. Sometimes what seems notionally best and follows the traditional trading rules can be wrong. My plan for this system here is to add one rule at a time, play it until it pays for itself or is discarded.
 
sounds good and good luck. i'm working on a random entry system with fixed stops and limits. the results are ok. if i put on some size i can do ok.

the next step for the system is finding out what to do with my spare time now. i am part of the system and by far the least reliable moving part.

i worked at a prop firm in london for short while and was lucky to sit next to the best guy in the firm (£500k a year for 4 years running).

people couldn't figure out what it was that made him the best.

i figured it out in the first week.

he got in at 7. traded till about 8.30. when the order flow had quietened down he'd get out, up or down, have breakfast and go to the gym. he'd come back about 12, have some lunch, watch some tv and settle in for half an hour in the afternoon. he was gone by 3 most days.

he never let a bad trade ruin his mindset or day or confidence. he brushed it off and carried on the same win or lose.

he didn't change his approach after one bad day, widen his stops, shorten his target to fit the last trade that didn't work out.

to my knowledge last year wasn't great for him but he's yet to blow up and still did over 1/4 of million.

somewhere in that routine, calmness and discipline is the key to making it work.

i never found out his entry or exit criteria beyond his wisdom. if it's going wrong i get out. if it's going right i stay in. if i don't fancy it i get out and if i don't feel myself i go home. with advice like that whether he used simple or exponential moving averages is irrelevant.
 
Fantastic story thanks Stephen. Plan the trade, trade the plan. That's real discipline.
 
Today's BB should be interesting - we've gapped down from last night's close to today's open by around 35pts, depending on which source you look at.

I am still basing the filter whether to take the trade or not, compared with ATR, on the rolling SB chart, but it's worth noting this, also the fact that ATR is based on the index, not the tick chart.
 
Presumably you are in and on way to profit, hope it keeps going as short from 5265 :D
 
:clap: Good stuff on the points, very good for 2 days.

I watch it action today and could see the simplicity of it.. but the market does seem to be nicely behaving and having little trends this week.. look forward to more, hopefully of the same.
 
nice trade. how do you handle getting long and then it falling to your short entry, would you get stopped and go short or just get flat?
 
Big Ben range on my tick chart today 37pts against ATR of 74 so orders are now set.

Stephen -
If my long order is triggered but price falls to my short order level, I would take this as a stop: I am not looking to reverse and go short on the same day.

Guys -
I was thinkng of a further filter rule in bed this morning (it's what I do).
Rule 1 is if BB rnage is>0.8 of ATR, ignore trade.
What about if BB range is very small, say 0.25 of ATR? In that situation, I am tempted to take the trade, keeping the range as the entry and stop, but extending the target out as far as 0.5ATR. So, if ATR=80, and BB range 08:00-10:00 is only 19, I would still take the range high as a long entry, with a stop 19pts down, but use entry + 40pts as target. This gives me a very low risk day on which I might up my reward side to at least 2 x risk. Does this sound rational?
 
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