"P and F"ing the FTSE

[Dr Mike]

Following JonnyT's thread on spreadbetting "bias"

http://www.trade2win.co.uk/boards/showthread.php?s=&threadid=4757

I've been spreadbetting the D4F FTSE cash for the past 9 days.

A sample day is attached. All prices were based on the D4F bid price for FTSE cash (3 point spread) hterefore the charting procedure was somewhat labour intensive.

Buys/sells (coloured boxs) were made on a simple P and F breakout or breakdown and positions closed immediately the 3 box reversal occured (coloured text).


The results were (before spreads):-

Wins 18 - average win 20 points

Losses 23 - average loss 6.25 points.

Draws 6

Net profit before spreads 217

Net profit after spreads 94

Maximum drawdown including spreads 54

I would appreciate hearing from anyone using a similar system on the indices or who could compare the net result with using IB or similar

Thanks

 

[neil]

Suddenly there was light

Thanks Mike...

I've now understand point and figure charting properly.

Excellent trading example of point and figure in action.

 

[cassiopeia]

Excellent trading example of point and figure in action

Excellent example how spread betting companies make their profits as well!

Net profit before spreads 217

Net profit after spreads 94

 

[Trader333]

Hi Mike,

As you have traded the FTSE index, it is not going to be possible to do a direct comparison with IB because they only offer the FTSE future. If you were to do the same with the FTSE future then a direct comparison could be achieved.


Paul

 

[oatman]

On your P&F, why do you cut on a 3 box rev? Your 1st sell signal at 3630 remained intact until the reversal(buy signal) at 3582. I'm not saying you should or that I did stay in 'til then, only questioning your method.

Happy trading,

 

[Dr Mike]

Hi Oatman

There seem to be several different methods for deciding on the closing signal.

The one you mention -the classic one of waiting for the opposite signal - means that one is always in the market.

Others I've come across include exiting on a fixed number of points profit or loss or on a larger number of boxes than the reversal signal e.g. using 3 box reversals but not exiting until the 4th or 5th box.

I chose to exit on the 3 box reversal because I didn't want to be in the market the whole time and looking at the data for a couple of days before I started the 3 box seemed to be the optimum choice to avoid losses without reducing gains too much.

Using a fixed box reversal also allows me to set an immediate emergency stop loss when I enter the trade which is one of my trading rules.

HTH

 

[oatman]

Hello Dr.

I make you right. You must know your "out " before you enter. I was just curious. I have the same problem of where to put the stop. I decided there's often 10 or 15 points profit on a break before it turns out to be false. Momentum is what you're looking for. I don't trade every signal. If you take some profit at 10/12 points you can afford to be braver with the rest of the position. When does a reaction become a reversal?? Of course there are "count" methods to determine target points. These, sometimes, more so on the bigger moves, can be uncannily accurate. Other times they're cr*p, but at least it gives you a target to start with(whether you adhere to it or not). It's a matter of how patient you are. My problem is that I can't leave the position alone once I'm "in". On the stop front, I tend to use the 21 and 55 Indexia MA and Indexia's 1/3,2/3 Speed/Resistance Lines and any regular chart patterns for support/resistance and of couse, plus how much I can afford!
I look at other indicators, but on 1min., indicators only follow the price. But, I do like and use Indexia's Market tracker.

Remember though, that if Ftse's been in a, say, 30/40 point range all morning, there's a pretty good chance of a break. Have a look at some of the Ftse daily hilos.

Enough ..... I'm rambling,

Good luck,

 

[mmillar]

Dr Mike,

Apart from a very good post about P&F you have also posted a perfect example of how to choose your broker depending on your trading style.

In your example you have traded 47 times in 9 days. That's a lot of trading! In most instances, with this number of trades SpreadBetting is not the way to go. Using your numbers above, if you had spreadbet at £10 per point you would have made a total profit, after spreads, of £940. If you had traded in exactly the same way with IB (using 1 contract = £10 per point, 1 point spread, £3.40 round trip commission) you would have made over £2000. Even taking tax into account IB is clearly the way to go.

You should use SB companies when 1. you can't afford to trade £10 per point (because this is the minimum with IB), or 2. you're trading much less often, and making bigger gains per trade.


On another point, over the 9 days your system was only 38% successful. In your one day example above your system only made 2 successful trades out of 7. From a psychological perspective it is very difficult to trade a system with such a low success rate. Even though you know the system is successful over time, if you have a few bad days and your capital is being hammered most people (in my opinion, and I include myself) would give up.

cheers

 

[Dr Mike]

Hi all

Thanks for all your replies . Mmillar your IB data is most interesting and I take your point about the high percentage of failed trades and the emotional effect thereof.

On the day above it was certainly helpful that the big win came early on !

I've been working on some alternative box sizes to try and reduce the whiplashs and think that I can reduce the number of trades considerably with a reduction in "gross profit" but not in net profit.

As I'm rehashing my existing data, all my test box sizes have to be a multiple of three, but then no-one ever said this game would be easy!

cheers

 

[JonnyT]

Hi Mike,

Similar to my system but you results are no where near the ballpark I've acheived

I set an initial stop as a reversal past the last resistance or support which normally is 18 points.

I look for 50 point trades so do not have as many trades as yourself but over the same period have arranged over 30 points net profit per day.

Generally a max of three trades per day, on a good day you get a 50 points trade in the morning and a 30-40 point trade when the Yanks wake up.

On a bad day I lose around 20-25 points. Generally 2 to 3 good days a week.

I look to enter on reversals from double tops/bottoms (will go counter if that then gets taken out) or ascending bottoms/descending tops etc.

I only enter a breakout on a prior position failure. I learnt this from trading the ES where entering breakouts is a mugs game most of the time as you generally get faded.

Glad to see you've made it work but there are different ways to interpret a 3x3 FTSE chart

x x <- risk 3 points above here
xoxo
xoxo
o o <- short here...




x
xox <- long here
x xox
xoxox
xoxo
o <- Stop loss below here

JonnyT

 

[JonnyT]

Here's a spreadsheet for Fridays action

Hi folks.

My examples didn't turn out too well so here's an excel spreadsheet for Friday detailing my methodology.

PS it works with other indices like the DAX if you tune the PnF a bit.

JonnyT

 

[dolton]

On the stop front, I tend to use the 21 and 55 Indexia MA and Indexia's 1/3,2/3 Speed/Resistance Lines and any regular chart patterns for support/resistance and of couse, plus how much I can afford!

Hello Oatman....I see your reference to Indexia, and I think I saw postings by you on the Indexia site....can I ask which feed you use for your Indexia.......

 

[oatman]

Hello dolton,

Yes, I've been on Indexia's site. As you know they no longer support the programme since JDuP jumped to Updata. I've got TA as well but it ain't working proper yet! It's supposed to be compatible with any DDE feed but they really want to sell you their IP feed which, judging from the BB isn't worth a toss. It always seems to be down.

I take RT with Tenfore via Satellite. I only take Ftse Future. It costs about £1400 pa depending on what you subscribe to ie. exchange fees. You've also got a one off for the dish and installation. You get S&P,Dow and DAX indices thrown in as the exchanges don't charge. Also they include their own chart package.
It's fast and accurate...I like it!

Good luck,

 

[mmillar]

Dr Mike,

You're never going to increase your success rate with a P&F chart alone. You're working on a breakout system and in my experience you are never going to get better than 30-40% using breakouts alone.

You've started with a successful system that has produced 47 signals (over your 9 days). What you need to do now is filter those signals to reduce the number of bad signals whilst leaving the good signals intact. There are three main ways of doing this...

1. Time constraints. If you removed the first signal of the day how would your overall P&L change? How many false vs. good signals are generated in the morning, lunchtime and afternoon sessions.

2. Buy-easy/Sell-easy. There is a concept of having days that are buy only or sell only. You can work this out with something as simple as 'the 20 day moving average is down' to mean that you should only sell on this day, to much more advanced concepts such as LSS.

3. Indicators. Use other indicators to confirm a signal. Anything from an intraday MA, MACD, stochastics, CCI etc etc would reduce the number of overall signals you get and should help increase your success.

HTH. Cheers.

 

[JonnyT]

PnF Alone is Fine!

Hi mmillar,

You can filter trades with PnF alone. There is absolutely no need for Indicators or anything else.

Have a look at my Spreadsheet for an example.

JonnyT

 

[oatman]

Hello mmillar,

I agree with you.
P&F gives great signals in volatile markets in good volume. But when it quietens and the sideways sets in, it can be a killer.
If you're selective with your trades you can improve results eg. Rather than trade a signal a few points from a high or low I prefer to wait for the trade at a new level or maybe thru a 00. It costs you a few more points to enter but momentum should be better with the break. I usually won't trade against the MA or against a trend line. I don't like to trade 'til about 20mins after the OPG, can be whippy. Let it settle. You can set as many "qualifiers" as you like, depends how often you're happy to trade.

Good luck,

 

[Dr Mike]

Hi All

Results for this week were:-
29 wins
30 losses
9 draws

Net profit 99
spreads 63

Net net 33.

Now that I've got 3 weeks worth of data I'll be reviewing it with the objective of reducing the unprofitable trades.

Thanks for all your suggestions

 

[Dr Mike]

Apologies

data above is a mix of cumulative and weekly.
correct figures are :-

11 wins
7 losses
3 draws

Net profit 99
spreads 63

Net net 33.

 

[Dr Mike]

As you know I like P+F because it clarifies the charts.

Well, usually it does - here is this morning's action on the FTSE.

 

[oatman]

Dr Mike,

It's not so bad, I followed both and got me money back on the second one . As usual though...out too soon.
Keep trying........

Be lucky,