swingin' the ftse: 2008

[tomorton]

Today ended better than it began in London so my stops were not triggered and the longs remain open - both FTSE100 and BP. The US did not end so strongly but apart from the Nasdaq the uptrend continues.

I have also opened a separate long on the FTSE based on the simplest of systems that I backested earlier today (on holiday this week with time to kill). An article someone posted elsewhere here prompted me to think up a way that excessive volatility and sharp reversals could be harnessed. This involves buying FTSE on a lower close if above the 14MA, exiting at the following close: or shorting the FTSE on a higher close, if below the 14MA, likewise exiting at the next close. And that's it.

I have backtested this over a year with 10, 14, 20 and 50MA and all are profitable but the 14 gives optimum results. Even then - caution - I have not allowed for spreads, this has only a 61% success rate, and gain:loss is only 64%. So its marginal but simple, absolutely mechanical and a bit of fun. I do think these stats could be improved with a stop-loss, say 1% from entry, and a decision process to run winners another 24 hours or so many points from the target close. Not recommended for widows and orphans.

 

[tomorton]

First 'shuttle' trade on FTSE as per last night came out a winner, +30pts net at Close today. Flat now, but target tomorrow will be to go long again at Close if tomorrow's Close is below 5228 but above 14MA, aiming to exit at Friday's Close.

Rivalland swing long still open and in the black.

 

[pedrito]

First 'shuttle' trade on FTSE as per last night came out a winner, +30pts net at Close today. Flat now, but target tomorrow will be to go long again at Close if tomorrow's Close is below 5228 but above 14MA, aiming to exit at Friday's Close.

Rivalland swing long still open and in the black.

Hi tomorton,
i was interested in your 14MA system described above. Im fairly new to trading - been at it about a month - reading avidly and working with small bets - and curious about systems. With the 14MA system you describe for the FTSE - does the "close" mean the 4.30 close of the exchange or the 9pm close of the Rolling Daily Future trading? Looking forward to planning for tomorrow - todays 4.30 close showed FTSE above the 14MA line, whereas at 9pm it was below the 14MA line. Similarly - when people talk about pivot points - does the high/low/close data refer to the 9-4.30 timeframe or 7am-9pm timeframe? on another note - what is the Rivalland swing?
Enjoying all the posts on here!
cheers
Pedrito

 

[omni]

Hi Tomorton,
Can you post a chart of the shuttle trade. Just so i can "visualise" what you have done here.
Thanks

 

[tomorton]

Hi pedrito - thanks for your message. This is a simple system so therefore would be easy to manage and avoids subjective judgement, but does not have any real method for limiting losses yet - you just open a trade today and hope that the 24 hour limit will mean you do not lose too much if it is going the wrong way. I will be trialling a stop-loss setting as I run these trades but I suspect that it would need to be perhaps 1.5% away from entry (so currently about 83 points!) to avoid being triggered by normal volatility.

By Close, I mean the 4:30pm close of the London stock market. I use spreadbetting so this market for the FTSE is almost never closed from late Sunday night until Friday evening. I think this therefore eliminates your query about the position of the 14MA at 9pm: I am using end-of-day (4:30) charts and value for index and MA.

Usually High and Low refer to the day's high and low established during market hours - 0830-1630 - by the actual index itself. Of course, different information providers sometimes give different values for these, which is a nuisance.

A Rivalland swing trade would follow the rules set out in Marc Rivalland on Swing Trading, almost a bible for swing traders. It basically looks for, in an uptrend, 3 days with lower daily lows and daily lower highs: if the subsequent day has a higher high and higher low, you buy: the initial stop-loss is the low of the day before entry (the swing low). Reverse the above for shorting in a downtrend. Not much more to it than that (but read and understand before committing big cash) but you can see where my inspiration comes from.

 

[tomorton]

Hi omni - I've not posted a chart here before, I guess its simple, but look at the FTSE100 chart for the last 3 days -
22/08 Index closed at 5505.6, above 14MA.
26/08 Index closed down 34.9 at 5470.7. But this value still above 14MA so go long at 4:30pm.
27/08 Index closed up 57.4 at 5528.1. Exit position for potential profit of 57.4pts.

That's it for now but be aware, the percentage of wins in a 1yr back-test was only 61% and there is no stop-loss, just a 24hr time limit. The worst loss in my test was 158pts.

I am going to do a further back-test to see if results are improved by avoiding positions that are contrary to the slope of the MA - i.e. only open a long if today's close, whilst lower and still above the MA, also still maintains an upward slope on the MA. I will post reults here soon.

Best wishes all.

 

[barjon]

............................. what is the Rivalland swing?............

pedrito

tomorton has explained it, but you might like to look at T2W Day Trading & Forex Community as well if you haven't spotted it.

good trading

jon

 

[tomorton]

Further back-test on shuttle trades - Original rules apply: FTSE100, looking back 1 year: if price on day 1 above 14MA, buy at close on day 2 if it closes lower but still above 14MA: exit at close day 3. Reverse this for shorting.
Additional rule - only buy if slope of 14MA is upwards: only short if slope of 14MA is downwards.

This reduces the number of trades by 20% to 72 but success rate is hardly better, 62% compared with 61, so this is disappointing. The number of winners is down 18%, in line with reduced trading, but the number of losers is down 40%, very encouraging. However, the reduced risk is not reflected in reduced losses: total gains are down an in-line 19%, but total losses down only 20%. This left me with 16% less net gain after a year. I suppose for 20% fewer trades, this is more effective use of time/money but its so marginal I don't know its worth it. Disappointing I can't very simply open the gap between gains and losses: I am sure it can be done by introducing a suitable indicator to verify trend (whihch is what I was trying to do with MA slope, but I think I would prefer to develop a stop-loss rule at this point rather than refine the entry signals further.

 

[timsk]

I've not posted a chart here before, I guess its simple . . .

Hi Tom,
Yes, it is!
1. With the chart open, hit 'print screen' on your keyboard.
2. Open MS Paint (or similar) and click 'paste'.
3. Crop and fiddle as required.
4. Save as a .jpg or .gif file to keep the file size small.
5. When posting, under the 'Additional Options' heading, click on 'Manage Attachments' and then follow your nose. It's easy when you've done it once.
I agree with omni that your posts would really come to life with the visual aid of a chart to illustrate the text!
Great contributions btw - keep it up.
Tim.

 

[tomorton]

PS. I can't believe I am first to think of this simplistic system - there are similar ideas in Street Smarts. My original idea was prompoted by this article uploaded by BSD - http://www.trade2win.com/boards/gen...0-trading-choppiest-environment-50-years.html - from here - Quantifiable Edges: How To Trade The Choppiest Environment In 50 Years

If I am not crediting more original thinkers than me on the board, my sincere apologies.

 

[tomorton]

Many thanks Tim. We were both posting simultaneously. I have saved your instructions - expect charts galore from here on.

 

[tomorton]

Closed long swing trade from Friday for +196 points net. Happy to forego any further rise tomorrow and certainly don't need any extra long-side exposure running into US holiday weekend.

 

[Splitlink]

Closed long swing trade from Friday for +196 points net. Happy to forego any further rise tomorrow and certainly don't need any extra long-side exposure running into US holiday weekend.

Thanks for mentioning the holiday. They always seem to catch me out. I've made some money but you, with your 196 points, have done better. I think I'll go back to long term trading, I'm getting a bit long in the tooth for this intra day stuff.

 

[timsk]

. . . I think I'll go back to long term trading, I'm getting a bit long in the tooth for this intra day stuff.

Yo Split',
The word bu88er springs to mind!
I've long been working on what now appears to be a rather short theory that it's the fast intra day time frames that keeps one young!
Tim.
(Apologies for the laboured puns, )

 

[Splitlink]

Yo Split',
The word bu88er springs to mind!
I've long been working on what now appears to be a rather short theory that it's the fast intra day time frames that keeps one young!
Tim.
(Apologies for the laboured puns, )

Well, you could be right. Maybe, I just need a rest.

Split

 

[tomorton]

Revising my comment on long-side exposure over the weekend - if we get a shuttle trade buy signal tomorrow at the close I will have to take it - if close is less than 5601.2 but above the 14MA - both of which look quite credible. Rules 5 and 6 apply -
5. A weak signal is still a signal.
6. Trade what you see, not what you think.

 

[pedrito]

Many thanks Tim. We were both posting simultaneously. I have saved your instructions - expect charts galore from here on.

Hi tom
Thanks very much for the explanation of your shuttle system and my other queries.

Another good way to grab charts - which saves cropping/pasting etc - is to hit the printer symbol/button at the foot of the chart (my SB firm uses "IT-finance" charts which have this print symbol at foot of chart) then choose adobe PDF as your printer - and you have yourself a nice A4 PDF of your chart - which can be saved/uploaded/easily printed for your own records - works a treat!
P

 

[pedrito]

pedrito

tomorton has explained it, but you might like to look at T2W Day Trading & Forex Community as well if you haven't spotted it.

good trading

jon

thanks for that Jon - some more midnight oil burning/reading beckons. this trading learning curve is like the north face of the eiger!
P

 

[tomorton]

Thanks pedrito.

 

[tomorton]

For those interested in these things, last week we had a 3-day unfilled gap reversal pattern. I was not around to see it but this was formed when 19/08 traded to leave a gap down from 18/08's low 5425.3. The idea is that, after the close, you enter a buy order just above the high of 19/08, which was 5400.9, and let the order ride for a maximum of 3 days. In this case, the buy would have been triggered 2 days later on 21/08. This day was also confirmed as the swing low with an entry signal at 5408.0. Not much difference in points terms in this case between the two entry points, but the time difference is the thing - sometimes getting in 24 hours early can be a nice edge, especially when 24 hours makes up perhaps a quarter of the move's duration.

These gaps also work in reverse for downward reversals. If the order is not triggered after 3 trading sessions, cancel and look for another opportunity.

These gaps are not rare on charts (at least not on Sharescope) as the FTSE is not constrained to print its open at the previous close, as is the S&P or Dow etc. For example -
30/07 short
23/07 short
15/07 long

The stop on a long is low of the gap-down day. This causes a potential problem with the 21/08 entry as its low breached the stop at 5317.1. Possibly this had already occurred before the buy order was triggered (this would not cancel the order) but as ever, there is always the risk that an early entry will be quickly stopped.