Big Mike's Trading Blog

Day trading futures, discussing money management and trade management techniques, and more

Monday's charts

Here is what my charts looked like for Monday. Several nice setups to trade with a lot of follow through.

I use an ECO2 (bottom panel here) setting of 3 (fast), 7 (signal), 21 (slow) for discretionary trading. The CCI is the yellow line in the second panel (my own flavor, basically I an averaged CCI setting of 9 with 5 smoothing).

Look for zero line cross on both to enter a trade, and then look for reversal in both to know when to get out.

5 range chart:


5 minute chart:


Often, the ECO2 is the last to cross zero. But that is ok, we aren't trying to catch every single tick of the movement and we don't have to be in first... we just want consistent points. By not being "first" to trade we'll leave the fake outs to the other traders to deal with.

If you are in a long trade and the ECO2 turns purple, look to get out or take some contracts off the table and lock in profits. Same is true (vice versa) for shorts.

Stay tuned, I will be releasing the "Mike Trend" (second panel) indicator soon. But first, I need a better name for it... :)

Mike

3 comments:

Kees said...

Like your 5range chart with Eco2 and DoubleMA
Nice peace off work, Thanks
Kees

Anonymous said...

I'm curious if you have done any backtesting using this double zero cross? I played around with just the ECO2 and I couldn't get anything profitable. Maybe combining it with your MikeTrend is the key?

Big Mike said...

Hello anonymous,

I love backtesting. I love writing automated strategies. They have many advantages, but they have many downsides as well.

I have written many successful strategies and backtested them for anywhere from 3 months to 3 years (depending on the data (tick or minute)).

They all showed profitable, and I accounted for every single flaw in the backtesting results I possibly could (used market orders, avoided same bar targets, made sure had a large number of trades to avoid curve fitting, etc).

If they had all continued to work in the real market, I'd be retired by now. :)

I find no matter how incredibly complex I can write a strategy to be, trying to make it incredibly intelligent, adapting, etc, that it will still take trades that I would never take, or it would skip trades that I would expect it to take.

I could write a 500 page book on backtesting and strategies, but my point for this post is that discretionary trading still has a great number of advantages.

So for me, I try to prove concepts using backtests, try to optimize certain variables like "is a MA of 45 better, or 100?" and "is a setting of 9,2,9 best, or maybe 14,5,14?". That kinda stuff.

So I don't generally pluck numbers out of the air, but I backtest to try to find what works best most of the time. But, I also try to stick to numbers with a recurring theme, like multiples of 7, or for small numbers I'll usually only consider "2, 3, 5, 7, 9" leaving out the rest, again trying to skip curve fitting.

So, I've not written a strategy that trades only on the DoubleMA cross. But instead I just use it as a gauge of when NOT to trade. As I've written in the blog, the DoubleMA is still a new part of my strategy and I am still evaluating it. But I would suggest looking at it as when NOT to trade vs. using it as a cross.

I am currently using a setting of 7 HMA, 45 VMA. I am trying out the rule of "only take longs above the rising 45" and "only take shorts below the falling 45". You will miss a lot of profitable trades this way, but some of my testing suggests it still improves your odds.

And at the end of the day, we've got to stop focusing on "missing" trades, or not catching the top or bottom. Instead, focus on just getting those 2, 3, 5 point targets and trading once or twice a day. Who cares when you jump in or what you don't trade, so long as what you do trade works.

Mike

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