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Commodity Trading Discussion Forum

Re: mini Nasdaq 100 June 9AM

Posted By: drmarty
Date: Thursday, 8 May 2008, at 4:00 a.m.

In Response To: mini Nasdaq 100 June 9AM (drmarty)

It helps to define a reversal bar for yourself. An ideal reversal bar is one that "reaches" for a new recent high (in an uptrend) and then closes very near the bottom of the day's range. The range should also be substantial and not an inside day or very narrow. I define the "close to the bottom of the range" as in the lower 20% of the day's range and more confidence is given to a close within the lowest 10% of the range.

What I call a "cycle turn" can be learned from the daily data. It is a SUBSTANTIAL distance (in dollars or points) from either the low of the day to the close, or the high of the day and the close. It is a search for very near term momentum and you can quantify the "distance" for different markets, for example $400 in Beans and $200 in BeanOil. Since the recent increase in volatility, it is permissable to change one's rules to suit the present characteristics of the market. The signal to enter a market comes on or near the opening of the next day, following the momentum of the previous day. For example, a substantial distance from low to close in Cocoa of 50 points, or $500 is taken as a signal to go long...either at the close of that day, or at the open or near the open of the following day. A GAP OPENING "up" of 20 points would cancel the signal. A GAP opening "down" of 20 points might or might not cancel the buy signal. You can interpret the momentum as ended if the market trades lower from the opening, but if it trades higher, a buy signal can be entered.
The point is: you can write the rules for your strategy as detailed as you can.....this IS YOUR PLAN and you can follow it as meticulously as possible. It is also desirable to back-test it....not to optimize it...but to see if it works in a general way, over time. If you have confidence that it HAS worked in the past, it is a decent bet that it will work in the future. This is your risk.

OK so far?

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