Two ways it can lose - buy order triggers but price falls back through the candle’s range and breaches the low. This triggers the sell order, which locks the trade into making whatever profit the sell order makes by the next close lower than the short entry, minus the loss incurred by the long trade since it opened (it is closed when the short order is closed).
So a loss is incurred if the new candle forms an outside range candle.
But then you re-set another pair of orders and start again. So the strategy is more likely to make a loss if there are more outside bars. Intra-day this isn’t something I’m familiar with but outside bars are not common long-term.
Well both orders could get hit and triggered, but as soon as the second is triggered, that hedges the loss - there is no stop-loss as such but you can set the maximum loss according to the distance between the two opposing orders.
Even if both orders are triggered, closing at the next favourable close very possibly means a loss less than the maximum calculated.
It seems the danger is placing the two opposing orders and then having both triggered, by a following outside bar. Which does suggest, as you say, that selecting the right bar type would help - a narrow range bar for entry set-up would seem to be asking for trouble.
Haha I tried this years ago. I was unsuccessful. It’s very frustrating and you get more frustrated when you miss a trade that worked. So I tried adding more confluence eg moving average, or if day is green then only take buys and a whole host of other setups but it didnt work. It’s so simple that its unreliable probably because the setup becomes inefficient when everyone is looking at it? It’s so discretionary that theres no way you could analyse it or follow it consistently.
A good way for people to start testing more strategies though. Lol, itll keep them busy for months.
All I’ve managed to do today is break even - bar 82 pence!
Still, the simplicity of the planning makes me want to persevere for a week or three. Of course if I’d had more success intra-day trend-following I wouldn’t be bothering with this but there you go…
OK, let’s say M5 bar, range 4 pips, the open of the beginning next bar slightly higher, you put a long order at the previous high and s sell at the previous low at the same time,I guess.
OK, now price moves up, but you can’t get over the spread and still in loss. Suddenly price moves lower, hits the sell order, in the mean time your buy position is in minus the 4 pips plus spread.If price goes on moving down, you always have a loss of 4 pips plus spread because the win of the sell order equals the other loss. And vice versa if price moves up.
So this only works, if the new bar starts to move immediately in your first direction you went long or short,without triggering the second order, an keeps on moving in your winning zone.
That’s it - the risk is that price prints an outside bar. This triggers both orders and builds in an unavoidable loss of range + spread. The outside bar effect could of course be spread across several bars of the time-frame - if say a buy order is triggered but then price falls back into the mid-range of the set-up bar and stays there for bar after bar. Eventually it might fall through the sell order price level, same effect, but wasted a chunk of the session.
So I’m looking at charts with the fewest outside bars - gone almost straight away up to the M30 time-frame, and taking most trades off US index charts rather than forex - though the obvious major forex pairs like EUR/USD, GBP/USD etc., seem pretty friendly.
I’m avoiding setting orders off very wide range bars - nearly always followed by a clutch of bars consolidating within the wide range. Narrow range bars are also a trap as they’re likely to be followed by a bar which is of average range but easily goes outside the narrow bar’s range. But these are little tricks based on volatility, not technical analysis. Trying to eliminate the individual input as much as poss.
Interesting. I’ve experimented w similar systems (straddles). The way I see it there is an advantage to this methodology because the entries are at the high or at the low of their respective time frame. Your chances improve when entering at the “edges” as opposed to entering at price points in between the open/closes
You can use an entry order that cancels the second entry once the 1st entry is triggered (oco) to avoid some of the issues discussed above. Then you can begin to employ other layers of techinical factors to fine tune your entries in order to optimize the system.
Thanks for this. Yes the edge comes from jumping onto fresh momentum at the end of every bar. There is always a majority of bars with higher ranges and higher closes in an uptrend than bars with lower ranges and lower closes.
On the daily chart, this majority can be modest - even in the strong uptrend segments of 2019, the Dow only made higher closes 56% of the time. But of course, the average price rise was also greater than the average price fall, or else there wouldn’t have been an uptrend at all.
I hope to take advantage of these features intra-day. It looks simple.
Yes, you could use OCO orders but I’d still have a SL initially where the opposing order lies. But the stop on the triggered order could always be trailed.
Plan for tomorrow will involve bracket orders on the 30-minute charts for -
FTSE100, Nasdaq100, GBP/USD
Trading this strategy about 0900-1630 (UK). Exits will be -
a) stop-loss hit
b) second higher close for longs, second lower close for shorts
c) at close of fifth bar from set-up if neither a) nor b) triggered
Not placing orders based on exceptionally wide or exceptionally narrow bars. Taking profits immediately if open position prints extreme gain.
Sounds like an interesting variation. As ever, there’s always the tension between taking profits early and re-entering, or running the winners until they die.
I’ve thought about this as well. In the end, we’re collecting pips. So whether they are in increments of 10 20 50 hundred 300 does it really matter?
Of course collecting smaller amounts will require additional cost due to the more spreads. And would involve more screen time.
Just another perspective because I know I’m always falling prey to the temptation of looking to get in earlier and earlier and stay in later and later which is simply impossible.
I’m sure there’s a black hole, event horizon reference in here someplace, but there’s really no way to consistently call tops and bottoms unless of course you’re on the inside.
So I guess one question maybe, or viewpoint would be easiest way to consistently collect pips. How many times have we been surprised at the amount of money in our coffee can?
To add or clarify my above reply, I have found my collecting pips thoughts percolating from perhaps impatience and possbily watching or holding trades too long that go from green to red.
I think of it like climbing a pip ladder where each rung gets cashed out, there is no backsliding. It is still something I am pondering and haven’t found clarity in my thoughts yet.
firstly 30 minute charts are far too volatile for this type of thing , IMO
Secondly three markets for this strategy? Two of them are indexes and will probably both be triggered at same time.
Thirdly your idea to cancel after 5 bars means your effectively not trading this strategy at all, it’s become random noise.
this type of thing only works if it’s triggered on the next bar only
I sometimes do a similar thing, only dailys but always cancel after next bar if not triggered
the discretion that is being used for exceptionally wide or narrow bars, is very likely to be overridden
fact is this type of thing works best with short bars because it’s an expansion in voltatility.
the fear of being triggered in both sides is a very real one on such a small timeframe, longer time frames the chance is not so high.
Monday is a notoriously bad day for very short term price action in the stock market.
However, I’ll be keeping my fingers crossed, I do think the type of thing your looking at has potentially but really think you need to try it on only one market first (ftse least volatile intraday) and maybe step up a time frame
