Saturday, September 6, 2014

EVO SIM - 9-6-14 - Decent day ....

Software messed up and would not show sim trades executed as normal.

http://i.gyazo.com/9ae6fad3a51b200b923e77e4e3924e78.png

FUTURES Instruments - DAX to CL

The DAX is really is better suited for European traders. I live in NYC so in order to monitor activity or daytrade, I would have to stay up from 3AM EST which is start of premarket until 4AM, actual start, then monitor activity anytime to the close at around 12PM EST. Not conducive to a regular lifestyle.

In addition, it's an expensive contract, one tick = 12.5 EUR (16.65 USD).

If you trade US hours, typically the volatility for the futures contracts range from

ES = slowest (tick = 12.5 USD)
YM = fast (tick = 5 USD)
NQ = faster (tick = 5 USD)
TF = fastest (tick = 10 USD)

I prefer the TF (Russell 2k futures) but for newer traders, the YM may be a better alternative/medium since it's not as spikey as the TF but won't make you fall asleep like the ES.

Now if you want to live on the wild side, try trading CL ....

http://www.elitetrader.com/et/index.php?threads/i-want-to-trade-fdax.257505/

Tips for trading on the DAX 30

Tips for trading on the DAX 30

It is no secret that there are times during a trading day when it is good to trade and times when it is not good to trade. Experienced traders have learnt when these times are, and novice traders need to learn this information. Understanding the timing of the market will definitely improve your indices trading experience, particularly in the case of trading the DAX.

Investors whether they are long term or short term may be holding an investment for hours and days (short term) or weeks and months (long term). Time is both an investor's friend or an investor's enemy and therefore it is vitally important for traders trading the DAX index to interpret the time elements relating to when to trade.

Definite hours in the day are normally healthier for trading; some incline to be better for short positions and some better for long positions. Of course, no time pattern is fixed in stone. Nothing is fixed in stone regarding the stock market.

So what are the time patterns that DAX 30 index investors should be aware off?

    After a bank holiday the afternoon period is much more reliable than the morning period.

    Mondays, predominantly Monday mornings, are not decent days to trade as markets are "absorbing" the previous weekends trading and news happenings.

    Friday afternoon is a bad day to invest since volumes are low as many traders have gone for the weekend.

    Contract rollover days for options and futures, which happen every three months are bad days to trade.

    The afternoon period preceding rollover is always risky.

    Tuesday, Wednesday, and Thursday are decent investing days, except if there is a statement from the Fed bank or major earnings data from an important company.

    The best time for trading is 9:30 to 11 am European time, and the final hour of the day.

    Don't trade in the first 15 minutes of the day, because the market requires a period to form a trend.

    Avoid trading from 12 - 2 pm as floor traders at the exchanges take lunch and the volumes fall, while volatility takes a grip.

    According to the DTI (Diversified Trading Institute) 7.00am and 4:30pm European time are strategic times for the DAX 30. The 7am price of the DAX is a key pivot point to evaluate the sentiments other investors in the market. At 4:30 am European time, the Asian markets handover to the European markets.

    European markets handover to the American markets at 9:30pm.

    If the DAX is down on a Friday, the odds favor a down on Monday.

Thursday, September 4, 2014

Gap Trading: Trading With Probabilities - Trader Kingdom

http://traderkingdom.com/trading-futures-education-topics/trading-futures-basics/5251-gap-trading-trading-with-probabilities

Gap Trading: Trading With Probabilities - Trader Kingdom

"Gap trading" is a simple and disciplined trading approach. When gap trading, you don't need any indicators. You only need to find a market that has a price gap from the previous close to today's open.

More often than not prices tend to move towards the direction of the previous close, presenting excellent trading opportunities.

In this article I want to show you some ideas how to trade them.

It's All About Probabilities

Depending on where the market opens today in relation to yesterday's close, we see either a full gap or a partial gap.

Scott Andrews from www.MasterTheGap.com has been doing some extensive research about the probabilities of a gap fill.

Click on image to enlarge!

The above picture shows the winning percentage for various gap opening scenarios for the e-mini S&P based on more than 2,150 opening gaps between 2002 and 2011.

In this graphic the historical win rate in the S&P 500 E-mini futures for each zone is shown and assumes you faded the gap at the open and held for gap fill (prior day close i.e. thick, yellow line) or until the end of the day if gap did not fill.

Let me explain the different gap trading zones:

All zones starting with "D" are gap trading zones after a "down day", i.e. the previous day's close was below the previous day's open. Here are the different scenarios:

D-H (54% historical winning percentage). If today's open is above yesterday's high, then there's a 54% historic winning percentage of prices moving to yesterday's closing price.
D-HO (61% historical winning percentage). If today's open is above yesterday's open, but below yesterday's high, then there's a 61% historic winning percentage of prices moving to yesterday's closing price.
D-OC (74% historical winning percentage). If today's open is between yesterday's open and close, then there's a 74% historic winning percentage of prices moving to yesterday's closing price.
D-CL (83% historical winning percentage). If today's open is below yesterday's close, but above yesterday's low, then there's a 83% historic winning percentage of prices moving to yesterday's closing price.
D-L (64% historical winning percentage). If today's open is below yesterday's low, then there's a 64% historic winning percentage of prices moving to yesterday's closing price.

Scott identifies similar zones after an "up day", i.e. the previous day's close was above the previous day's open. Here are the different gap trading scenarios after an "up day":

U-H (65% historical winning percentage). If today's open is above yesterday's high, then there's a 65% historic winning percentage of prices moving to yesterday's closing price.
U-HC (85% historical winning percentage). If today's open is above yesterday's close, but below yesterday's high, then there's a 85% historic winning percentage of prices moving to yesterday's closing price.
U-CO (74% historical winning percentage). If today's open is between yesterday's open and close, then there's a 74% historic winning percentage of prices moving to yesterday's closing price.
U-OL (65% historical winning percentage). If today's open is below yesterday's open, but above yesterday's low, then there's a 65% historic winning percentage of prices moving to yesterday's closing price.
U-L (48% historical winning percentage). If today's open is below yesterday's low, then there's a 48% historic winning percentage of prices moving to yesterday's closing price.

Not All Gaps Are The Same

As you can see, opening gaps in general have a strong tendency to trade back to the prior day's closing price (65-70%), but depending on today's open in relation to the previous day's open, high, low and close, sometimes the probabilities are higher than average.

You don't have to trade every single gap - focus on the high probability gaps!

The name of the game is not trying to catch all of the winners, but rather to avoid most of the losers.

As an example, why do you think gaps in the U-L zone (bottom right of the Gap Zone Map - see above) show such a low historical win rate (48%)?

Scott Andrews believes it's because gaps opening in this zone are catching traders positioned to the long side off guard, triggering many sell stops in the process. Plus, such an obvious reversal from the prior day surely attracts new short sellers who want to jump on board the beginning of a new potential trend.

Gap Trading In A Nutshell

When looking for gaps, obviously you want to exclude the "overnight session" and only focus on the "day session" of the markets.

ANY market and even stocks are suitable for gap trading. The above graphic shows the historic winning percentage of the e-mini S&P. As you can see, the odds are in your favor when trading gaps, but keep in mind that past performance in not necessarily indicative of futures results.

Pick the highest probabilities. As I said before: It's not about trying to catch all of the winners, but rather to avoid most of the losers.

With that in mind, give gap trading a shot. You can do it with ANY charting software, since you don't need any indicators or other fancy tools.

To learn more from Markus, please visit his blog at RockwellTrading.com.

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