Monday, October 30, 2006

Junkin' 30 Minute Opening Range Breakouts

I got my wife's ring professionally cleaned by the same merchant who sold it to me in the Diamond Exchange off of Times Square during my recent visit. (Let me know if you would like his contact info - a great jeweler.) The cleaner removed 5 years of crud and transformed it once again to its original brillance. When I returned it was like giving it to her for the first time.

Making something old, new again is what we call Junkin'. In this second edition of the Junkin' series The Odds Maker is like the cleaner who gives an old Strategy (created in Trade-Ideas) a good polish and adjustment to make the strategy fit this market once more. Using The Odds Maker I gave a previous strategy, Volatile First Half Hour Trading Range Breakouts and Breakdowns, the tune-up.

Thanks to The Odds Maker a trader can evaluate if a Trade-Ideas strategy produces reliable, profitable trades in the current market. Let's take strategy above. I ran a lot of different Odds Maker configurations (which govern how long the trade is held and when the trade takes place) and came up with some interesting results - including the conclusion that this strategy excels in the second half of the session (assuming a long position on every trade alert).

First I didn't need to update the strategy by changing any alerts or filters to see good results in The Odds Maker. This suggests the strategy is as good or better now than when it was first created in April. Second because the strategy works well with the original configuration, the profitable trades from this strategy depended on not trading any signals until 2.5 hours after the open and holding each position until the close. This may seem counter intuitive - after all the strategy suggests acting on 30 minute opening range breakouts/ breakdowns. The Odds Maker says hold on and wait 2.5 hours before trading these alerts for better outcomes.

The snapshots of The Odds Maker configuration show which settings produced the best results:















Here is the summary information The Odds Maker provides for this strategy: (Note - you can also select to see the results expressed with %s vs $)





These results are based on a look at the last 3 weeks of market activity and are therefore subject to change as time moves on. Running The Odds Maker every couple of days informs a trader if the use of the strategy is still valid. That's a key trading lesson: It's not enough to have the right strategy for a given market, but knowing when to use the strategy during a session and how long to hold the position. The Odds Maker turns out to be a good trading coach, calling for the right plays at the right time based what's working now (i.e., the last 3 weeks). It's also great at putting a fine polish on something that was already pretty brillant.

PS - I'm glad I picked up the ring after my enjoyable visit to WallStrip and Howard & Co (think of their address in NYC as 'The Departed' meets 'Demolition Man' - lots of construction and blunt instruments lying around). I loved meeting Jeff and Adam and drank enough of the Kool-Aid from Howard to believe their plans for what's coming will be worth watching. If you haven't seen WallStrip, go - they are off to a great start!

4 comments:

Anonymous said...

Nice results on that strategy!

D TradeIdeas said...

Thanks - i wish you success with it. Remember to Link to other Strategy Sessions from our blog page, categories section.

Remember also that these set-ups are sketches meant to give you an idea how to model your own trading plan. Use this 'as is' or modify it to your own liking as many others do. Know, however, that Trade-Ideas.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, alerts and all other features are for research purposes only and should not be construed as investment advice.

Anonymous said...

It appears there were many set-ups? (top of scroll only) and the ones that were viewable on your snapshot were all shorts?
Although you wrote "including the conclusion that this strategy excels in the second half of the session"(assuming a long position on every trade alert). They all were tagged as "breakdowns" - Would you please help me better understand?.

D TradeIdeas said...

Sorry for any confusion. Let's get clear on terms. When I say set-up I mean the strategy behind the alert window that produces the lines of alerts you see in the screenshot.

This set-up (alert window) produced a lot of results. This strategy considers a good entry position to be a buy on a breakdown from a channel. As The Odds Maker results show, if you hold the position until the close you are more likely to have bought on a dip and see the stock move up by the end of the day.

You can't follow this blindly though. That's why we give you the average winner and loser amounts. This gives you an idea when a stock loses more than the average, your time in this stock is up - get out and find another.

Let me know if this clears things up.

Best,

D