Intra-day swing trade method test

A method I'm experimenting with at the moment is fairly simple swing trade method that I've been using on daily time frame but that I think can be used on any time frame. So today I did a intra-day paper trade on FXPO.L which I'm currently in a real trade on a longer time frame, but I thought it would be interesting to experiment with the method on an intra-day time frame.

So I define the full daily range using the 200 day ATR and measure it from the previous close on both sides. So the previous close for FXPO.L was 475 and the ATR was 14.56 so that gave me a lower range of 460.44 and and upper range of 489.56

FXPO.L sold down steadily with the market during the morning and got within 1 point of a full days range at the low. The next bar was a buy-if bar as it failed to make a new low and closed higher than the previous close. So I needed the next 30 minute bar to close higher again to confirm the entry signal. Once it did I set a buy order to buy at a 30% retracement of the previous bar at 465.2




This was filled and the price moved up for next 3 bars but stuttered at S1 pivot level and failed to reach my 2/3rds off level which I set at half of the ATR daily range. It then made a new base and started to move up fairly strongly and I thought I'd reach my target but then the Japan news hit the market and it sold off with everything else for a while.



So as this was a paper day trade I closed it just before the close for a small profit. So although I was disappointed it didn't do better, I think it was a good example of the ATR range swing method I'm trying to get a handle on and will see if I can do many more of these to see if it's a profitable intra-day method.

hi isa thanks for sharing... I can relate to this.

I'm interested in your reasoning here - assume you are treating the ATR levels as reference points where price may be overextended, rather than as dynamic supres levels? thinking about it theres not much difference!

In the fxpo example here the price action was almost perfect in terms of the first up candle of the day (buy if) was at -1ATR level. is this the sort of price action you'd look for in the build up or are you solely looking to the level as a swing opportunity for cheap entry.

2/3 off the table asafp is my favourite risk management method, although I use half risk to ensure breakeven trade rather than ATR multiples this is something I'm overlaying to my backtesting to see if I'd closed every trade at 1.5x 2x 2.5x ATR from entry etc what would my overall performance be.

cheers nice example
Wig

Hi wig,

I didn't include everything in my example as to not over complicate it. I was looking at the market charts at the same time and the sectors and could see some of them starting to turn up. But also on my previous charts you'll notice the pivot levels are plotted and the S2 level was at 463.27. This is a fairly key level as well I think as a break below that would be very bearish, so the confluence of that, the -1ATR daily level and also if you look at the attached intra-day charts below you'll see that it was also the -2 & -1ATR levels on the 30 and 60 minutes charts and also the 50 bar exponential moving average (EMA).

I'm not sure how much weight you give indicators, but I like to look at MACD, Force Index and RSI for confirmation purposes together and divergences with the price action. MACD and the quick EMA had started to turn up so the Elder impulse signal turn from bearish to neutral (Red bar to Blue bar on the stockcharts). This means that buying is allowed again. When it's red you should stand aside.

Another thing I noticed was that it was matching the general market move down fairly closely and force index was indicating that there was no selling volume coming in. So a divergence there. Finally RSI had almost reached oversold on the 30 minute chart and was sitting the 50% line on the 60 minute chart which is a common pullback level. So this all added confirmation for me that the signal was good.

I hope that all makes sense. Here's the intra-day chart from stockcharts.com I referenced.

This is a technique I'm experimenting with but the basic premise is that I'm looking for a buy-if candlestick at a key support level or confluence of intra-day levels and confirmation from the broad market of a turn in sentiment.



Cheers

isa

Wig wrote:hi isa thanks for sharing... I can relate to this.

I'm interested in your reasoning here - assume you are treating the ATR levels as reference points where price may be overextended, rather than as dynamic supres levels? thinking about it theres not much difference!

In the fxpo example here the price action was almost perfect in terms of the first up candle of the day (buy if) was at -1ATR level. is this the sort of price action you'd look for in the build up or are you solely looking to the level as a swing opportunity for cheap entry.

2/3 off the table asafp is my favourite risk management method, although I use half risk to ensure breakeven trade rather than ATR multiples this is something I'm overlaying to my backtesting to see if I'd closed every trade at 1.5x 2x 2.5x ATR from entry etc what would my overall performance be.

cheers nice example
Wig

Sorry I didn't answer your direct questions in the last example. My thinking behind the level is that if it's already moved it's whole days range by 11am then there's a good risk reward for a swing entry as unless the stock is collapsing under strong volume there should be some sort of bounce around this overextended level.

After yesterdays price action hovering near the high I was looking for a pullback to the 50 bar moving averages which were at 465 on the 30 min chart and 459 on the 60 min chart. So this and the confluence of other things I mentioned in the last post gave me more confidence when the buy-if candlestick appeared. Remember the entry isn't until 2 bars later. You need the buy-if bar, then the buy confirmed bar and then you buy on a 30% pullback of that bar in the next 30 mins. So it's over 1 hour of price action which gives it more validity IMO.

I'm experimenting with the 2/3rds off method as I think it could be the way to go with my One Trade a Week Picks in my real account. So my thinking is that I will take 2/3rds off at my target level of 1xATR and let the rest run with a trailing stop or close the whole position if it doesn't reach my target by the end of the week. I'm not sure if I'm being too conservative with this so I'll be interested to see the results of your back testing about the levels.

Cheers

isa

I just missed a new swing entry on FXPO.L

Entry for the method would have been at a 30% pullback of the second white bar on the third white up bar. So as I missed it there's no trade.

This one is performing quite well. Is a shame I missed the entry.

It reached the daily 1ATR level and and has sold back down a little. So according to my methodology I would have taken 2/3rds profit there and would have a 1/3rd position still in play. But I would now move the stop loss up to break even and then start trailing the stop on the following day.

Here's the current charts.

So the idea of this method is to close at the end of the day. So the remaining 1/3rd position would have closed slightly in profit at 475.

So the trades details if I'd seen the signal bar would have been:

entry: 474.2
2/3rds off: 481.09
1/3rd close: 475

However, considering the spread, the 2/3rds target wouldn't have been hit so the whole position would have been open until the close. So it would have only generated a break even trade. So I need to decide if I need to add another rule to close 2/3rds if it doesn't reach the original 2/3rds target.

Here's the chart

Alright isa all good stuff here

I can see how bringing ATR into the mix gives another reference point for pullbacks, and waiting for two reversal bars on lower tf is a great way of keeping you out of as many false bounces as possible. its these small margins I believe which turn the edge in your favour over time.

This is something I have begun to take on board recently, to stop second guessing price and wait a little bit longer to let it tell me when it is more likely to be moving. I believe this would have kept me out of many losing trades in the past when I jumped in at the first sign of a green candle for FEAR of missing a move and GREED of catching every little pip.



2/3rds target is a study in money management in itself and a solid base from which to build. the way I see it is a breakeven trade is a good trade, and a winning trade is a great trade

cheers
Wig

I've managed to program my buy-if and buy confirmed signal into my end of day chart program and have scanned friday's markets (S&P 500 and FTSE 350) to see which stocks and indexes made a buy-confirmed signal. These are the results:

^NMX2710_____FTSE 350 Sector Aerospace & Defense
^NMX4570_____FTSE 350 Sector Pharmaceuticals & Biotechnology
APC_____Anadarko Petroleum Corp
BEZ.L_____BEAZLEY
BIDU_____Baidu
BSET.L_____BRITISH ASSETS
BSY.L_____B SKY B GROUP
CNX_____CONSOL Energy Inc
CRM_____Salesforce.com
FLS_____Flowserve Corp
GLD_____Gold
GSK.L_____GLAXOSMITHKLINE
HICL.L_____HSBC INFRAST COS
HP_____Helmerich & Payne Inc
HUM_____Humana Inc
IGUS.L_____S&P 500 iShares £ Hedged
IVZ_____Invesco Ltd
LSIL.L_____Leveraged Silver
MYL_____Mylan Inc.
NBR_____Nabors Industries Ltd
NOVL_____Novell Inc
OXY_____Occidental Petroleum
PCS_____Metropcs Communications Inc
PFE_____Pfizer Inc
PPL_____PPL Corp
SLV_____Silver
SVU_____Supervalu Inc
TRYS.L_____TR PROP SIGMA
UU.L_____UNITED UTILITIES GR
VRTX_____Vertex Pharmaceuticals Incorporated
XCH.L_____XCHANGING

I've had a look through and is definitely some prospects in there I think for Monday. Remember the method is to buy a pullback of around 30% of the previous days buy confirmed bar and place a stop 2 bars back below the low. So some will be no goes as the risk reward needs to be considered.

So another way I think you could use the daily buy-confirmed signal is to use it for an intra-day play for the following day as the probability should be good of it closing higher the following day in theory, but that will need testing.

So a method could be that you get a watch list for the following day from the daily buy-confirmed signal. Then you wait for a pullback on your favourite pick/s and use the intra-day buy-confirmed signal on the 30 minute time frame for an entry point?

It sounds good in theory, but I'll need to do some back and forward testing to see if it has merit.

I traded my one trade a week thread pick in my spread betting account today and although I jumped the gun a little bit on the entry by 15 mins it was a near perfect example the method I'm trying to do for the intra-day trades.

First white candle near support was the buy-if candlestick and then the next candle closed higher so that was the buy-confirmed candlestick. So if I hadn't jumped the gun and got in on the buy-confirmed candle then I would have aimed for a 30% pullback of the buy-confirmed candlestick length.

Here's the chart:

ABF.L___ASSOCIAT BRIT FOODS
ANTO.L__ANTOFAGASTA
BNKR.L__BANKERS INV TRUST
BRW.L___BREWIN DOLPHIN
BT-A.L__BT GROUP
COB.L___COBHAM
DEB.L___DEBENHAMS
DLAR.L__DE LA RUE
DRX.L___DRAX GROUP
EDIN.L__EDINBURGH INV.TRUST
FLTR.L__FILTRONA
FRES.L__FRESNILLO
GFS.L___G4S
HL.L____HARGREAVES LANS
HOME.L__HOME RETAIL GROUP
IPF.L___INTL PERSONAL FIN
JFJ.L___JPMORGAN JPNSE INV
KAZ.L___KAZAKHMYS
LAM.L___LAMPRELL
LRE.L___LANCASHIRE HOLDINGS
LSE.L___LSE GROUP
PLI.L___PERP INC AND GTH
RNK.L___RANK GROUP
RR.L____ROLLS-ROYCE GROUP
SDR.L___SCHRODERS
SMIN.L__SMITHS GROUP
SMP.L___ST MODWEN PTY
SMWH.L__WH SMITH
SPD.L___SPORTS DIRECT
SSE.L___SCOT & STHN ENERGY
SVI.L___SVG CAPITAL
SYR.L___SYNERGY HEALTH
TRY.L___TR PROP INVEST TST
ULVR.L__UNILEVER
XTA.L___XSTRATA

From a quick scan of the charts LSE Group looks promising, Brewin Dolphin and Filtronia IMO, but I'll have a more in-depth look to see if I want to trade any.

So remember if you trade any, the method is to buy a 30% pullback of todays candle using the buy-confirmed signal on the 30 minute chart. So if it drops past 50% of todays candlestick length then I'd leave it.

The buy confirmed bar completed at 11am so I waited for a pullback but after 15 mins it had only moved up a bit so I went long HOC.L around 11.15am.

Here's the charts

My stop loss was hit near the end of the day. The broad market was just too weak so unfortunately for this trade it was was dragged down with everything else. But I'm still pleased as the method worked again and I should have taken the failure for it to get above the days high and reversal below my entry as the sign to get out. Or I should move my stop loss up once it makes a new pivot low after my entry which it did in this case 3 bars after entry. Is something to consider along with position sizing considerations.

Here's the chart of the whole trade

EDIT: Actually I've just noticed on the chart that just as I had the buy-confirmed bar at 11am I should have noticed the same pattern in reverse on the 1.30pm bar. So a sell-confirmed bar. So if I do the reverse of the buy signal then I should sell on a 30% retracement on the next bar. I'm beginning to think this could work, but I need more liquid markets with smaller spreads. Might do some testing on forex crosses.

I had an unsuccessful day today with HOC.L using the price bars alone method. So I've posted the actual trade and trade that I should have taken. Both use the same method, but I didn't consider the daily trend so was on the wrong side of this again. But this all a learning experience and I definitely think there's an edge in this method, I've just got to refine it through these daily experiments.

Here's the charts:

I had another go at HOC.L yesterday as Thursdays tail on the daily chart that touched support and the fact that it was on the long term uptrend line made me bullish for an intra-day move up. I used the buy-confirmed method but I waited an extra bar for it to close above the short term EMA and the previous days close to add a bit more confirmation.

The trade went well, but my previous two loses made me take profits on it too soon as I took the first R1 target and didn't wait for it to reach the daily 1 ATR level which it invariable did later in the day. Anyway it was a good trade and this weeks experiments with this method have given me hope that it could be a useful method for day trading. But I realise that I'll need to find more liquid stocks or other products as the spread on stocks like HOC.L is just too big for day trading.