Intraday movements on a trading system

[surfer]

Say you have a system that tells you to buy or sell using closing prices (I am not asking about the system) how do u think the system should work the next day when you want to do the trade and the stock has gapped up or moved against . do u think you should just going do what your system says the next day no matter how the share opens or wait and see or do u think you should trade it but try get best price in your favour .

[quovadis]

This is a problem which I confront regularly and I still don't know the answer. Perhaps Simon or one of the other "experts" can assist. For example, last night my systems gave 2 shorts and 1 long signal. This morning the prices on both long trades gapped up and the price on the short also gapped up but later moved back down. The long trades then continued to move up while the short trade came back down. Perhaps the answer is to simply trade at market price?

[surfer]

I am sure the answer is trade the price ,but do think u have to have a system as there is nothing worse than missing out on a profitable trade due to intraday volotility.

[SimonPB]

many options, as is usually the case in trading .. I get around the problem by enterignat 4.30pm th eday after the trigger, assuming the direction is the same as the tarde .. or enter at opening .. or watch during the day and try a best entry (don't like this on eat all) ..

[quovadis]

The thought occurs ... I read some time ago (where I can't remember) that prices have a tendency to revert to or bounce near their 5 day EMAs. The theory is that one calculates the 5 day EMA by using the previous 4 days EOD prices and adding the last pre-open price or early trading price for the 5th day (ie the day on which one intends to trade). One then enters an order at the 5 day EMA price thus caculated. The theory might be worth testing! Usual disclaimer applies.

[#6]

It is definitely a tricky situation and the strategy depends on your timeframes. In principle, a share that closes close to its highs on a green day is supposed to have a really good chance of gapping up the next day. the problem is that all research done in this area, and all books and strategies based on swing trading (short term movement capitalization) are written in the US, where share price action is generally set in the first hour of trading. Foreign market openings have little influence on the stock. With us, the situation is completely different, because we are affected at opening by the FTSE and Asian stocks, and then at close by US markets - which have a very large influence. Best advice I can give is use at least 2ATR stoploss. Another trick, if US futures prices have moved by 1%, then that almost always declares the direction for the day

[#7]

It is definitely a tricky situation and the strategy depends on your timeframes. In principle, a share that closes close to its highs on a green day is supposed to have a really good chance of gapping up the next day. the problem is that all research done in this area, and all books and strategies based on swing trading (short term movement capitalization) are written in the US, where share price action is generally set in the first hour of trading. Foreign market openings have little influence on the stock. With us, the situation is completely different, because we are affected at opening by the FTSE and Asian stocks, and then at close by US markets - which have a very large influence. Best advice I can give is use at least 2ATR stoploss. Another trick, if US futures prices have moved by 1%, then that almost always declares the direction for the day

[#8]

Tis also about trust in your trading system. So, after a buy signal, if I get the share at any point below previous close I regard this favourably

[quovadis]

Presumably for a short, if you sell at a higher price you would also regard that as favourable?

[Oom_Boom]

Have you looked at pivots to determine the next days range?

[Ninja]

Day 2 confirmation needs to take out day 1's (trigger) high or low before entry.

[MR_V]

In opening let me just say - "thanks" to all contributors. For me this thread has been very informative. No REALLY! But ... & bottom line, IMHO of course. Prices (be them second, hour, month, year, etc) are determined by the combined, infinite emotive responses of every 'player', on an infinite no of possibilities. Every system written (& marketed well - lol) is some "bright-spark" attempting to reduce the inconceivably infinite down to a mathematical equation (program) & hence validate his own miniscule "brilliance". {fyi - I'm a software programmer}. Yes, it's a game with the proverbial 'law of averages'. IMO, the best trading system would be one that reduces 'human nature' into a mathematical equation. So once Quantum Physics is 'old news' - so too will the Markets be. Man, I need to stop drinking so much!!! I gets so slim it hurts.

[#13]

No Mr V, I would disagree with you. A system is not designed to give you a statistical edge over the market - your money management (risk vs reward & position sizing)will do that. I doubt there is any trader out there that can get better than 40% successful call rate. A system is designed to get emotion out of the equation, to give you confidence to actually enter a trade. Because you have to be init to winit.

[SimonPB]

I don't agree witht he 40% number .. sure a 40% win rate will make profit with good money management .. but getting a win rate of aroun d55% is very possible, even just a simple set of MA's should do that .. remember a coin toss and dart is 50% ..