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Pitbull Three Strategy


Here is a strategy which I did not originate. Perhaps some of you have seen or heard about various forms of this. It was taught to me by a self proclaimed “old Timer” who I happened to meet about 5-7 years ago in a commodity site chat room. This was before Paltalk and Hotcomm was popular. I present it here mostly as it was taught to me for free. I “watched” him trade this for about 9 months in real time. It was designed for the big S&P contract so I have modified it slightly for the emini. The man who taught this was gruff, sometimes abusive ( especially when the future vendor Kingfish came in the room) but always answered questions…

Originally I thought he was going to turn out like the Army Sargent played by Lou Gosset Jr. in “Officer and a gentleman” but this mentor just disappeared and I never found him again. Perhaps he started his own service and markets this but I haven’t seen it. His idea on stops was the following….”You can either take the loss and try again or trade your way out”. He always tried to trade his way out and would sometimes lose on trend days… as it is a counter – trend strategy……a few other things….he would call in for the official opening range…( it is not the one minute high or low as some think but we can use that for exits)..I am using the opening price on the emini to set the levels . He would trade up to 50 contracts if he needed to so he was at times adding to a “losing trade” as some might say……he always took a 1.5 point profit target…….he didn’t alter this….I’ll think of other things as we go. He also thought that if the rumors where true and the floor traders where moving to screen trading then this strategy would become less effective…….it is only traded in the first hour and he only broke this rule if he was trying to “trade out”…..keep in mind this was designed when volatility was higher and 5 minute bar could have a range of 5 points…unlike today's markets……I think the levels are most important and although I don’t snap them on my own personal charts I have them written down on paper after the opening….He believed that at 10:30 EST you should close your business up and end for the day…unless he was trying to recover... ok enough of the history

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ok first we take the opening price and add and subtract the following numbers
The strategy tends to capitalize on the floors ability to push the market in one direction to sucker in the public for it to then only snap back towards the opening range…I have noticed that it works best when the market is pushed to an extreme of either an overnight high or low or the previous days high or low…so we can relate this to an “open-test-reject” as per Market profile concepts……
+- 2.5
+- 4.0
+-5.5
+-8.0
This sets up our WINDOW of trade entry points….For today Friday January 5th I have the opening price at 1424 so the downside numbers would be 1421.50, 1420, 1418.50 and 1416..and here are the rules.



1) If we open and drop down to the minus 2.5 number then rally to the open you buy
2) If we open and drop down to the minus 4 you then buy at the minus 2.5 on the way back up
3) If we drop down to the minus 5.5 you buy the minus 4 number
4) If we drop to the minus 8 you buy the minus 5.5
This is all reversed for the upside.
Anything beyond a plus or minus 8 meant the market was too risky too initiate from down or up from the opening so he avoided it…in general he believed that the further out into the WINDOW you went then the riskier it became…so buying a minus 2.5 after a hit on minus 4 is a safer trade then buying a minus 4 number after a minus 5.5…He didn’t use stops but his target was always 1.5 off the window number ..not your fill price...



You would stop trading if the markets dropped 2.5 points below the opening and then traded 2.5 above the opening…..this would be called a COMPLETED WINDOW RUN and the floor was done doing it’s business…you would be finished also…just one or two good trades a day……for now think about how you can incorporate the Pitbull One and II thread ideas into this……did you see the singles band with the first and second one minute bar today

The Market opens at 1424 and drops down to slightly below the minus 2.5 number at 1421.50…since we didn’t trade back to the opening at 1424 there is no long trade…..The market then drops further and goes to the minus 4 number at 1420 so we are a buyer at 1421.50……which is the minus 2.5…If you use stops then this trade would not have hit 1.5 points of profit and you lose if you are using stops….The market drops further to the minus 5.5 number to the tick at 1418.50..so you are a buyer at the minus 4 which is 1420….this achieves it’s target and rallies up to test the band..see pitbull thread II at the first and second one minute bars…not shown on this chart. ok...this is a lot so I will work on trying to clarify what needs to be clear…the second long was better because we had Tick divergence to support the trade…may seem complicated but it’s not..I’ll highlight the important stuff…..and ask questions...it helps me too to get this stuff in words

Bruce
so today we hit the plus 4 - 5.5 zone into the VA low...Market delta showed sellers at 57.50 so That is the short area...not sure this will amount to much but it's just an example of confluence I look at with these zones....the challenge with this is that they rejected the ovenight lows at the key 48 - 50 zone on high volume.....so this fade is obviously harder as volume is in the market....I would have prefered to see them run out the overnight lows on lower volume
and so it does what it is "supposed" to do again..they run in the breakout players / some folks take profits and then they return it to the open.......ok..nuff said
Bruce for vol. fades which minute chart is best suited. 5 MIN OR .........
I like the 5 and 15 minute...look at merged profile thread and Davids comments on the first 15 minutes and the first three 5 minute bars.......that's the best thing I've added to my arsenal in a long time.....it is that reason that I thought the plus 4 - 5.5 might have trouble catching the high this morning...let me know if you can't find it and I'll cut and paste it.....it goes well with Crabels opening range breakout.....then I compare the most recent complete day and the day before that..
Bruce,

Have you noticed anything on the day after a NR7 day, the days after a NR7 that break the range of the day before tend to trend strongly does this affect this setup at all?
Admin Edit: Removed copyright material.
I haven't noticed this specifically Joe. I think that keeping track of how and where we open in relation to the previous days range and the value area is a good idea......lots of fades work well when they happen to fall inside the previous days range and/or Value area...I always want to see what is happening with volume once we break or re-enter a previous days range
quote:
Originally posted by CharterJoe

Bruce,

Have you noticed anything on the day after a NR7 day, the days after a NR7 that break the range of the day before tend to trend strongly does this affect this setup at all?

not sure if this is OK for two reasons

1) The author is a poster on this forum and a genuine nice guy

2) This probably has copy right protection

We'll need to let Guy handle this one...
quote:
Originally posted by SPQR



[file]OBV.pdf,2448,,0[/file]

Bruce is correct. We can't post PDF's from Stocks & Commodities or any other copyright source in this forum or anywhere on this site without the copyright holder's consent.

I've removed the file from your upload list SPQR.

You can quote snippets from the article and summarize in your own words.
My point being Bruce was going to copy and paste his post (intellectual copyright infringement - and which also didn't contain any useful information) and spin what was in it to mean whatever the hell he thought best, to his own ends.

So instead of guessing what David meant and trusting Bruce's explanation of what couldn't be gleaned without additional material, I provided the material.

At least you left if up a day so that those who read it will know a lie when or if Bruce tells one re OBV. I hope they speak up too.
Originally posted by BruceM

big mike...is this one of bitmans ideas u r using on weeklies

http://community.livevol.com/index.php/articles.html/_/options-trading/spx-weekly-credit-spread-strategy-r3205


Yes it is.