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YMM1, (3, -1), profitable strategy, Stretch


Hi,
These past several months I've been posting this intra-day e-mini $5 Dow futures trading strategy in the Traders Lounge; and thought I would post the same in this room, for the purpose of identifying students of the markets who are interested to intra-day trade e-mini $5 Dow futures (YMM1).

Hi,
Trading from the 28 April settlement, 12708, and applying the (3, -1) formula to the Stretch calculation, and the Fibonacci of the Stretch calculations, the following price measurements printed before the end of the B trading session, this Friday afternoon:

28 April settlement = 12708
Stretch = 27
1.618% of the Stretch = 43
2.618% of the Stretch = 70
4.25% of the Stretch = 114 (108 = 29 April high - low = 12796-12688)
Pivot point = 12680 (never printed)
29 April high = 12796
29 April low = 12688
29 April settlment = 12794 + 86

12720- 27= 12700 (fading first intra-day counter trend = -1 of (3, -1)
12708 + 27 + 27 + 27 =12789 completing the trending move 3 of (3, -1)

12720 tested previous day's high (that's with the trend, up).
12720- 27 = 12693 =[12720 - Stretch calculation = 12693] (low=12688).

June e-mini $5 Dow rallied from the low, 12688 to unchanged, 12708, and rallied an additional three Stretch calculations, completing the 3 of (3, -1) formula basis trading the Stretch calculation from unchanged.


12708 opened and tested the 28 April high, 12724 (12:45PDT, which high failed in the last half hour (call it profit taking or ... evening up of positions going into the close.... whatever you want to call it, 12724 reversal trend from the high lower to the settlement, 12708). The 29 April A session soon lifted from 12708 to 12720, testing the previous day's high, 12724, failing 12720, decline to 12688 (28 April low = 12688). (12720 - 27 = 12693) From the low, 12688, prices rallied into the close, 12794 (12796 = high 29 April).
"The 29 April A session soon lifted from 12708 to 12720, testing the previous day's high, 12724, failing 12720, decline to 12688 (28 April low = 12688). (12720 - 27 = 12693)"


One question, I dont understand why you take the stretch number off 12720. I thought the "-1" is off the 12708 settlement number? do I take it that if the opening say rises before doing the fade, you look for your first projection from the newer high?
just looking back during the week. How would you have dealt with the 27th, given that the market rose from the open. You would have seen a fade opportuity during the European session. Do you have any guidelines, do you prefer if the fade happens before the Euro session gets going as it maybe the trend for the day, or is it down to good old fashioned stops?


[Wed. Apr 27, 2011] YMM11 Open: 12,524 High: 12,658 Low: 12,514 Close: 12,641
Hi Silverharp,
"The 29 April A session soon lifted from 12708 to 12720, testing the previous day's high, 12724, failing 12720, decline to 12688 (28 April low = 12688). (12720 - 27 = 12693)." That's a re-test and rally failure that held above the pivot point during a "Bernanke rally."

Look for the larger price reversals, i.e., 2.618% (they usually tend to reverse), and 4.25% extensions (4.25% tend to indicate a respective range).

The 12609 low (27 April 05:32PDT) was a 2.618% correction, which reversed 115 points (27 April 4.25% of the Stretch = 114 points). These are mature extensions. 12724 - 1.618% of the Stretch = 12682.

During the early A session prices are defining an ever expanding range, which is to say that you are looking for the first place to enter into a trade. So you are calculating the previous sessions last half hour, last hour or intra-day high as a price reversal that correlates to match the first price move in the new A session. You're waiting for an event to happen. Will it reverse at the Stretch? and reverse three Stretch high / lower (fade and target intra-day range approximately)? or will it reverse at 1.618% of the Stretch? Corrolate the possibilities. You are probably better off fading a 1.618% of the Stretch measurement. You may miss a few trades, but you'll learn how the measurement from the previous rotation high / low applies to this strategy.

All information is factored into price. Don't try to guess what Europe is doing. The buying / selling in Europe could be the opposite of what the markets in Europe doing. Fund managers have to balance their own portfolios which may have nothing to do with a one day market direction.

One question, I dont understand why you take the stretch number off 12720. I thought the "-1" is off the 12708 settlement number? do I take it that if the opening say rises before doing the fade, you look for your first projection from the newer high? Silverharp
50

Please refer to the YM (emini $5 Dow futuers) over night session as the A session... apples to apples.
Is it just me being dense or what? I dont see when to take the stretch, or the fibs of the stretch>. Is the first trade always a fade and go from there? How about posting live and explaining what you are doing and what you are looking at. That may clear up the situation. By the lack of responses to your after the fact recaps, I am believing other people also need some real time guidance to understand your concepts.
Can I bump this request?
I started a new thread by accident but I'll add my chart of today here just in case.

I highlighted the 2 trades where the strech 1.61 was useful. If combined with Fib projections and the pivot it helped identifying trades today. I'd like to see a few "normal days" to see what it throws up.




thoughts welcome of course


Click image for original size
stretch2
RBurns,
Nothing is ALWAYS.
1.) "Is the first trade ALWAYS a fade and go from there?" (see: rally leading into the first Federal Reserve press conference in 97 years. [Where the is chaos the markets fall. Where there is leadership markets are strong.] Also see: the initial news that Osama bin Ladin was dead. If you don't know where to sell into a price spike [and someone will sell into it]
The answer is no. Intra-day trading is a real time business, where price failures, etc.,... happen, and reverse, without notice. If you want to intra-day trade for a living, you have to watch your open positions. You may not have looked at the math. Intra-day margin is about $672. A ten percent price move is $67, which is thirteen ticks. Go back to your charts and ask if intra-day trading e-mini $5 Dow futures is the best place to place your money at risk.

One of the strategies that you may learn, ... when, where, how and why to apply ... to sell / buy into a price vacuum / spike.
Just for the fun of it... previous settlement, 12756 + 1.618% + 1.618% + 1.618% = 12870. 12873 = 2 May high.

You may ask how? or when? or why? I look at the price moves this way. I am measuring multiple possibilities. I AM TOO BUSY TO POST MY TRADES WHILE I AM TRADING.

2.) "I dont see when to take the stretch, or the fibs of the stretch."
Your entry is NOT "TAKING" the first Stretch, or the fibs of the Stretch."
Your entry is fading the first price move by the Stretch or the Fibonacci of the Stretch (That fade could be 1.618%, 2.618% or 4.25%. YOU MAY HAVE TO MEASURE THE PREVIOUS PRICE ROTATION THAT MAY CORROLATE WITH ONE OF THESE ABOVE STRETCH / FIBONACCI OF THE STRETCH CALCULATIONS, OR TRADE A STRETCH OR 1.618% ETC., OF THE STRETCH. There may be no previous corrolation, which then requires the trader to determine if the best entry is the Stretch, or a ratio of the Stretch. If you are not watching the prices in real time, as they occur, through the night, until your measuring objective is reached, or not, because nothing is always, you may be putting your money at unneccessary risk.)


3.) More clarity on the industry strategies... "fading the first trade," would have you selling / buying AGAINST the first fade. Fading the first price move is the trade. It is not where you should fade the trade. If you think of it as fading the first price move, this may help clear up some of your confusion. I've traded the strategy, "fade the first move since 1997."

Trading from the previous settlement, 12756 to the 2 May very early A session high, 12806, corrected 30 points to 12776, and bounced to test the 12806 high, trade two ticks above 12806, where there was NO additional buying, defining resistance at that level, in that moment (this is called 'positioning'). From that level, 12808, prices started declining, until the news about Osama bin Laden's death was reflected in the YMM1 (June e-mini $5 Dow futures) price move.

The 2 May early A session rally failure, 12808 (two ticks above the high, 12806, was a price failure and prices started falling, i.e., making a lower lows, 12776 and 12768. Trading from the previous settlement, 12756 + 38 = 12756 + 1.618% = 12794... and then the news.

One quote comes to mind:
On surviving into your old age as a day trader:
"If you are ready to give up everthing else - to study the whole history and background of the market and all the principal markets (in my case, the the tempermental and ever changing e-mini $5 Dow futures) as carefully as a medical student studies anatomy -... and, in addition, you have the cool nerves of a great gambler, the sixth sense of a clairvoyant, and the courage of a lion, you have a ghost of a chance." - Bernard Baruch (Financier speculator, statesman, presidential adviser, 1870-1965).
Thanks Silverharp,
Thanks for the chart. "Normalcy," yeah, I'ld like some of that. Can I buy a vowel? Today's price spike (traders will take a profit at price spikes and vacuums, which is where these Fibonacci of the Stretch, and Fibonacci of the larger price move are good trading notes to keep on hand, as they happen.) produced a great place to fade the price spike higher. Trading from the previous settlement, 12756 + 1.618% + 1.618% + 1.618% = 12756 + 38 + 38 + 38 = 12870. 12887 = high 2 May.

The 'fade the first price move by the Stretch calculation / Fibonacci of the Stretch calculation' is a strategy that, on a normal day, I apply soon after the open. I am looking forward to hearing more about your application(s) as the trading day develops. After my first trade, I'm usually busy with life.
I am looking forward to hearing more shared mutual interests.
Thanks again.
RBurns,
Remember, you are measuring multiple possibilities, projecting the tradeable probability of an entry level that fits your style of trading. I've found a formula, (3, -1) of the Stretch / Fibonacci of the Stretch that enables me to identify price rotations as well as estimating daily ranges.

Try this, ... on a normal day, look at the last half hour. Pick that price rotation high / low that is approximately the Stretch or 1.618% of the Stretch. Now measure follow through into the next A session, and sometimes you may have to increase the calculation by one (an example, but not limited too, the Stretch to 1.618%) so that the previous last half hour corrolates to the new session's unchanged (previous settlement) less / plus the Stretch or 1.618% of the Stretch. You are looking for an entry. Even if the price move starts back through unchanged, you should still have great opportunity to profit ... 20 - 30 points.
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I agree Rburns. This idea seems like one of those things that look great at days end but difficult for us traders to actually trade. You can stretch price all over....
but I must be fair and add that Silverharp is making a great effort for us as it shows us a visual. Hopefully over time we will see some repeatable patterns that can be used over and over. No offense Hunter but I feel that too many words are ruining what might be a good idea.

That's just my opinion based on the lack of feedback on these threads. I get bothered by threads that seem to try an make others do all the work as if the poster is an "authority". Sometimes it's as if the poster has a good idea but actually hasn't fiqured it out completely for themselves yet.

It becomes more of an academic thing that hasn't been fully developed. Now on the flip side of all my ramblings that seem quite negative is that we need to be thankful that Hunter has taken the time to post here. I think the request is that we need to get some better explainations with annotated charts to make the effort more useful.
Originally posted by rburns

Is it just me being dense or what? I dont see when to take the stretch, or the fibs of the stretch>. Is the first trade always a fade and go from there? How about posting live and explaining what you are doing and what you are looking at. That may clear up the situation. By the lack of responses to your after the fact recaps, I am believing other people also need some real time guidance to understand your concepts.
Hunter you put your method out there for people to review. Whats with this browbeating?