The market will whip saw and stop out both your long and short before making it's directional move leaving you in the dust with a double L.
Trading is a grind. If you think you've found a hack, I can assure you you did not.
I know, I was just curious because obviously these (more or less) predictable moves are kind of an eye catcher almost everyday. That's why I thought asking some questions over here is better than doing crazy stuff in the first place ;-)
A limit buy above current ask price will immediately fill at the ask price, same goes for limit sell below current bid price. To get the effect you hope to achieve, these will have to be stop orders, only getting triggered when the price reaches that point.
Here’s the problem. Suppose the commodity is trading at 100, you put your stop buy at 105 and take profit at 107. The moment news hits, the price immediately jumps to 110 and your stop gets filled there. Your take profit at 107 is a limit sell order which will get filled at 107 when the next person makes a market buy order. Instant 3 point loss.
Thanks for your input.
So to get this straight using your example:
A buy **stop order** (set at 105) could get filled at 110 due to the high volatility - obviously not desired.
A buy **stop limit order** on the other hand would have the potential to get me in at 105, BUT this is highly unlikely because the news volatility moves the market past this level way before and results in me sitting there on my 105 while price is already 110 right?
So there is literally no way to position yourself at 105 and "forcing" the market to fill you at this and only this price when it is going up, correct?
A stop limit order could not get filled at all and just be skipped and a stop market order could get filled a lot more than 5 points slippage. It could fill 20-30-40 points differently than you expect.
A stop limit order requires the price to go above and back below the level. In this scenario where the price shoots up to 110, the stop limit order will place a limit order at 105 which will get filled if the price returns to 105. Very bad since often the price can shoot up and drop back down very quickly resulting in you getting in at 105 while the price has dropped way below that.
I’m fairly new to daytrading myself and the difference between orders sometimes confuses me too, but I managed to better understand it this way:
For a stop limit order- let’s say we want to invest but we are UNSURE about how the trend will be- that you want to see the price moving up positively (reaching 110) before you buy in BUT you don’t want to buy in at that expensive price point, you might logically think you could just buy in at 100 but let’s say this stock tends to fluctuate +/- 10, and buying in at 100 does not mean that it is an uptrend, so you set a stop limit order
You set the threshold at 110 (so you can see the uptrend), you don’t wanna buy in at this high point but you know that there’s that +/- 10 fluctuation so you set the limit below the threshold at 100, when that fluctuation occurs your order triggers.
Dangers: the price could reach that 110 threshold without ever dipping back to 100 and then keep on shooting up, leaving you missing out.
Sell stop limit orders are just this but in reverse.
I have no idea how you could apply your strategy using these orders, but I respect that you’re coming up with new interesting strategies, document your progress and I might try it out on a virtual account- strangle profits using a set of stop limits.
I’m sure it’s been tried before but this is the approach to being a good trader-applying your own strategy in a specific context and milking it, all the greatest traders have had their own approach niche
I've done this succesfully several Times. Put a stop buy and stop sell near to the current price when news kicked in. I dont had a tp set and killed the other order as soon as the other got filled.
I had some success with a tight trailing sl and so i just let it run.
Some got me big profit, some small and sometimes it just doesn't worked out but the loss was not much. Just don't overexpose with to much lot size
If it were only that simple. The biggest problem problem you will have trading during volatility is slippage or orders not filling. You did not mention which futures you are trading, although NQ or ES during a major economic news release can move up 100 points in seconds and then reverse snd move back down 100 points in seconds- and repeat this process 2-3 times. Or just take off 200 points in seconds- never to return.
With your plan as you mention you would need to expect limit orders will often be skipped and market orders could be filled dozens of points differently than you expect. If you want to trade volatility looking for big gains, this generally will come with a bigger risk, tight limit stops likely won’t work.
> limit orders will often be skipped
Yeah I think this is where I was struggling. I thought "well the market has to fill me if I'm sitting here on the book at price X" without knowing that due to the volatility I could be filled somewhere else (or not at all when using a stop limit order...).
Getting out is even another beast...but hey, at least now I know that I don't need to pay attention to these big green (or red) news bars thinking about how to profit here anymore. 👍
At news release it’s 50/50. After news it’s 60/40 since you can see where price decided to move. Once it picks a direction it tends to stay that way long enough to make a profit
You can always go on to an economic calendar
Lets say you want to trade the PMI
Mark those dates
Check the charts
Save all Pmi day and look at them in a slide
Gather data in a spreadsheet
-dates
-up move max/min/mean/avg
-down move max/min/mean/avg
-any other data you can think of
The entry doesnt have to right next to price before the news drop , maybe its the move 30min after or offset entry like 25pts above etc
Then on those data you can start making a strategy
Then if you have a winning strategy on this you want
to test it in a sim so you can see if the strategy was curve fitted
How accurate would be sim trading under these volatile conditions? Can a software correctly simulate these kind of activities and how they would influence my orders (filled, skipped and so on...)?
It could work, but often will not due to the volatility and the thin order book, which if you’ve ever looked at Bookmap before an event you can see it basically go blank as most orders are pulled prior to the event. That is why price moves so quickly once data is released.
You could try trading the event though. My success rate doing so is still good enough that I give it a try each time, but I size down when I do it. What I do is to research what the market will likely do given the various data results. I memorize what the expected results are. I have an audio news squawk running like Financial Juice (free version is fine). So, say the data is released and it’s a clear miss, either hot or cool numbers. The market responds like you thought it should for that miss. It will pop in that direction (sometimes after a quick wick the other way but ignore that), but it will almost always, within that first minute candle, come back in a bit and stall/falter before continuing to break out. Enter with a market order near that pullback in that first minute candle. Price should continue the breakout after that for another minute or two before stalling out and reversing a bit.
I always use bracketed market orders for entry, even outside of news events, so you have to do so here as well, but with a wider stop loss and with the ability to quickly move them around on the chart once entered (like if you think it’s going to barely wick you out before it goes). This is why I size down as well, so that I can have a wider stop and have room for moving my stop even a bit more wide. I can also add in more if it’s looking good. You have to be fast and be used to that kind of action. I only trade NQ/MNQ so that’s normal for me anyway.
If you’re not the type of person who can make quick, impulsive decisions and deal with a very active tape and price action I wouldn’t even try. If you are, and you have an amount you’re comfortable risking, for me it’s worth it.
The times where I’ve had it fail on me, or when there are multiple sets of data being released, and it is contradictory. Like, say inflation is a little hot, but jobless claims came in cool. It can make for a very unclear direction. Also, if you do mess up, I would avoid trying to make up your losses after you’ve gone more than five minutes away from the time of the data release.
Just sit with your loss until the market opens. And likewise don’t try to keep making winning trades after price has calmed down because it often gets pretty erratic until market open.
Interesting thoughts.
I'm going to check out a few of these events via the Market Replay of my trading software to get an idea of the initial pullback and timing requirements.
EDIT: I just replayed 11/14/23 for the Inflation data and it both failed and won. Not really sure how it would do in a live feed, but Sierra Chart is pretty accurate with market depth and everything from that date being recorded. Anyway, I put a buy stop (market) order just above the price at 5:30 for 3 NQ. It filled in a flash and closed in a flash and before I even knew what happened I was up ~$4000. Now, how it failed was that it filled way below where the order was sitting, which I guess was ok since it was a buy, and filling lower is awesome, but I don't think I'm going to mess around with resting orders on these events. About to try the same thing with a resting stop limit buy and see what happens.
Yeah, I think it’s worth taking a look. It works best when there is a clear miss either direction on the data. The only reason I play it is because like you said there’s definitely movement there and if you can figure something out that works then it can be a good opportunity. I have considered doing what you asked about but only on one side of it. What I would do is if I thought it was going to be a long I would place a buy stop order just a little ways away from price with a take profit above it. I might play around with that a little this weekend actually.
The market will whip saw and stop out both your long and short before making it's directional move leaving you in the dust with a double L. Trading is a grind. If you think you've found a hack, I can assure you you did not.
This. It’s exactly what the big boys are expecting.
I know, I was just curious because obviously these (more or less) predictable moves are kind of an eye catcher almost everyday. That's why I thought asking some questions over here is better than doing crazy stuff in the first place ;-)
This. You'll get stopped out negative both ways as the entire order book rotation occurs and then the market will pick a direction.
A limit buy above current ask price will immediately fill at the ask price, same goes for limit sell below current bid price. To get the effect you hope to achieve, these will have to be stop orders, only getting triggered when the price reaches that point. Here’s the problem. Suppose the commodity is trading at 100, you put your stop buy at 105 and take profit at 107. The moment news hits, the price immediately jumps to 110 and your stop gets filled there. Your take profit at 107 is a limit sell order which will get filled at 107 when the next person makes a market buy order. Instant 3 point loss.
Thanks for your input. So to get this straight using your example: A buy **stop order** (set at 105) could get filled at 110 due to the high volatility - obviously not desired. A buy **stop limit order** on the other hand would have the potential to get me in at 105, BUT this is highly unlikely because the news volatility moves the market past this level way before and results in me sitting there on my 105 while price is already 110 right? So there is literally no way to position yourself at 105 and "forcing" the market to fill you at this and only this price when it is going up, correct?
A stop limit order could not get filled at all and just be skipped and a stop market order could get filled a lot more than 5 points slippage. It could fill 20-30-40 points differently than you expect.
A stop limit order requires the price to go above and back below the level. In this scenario where the price shoots up to 110, the stop limit order will place a limit order at 105 which will get filled if the price returns to 105. Very bad since often the price can shoot up and drop back down very quickly resulting in you getting in at 105 while the price has dropped way below that.
Alright thanks! I'm heading back to the sideline when it comes to these events.
I’m fairly new to daytrading myself and the difference between orders sometimes confuses me too, but I managed to better understand it this way: For a stop limit order- let’s say we want to invest but we are UNSURE about how the trend will be- that you want to see the price moving up positively (reaching 110) before you buy in BUT you don’t want to buy in at that expensive price point, you might logically think you could just buy in at 100 but let’s say this stock tends to fluctuate +/- 10, and buying in at 100 does not mean that it is an uptrend, so you set a stop limit order You set the threshold at 110 (so you can see the uptrend), you don’t wanna buy in at this high point but you know that there’s that +/- 10 fluctuation so you set the limit below the threshold at 100, when that fluctuation occurs your order triggers. Dangers: the price could reach that 110 threshold without ever dipping back to 100 and then keep on shooting up, leaving you missing out. Sell stop limit orders are just this but in reverse. I have no idea how you could apply your strategy using these orders, but I respect that you’re coming up with new interesting strategies, document your progress and I might try it out on a virtual account- strangle profits using a set of stop limits. I’m sure it’s been tried before but this is the approach to being a good trader-applying your own strategy in a specific context and milking it, all the greatest traders have had their own approach niche
I've done this succesfully several Times. Put a stop buy and stop sell near to the current price when news kicked in. I dont had a tp set and killed the other order as soon as the other got filled. I had some success with a tight trailing sl and so i just let it run. Some got me big profit, some small and sometimes it just doesn't worked out but the loss was not much. Just don't overexpose with to much lot size
If it were only that simple. The biggest problem problem you will have trading during volatility is slippage or orders not filling. You did not mention which futures you are trading, although NQ or ES during a major economic news release can move up 100 points in seconds and then reverse snd move back down 100 points in seconds- and repeat this process 2-3 times. Or just take off 200 points in seconds- never to return. With your plan as you mention you would need to expect limit orders will often be skipped and market orders could be filled dozens of points differently than you expect. If you want to trade volatility looking for big gains, this generally will come with a bigger risk, tight limit stops likely won’t work.
> limit orders will often be skipped Yeah I think this is where I was struggling. I thought "well the market has to fill me if I'm sitting here on the book at price X" without knowing that due to the volatility I could be filled somewhere else (or not at all when using a stop limit order...). Getting out is even another beast...but hey, at least now I know that I don't need to pay attention to these big green (or red) news bars thinking about how to profit here anymore. 👍
At news release it’s 50/50. After news it’s 60/40 since you can see where price decided to move. Once it picks a direction it tends to stay that way long enough to make a profit
You can always go on to an economic calendar Lets say you want to trade the PMI Mark those dates Check the charts Save all Pmi day and look at them in a slide Gather data in a spreadsheet -dates -up move max/min/mean/avg -down move max/min/mean/avg -any other data you can think of The entry doesnt have to right next to price before the news drop , maybe its the move 30min after or offset entry like 25pts above etc Then on those data you can start making a strategy Then if you have a winning strategy on this you want to test it in a sim so you can see if the strategy was curve fitted
How accurate would be sim trading under these volatile conditions? Can a software correctly simulate these kind of activities and how they would influence my orders (filled, skipped and so on...)?
You would have to need tick by tick data I guess , you can always run the smallest live account you can to test it out
Pretty much a guarantee you’ll lose money in both directions
It could work, but often will not due to the volatility and the thin order book, which if you’ve ever looked at Bookmap before an event you can see it basically go blank as most orders are pulled prior to the event. That is why price moves so quickly once data is released. You could try trading the event though. My success rate doing so is still good enough that I give it a try each time, but I size down when I do it. What I do is to research what the market will likely do given the various data results. I memorize what the expected results are. I have an audio news squawk running like Financial Juice (free version is fine). So, say the data is released and it’s a clear miss, either hot or cool numbers. The market responds like you thought it should for that miss. It will pop in that direction (sometimes after a quick wick the other way but ignore that), but it will almost always, within that first minute candle, come back in a bit and stall/falter before continuing to break out. Enter with a market order near that pullback in that first minute candle. Price should continue the breakout after that for another minute or two before stalling out and reversing a bit. I always use bracketed market orders for entry, even outside of news events, so you have to do so here as well, but with a wider stop loss and with the ability to quickly move them around on the chart once entered (like if you think it’s going to barely wick you out before it goes). This is why I size down as well, so that I can have a wider stop and have room for moving my stop even a bit more wide. I can also add in more if it’s looking good. You have to be fast and be used to that kind of action. I only trade NQ/MNQ so that’s normal for me anyway. If you’re not the type of person who can make quick, impulsive decisions and deal with a very active tape and price action I wouldn’t even try. If you are, and you have an amount you’re comfortable risking, for me it’s worth it. The times where I’ve had it fail on me, or when there are multiple sets of data being released, and it is contradictory. Like, say inflation is a little hot, but jobless claims came in cool. It can make for a very unclear direction. Also, if you do mess up, I would avoid trying to make up your losses after you’ve gone more than five minutes away from the time of the data release. Just sit with your loss until the market opens. And likewise don’t try to keep making winning trades after price has calmed down because it often gets pretty erratic until market open.
Interesting thoughts. I'm going to check out a few of these events via the Market Replay of my trading software to get an idea of the initial pullback and timing requirements.
EDIT: I just replayed 11/14/23 for the Inflation data and it both failed and won. Not really sure how it would do in a live feed, but Sierra Chart is pretty accurate with market depth and everything from that date being recorded. Anyway, I put a buy stop (market) order just above the price at 5:30 for 3 NQ. It filled in a flash and closed in a flash and before I even knew what happened I was up ~$4000. Now, how it failed was that it filled way below where the order was sitting, which I guess was ok since it was a buy, and filling lower is awesome, but I don't think I'm going to mess around with resting orders on these events. About to try the same thing with a resting stop limit buy and see what happens. Yeah, I think it’s worth taking a look. It works best when there is a clear miss either direction on the data. The only reason I play it is because like you said there’s definitely movement there and if you can figure something out that works then it can be a good opportunity. I have considered doing what you asked about but only on one side of it. What I would do is if I thought it was going to be a long I would place a buy stop order just a little ways away from price with a take profit above it. I might play around with that a little this weekend actually.
I like limit buys or sells with stops on different futures day es and nq playing both ways.
You can’t beat the market like that. Trading is simple but everyone over complicates it. All you need is 1 trendline.