Goal is to catch the main moves of the day, Elephant Hunting as Mike
Bruns would say. Trade with the trend using entries off the NQ 15m
chart and exits off the 5m chart. Losses strictly managed. Trailing
stops wide enough to stay in the trend until it ends. Increase position
size once trend is established.
1. If flat, enter with the trend on breakout of the current 15m
bar any time between 9:45 and 3:45 EST.
2. After a 5m and/or 15m reversal pattern, enter a trade in the
new direction on breakout of the current 15m bar (If a previous
position has not been closed out, exit it at the same price).
3. If in a position that's already profitable, add to the position
on a 5m continuation signal.
4. If stopped out of a trade, wait for the next 15m bar breakout
5. If stopped out twice in a row in the same trading range, stand
aside until 5m breakout of range, trendline, or triangle. Use 15m
bar breakout entry in whatever direction emerges.
1. Enter an initial stop-loss order of 5 points on all trades as
soon as a new position is opened.
2. Move the stop-loss order after each new 5m swing is formed to
1 tic outside the most recent 5m swing extreme.
3. Tighten stop on 5m reversal patterns.
4. Exit all positions 15 minutes before the close.
of Retro-Trader terms
Bar Breakout entry: Retro-Trader positions are opened by
stop-limit order placed 1 tic outside the current bar as soon as
Trend: For Retro-Trader purposes, an uptrend will be defined
as a series of higher lows and higher highs on the 5 minute chart
and vice versa for downtrend.
1. breakout from a retracement bar in the direction of the previous
2. breakout from an inside bar in the direction of the previous
Downbar: a price bar with a lower high and lower low than
the previous bar
Inside bar: a price bar with a higher low and lower high
than the previous bar
Retracement bar: For Retro-Trader a retracement
bar is a downbar in an uptrend, or an upbar in a downtrend.
There may be several retracement bars in a row before the trend
resumes, but for Retro-Trader purposes if the trend hasn't resumed
after the 6 retracement bars in a row, cancel any continuation order
and start looking for a reversal signal.
1. Failure of prices to post a new high during an uptrend, vice
versa during downtrend. If this occurs after a trend it usually
takes the form of a 1-2-3
top or bottom. For Retro-Trader purposes a lower swing high on the
5m chart will trigger an exit from a long trade, and a higher swing
low on the 5m chart will trigger an exit from a short trade, with
stop placement as in the 1-2-3 example. Trend will be considered
to have reversed.
2. Failure of prices to hold above a previous swing level after
penetration thereof during an uptrend, or vice versa during a downtrend.
If this failure occurs after a trend it is called a 2B
top or bottom. For Retro-Trader purposes the same principle applies
on a test with penetration of any important swing level, like high
of day, low of day, triangle or channel boundary, or previous swing
high or low. Stops will be placed as in the 2B example. Trend will
be considered to have reversed.
3. Failure of prices to hold above the bottom of an inside
bar in an uptrend, or vice versa in a downtrend.
Stop order: a conditional order that is triggered only if
prices trade past a certain price. When the stop price is hit, the
order is executed at the next available price, usually at, or close
to, the stop price. If prices never reach the stop price, the order
is not activated. A buy stop order is placed above the current market
price. A sell stop order is placed below the current market price.
Stop-loss order: a stop order which is placed for the purpose
of limiting losses if prices move against an open position.
Stop-limit order: an order with 2 conditions which must be
met. The stop price is the price which must be reached before the
order is activated. Once the order is activated the order can only
be filled at the limit price or better. For Retro-Trader purposes
the stop price and the limit price will be the same. Sometimes a
stop-limit order can be triggered but not filled if prices jump
past the limit price in fast action. For this reason Retro-Trader
uses stop-limit orders to open a position, but never to exit. Some
brokers don't accept stop-limit orders, in which case stop orders
may be substituted.
Swing: a price turning point. A swing high
is the high of a bar whose high is higher than the bars on either
side of it. A swing low is the low of a price
bar that is lower than the bars on either side of it.
Trading range: an area of price congestion or consolidation
between overhead resistance and support below. Retro-Trader doesn't
do very well when prices are stuck in a narrow range.
Upbar: a price bar with a higher low and higher high than
the previous bar
- Initial results have been encouraging (understatement).
- The system seems to need a daily range of 40 points or more.
It does not fare well on narrow range days.
- More testing is needed using different time frames, different
initial stop-loss values, etc. Might be interesting to test it
on S&P futures too.
- When faster markets return, switching to 9m/3m timeframes or
other combination might be desirable, or the system might not
work at all!
- I'm not worried about sharing the system, because more people
buying a breakout will just make the breakout stronger. If getting
filled becomes a problem, I'll just change the entry rules to
make sure I'm the first one filled ;-)
- If other people in the trading room are following the system,
that benefits me because it might keep me from snoozing and missing
a trade or an exit signal.
- If other people are following the system it helps to keep me
honest in following and evaluating the rules. A system can only
be evaluated if there are rules that can be followed objectively,
and if other people can follow my rules and get the same results
that proves to me that the entry and exit criteria are empirically
sound and not tainted by some subconscious bias.
Retro-Trader began in July 2001 as a study of longer time frame intra-day
trades in the e-Mini Nasdaq futures. My goal was to find a trading
system or style that suited my personality and trading abilities.
I wanted to be able to evaluate the system before trading it to be
sure it was worthwhile. The system had to be simple. I wanted to make
2-6 trades per day. I needed it to be consistently profitable, yielding
75% or so winning trades with a healthy profit/loss ratio. I tried
different time frames before settling on 15 minute charts for entries
and 5 minute charts for exits. I've gradually refined trading rules
to make them work for me, at least during these slow summer markets.
The trading rules will probably continue to evolve. I began posting
charts of the entries and exits on this website in August 2001. The
name, Retro-Trader, was coined when the trades were being identified
retrospectively, in hindsight at the end of the day. The name kinda
stuck, so Iguess I'll have to change the rationale for the name to
"it's as if you were trading yesterdays chart." The level
of interest shown by fellow traders inspired me to provide more documentation
on my research. I hope that familiarity with my experimental system
will enable my friends to help me finish it, and I hope some of the
ideas used here may help some of you to come up with a system that's
right for you. So here it is.
Retro-Trader is posted for its educational value only. Historical
results have not been fully backtested or evaluated. Trading rules
may be subject to interpretation, and may need to be changed or
even discarded after further research. Planned risk levels may be
exceeded drastically in extreme market conditions that are not uncommon.
Feel free to use the Retro-Trader rules and/or modify them to suit
your style, but only at your own risk.