Finally, I have finished the OTM side of this trading strategy. The C and C’ trades were ITM trades and I designated the OTM trades as D and D’.
As a review:
- A C trade is defined as selling a strike 1/2 deviation above a valid Green APEX E bar trigger, and buying a strike 1/2 deviation below a valid Red APEX E bar trigger
- A C’ trade is defined as selling a strike 1/2 deviation above a valid Red APEX E bar trigger, and buying a strike 1/2 deviation below a valid Green APEX E bar trigger
- A D trade is defined as buying a strike 1/2 deviation above a valid Green APEX E bar trigger, and selling a strike 1/2 deviation below a valid Red APEX E bar trigger
- A D’ trade is defined as buying a strike 1/2 deviation above a valid Red APEX E bar trigger, and selling a strike 1/2 deviation below a valid Green APEX E bar trigger
Probability results:
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YM (Wall ST 30, DOW)
- D trades: 37/110 = 33.6% or 13/110 = 11.8% (Depends upon exit strategy)
- D’ trades: 26/110 = 23.6% or 6/110 = 5.5% (Depends upon exit strategy)
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TF (Small Cap 2000, Russell 2K)
- D trades: 67/139 = 48.2% or 24/139 = 17.3% (Depends upon exit strategy)
- D’ trades: 56/139 = 40.3% or 20/139 = 14.4% (Depends upon exit strategy)
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NQ (US Tech 100, NASDAQ)
- D trades: 40/95 = 42.1% or 17/95 = 17.9% (Depends upon exit strategy)
- D’ trades: 36/95 = 37.9% or 12/95 = 12.6% (Depends upon exit strategy)
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ES (US 500, S&P 500)
- D trades: 42/79 = 53.2% or 18/79 = 22.8% (Depends upon exit strategy)
- D’ trades: 31/79 = 39.2% or 9/79 + 11.4% (Depends upon exit strategy)
Strategy Testing Profitability: To test profitability, I used the same exit strategies as from the C and C’ trades. In this case Option A is exiting the contract when the underlying hits your strike (exit at $50), and then Option B is to hold the contract to expiration. As far as prices paid (risk) I did two different calculations. One I called Max Risk, which was the highest price I saw for a contract during the day. The other calculation I called Morn AVG. This was the average of all the prices paid from 0800-1200ET. I didn’t do an afternoon average because all of the prices in the afternoon were less than the Morn AVG. Here are the values used:
Max Risk Morn AVG
YM 35.00 16.00 TF 31.25 15.50 NQ 29.00 14.50 ES 32.50 15.00
The Profitability looks like this: YM D Trades (Max Risk): Option A= -$2840.00 Option B= -$3390.00 YM D Trades (Morn AVG): Option A= -$294.00 Option B= - $844.00 YM D’ Trades (Max Risk): Option A= -$3250.00 Option B= -$3950.00 YM D’ Trades (Morn AVG): Option A= -$780.00 Option B= -$1480.00
TF D Trades (Max Risk): Option A= -$2337.50 Option B= -$3287.50 TF D Trades (Morn AVG): Option A= $529.00 Option B= -$421.00 TF D’ Trades (Max Risk): Option A= -$2668.75 Option B= -$3468.75 TF D’ Trades (Morn AVG): Option A= $87.50 Option B= -$712.50
NQ D Trades (Max Risk): Option A= - $1422.00 Option B= -$1722.00 NQ D Trades (Morn AVG): Option A= $289.00 Option B= -$11.00 NQ D’ Trades (Max Risk): Option A= -$1651.00 Option B= -$2257.00 NQ D’ Trades (Morn AVG): Option A= $74.50 Option B= -$525.50
ES D Trades (Max Risk): Option A= -$1247.50 Option B= -$1547.50 ES D Trades (Morn AVG): Option A= $555.00 Option B= $255.00 ES D’ Trades (Max Risk): Option A= -$1732.50 Option B= -$2382.50 ES D’ Trades (Morn AVG): Option A= $35.00 Option B= -$615.00
Some further observations:
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The biggest thing I learned is how big of an edge being able to exit at $50 is in ITM binary trading. I know Darrell says it all the time, and I believe him but seeing it with your own empirical evidence really cements it. If you look at the results from this, almost across the board your profit is more and your loss is less, if you exit at $50.
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We all see patterns when we trade. Some we think are great, but unless you test it out over a long enough period of time you are throwing your money away. If you followed this thread from the beginning, the very first part I was testing was just on YM, and the probability was around 97% with almost $1000. Well, over time that drops to 88% and $550. There are a lot of things that push the price around and without thorough testing you shouldn’t have confidence in a system. When I started this, I thought I had something awesome. Now, I realize that only parts of it work…I guess what I am getting at is what we think doesn’t really matter, what matters if we are trying to make money is what we can prove.
Enjoy!! Happy Trading!!! Brad