Iron Butterfly Model with stops only win 50% of the time and win big!

#1

Hey guys been working on this model for IBF’s using the stop plugin, the model does not factor in take profits which can be used but they will reduce you profits, I set up the model with only 50% win rate and you still get massive profits, you can even profit very well only winning 2 out 6 times that’s 33% I think we can all do that no?? all my numbers factor in exchange fees already so the profit you see is the real deal, should you have any questions please let me know also if you see a way to improve this I would like hear that too:o

I hope you find this helpful, I know it opened up my eyes lol and this is an excellent strategy for people who have no time to sit and do some of the other systems DM teaches lord know we are not all full time traders just yet:eek:

you still will need to keep yourself informed about the news while placing these trades as this is a more neutral strategy but I have seen IBF’s 100 ticks wide at times and the risk is so darn low on these things thanks to the stop plugin its insane just be sure to set your stops inside the strikes by at least 3 or 4 ticks so if you get stopped out you get filled as close to $50 as possible if you set the stop right at the strike you could get filled as much as $15 + or - of $50 and that throws the whole model off.

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#2

Hi atrader2,

Are you using Expected Ranges to set up your Iron Butterfly trades (Close to Close or Hi to Lo)? Are there any particular instruments that you focus on? In general, how many hours prior to expiration are you setting up trades?

Thank you,

Chaz

#3

I could see this working very well for overnight IBF’s. I used to trade the EUR/USD every night with a Daily Expiry @7AM to get a decently wide IBF. Sometimes If i was lucky i could get a good one that expires at 3AM right when the EUR session opens. I would enter in the afternoon before my target expiration, after NADEX re-opens (after 1800 EST). I never tried it with the stop trigger because I did not have a computer that I could leave on all night. Things have changed for me in that area so I will give this a try. You could also set the “worst limit” on the stop trigger to avoid getting filled at $15…

I don’t think you would want to do this with profit targets over night though, if you hit them (profit target) you would have to cancel your working stop trigger manually and who wants to worry about doing that over night? I would just set it and hope it doesn’t hit a stop.

Great idea atrader2. Worth a try!

#4

Yes Using Expected Ranges…

Hey guys I will give a response later on how I set these up and will be doing a video to explain it all to but for now look at this risk management model it s pretty sweet, give me your thoughts.

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#5

atrader2,

Profit projections are fun and interesting, but have you actually implemented this strategy live? Or tested in demo for a while?

If you have, can you tell us how it went for you?

Thanks!

#6

Ronin,

I will be doing a video coming up soon on how I set these up and how the results are so everyone can see. I think the big thing to realize here is this is some thing that if you win only 33% you can still be profitable, just as its very hard to win every trade its very hard to lose every trade as well, even 50% win rate is great with this. additionally these trades are nice as they can go up down sideways and you still able to win, you chances of winning are a little less obviously due to using stops because you eliminate the ability for price to go outside your butterfly and come back in but like I said if you can just pick your strikes right 50% of the time you are good, also think of this if you place 6 of these trades and lose all 6 that would be a $24 lose, you win the 7th that would be $46 so $46 - $24 that’s a $22 profit for losing 6 of 7 trades, not bad no? :o

#7

Very nice atrader2! :slight_smile: Looking forward to the videos

#8

Looks interesting, but I think you may be overly optimistic that market volatility won’t cause you to get stopped out on both sides. For example, instead of 25/75, let’s say we go with 45/55. If neither stop is hit, we make $86 (90-4). If one stop is hit we make $36 (45-5-4). Sounds perfect. Obviously we miss the very real possibility that both stops are hit, in which case we lose $14 (5+5+4). The odds of hitting both stops are obviously smaller with 25/75, but I wouldn’t throw out the possibility that the odds of hitting both stops will erase your profits in the long run.

If I get a chance I might try to determine those odds. Maybe get some 15 minute OHLC and look at open-high and open-low ranges.

#9

http://www.youtube.com/watch?v=e7kGgI0vKno&feature=youtu.be

This video illustrates how to set up a Nadex Iron Butterfly on the US Small cap using the Apex Toolkit provided by Apex Investing Institute http://www.ApexInvesting.com

#10

Nerdtron,

If you have a fear of both stops being hit then close the other side if the stop gets hit on one side, this is what DM suggests that would solve your issue I believe, no? I do feel you will get stopped out a little more frequently due to the fact that price cannot go out and come back in like in a traditional IBF with no stops but if you close out when a stop is hit you have no worries then, if you have teamviewer you can control your PC from your phone so you close a position anytime you want, I would suggest you close it through teamviewer versus the Nadex app because if you have other stops in place you will kill them all when Nadex logs off when you start the app so use teamview to do the close out if your on the road.

#11

Great video! Nice job!

I think you might be able to optimize the stops a little with the worst limit and market offsets. I look forward to your next video. :slight_smile:

#12

Nerdtron, atrader2 is right … this is why i teach to get out of BOTH contracts if either side is hit to prevent this from happening. Take profit on one and take loss on the other using stop plugin to exit on both contracts. Setting up 4 stops plugin tickets so if either side is hit both contracts are closed. You obviuosly woud need to cancel the other two pending stop triggers if 2 of them are triggered.

(Reminder make sure the trigger price is at least 1/10th of a tick part or they wont fire off all of them).

Also dont forget to compare the loss/proft on IC’s Verus IBF’s

#13

Good video. Why do you choose to go with a daily setup versus a shorter time span (15 minute to expiry, etc.)?

#14

Nerdtron,

Only reason why I set them up this way was to illustrate that if you don’t have a lot of time to trade you can set these up, also because you can get nice wide butterfly’s as well, Im working on putting together some information on when and what instruments are the best setups so stay tuned for that

#15

Just wait till the 20 minutes come out :slight_smile: I covered that on my radio show today will have lots of short term ones.

#16

Im looking forward to it my friend!!!

#17

atrader2, any more results you can share with us? Thank you.

#18

Hey Jeff,

Been posting some in the pit I will try ot put some in here as well later today or possibly this weekend.

#19

atrader2:

Can you go into some more detail about the rules of the offset…I am a bit unclear about that??? Also, what are your thoughts about setting these trades up in the same day, that is, instead of the night before, how late in the next morning would it be viable to setup these trades for a daily binary?? 9 AM?? 10 AM? 11 AM?

Thanks, Drew

#20

Drew,

Here is the offset information:

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As far as how late in the day to set these up it really depends on the day because of there is a lot of news you can set them up pretty late like at 9 or ten but if there is no news there is no real implied volatility and the only other way to get the IV is with a lot of time between your strike time and exp so looking for them later when there is no news you will never find them you may however may be able to do these on the 20 min ones that DM has been teaching or some other shorter term one, my reason for doing the longer term ones is i dont have alot of time right now to trade all day and some days i dont feel like sitting in front of my computer all day LAZY;) also I like the idea of making money while I sleep! or golf or fish:cool: