Potential Apex OTM Binary Trade System Using Deviation Levels


#81

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:

  • 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)
  • 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)
  • 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)
  • 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:

  1. 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.

  2. 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


#82

Brad, Thanks for sharing that!


#83

Brad awesome work and a great lesson of the process of going through and putting together a system and not just assuming. You start with an assumption then build it step by step layering each piece until you end with the live testing of the reality before moving forward with the real $.

So out of all the combinations and variations of all the various methods of this strategy combined. What is your net summary of what is a good idea what is a bad idea and why?


#84

My thoughts:

  1. The best results actually came from the D and D’ (OTM) trades on all but the YM. As long as you can get the price below the Morn AVG (roughly $16) the TF, NQ and ES actually work out pretty well. That tracks well with the original idea that the indices that “reach” more often made the ITM not as profitable. Of course, the profits realized in these calculations are averages, and better actual results could be gained in real trades. This was based on and average of around $16. Generally speaking, the prices of the desired strikes fall off around 1200 to below $10. You could conceivably double the contract (i.e. if the strike costs $8 buy 2) and would make more.

  2. The second best overall result I think was the C and C’ (ITM) trades on YM with a single $25 risk trade and exiting at $50 if the underlying hits our strike. Like I said in the earlier post, the one thing I truly learned was that the biggest edge is being able to get out at $50. In almost every instance, it increased your profits and reduced your losses.

  3. I did not filter the results at all, it was straight data. But, every price is an approximation. So, the profitability numbers could be more, could be less. There is a good chance that you could get a better price on an available strike than what I could model here. Just depends upon what actual price you get in at, and when you exit… Plus, you could do a probably do a double binary strategy on the OTM trades…

  4. The one thing that I learned from this and other strategies that I have tested is that trying to do the same thing day after day on a daily expiration basis, leads to no edge. Trying to apply the same strategy to different instruments doesn’t produce an edge either. I really got an appreciation for just how different each instrument is, even those that we group together like the US Indices.

  5. Like I said in my previous post, our assumptions don’t really matter, what matters is what you can prove. But my hunch is this: - Filtering the trades by using the Diagnostic Deviation Indicator (DDI) (hat tip to Mark on this idea) could reduce unprofitable trades - The trigger signal is really independent of what type of trade you plan on taking. Looking at it that way, you could combine it with the DDI to help filter which type of trade to take. So, if the DDI is already above a full deviation move, then an OTM strategy probably isn’t the best idea and an ITM might be better way to go. Consequently, if I get an entry signal on YM but the DDI is say less than 50%, then I may want to wait and see if I get an OTM signal on one of the other indices. The problem is that I do not know what that value of YM is because you still need the underlying to move in your direction (roughly 25% dev) to get a favorable price. Understanding that the ITM strategy needs some volatility but not too much, and the OTM strategy needs volatility, you could decide not to take some of the trades based on what the DDI says.

  6. Extrapolating some of the conclusions from here, I would expect that the C and C’ trades would work better on the USD/CAD and USD/CHF, while the D and D’ trades would work better on any Yen pair… just a thought…

I’ll try to look at what filtering with the DDI does to results this weekend, can’t guarantee anything…

Happy trading!!! Brad


#85

I figured that with all the changes and updates, people may be a little lost as to what each trade means. A picture is worth a thousand words…

On a green APEX E bar entry signal:

C trade ____________ D trade(buy OTM) sell ITM

                                          [SIZE=5] E[/size]

C’ trade ____________ D’ trade(sell OTM) buy ITM

On a red APEX E bar entry signal:

C’ trade ____________ D’ trade(buy OTM) sell ITM

                                         [SIZE=5]E[/size]

C trade _____________D trade(sell OTM) buy ITM

Hope this helps, Brad


#86

Brad, are you still using any version of this? Particularly the D trades, on TF, NQ, or ES? Also, these stats, what is the length of time that these trades are pulled from? Thanks! Josh


#87

Josh - I traded it live for awhile, but decided to shift to spreads solely. I am not sure what you mean by length of time pulled from. If you mean testing, I think it was a couple of months. If you are looking to use or build upon this, please feel free. If you have any questions, or need some help, I will try to help…

Happy trading!!! Brad


#88

Yes, I meant the testing, how long a period it was. Thank you for that. Why did you shift to spreads only? Did you find that you could risk less on average per trade than with OTM binaries?

I am interested in using OTM binaries to trade TF in the morning using apex and deviations, but I would like to use more than just the E entry. I would like to use the MVP entry, (as I have gotten used to using this entry), and even a direct reversal off of the +1 deviation line, as it has just occurred today, and would have made a good entry.


#89

Also, did you ever get the chance to filter these trades using the DDI? I never was sure after reading these posts exactly what it was that Mark had made, and how it could affect this strategy. Thanks.


#90

I switched to spreads because I was having trouble managing impulse with binaries. I did a lot of " it’s close enough" , “it should work” and not trading correctly. So, for me, I was able to trade correctly with spreads easier.

If you are going to use OTM, you are going to need some reason for it to move ( news). Otherwise there is no real reason or expectation that it will move that far. Especially at +1 dev.

I didn’t test filtering out with Marks indicator. His indicator plotted the zone around the deviation levels. This is now incorporated into the dev levels, wasn’t when I started, I had to plot manually. As far as his other idea of filtering the trades by the dev move indicator, I didn’t. It makes sense, if it has already moved 1 dev, then OTM would be a bad idea, but an ITM would probably be a good choice. I just never got around to it…

Hope this answers your questions, let me know what else you have…

Brad


#91

At 1 deviation, I would be looking to buy an OTM going back towards settlement, not further into 1 - 1.5 deviation territory.

I agree, an OTM focus on a .5 deviation move is a bad idea after a 1 deviation move, IF you are expecting the price to move FURTHER in that direction, but what about an OTM at a .5 deviation BACK towards the center after a 1 deviation move? This seems more pretty likely to me, at least on the TF in the morning, and specifically before 12, when traders start to go to lunch and everything slows (typically).


#92

Also, the managing impulse I have trouble with, whether it is with binaries, or with spreads, but I tried something today that seemed to help that. It wasn’t easy, and seemed wrong when I did it, but I turned off my profit/loss section on Nadex. Granted I am still in demo, so this shouldn’t really affect me, but I find that it does, and that I get out of a good position because I am down a little. I tend to die the death of a thousand cuts, on good strong days in the market, because of the fear/greed cycle. Today that wasn’t as strong, mainly because I couldn’t see the profit/loss every second on a given trade, and gave me much more confidence to simply trade the chart. Did considerably better too. :cool:


#93

Its amazing when you stop looking at P/L and start focusing on charts how much better you do.

Its hard to admit but the P/L on your account has nothing to do with what the price action is doing on your chart. If your looking at P/L your not looking at what impacts that P/L (cart before the horse type thing)


#94

Josh - I though Darrell was nuts when he suggested turning off P/L!!! Of course, like everything else he teaches, he was right. It makes things much easier.

As far as your OTM after a one dev move… just think about what you are asking…TF has already moved a full deviation, now you are buying/selling an OTM binary with the idea that it needs to move a large amount (nature of an OTM) again…Is that really likely repeatedly over time? Statistically not. TF is tired!!! It might work once or twice, but I doubt it will give you an edge. Post a chart of what you are talking about, I’ll still look at it…

Brad


#95

My suggestion would be look at spike strikers etc… at deviation level and at an expected move on hi to low - then look for a OTM targeting the closest next deviation if your going to do this strategy and make sure you have some time for it to get there.


#96

you used a short post here

[COLOR="#FF0000"] you used a short post here

you need to click on the short link then click on the image itself and you will see a LOOOONG link in the URL

if you click on your short link that jing gives you and then click on the image you will get this link

jing gave you this:

  • you click on it - then click on the image you get this

see the .PNG at the end you need the actual image file not a web page but an image file link ie .png etc…

that is what you post[/color]


#97

2014-07-16_0811 - yoshi54’s library

I just cant figure out how to post the actual picture here. I read through the jing post, and the uploading an image too large post, but embarrassingly after 40 minutes, still cant get it right. Here is the chart from yesterday, I figured that I would post it. I really do think that it happens alot on TF, that when it moves a full deviation ( which it doesn’t every day ) that it is reasonable to think that it will move a .5 deviation the other way. This is one example from yesterday. After trading today, I will try and find more.


#98

The on ething I learned in that whole process is that it doesn’t matter what I think, it matters what I can prove. So, back test it see what happens. If it shows promise, instead of the $5 OTM binary, look at something that is just OTM.

Brad


#99

Yoshi on general forum and on most of the courses we link to this:

http://apexinvesting.net/forum/how-share-charts-other-traders-230/how-download-install-use-jing-screencast-432.html#.U8aslPl318E

not sure where your lost

just follow the steps when you have the image

use the long link (the short link - click on it get the long link) choose the image icon choose url paste the long link UNCHECK the little box under where you paste the link see this image below its from the jing post and covers these exact steps

link to see it larger:


#100

Trade C sounds like my new idea. I saw a video where someone sells for $15 & buys for $85 around 8pm for the 11pm daily expiry. He does the currency pairs. This is during the quiet period of the Asian session. I didn’t like the strikes only being 60 pips apart, so I decided to tweak it. You enter working orders at least one strike beyond the one he would normally take. You would probably only get filled on one side. The market would have to make a pretty massive move for you to lose. Problem is if the market doesn’t move very far, you wouldn’t get in on the trade. I’m willing to do that than risk getting in on THEIR terms.

Of course you have to make sure there’s no big news coming out during that time… or you could put your working order a couple MORE strikes away for the news days.

This is my next strategy. I’ll be doing this in demo this week. I still haven’t given up on my idea to find one thing that works over & over. I’ll find it. :slight_smile: