For those who might be interested, here is a chart of the P&L from that ES/NQ Relative Strength Trade from today (Sorry it is kinda big):
ttrader.com
The chart assumes that the trader goes long 2 ES at the open and short 3 NQs and then tracks the P&L through the day.
Notice that the Net P&L line follows directionally the intraday fortunes of the ES more or less. But with less drawdown and considerably more profit at days end, than if you had just gone long the ES. This is in part because the trade was weighted a bit heavy to the long side, as I had a bias for ES to be generally headed up today. If this had been weighted, say, 2 ES long and 5 NQ short, there would have been virtually no drawdown and much more profit (all the trade profit having come from the NQ side.) But this configuration would have gotten killed in an up market. The trick is to find the contract ratio that has the greatest profit potential regardless of market direction, merely based on the relative strength of one index over the other.
Another thing to observe is that during sideways market action, the P&L steadily rose, until both sides of the trade were showing profits. This situation returned in the last half hour as well, as the market fiddled and diddled into the close. That is really nice, since it is hard to make money in sideways markets with directional trades.
The other thing that I noticed is that the P&L started to deteriorate as we entered "the doldrums" or the long lunch hour. I closed my trade a bit early (11:15), leaving quite a bit on the table over the next hour, but I put it back on at 3:30 and was able to take some more out of it into the close. Like any other chart, I could plot a moving average of the profits during the day and enter and exit the trade repeatedly based on MA crossovers or the like.
Fun stuff. |
