My style of trading on the Bund futures market (FGBL), means that at times I will not get filled on my trades. I place a Limit Order at or just in front of the level and if price comes to this level, three things can happen with regard to this trade and getting a fill. I am not focusing on whether the trade is profitable, this is not the object of this exercise.
- Price stalls a few ticks before and makes a rotation away hitting targets.
- Price trades at my price but does not trade enough contracts for me to get filled or trades 1 tick before my order and makes a rotation away and hits the targets.
- Price hits my Limit Order and fills.
So I implemented a trigger system for entering trades at levels where 1 or 2 happens or at levels which are not strong enough in my analysis for a blind limit order entry.
For triggers, I am using a three bar read and have 6 general types of formation I look for whilst looking at the DOM order flow for confirming this formation. I learnt this type of price action reading from Lance Beggs.
I am not to going into the actual triggers I am looking at, as this is not the point. It is not as simple as a saying it is a engulfing bar, it is how it relates to the previous couple of bars and the order flow.
What works for me, might not work for you. If you are interested in this type of trigger setups then Lance has plenty of free material and paid material, all of which I have found to be excellent value.
The problem for me with triggers are twofold.
- I am getting in a worse price, than the blind entry, which is fine at levels which are not strong for a blind entry, I am willing to pay up for confirmation. At levels which are strong enough for blind limit order I am reluctance to take triggers due to paying up compared to where I wanted to take a trade. Which leads to some hesitation in entering and missing some trades. This is something that I have worked on and are getting better at.
- Not get filled on the trigger bars. In some aspects I have swapped not getting filled at levels to not getting filled on the trigger bars. This is the problem I trying to improve.
Why am I not getting filled on my triggers.
As I am using the DOM order flow as part of the trigger set up, once I see the order flow that I am looking for, I place a limit order at the price I want. I find that once I see this and place the order, price can move away very quickly not filling me or the time I enter the trade I am at the back of the queue and not enough contracts trade before moving away.
Blindly taken triggers does not work for me. I find that triggers can false break and go to test the level, or just false break and then fail.
I need to have a balance of when to place to market order to ensure that I get in and take a possible pay up cost of one tick or when I can place a Limit Order and get the price I want for this trigger setup. Remember that I am already paying up for this trade by taking a trigger which is rarely at a better price than trading blind at the level.
What I have done is gone thru my charts and looked at 50 successful examples of each of my 6 triggers setups. I am aware that I cannot see the order flow for the historical set ups but I need to start to change the way I trade these, so that I can compare the new technique with the past technique.
Looking at these 50 successful examples of each of these trigger setups, I looked to see on a lower timeframe, if price moved away quickly or price stalled / micro pullback before moving away.
I started a spreadsheet, then I recorded if it moved away quickly or stalled for each trigger. This took me over 4 hours to generate this data
Of the 6 triggers, 4 of them had majority (90% plus) of one type of move away and 2 triggers had no majority of the type.
2 types of trigger setups moved away very quickly. Going forward, if any of these 2 triggers setup and have corresponding order flow on the DOM, then I will be entering with a Market Order.
2 other types of trigger setups, stalled or pullback a couple of ticks before moving away. Going forward, if any of these 2 triggers, then I will be entering with a Limit Order.
The last 2 types had no one type of move away, for these I will stick to Limit Orders as I have done in the past.
I will record over the next few weeks I have more success with these sort of trades then before. I should have more entries as 2 set ups have market orders, on these I will monitor the price I get compared to what I wanted and how that effects the risk/reward ratio.
Of course the flaw with this is that by ignoring the unsuccessful examples of these triggers, I could end up getting in myself into trouble.
But I am not trading every trigger I see, I have tried that and it did not work, these triggers still have to be in context of my hypo and at levels of interest.