Seeing the E-Mini in the green after holding it over the weekend is definitely a good way to start your Monday and I strongly recommend it. What’s more important however is a little epiphany I had this morning when I was staring at the E-Mini’s volatility panel. The indicator I use is something I hacked up a few years ago but I could never really find out how to turn it into a system. Until today that is.
On the lower panel you see DarthMole which is my genetically enhanced version of the RSI – it basically measures RV swings above the upper and lower Bollinger. When I wrote it I was fascinated about its ability to predict directional swings, but at the same time I also realized that sometimes the trend would roll all over the signal.
The way I think I solved this was to use two concurrent indicators – one measuring the swings > the upper BB (yellow) and the other swings < the lower BB (cyan). In addition to that I am also using a simple SMA that ensures that only MR extremes are being considered, meaning only short campaigns > the SMA and long campaigns < the SMA. In addition to that I think candle breaches may add a bit more of an edge, but that remains to be tested.
Alright I already know what you’re thinking: Hey this is rather obvious, what’s the big deal, Mole? Well, thing is that simple solutions often look trivial in hindsight but coming up with them is not. That said, I don’t think this is the holy grail and that it probably needs a bit of work.
If I find some time I’m going to run the stats on this sucker and throw in some additional alpha factors, e.g. the frogbox on the VIX, or perhaps even the IVTS. But on the surface this looks like a pretty nifty swing trading system on the E-Mini. Feel free to share your thoughts/ideas in the comment section so that we all benefit.
Speaking of the E-mini – I now advanced my stop to break/even. Easy does it here as intra-day realized volatility (RV) is once again in the process of expanding.
So gold is looking like a possible long campaign but as you all know by now, just because it’s flagging a possible ST floor pattern doesn’t mean we automatically consider a long position.
In fact both the weekly and monthly panels look like they’re about to start trending lower. Unless of course those lower BB can be recovered. Which it might of course.
The ultimate decider in my mind can be found on the forex side. Please step into my lair for more perspectives on this, plus we have new setups:
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