Daytrading The Emini – An Update (Stochastic Midpoint Reversal System)

Back in August 2003, I have an article called Daytrading The E-mini published in the Technical Analysis of Stocks & Commodities magazine. It described a technique called Data Reduction that improves certain type of indicator performance drastically. The technique is applied onto a basic trading system that works very well at that point in time. We are going to take a look at the system today to see if it is still performing as expected.

The System

The setup of the system is very simple.

1. Emini S&P, 5-minute bar

2. Chart only the trading time from 9:45 AM to 4:00 PM Eastern Time. That means we are leaving out both the first and last 15-minutes of data from the regular trading hours.

3. Filter trades by using 100 period simple moving average (SMA100) – will go long if and only if price is above the SMA100, and will go short if and only if price is below the SMA100

4. Our signal line – 10 period average of Stochastic SlowD (45, 5)

5. Go long if signal line cross above 50

6. Go short if signal line cross below 50

7. Always exit the position by 4:00 PM (a daytrading system)

The original system was created with formulas entered as long and short signals into NeoTicker’s Backtset EZ indicator for quick and dirty testing.

The complete version is now rewritten in indicator formula that you can download here. You can use indicator manager to install the downloaded formula script file.

Data Reduction

To correctly setup your chart, make sure you customize the chart’s Data Setting through the Chart Manager. The data you’ve collected are not affected at all, it is just this particular chart that will use reduced data only.

Stoch Mid Point Rev Time Setup

NeoTicker’s SlowD

Here is a screenshot of the system in action.

Stoch Mid Point Rev Chart

Notice that after data reduction, the SlowD is much more smoother at the start of the day as the unnecessary volatility are skipped. One special thing about NeoTicker’s SlowD indicator is that it is based on the original exponential moving average formula, not the modified version used in many other applications today.

The Performance

Here is the equity curve of the system tested all the way back from year 1998 to Jun 2005.

Stoch Mid Point Rev Original Equity

See how the system performs since the original article was published. It is holding up well indeed.

A Twist

Personally I do not like to monitor signals in the afternoon, as indicated in other systems I posted here. So, I have added an extra rule to the system so that you can control the time to stop starting new position in the day.

If you set the time to, say, after 4:00 PM, then the system will behave exactly like the original one.

If you set the time to 12:00 PM, the usual time I use, you will get a some what different performance. Actually, a better one based on the equity curve below,

Stoch Mid Point Rev Morning Equity


The concept of data reduction is seldom mentioned anywhere in technical analysis textbooks, because there was no software available that can do that properly before NeoTicker’s introduction. Since it is now possible, you’ve got one more tool to help you trade better.

3 Comments on “Daytrading The Emini – An Update (Stochastic Midpoint Reversal System)”

  1. Mike Makuch Says:

    I’ve implemented this strategy and I get similar results to the equity curves given however, when I add 1 tick slippage and $5 commission the strategy loses ~$17k.

  2. Lawrence Chan Says:

    This is a basic trend following model with no money management rules. The basic bias provides a starting point for you to add those rules that you are comfortable with so that you will have a complete model. Good luck on your research!

  3. Sean K. Says:

    Each trader has his/her own strategies when day trading, and i find this very interesting. Though i don’t agree about there’s no software effective enough to help you get the much needed information when you are trading.

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