After my Harmonic Rotation research study, one of the things I’ve identified as an area to research to help me with my trading system creating is what the average daily range (regular trading hours) for the ES is. This is important because I’ve identified that a stop loss on the ES should be at least 2 points (8 ticks) to avoid getting whipsawed out on a normal rotation. And given that I would like my trading system to capture at least 3R (3 times my initial risk), I’ll need to see if capturing 6 points on the ES is realistic or not.

To perform this day range study, I wrote a NinjaTrader Strategy (in C#) that outputs the necessary bar data to either an Excel spreadsheet or an SQL Server Database. You can download the strategy here, but in order to output the data to SQL Server, you’ll need my data model which I haven’t made available yet. I’ll definitely look to release it in the future once I’ve worked with it some more and I’m sure I have worked out all the bugs.

The data outputted is the Time, Open, High, Low and Close for each 405 minute RTH bar (Which is a full day). Importing the data into Excel, we can quickly calculate the day range (Not interested in direction at this point), round it, and the plot the frequency chart. Here’s the data I collected:

This shows from Jan 1, 2008 to Sept 8, 2012, the most common day range is 10 points, while the 1st standard deviation is 7 to 21 points, and the 2nd standard deviation is 2 to 47 points. Based on this study, it is obvious that I should expect to capture 6 points every day on the ES. While it is possible, collecting more than 50% of a day’s range for any trading instrument is quite a feat. But on some of the larger range days, this is definitely possible. Thus my future research will have to look at being able to effectively calculate the probability of having a larger range day (Possibly by comparing the overnight range versus the regular trading hours range) and working my system on those days, and then looking to possibly trade a different instrument (or different strategy) when the probability is towards a lower range day.