Price & Time Filters and relative value trading

Question 1

What are price and time filters used for?

Answer 1

Used to work out when a support or resistance line is broken sufficiently

Question 2

Time filters

Answer 2

How long do you wait to be sure it’s broken?
•wait for daily close (sentiment shift?)
•wait for 2-day close
•wait for weekly close

Question 3

Traditional price filters

Answer 3

Wait for penetration through a level by a pre-determined amount

Question 4

What do you fix price filter parameters based on?

Answer 4

Your trading timeframe

Your risk appetite

Question 5

Better price filters

Answer 5

Need impulsive break
•long bar
•close on extreme 
•high volume
•gap
Need 2/4 of these for a reliable break

Question 6

Other names for relative value trading

Answer 6

Spread trading

Paris trading

Question 7

Relative value trading

Answer 7

Involves taking a view on the relative, not actual performance of two related assets. Traders speculate one asset outperforming another

Question 8

Benefits of relative value trading

Answer 8

• profits can be made in rising or falling markets

* generally considered as less risky than outright long or short positions

Question 9

Drawbacks of relative value trading

Answer 9

• profits are limited since positions are always fully hedged
• larger positions are required to generate decent profit

Question 10

What two things can you trade between

Answer 10

Two related assets

Two contracts of the same asset