Find the trend and Trade the Pullbacks.

Sitting at full alert for hours waiting for a trade is not easy. Los of discipline, missing trades, happens a lot. Using an algo to do the waiting and entering the trades that exactly meet your trading plan is a solution to about 70% of the issues that traders have in getting to CP. Managing a trade after auto entry is a lot easier and that can be rule based, either automated or manual.

Fore!

The LPGA came to my neighbourhood last week and Friday saw Mrs EL and I head to Evian, the home of mineral water, to watch the golf - The Evian Championship billed as the first Major in Europe. The course is breath-taking. It is situated in the foothills overlooking Lake Geneva (Lac Leman) and the day was sunny and bright.

We stayed the morning and got back to the farm after lunch in time for the RTH open.

I have two students on the go at the moment learning hybrid trading. One is still on theory and the other has started SIM with great results. We have a good trading plan that has achieved a high win rate and next week we are progressing to stage 2 along the road to CP. Hybrid trading seems to be the shortest road to CP as it provides the discipline to take the specific trades that have been tested and put into the trading plan. I'm teaching the use of a technique to turn the FloBot on and off as the conditions change making the appearance of a trading picture possible. This again improves performance.

This is Why I Hybrid Trade

Today's DAX chart shows it all. Flo got long just after the DAX open and stayed long for the whole move. Yes, as a hybrid trader I could have mucked it up a bit by exiting early, but look at the green bars on the bottom Bloodhound chart section. Each is a re-entry long! So if I had exited early -which I did I must admit I did - I had ample re-entry signals. I can also set Flo up to exit with a tighter profit target and re-enter if the entry picture represents itself and here that happened too. Notice how the LURenko bars smooth out the trend.

Hybrid Trading Made Easier

The advent of Bloodhound is a big deal for hybrid traders. The vid below shows one of my hybrid trading workspaces.

I have two types of entries: Inside-Out and Outside-In. the new GoFloTM FloBots are both active on the chart but can be turned on and off with a single click. The logic, created in Bloodhound, does all the entry work. However, and this is where it gets cool, several bars before any possible triggering of a signal, as I see the picture may be coming, I just turn on the trade I want to take. As soon as Flo sees all the conditions have been met, a trade is immediately fired of to the broker. I don't need to be too much on the ball or even be quick. Flo does that. I then manage the trade with my rules that have been documented in my trading plan. There is a drop dead stop and a "this trade is no longer a go" exit rule so if I'm not paying attention then the world does not end. I can make the trade fully auto by entering a profit target.

I make the choice of when to turn a Flo on and whether I want the Inside-Out or Outside-In logic to be active, or both. The beauty is I don't have to be too alert or too quick to catch a trade. I can easily trade more than one market at a time.

My tools: Ninjatrader, Bloodhound, PureLogik Renko bars, GoFlo (the EL algos), and a specific trading plan governing my trade management.See details of the tools here.

I've made a video to show how I do it.

Is it Is or Is it Ain't?

To paraphrase that great song by Dinah Washington "Is it Is or Is it Ain't?" a trade setup? That's the decision a discretionary trader must make numerous times a day. Lots of focus needed.

Pete Steidlmayer always said to, "just get the trade on and then manage it". Well, Flo can get the trade on better, quicker and more consistently than I can. I don't need to re-invent the wheel multiple times a day. The pic below shows yesterday's (Tuesday's) ES open using Ninjatrader and Bloodhound. Do I buy it or sell it? Flo went short and then it was a simpler a matter of managing the trade. Or I can let Flo manage it and do something else. These trades when a market opens and is in imbalance, can very often be the trade of the day. "Do the trade and go to the beach" as another trader I knew in California used to say. The profit per contract was $162.50 less fees (hybrid). Not hard to trade the size in ES that you need to make a daily profit target.

As you can see from the latest series of posts, I'm a big fan of using automation to at least enter trades. It just can get you to and keep you at CP much quicker. Don't get me wrong, this strategy has losing trades. Not many if you use the correct money management strategies, but losing trades non the less. Money management is at least 50% of the trade.

Algo Trading - a Different Perspective

For a long time we have known that different algos work better on different days. Putting that into Market Profile speak, an algo usually performs differently on a Trend Day ( or a more trending day) than on a Normal Day (when the market is rotating).

I have long been setting up algos to only trade at a certain times of the trading day when I believed that certain activity that suited the algo would more likely happen.

But there is a more hands on approach. The object of the algo is for it to quickly identify a trading picture and act on it without me being required  to be alert and glued to the screen. Much of the time I'm in my office doing research or putting on option positions etc. I love what I do and am never bored in this business.

I was often frustrated when I saw Flo take a trade that I "knew" was going to be a loser. When I first started trading with algos I often over rode the signals until I realised that I was wrecking the math of what I had created.

Taking one step back, what if a trader can identify the type of day that was happening, or just the type of market that was happening, and turned on the appropriate algo that was suited to that type of market. That would require a little attention but nowhere nearly as much as discretionary trading. Having the algo identify these activity changes was something I have tried to do and am still trying to do with different degrees of success. However, if a trend day starts I can easily tell Flo to only take trades in the direction of the trend. If I have a quiet day I can turn on a Flo that trades well in a rotational market.

Makes more money and takes away the frustration. Of course when I'm not there, Flo does her thing and gets more "average" (profitable but bigger drawdowns) results which is fine as that's the price of freedom.

Today's chart is a typical DAX trade. The market was called to open gap up - ES was trading higher overnight - so I turned on the Flo that trades this very usual trade. As soon as Flo entered the trade I went to my charts and quickly found the target and entered the order. No rush, no sweat. I also knew where the price had to go for me to be wrong and a stop was placed there.I then turned the automation off. There is no law that you have to use the same algo all day. The markets often trade in three different modes - the opening hour or two, the middle and the closing hour or so. The reason for this is that it is at the open and the close that the bigger market participants have to create and balance positions.

As you can see, entry was at 8254.0 completely automatically in accordance with the logic in the Bloodhound FloBot. Exit was on a discretionary but rule based basis (trading plan) at 8274.0. The profit of 20 DAX points or 500 Euros per contract meant that my morning trading could be done for the day. You can see where Flo would have exited the trade on an automated basis, at 8270.0, 100 Euros less profit. By trading as a hybrid trader, it is possible to consistently beat an already profitable algo by concentrating on manual trade management, a lot easier bar to meet than trading as a fully discretionary trader. The chart below is using the PureLogik Universal Renko Bar