Is It a Buy or Sell? Easy!

 

 

Is price here a BUY or a SELL? Value had dipped into the porevious day's VA but has also moved up a tad. Now look at the next pix below.

 

You can see that it was a BUY. Value moved up. Now look at the last pic. The renko chart shows trend as up and clearly identifies the pullback and thrust to get me long right at VAH support. Putting these two disciplines together provides more clarity of what "they" are doing.

Could You Trade this Algo?

The pix below show the metrics of a trading system trading the ES. There are no optimizable parameters. As you can see, it has a low win rate. But it makes money month after month. It has no target and it has no stop loss. There are no parameters to go out of sync with current market conditions.

Best of all, look at  the average trade size.

Maybe, the question should be not "could" but "would you want to". There are many ways of making money in the markets. Just the same number of ways of making money as losing it because it's a zero sum game - every trade has someone on the other side. If you don't like this system then you could just take the other side of the trade. Does saying "I wouldn't want to take either side" make sense?

Doing what everyone else is doing gives you the results that everyone else is getting.

Anatomy of a Losing Trade

The chart shows why I avoid anything but drop dead stops.

You can see where the trade entry is. Not a great trade location as it's a bit far from the  shorter EMA but still OK.

The trade fails as the trend is now suspect but the context allows an exit at break even. An order can be placed at resistance which in this context is the longer EMA. When the DoubleDown entry is executed, an order is placed to exit at break even with a drop dead stop still in place (there is ALWAYS a drop dead stop in place in my trading plan).

Market pulls back from resistance and the trade is exited at break even.

Looking for a new trade.

This can be done as a discretionary, hybrid or fully auto trade.

Consistency

One of the key components of CP is the Consistency. It's OK to have a few losing trades but a high win rate with proper risk management for the losses provides a mathematical edge in your trading plan.

Having tight stops is not the way I do it. Rather, doubling down and even tripling down in a trade where the entry qualifications are still valid allows the basis cost of the entire position to be reduced and facilitates the high win rate and consistent profitability.

Today's picture is the third day in a row with similar trades although each has a different context. However, they are all trades that trade the pullback-thrust of the trend of the chart in which they appear.

The initial entry was early but identifies the Fav Fib target below. It allowed a doubling down at a better price which resulted in a much larger profit on the trade. Initial entry may be 25 to 50 percent of the position with the balance entered on the double/triple down.

Just getting the trade on is what important. If you don't have a trade on then you cannot get a result. Overthinking kills consistency. Do the testing and rely on the metrics you discover. You MUST expect and accept losing trades. It only takes one strong hand to take the position opposite to yours to make a trade a loser but if your testing shows that you are profitable 75% of the time and green every week, just take the trade.

Ground Hog Day

This stuff works because these market patterns just keep on repeating themselves.

Today, the DAX had a deja vue trade - same trade as the previous post. Market thrust after the pullback and stopped at my Fav Fib. This trade worked as either a Hybrid trade or fully auto. I'm finished for the morning and it took all of 3 minutes or so. You do the math x number of contracts.

Hybrid Trade into my Fav Fib

The chart below is a Ninjatrader chart with Bloodhound taking my EL signals. Each of the racing stripes are a signal: Green for BUY and Red for SELL. There is a panel on the right that allows the trader to switch the algo on and off and to manually exit trades.

A Hybrid trader can turn the algo on when he sees conditions are close to a trade setting up. He can do this from watching his Market Profile or just looking at the EMAs converging or the CCIs changing trend.

Once a trade has been triggered by Bloodhound, the trade can be exited manually at a predetermined target such as my Fav Fib as in the picture below. If a trade is exited then the algo will enter a new trade when the conditions specificed in the algo are met. That's why you see all the racing stripes. No additional trade if you are already in a position in that direction.

If you turn on Flo and the conditions are not met, there is no trade.

It's Simple if you use Algos for Discipline and Focus

Trading is not easy but it can be made easier if you keep it simple. This morning's trades in the DAX are a good example.

Creating an algo - MultiCharts, TradeStation or Ninjatrader, it doesn't matter which - allows you to wire in the discipline and focus. Instead of needing to be focused and smart for over 480 minutes every single trading day, putting the effort in creating an algo to do what you would do to enter the trade makes more sense if you create a trading plan with specific goals. This way, whether you trade hybrid or fully algo, you leave the focus of capturing the trade to your Flobot. Then to manage the trade you can either trade hybrid (manual exits) or still fully algo but adjusting your stops and targets to the context that you see BEFORE you turn the algo on.

Here's the pic. The range of the overnight ES told me that a 250 Euro target would be high probability for both the Inside Out and the Outside In trade.

Today is the one month anniversary of the death of my Mother. She was 94 years old and passed away peacefully in her sleep. She was diagnosed with cancer in January - the same type of cancer that took my Father in 2007. I'll miss her a lot. I continue to support the various cancer charities, especially Macmillan, that either help look for a cure for cancer or support the people who are impacted by it.