Outside In!

The times are still a-changin'. The effects of the governments' activities to "repair" the impact of the events of earlier this century are still causing market participants to act like Pavlov's dogs. While we are in a somewhat artificial environment, its still the same as before - markets react to what is happening.

One aspect of the current "fingerprint" is that markets are perhaps more nervous and watching for the possibility of change even more intently than before.

For me, Outside In ( mean reversion to some) trades can be very effective.

But as for all strategies, Outside In has a trade off. While the markets are in a trading range which is most of the time, Outside In is very profitable. However, when a trend begins, the trades have to be either filtered out or managed.

These are NinjaTrader charts with Bloodhound used to create the flobots.

So how can you filter and how can you manage?

Filtering is a matter of observation and testing. I can filter out trades that would be losers when the market trends using the slope of my EMAs. If the slope is too steep then no trade. Others use the Wells Wilder's ADX but I have found this to be too lagging for my timeframes.

For managing, I double down. My purpose is to average the basis price of my entry. I may have to do this more than once. Yes, I occasionally take a loss because I know that the markets can stay irrational longer than I can stay solvent but again, that "uncle" point is a matter of testing.

Whether I trade with a flobot or as a discretionary trader, the testing I do gives me the metrics I need to be able to maximise profitability. Without that testing, I'd be guessing.