Monday, 24 January 2022

Experience can just mean making the same mistakes with increasing confidence.

 Yes, experience can just mean making the same mistakes with increasing confidence. This seems to be the underlying cause of why instead of CP, traders are consistently unprofitable.

As these markets evolve, I am continually tweaking my trading plan. The basis of what I trade is order flow. We have had the tools to see order flow in the futures markets for some time and I still wonder why the majority of retail traders don't seem to use this information. I look at YouTube and see hundreds if not thousands of videos of people showing how to trade profitably. However, examining many of these ideas I see its mostly making the same mistakes with increasing confidence.

I spent a day on the week-end just back testing the tweaks that I proposed implementing to my trading plan. Getting very specific information from deep back testing of the recent past gives me the information I need to make changes as the volatility and market rhythms change.

The big take away for the last months has been that stops have to be further away for my style of trading, especially for the NQ. Had I not moved stops to the second resistance instead of the first and cut my size, I would have had many red days instead of green.

Chart below is about an hour or so before RTH NQ. I'm done for the day after about 2 hours of trading. My stops were up tp 25 points, not ticks, from entries. I used 30 second bars so I have enough time to make decisions. I also have some automation so I don't need to be so fast.

Friday, 22 October 2021

Its Never Been this Simple

There are more people than ever trading today than there has ever been before, The internet is full of people offering THE way to trade profitably, yet, the stats of the percentage of people who learn to trade consistently profitably seems to have stayed at the same low numbers we have seen for 50 years or more.

The sad thing is that this does not have to be like that. We now have the tools for a large percentage of people to lern to trade successfully.

Price will move in the direction traded by the most agressive traders until those agressive traders stop being aggressive or until traders who are more aggressive trade in the opposite direction. By "most agressive traders" I mean volume traded.

Today, there are a plethora of tools available that can identify and measure the direction and strength of the aggression in a liquid auction market. Simplistically, its easy to see in which direction price is moving and easy to see when that movement is running out od steam.

Once we have identified a market move, we then need to identify the areas where this movement might meet some opposite agression.

This is all that trading is EXCEPT we need a trading plan and money management plan that decribes in detail how we interact with the other traders in the market,

Pete Steidlmayer is probably the best observer and interpreter of volume, price and time. The invention by him of Market Profile has probably been the greatest gift to traders since trading began. It puts volume, price and time into a measurable and observable structure that allows us to see aggression and order flow clearly. The morphing of Market Profile into Volume Profile has been the next step. Pete's work subsequent to Market Profile has taken his work into the electronic market era.


The chart above has the type of information I have been talking about. So you see, trading is simple. But still not easy especially if you don't know how to create that trading plan. No activity can be successfully completed without a plan. As Tatoo always said:" The plan, the plan!" 😂

Thursday, 14 October 2021

Battle of the Trader Funding Companies

 Just a quick post about trader funding companies. Suddenly, there are lots of them out there. Its great for traders as it takes away one of the reasons that so many traders never reach CP (consistent profitability).

Having said that, trading to "pass" the evaluations to get funded by these companies is not as straight forward as it looks. There are a number of metrics which have to be met as one sees when doing the due dilligence. Meeting these metrics will probably require a change in the way most people manage their trades. One of the metrics is a trailing stop loss on the account. The trailing stop loss on the account trails the tick by tick high water mark of the account. If your trade makes a new high in profit but you close it out at less than that high then the difference will tighten your accounts trailing stop loss. This means that a scalping style is less likely to have you fail the evaluation. If you usually exit on pullbacks in the profit on a trade then the medicine is to lower your size, perhaps even to use micros. The price on doing this is that you may not reach the profit target of the evaluation within the 30 days and have to pay another month of fees to continue. I failed evaluations several times before I worked out how to manage my trades so I can complete an evaluation within the 30 days and not be stopped out.

The other thing that you should know is that after you pass an evaluation, to get funded, you need to sign a contract wich contains a non disclosure requirement as well as some other conditions from some companies, which I can't disclose, that may not be what you expect. None of the funding companies that I have seen display the contract before you pass the evaluation.

Having said all that, giving me 90% of the profit I make but zero risk is a great deal, especially if you run mutiple simultaneous accounts. 

Presently, there seems to be a battle between some of the funding companies cutting their eval prices so its a great time to get involved if you want to get funded. Have a good look around and ask questions from them to clarify anything you are not clear on.

For me, its all about the order flow.


Thursday, 26 August 2021

Someone Wacked the Pinjata

 I had anticipated another tight range day ahead of Powell (FED) talk tomorrow at the virtual Jackson Hole meeting.  Not to be. The charts below show how a few of the trades were triggered by the order flow.

A little after the open a guy started selling an iceberg at 4487.75. I think he sold about 3000 contracts. Here's the chart showing the order flow then. The GREEN support you can see after the iceberg was filled showing that the buyers took all that the iceberg guy had to sell.

Price went against him a bit until the market cycled a bit until people got bored. He then seemed to come back and give it a good wack which set off a string of stops. The Bubble shows the wack.

The bids were hit hard and stops were triggered and triggered until we ran out of sellers and buyers stepped in.

 It got better - we got a retracement to the mean and got two chances to make some more money.

The key to trading these auction markets is to follow order flow and find the areas of support and resistance. The above charts do not show the context apart from where the mean is. I have been using Jigsaw's Auction Vista and Bookmap with their SI add-in that shows stops and some of the icebergs. I struggled to get any extra info from either of them although I really tried. My chart with added context and Market Profile tells me more and everything I need to know.

Friday, 20 August 2021

A Clearer Chart for You??

 There are many ways of setting up an order flow chart. For me, a strictly footprint chart is useless. Looking at all the numbers completely overwhelms me. I'm a very visual person as probably most males are. I need a chart that shows patterns I can identify. 

Below is a chart with the bars grouped into mini volume profiles, each with its own VAH, VAL and POC. Each bar on the chart reveals powerful order flow information to me as do the arrows above or below some of the bars. 

The chart below shows the opening of the ES today. As you can see my chart shows the breakout up and shows me likely continuation upwards from the breakout point. The long trade triggers at the close of the 09:45 (EST) bar and can be automated so it triggers right on the close of that bar with that order flow information.

I teach students to use the chart that shows them the order flow most clearly. I have a number of templates but one size does not fit all. You know the old saying: "None so blind than those that cannot see".

Wednesday, 18 August 2021

Bubble Trade in Crude


I trade three types of trades. Let me list them.

  1. Breakout/Pullback Trade – start of a new trend (may be a short trend)

  2. FavFib Trade– reversal – outside in trade

  3. Bubble Trade – this needs MZpack

Each trade has a couple of defined ways of triggering. 

The chart below shows a Bubble Trade. I have configured MZpack to find the trade and use Gomi to help trigger it. Its just order flow and those two apps to NinjaTrader give me the information to trigger it. I also Use SharkIndicators to monitor and sometimes to trigger it after I arm it when the context is right. 

Crude is a good market for me nowadays and moves well directionally. The chart below shows the bubble after the weekly inventory report. A couple of minutes in you can see the first blue arrow up which was the entry. The exit was the mean at the red line. These Bubble Trades repeat in several times a day, not just after a report. You will see a couple of other good trades on that same chart. My goal is to trade just up to two hours a day to make a daily profit target, not to sit there all day.


Wednesday, 11 August 2021

Context is King

 Those of you who have been reading this blog for a while, especially those that have had learned from me personally, know that I have things I call "trade pictures". 

A trade picture is what a chart has to look like for there to be a trade.

Today in the ES we had two pictures that happened almost into one trade.

The chart above is a simple Market Profile chart of the ES RTH. The red "0" is the open and is the area where my Open Mean Reversion picture was triggered. The trigger was the order flow I read on my bar chart like the one in my previous post. I was waiting to see the order flow as the ES RTH session opened as I was looking to sell based on the order flow and context in the minutes before. You can look on any low periodicity bar chart and draw in the mean and see how this trade worked.The second trade is my VAH - VAL trade. It is triggered by order flow and context as price is accepted into the previous value area with correct order flow and context.

The other part of the trades was the trade management. Stops, Targets, Scaling in and out, Doubling down id necessary. Scaling out allowed the second trade to be profitable even though it did not hit its profit target of VAL. 

August has been lower volatility but trades have presented themselves non the less. I also trade CL where there have been some nice trades too.I'm planning on showing some of those if the markets co-operate.