Tuesday, 17 November 2009

Roy Rogers' Horse: Trigger

Roy couldn't go anywhere without Trigger and neither can we.

I didn't trade yesterday as you can see from the blog -  I left the work to Kiki who had a great day. Anyway, it gave me the chance to surf the blogs and forums. I came across a blog written by a guy that was a couple of years younger than Kiki.  He had confessed on his blog to having had a terrible morning, commonly called "a mare" in the U.K. (nightmare). I read some of his earlier posts and replied to him about not being like Roy Rogers.  So I thought it was important for Kiki to remember the importance of a Trigger in trading.

We have a very detailed trading plan. It is detailed so we don't have to re-invent the wheel during a trade in the heat of battle, when there is no time. We react automatically to what we see and the information we process from what is visible. That is why Kiki spent months on the simulator before she went live, and that is a big part of the reason why she is on the way to being a successful (read profitable) trader.

Our trading plan requires us to do a little work each day before we trade. We start with MP and mark all the support  and resistance, POC, VAH, VAL, split the distributions and so on. We next draw our expectations for the day's profile - how we think it will look. Sometimes there are two different views.

Now we trade. Our trading plan has setups - the things that need to come together for there to be a possible trade. Then there is the TRIGGER. The Trigger is the "go - no go" for the trade. It is the point at which we must make a decision.

Why is our trading plan like this? Several good reasons, you as readers, will no doubt think I will say.  You are correct of course and the reasons are:

1. You have fixed criteria you are watching and can make the required complex assessments quickly
2. You are consistent
3. You can react, and don't have to figure out what to do
4. You know from the past that you have an edge and that over time, if you maintain your consistent trading plan you will make money
5. With a Trigger, you can automatically take the step to put trades on and take them off without real indecision. Its purely SETUP -TRIGGER - TRADE

6. You have no fear of a losing trade as you know in advance how big it will be and roughly how many a week you will see. The fear of the unknown is gone.

I tried, in a few lines, to pass this on to the guy whose blog I found. He says he trades order flow but from what I saw he is micro managing trades based on fluctuations in the price rather than having a trading plan that meets his specified and tested trading ideas. There was another post that advocated trading that way too. The guy I was trying to help is a real hard and dedicated worker. Puts in a lot of effort. My point is that most traders are made not born. Sure, I have seen traders on the floor who say they trade by the seat of their pants with no plan, they just trade and make money. But when you look at what these guys really do, you see there is a "plan" although they don't know it. They are born traders who just instinctively put it all together. They are maybe 1% of traders. The other 9% of us have to structure what we do so we can repeat it day in day out. The other 90% without a plan just ask "do you want fries with that?"

And now for today's trading:
Kiki finished light green in a day when the market didn't give up much. Up to the NY lunch, price bounced between previous day's POCs and VAs. These types of days can be harder to trade as there are many false starts and after days when the volatility was higher, you can miss exiting at the optimum places.

Click to enlarge


  1. 2 quick questions

    1) is that a 5tick range bar in the picture?
    2) I think the P&L for trade one is mixed up, not a losing trade based on entry and exit?

  2. I've read a couple of your posts and I found them excellent.
    I become interested in markets about three years ago and it took me two years to discover market profile... how lucky your daughter was/is to really know some who makes a living from trading. Having a mentor or at least a coach definitely shortens the time one needs to learn trading.

  3. Thanks Electronic Local. I found your blog the other day and am enjoying reading the posts.

    You mentioned that you look at MP in a 24 hour context, not just the NY session. Why do you find this more helpful than spliting the overnigtht and day sessions and choosing the VAH VAL POC's etc from te day? Wouldn't the higher volume give the day's session more significance?

  4. Really finding your blog very useful...way to go Kiki!! Your daughter is doing fantastic!

  5. be the ball, yes it's a 5 tick range bar.
    Thanks for spotting p&l was better. I'll fix it.

    Aaron P, let me clarify MP. For me, the distributions are what matter and I split them according to that. RTH volume is much gretaer but I think you will find that there has been more activity from traders outside the U.S. in the last year and the s&p has often seen important moves outside that time. I'll do a post on the subject.

  6. What parameters are you basing your distributions on?

    Yes, I agree that a lot of the range has been during non RTH hours. I trade from California, so many of the early to mid Europe market hours unfortunately are outside my trading times. Late Europe and early NY are available though.

    Can you clarify a bit more on what you are looking for in the order flow? It seems that you are determining your bias via MP, then entering at support/resistance points when the order flow confirms your bias.

  7. I'd also love to see a bit of an elaboration on your triggers in the order flow for entering a trade.

    I am dialed in on MP, identifying key levels and the like. Where I am still trying to improve is, when we are at a key level, recognizing signs for continuation or rejection.

    I understand this blog is for your daughter and not us random strangers...and I am honestly not looking to copy your exact methods...but any insight you would like to share would be appreciated!


  8. Keep reading the blog for more info on triggers and MP. As circumstances arise, I'll elaborate.