Friday, 26 February 2010

Questions and Answers

I had a few comments yesterday, one of which was a chastising one. As the three comments related to each other, I thought I would answer them here.

tickvix said...
El, If I understood right, you determine context by historical S/R, MP levels, fibs etc. As context is very crucial in your set ups, do you look for the same/similar context each time you take a trade? Is there a correlation between your 18 or so set ups and the context? Thanks

tickvix, context is a bit more than that. Context is the type of paper that the picture is painted on. For example, where am I in the Keltner cycle? Is my buy setup at the lower, middle or higher band? Am I leaning on support for a buy setup? All these things qualify the setup as good or not in addition to the setup components themselves.
Andreyyy said...
I've been a follower of your blog for a long period of time and i'm a little bit disappointed with a posts like this and i think so are many of the readers of your blog. You could ask me why? So here is the answer. In your webinar's and in your earlier posts you are talking about observation of the market, discretionary trading, trading the context and so on. Also you are talking about developing own setups. Yes, here is part of true, but only 1/2 of true. I'm not a novice trader and i know what i'm talking about after the 8 years spent in this business. The main problem is that in one posts you are talking about discretionary trading and in the another about pure mechanical trading. One couldn't backtest observed setup, and to get some "x' probability in the backtester if there is no hard and fast rules. I've developed ~ 4 profitable strategies over the time and there are hard and fast rules which you could write on the piece of paper, to get it to the novice trader and he'll become profitable if he will follow all the rules. So i think same is in your situation. Surely here are hard and fast rules, this could be observed from your charts. Like price crosses EMA, VB is down and CCI is crosing zero line. And here is a reason why are Kthe iki profitable. She know such a rules, and i don't think she had developed her own setups in such a shord period of time. So i think we shouldn't speak about trading context and so on. So either you speak about pure discretional trading or either mechanical. If you are talking about both - you are confusing newbies, which are your followers and don't understand how to trade. So if you would like to be an accountant for your and your daughter trades you should post your charts and if you would like to teach you should give people these obvious rules and please, don't speak about discretion and context. These rules, which you had put in the backtester and got 80%+ win rate. Or which know your daugter. Desribe your basic setup without discretion, as KikiFlo Bot trading it. As i said you told some rules to this Bot isn't it? I think many of your followers thinks same as myself. So if you re teacher, and if you would like to teach you should post the rules like this...( here is my modification of my trading system a-la "electonic local" and how i would trade in your way). 1. Instrument: ES 2. 1.25 Range Bars, 33 and 99 EMA, anything else, as in your situation. 3. Long entries. 3.1. Wait for the price crossing and closing above 33 ema. Full body should be above 33 EMA, and not part of the body. For the conservative traders wait for the close above 99 EMA too. All the parameters should be met: 3.2. Cumulative delta is green for at least 3 candles; delta momentum is green and rising, CCI is crossing zero line or crossed it already and headed up. Stop - below 33 EMA or x range bars, like 2 range bars or 3 range bars. Profit target - 2 points. That's all. trade this setup and you'll be profitable. If you would like to be MORE profitable and to have more winning trades you should like on MP, trendlines, VAH and VAL and so on. so, electronic local think about my words or, please, don;t confuse people.

Andreyyy, this blog is not a mentoring service. With mentoring comes both responsibility and a requirement to monitor the student's actions. I have painted with broad brush strokes the principles that I have taught Kiki. A large number of you have emailed me that you have taken these principles and used them to become profitable after having not been CP, or have said that the principles they learned by reading this blog has enabled them to take their trading to a higher level.

People take what they find useful in the blog and use it in the way that they interpret the information to help them become more successful traders. If I have time I try and answer questions that I think may be useful for everyone. I backtest mechanical setups without context to see that my basic idea is right. I then watch them live with context and finally risk my own money one them. When I trade I look at the context to qualify the trade.
Anonymous said...
Hi,El, Thanks for this great post of revealing your underlying methodology and trading philosophy. Just a small question. You mention that your have 18 setups. Are trading against POC,VAL and VAH three setups or only one setup based on the same logic? Thanks again
Anon, all the setups are based on orderflow and momentum in different contexts. I use the different indicators to provide the information which I selectively interpret with discretion taking into account the context and to fit the vision I have of what is happening and likely to happen. The Profile, Keltner and EMAs are part of the context so when I look at the order flow and the momentum with which price is moving, I can see whether I am likely or not to be able to get a first scale. That is really all I care about when I pull the trigger. I want to get that first scale. Then when the first scale is taken, either at a fixed point amount or at the first S and R area, I look to see whether continuation is probable or not, and act accordingly. I evaluate my position at the close of every bar.

While I am trading I am continually seeking information. Sometimes you will see screen shots with indicators set to non standard values. That is a result of my changing them during trading to get a different look. I change them back afterwards. For example, with the smoothed CVD, I use a 9 bar smoothing but often switch to a 3 bar smoothing to have a look see at what is happening on a more granular basis.



  1. Wow, Tom is "taken to the woodshed" for putting it out there. Learning to trade is trading to learn, so to speak. Tom can't "teach you" and I wouldn't diminish Kiki's effort by implying that trading resembles rudimentary rote learning. I am not a pro but live in Chicago and know many, some of whom are my neighbors, and many have incredible family histories. The grandfather of one of son's school mates escaped from Poland by clinging to the undercarriage of a railroad car. His father has become an extremely successful trader and his son a "firecraker" himself.

    Kiki is fortunate, to be sure, but I wouldn't know how to mentor my own son and Tom has a knack for teaching obviously. I've referenced, "Dr. Brett," who writes a prodigious blog. Talking about how to learn to trade is complicated, but you can't go wrong by starting with this trader and psychologist.

    Tom has mentioned that he uses Market Delta as it gives you the sort of information a floor trader sees. I've sat in an office at the CBOT with the most successful trader I know--no charts, levels on a sheet of paper and a screen populated with TT Doms. He's rolling a poker chip through his fingers, chatting, and there's a ding. He walks over to his desk and clicks the screen and then turns back to me. He's stood across from Tom Baldwin and others of that caliber. How does he trade? "By feel." Really, well yes, but I don't have his touch and it's taken 20 or so years.

    Give Tom props. He's giving you something too. "Don't bite the hand..." (you know)

  2. Off topic... Do you know if MultiCharts calculates range bars differently than TradeStation. I know they are very similar. I am a TS user and they calculate range bars differently than all other data vendors. Any advice?

  3. shep, thanks. Yes, a very few traders are born and the rest of use have to learn a work around. There is one urban legend about the great Tom Baldwin that really appeals to me. He had started out on the floor like most of us, a losing trader. He was allegedly down to his last $25,000 with a wife and small baby when it all just clicked and he went on to be one of the largest and boldest and most profitable traders for generations.
    Anon, you can find references in this blog's comments from TS users who suggest using a 1 tick setting for TS range bars. It may be a little different in the way it creates them, but consistently different so should not be a real issue.

  4. Thanks for replying to questions even to those that are not happy with your approach. We all react our own ways. I frequently find something insightful in your blog - either new or reinforcement. Yes, somethings are confusing but the onus is on me to learn more and get clarification. For me, the education and internalizing the key concepts - momentum, order flow, context, and the vision of what is likely to happen - are very important. A set of "buy here and sell there" rules, while useful in the education, is not enough to make one consistently profitable.

  5. Hello Boss,

    Welcome back and I hope you got out of your trip whatever you were looking for.

    Have you been watching the Olympics? Talk about making a sacrifice for ones profession. I think I cried like a little girl at least 5 times. The only thing is I do not know if I am crying for them or me.

    I can think of no better example of the importance of muscle memory and being able to execute without hesitation because of it.

    Anonymous, TS has Range bars and what they call Momentum bars. One builds a bar at the end of the range set, and the one builds it after. You want to use Momentum bars with TS. That is the one that is similar to everyone else’s Range bars. And as EL said you have to use it with a 1 tick setting.

    May you always stick your landing,


  6. Hi El
    As a trader for over 50 years I find your blog both interesting and informative as one can always learn and improve. As to the poster who voiced much criticism, I suggest he find a paid guru so he could then decide whether or not he was getting his monies worth.
    I am curious as to view and determine Keltner cycles
    TIA and good trading to all. David