Friday, 12 February 2010

Stringing It All Together

Being CP really requires just that: consistency and profitability. It means stringing trades together throughout the day, the days of the week, the weeks of the month and the months of the year. Whether you call it "grinding it out" or something else, it means in my world that I have to win most of my trades and on the losers, I can't have a bleeder. So I have developed this methodology that gets me into a trade fairly aggressively, tells me if I am wrong quite quickly and gives me an expectation of instant gratfication. I have to put these together, day after day so at the end of the month I can reap a payday.

When Kiki started off, this result was what we were after. We started off with the simplest of setups that happened often, that was readily identifiable and that was also forgiving if you read it a bit wrong, giving you time to get out without a loss. We then started building on this basis and added setups. We are about 60% of the way through the process. The second half is in a way easier than the first half because Kiki now is a CP trader but it is also more difficult than the first half because the setups we are adding are slightly less reliable and more difficult to read.

The question to answer, is it worth going further with more complex trade desicions or is it better to stay with what we have and increase size. Therein lies the quandary. I am very concious of the variation of the so called Peter Principle which, when applied to trading, could be that we keep on increasing size up to the point when the stress on the trader is too great and he cannot operate CP as he did at a lower size. This is a question each trader must discover for himself.

I had computer issues today so I am on my backup with MultiCharts. New laptop is arriving Monday I hope.

Trade 1 was the usual morning trade, Trade 2 was its continuation after pulling back to resistance  - the EMAs. Trade 3 was a failed attempt at the move down in RTH but support held. Trade 4 looked like we would retrace and was the loser for the day. Trade 5 was the actual retracement. Trade 6 hit the Box right on and became Kiki's outside in trade of the day. It did its job and came back to the EMA. I won't say how I calculate the Box but will acknowledge your correct explanation in a comment to the blog. There is usually more than one of these every day.

The position of the EMAs relative to each other and whether they are diverging or converging and what price is doing in relation to them is an important thing to watch. During one of the SIM exercises I gave Kiki, she had to paper trade just using these two lines and the Keltner. Was a great tool.


  1. box = RTH gap fill

  2. Trade 6 is bounce off POC yesterdays splitted MP. ????

  3. nice chart- appears you've created a box using the vol poc and tpo poc from yesterday.

  4. None of the above. It's not a trick question and the answer is mentioned somewhere in the blog ;-P
    EL says if there isn't a correct answer, he'll do a post on it on Monday.

  5. Hi,

    Thanks again for this great blog and the continued insights into trading.

    I figure that the box is a 127.2 fib extension of the swing down from 1072 to 1060.

    Have a great weekend.

  6. Milt gets the prize. This is the only Fib number that as far as I'm concerned has a practical application in my trading. I'll post more about it on Monday. This can be a real money maker. Have a good weekend everyone.EL

  7. Very nice EL, I use something similar. Some traders refer to them as measured moves. This sounds like the same approach.

    One question for you. Trade 5, why didn't you take this the previous bar, what did you not see in this bar that kept you from initiating the trade?

  8. About trade 4, the EMAs are converging and the slow EMA one is still going down, and the entry is very close to Keltner - what made you take the trade?
    ( I was thinking the box is your fib ext as I read the blog but then I saw the answer ).

    Thanks for the continued education and the insights

  9. EL & Kiki, Based on the fact that I am paying bills from trading profits, I can consider myself to be CP. However I don't think I can successfully use Tom's methodology and techniques (primarily don't want to fix what is not broken), but I really appreciate the blog and Tom's elucidation of trading principles that I can readily apply to my own trading and hopefully will see the impact as time goes on. I am sure it is helping other traders in different ways. This blog is unique. Thanks.

  10. Nice call Milt! I was going to say that it was a 100% extension of the initial one hour balance (1074.00).

  11. Anon 20:23, I really like to trade right at the 1.272. Previous bar was further away and the 45CCI looked like it hard more to go to me. As it was, I was one bar early.
    tickvix, you're really correct. Not the best entry and probably I should have passed but CCIs looked like momentum was OK. It didn't cost me much.
    Geo, glad to hear it and you are right, just take what you can use. I'm also a big believer in "what ain't broke don't fix".
    Stone, it may have been but I don't look for that. There are lots of things that give the same info. For me, it's easy to see the 1.272.

  12. Hello Tom and Kiki,

    First I would like to thank you for your unselfish time and effort you put in to this blog. Second I can’t wait for the book version to come out.

    I have a couple of questions if you do not mind. What Is your definition of a setup? I know what a traditional setup like a bull flag and head and shoulders are.
    Having a harder time with the range bars because it takes the emotion and sometimes usual patterns out. I do see the advantage of using them though.

    One of the reasons I ask this because new traders are stuck in a conundrum. How do you do Sim time without having a few setups to work with. How do you know what setups are if you are newer to using Range bars?

    If there was anyway without giving away the tool box you could give one or two setups to start with that would be great. I understand the teach to fish as opposed to feeding mantra but it is a little hard if you do
    not know what to look for in the water to build on.

    Thank you,


  13. Hello Tom,

    In the realm of things this is a little silly
    but I am sufering from a brain cloud.

    When you have an arrow on a specific bar is your entry at the end of the bar your pointing at or the beginning or does it vary. (I know your 2 ways of entering, I am just talking about the one you are pointing at)



  14. Hello Boss,

    Here is an interesting study from tradingtheodds on Evaluation of Momentum Oscillators.

    As you say, why fix what works. I thought you might find the site interesting if you were not aware of it already.


  15. Good question Sam. I had been wondering the same thing. I had assumed the arrow points at the bar that he took his entry in. However, I suspect the entry price was the breakout of the high/low of the prior bar. (or very close to it) Hope Tom answers your question and confirms!

  16. Rocky, I'm working on a post to answer your question. It will probably be a week from today.
    Sam, I enter on range bar close so it's the close of the bar with the arrow. I anticipate that it will close in the direction of the 5th tick (in the case of the ES). There is a post explaining a couple of alternatives.

  17. Hi Tom and Kiki,
    I'm wondering what made you pick the 1072 swing high as the start point for drawing your box? As a fib user myself my inclination would have been to start from the 1079.75 swing high made just after the open of globex for that session. Or is the 78.6 from 1079.75 - 1060 retracement and the 127.2 retracement overlap what made the box?
    Thank You.