Thursday, 22 April 2010

Kiki: The Next Stage

Kiki has been doing very well. She is CP but still finding exits after the first scale inconsistent. Her win rate is slowly increasing too.

It's now time to start stripping off some of the indicators. This next stage of her progress into a top class trader who can live off trading any market anywhere will be even more exciting than the previous stage.

Kiki has been trading for more than 6 months live and has had enough so called "screen time" to try and move to the next stage. This will be a big challenge, mainly because financially, it will be a step back until the benefits start to kick in and her daily average profit per contract increases. We have to focus more on the Range Bars, how they relate to each other and how long they take to form. The volume delta remains the same.

Many of the indicators showed similar things from different points of view. Removing them one by one from the chart is what we will do, making sure that Kiki still "sees" the picture. This needs more intervention from me as we will go back to a daily replay of the day's trades after the market has closed and discuss "would'a, should'a, could'a".

FloBot Update: We are still in the testing and tweaking phase. Not ready for anyone to see it live yet even with all the disclaimers and caveats about it being only an educational and testing display. There are two issues at the moment: Back testing the current version has shown an annual profit per contract of about $US32,000 on the ES with a draw down of less than $US2,300 per contract. The issue is there is still one losing month out of the 12 and I am still trying to quantify the effect in live trading of missing an entry due to lack of overlap of range bars.

The point we want to get to with Kiki's discretionary trading is my trading chart below. It has just the 33EMA, Volume Delta and smoothed Cumulative Volume Delta. Market Profile, of course, stays for the context. I have marked my setups on the chart. The process remains the same, "get the trade on and manage it". I am not married to any trade and quickly cut a position, even for a tick profit or loss, if I see the market action or order flow weakening.

I was long the ES just before the Greek Moody news, scaled out the first piece and got stopped out the balance at the low after the news, missed the long after that too. There was a big gap in the 6E as the Euro was hit in the cash, and both markets looked shell-shocked for a while after that so I went for my afternoon espresso. Then just one more trade.

Order Flow part 2 will be the post for tomorrow!


  1. Tom, I have been hoping that this day would come. I've been trading only price for weeks now, and it is the most liberating experience I've had since beginning this journey. I finally shed my last indicator last Wednesday, and I feel better than ever. I figured that this was the case with you as well, but I'm very glad to get the confirmation today. This is the next stage of the journey, and in my opinion the true jump to becoming a professional. Good luck to Kiki during this exciting leg of the journey!

  2. Hello Boss,

    "Many of the indicators showed similar things from different points of view."

    I did find it interesting how the 33 EMA and 45 CCI linked up.

    With Dr Brett leaving us that leaves you. No pressure though.


  3. Hey EL,
    Long time lurker here... Just wanted to pop in and thank you for all the posts here. By combing over your work and incorporating certain aspects into my own trading plan, my win rate has been fluctuating between 70-80% for over a month now. I don't really understand the disparaging comments I see pop up (if you don't gain anything here why keep reading?)

    Looking forward to the continuation of the orer flow posts

  4. Hi Tom,
    I was thinking about the comment you made today:

    "We have to focus more on the Range Bars, how they relate to each other and how long they take to form."

    With this stripped down chart, the elimination of your CCI's as a momentum indicator means that the above statement becomes a critical element to your system...meaning that your observation of the bar to bar behavior of the range bars IS your momentum indicator, correct? The time it takes for each bar to form gives you your strength of momentum, along with the confirming delta...let me know if I am on the right track with this.


  5. Hi, Tom,
    Thank you for this great post I expected you would write. I naturally suspect the usefulness of laying many technical indicators in a chart especially in day trading. I hold no belief on them. Of course, I think indicators are more useful in computer trading as you did in FloBot. I am not a trader and even did not trade real account. But I am passionate about trading. Maybe I have a little “coward”. However I believe that, as you once said, entering the trading without strong belief on your system is a sure way to lose money. In the past, I always thought that the real edge of your system is “YOU”, your long time trading experiences. That’s why you can see a “picture” but I can’t. I believe one of the few ways (if any) to become a great trader, especially in day trading, is stripping off the indicators one by one from the chart. You need great courage to do so to be independent, to take responsibility and to be objective because indicators always give you some illusion of safety. I understand doing so is really tough.
    Your post give me more confirmation of my belief and more courage to start trading (SIM :)) this way.
    Thanks again and I wish KiKi a great start in her next step.

  6. The Part 2 will talk more about the what I look at in the range bar relationships.

  7. Hi EL,

    Your blog is amazing. Best trading information on the web.



  8. Question for you EL. You enter your positions before your range bar leaves. So with that said, how does Flobot enter it's positions, is it entering at 1 tick worst then what you would normally enter on a stop limit order? I'm curious how you are properly simulating Flobots entries.

  9. FloBot enters on the Open of the new bar. It has a limit and misses some trades if the range bars do not overlap. This is an issue at the moment we are testing to resolve as it affect profitability significantly.