Friday, 7 May 2010

The Jackson Pollock Effect

Boy, was the heading to the day before yesterday's post an understatement. Yesterday we had over 3 million contracts traded in each of the ES and the EuroStoxx50. A large part of that was clearly due to HFT (high frequency trading), the buzz word of our day, that went a little awry . When the shazbat, as Mork used to say, hit the fan just after 2.30pm NY time, the Bots went to war and for a few minutes the charts looked like a mad painter had throw red and green paint against the canvas. The Jackson Pollock effect. One seeming mistake kicked it off and then the computers pin-balled and did exactly what their algorithms told them to but in an abnormal context. The huge flicks in price were reactions against each other and painted a surreal canvas on my screen.

I had gone to vote. In Oz, voting is compulsory which I believe is a good thing as any election is the result of the whole eligible population. Yesterday I made sure to exercise my vote as I couldn't stand the mess the UK is in and thought I would do my part to try and avoid a hung parliament. So I had finished work before the madness.

Today was a very good trading day as you may have expected. I've changed the background colour back to black.

I have also gone back to marking the actual triggered trades rather than the setups. Additionally, I'm now showing both inside out and outside in trades.

Kiki has graduated to trading all the setups she can find. Her size is still small and I will recommend it stays that way until at least October. By then she will not have just perfected her skills having experienced markets of most types but will have also achieved the very needed mental attitudes. In any case she is earning more than the average wage so there is no pressure on her to move faster.

As you can see, I exit and re-enter on days like this when there is a lot of two way rotation - I'm in scalp mode. I hate giving a profit back so I take the profit and re-enter on the pullback. You may want to trade the swing to it's end rather than break the trade into a number of trades like I have today. There are good arguments for both methods. There were 14 trades in the EuroStoxx50 before lunch with quite a nice range. I broke yesterday's Profile into it's distributions and used the S and R that was revealed. The VB and the inside the bar stuff of MD confirmed the trades when the momentum change occurred at the S and R areas.

I switched to the ES just before RTH trading began. The first couple of minutes were strange with people rushing to close out errors which resulted in volatile sideways action. Then into scalping mode again for the first hour where 7 trades were triggered. I tended to exit too early due to the volatility but was lucky a couple of times when the market moved too fast in my direction and I didn't have time to bail too quickly. 


  1. Dear El,

    Is there any studying or books to be read required b4 attending the training? or can I learn everything i need to know in the online training?


  2. it does not sound like you have studied the blog or the webinar recordings.

  3. Im trying to find my edge for 7 years now.
    Im following this blog for 5 months but the longer im trying to fit it all together the more confused i am.
    Im totally lost at this point, i have no plan and method anymore (i tried every indicator, every method, every market), my account is back to 0 and no money left for your training....

    i went back to the basics of your approach and see many setups on the 33 ema cross. 6 cci below/above 100, 45 cci in direction of trade 33 ema in direction of trade, cvd in direction, delta in direction, etc.
    when im using this i have more losers than winners and of course i know about context etc. but no matter what im trying im only successfull in one thing. Im CU , constant unprofitable....

    For many years im following the live session and am going over the charts each evening and try to discover only one simple method to build my trading on. Many times i have thought that i figured it out.
    In hindsight it is looking great but the next day in a live environment it isn't working because market is different, other rhytmm, etc.

    The more i study the more I like to trade with a minimum amount of indicators.
    i did read this blog at least 5 times but no lightbulb yet.
    Any advice what to do so that i can turn that corner to CP?


  4. Anon 22:16, Use one chart for one market and one time frame. Take one type of "setup", backtest it, and trade it SIM until you can trade it in your sleep. Become CP in SIM. Consistently does not mean you made money for 3 days. Consistency for 1 to 3 months depending on your win rate and drawdown experience. If you cannot get to CP in SIM, you should not trade with real money until you do.

  5. With this volatility, when would you consider changing to a wider Range Bar.. ie 9 or 10 ticks in the ES. I actually prefer the speed of a 10 tick bar for Thursday and Friday's action ... (although I am trading in the US session only which is more volatile than the European session. I am making a bars per minute indicator to see when fast is too fast) The 5tick bar is sometimes too fast to catch the changeover from a buying pressure to a selling pressure.

  6. bakrob99, I look at bar size all the time. Sometimes I need a different perspective and both drop down to, say, 3 or up to 6 or 9 to have a different view. I also sometimes switch to a volume bar to see something different, especially with Light Crude. Discretionary is the word and I make sure that if things are not clear enough I look for more info. When there is a sudden change in volatility, you see what you perceive as "unusual" market action that becomes usual after a couple of days. You are doing what works for you and that is what its all about. Nothing is written in stone.

  7. Can you give examples of when you would deem 3,6,9 to be more appropriate for the ES?

  8. I always trade ES with a 5 tick range bar. What I was saying above is that at certain times, I flick to a different view to see more. This is usually at a potential major reversal point, or when the market is very slow, or when the market is very fast. I'll have a look and then flick back to the 5 tick. For me, it's important to maintain consistency.

  9. I am testing range bars for NQ. So far I like the 7 to 9 tick range bars. Anyone has suggestion for the best range bars for NQ when applying momdots and other indicators taught in this blog.

    Anyone has suggestions for the size of range bars NQ & YM ?