Tuesday, 11 January 2011

One Methodology, One Chart, Any Timeframe

Robustness of methodology is very critical to CP. If you can't rely on your methodology, then you will find it difficult to put the trade on. I use the same methodology on any market and on any time frame. That doesn't mean that you can just load any periodicity, but it means that within the periodicity range you want, you should be able to find a time frame that is in sync with the market's rhythm or fingerprint.

Robustness means that I don't want the methodology to "not work". "Not work" is a fairly subjective measurement. I'm OK with a losing day and a losing week and perhaps a borderline losing month if I can see why. These are things that need to be addressed in back testing. Getting the right mix of trade frequency, risk and reward is very important, taking into account your own inputs such as available capital, risk tolerance, hours available to trade, time required by you to make decisions and more.

I use the same methodology for longer term trading and short term trading, as I have said before, but I choose the best instrument to trade it: future, ETF or option, depending upon the context. I was always determined to be responsible for my own investments after seeing the mess that agents made of other people's. I remember the quote from Woody Allen in "Midsummer Sex Comedy" where he said he was an investment advisor: "
In actual life, I help people with their
investments until there's nothing left.
Sadly, the quote is often true. The problem with investments managed by others is that you really don't have a handle on the risk aspect a la the flash crash. I like risk as long as the reward is commensurate. Where people get unstuck is when they get, say, a 12% annual return and suddenly lose 50% or more of their capital. Hard to make that up. On the other hand, everyone can't be an expert at everything so most people find a half way plan. I get trading ideas from all sorts of people and then choose what I think suits me.

The Chart below of the daily Euro chart is a good example. Even the daily charts can be traded as HT or auto.

Today's trading was quiet in the London morning. One great trade and then a change of idea. I tweeted the Gap trade yet again. The Gap trade is one of my favourite trades, as you probably have gathered by now. For me, it's a really easy trade to put on and manage. It's also very easy to back test, so I can get it right. Look at the vid for today's action.


  1. No audio Tom, at least as far as I can tell!

  2. Just fixing the audio now. Will update when OK

  3. Great trading, you make it look so easy! ;-) I was just wondering if you were worried about buying at the 33EMA after the 45 CCI moved over 200 then crossed below 100? Isn't that usually a sign of trapped longs?

  4. Thanks Tom for sharing, I do really appreciate it! It helps My own trading to go in the right direction!

  5. EL - What time GMT are you entering these Daily Trades? How many ticks is your StopLoss?

  6. Wes, yes but I trade the picture and each trade is different. The percentage trade is what I take. That's one of the differences between pure mechanical trading and HT.
    bakrob99, entries are fairly mechanical but trade management depends on which instrument and market I have traded. Sold Options are more forgiving and give a much higher win rate although the potential earnings are fixed. I use major S & R for stops and targets.

  7. jenrique42

    podria decirme si hay algun paquete como el gomCD pero q trabajase con el historico, para el ninja trader, porque con este en el momento que estas desconectado los datos se pierden y asi salen los graficos

    he intentado un par de veces conectarme con el marketdelta y es mas complicado de lo que parece


    could you tell me if there is any package as gomCD but q work with the historical, for the ninja trader, because with this at the time that these disconnected the data is lost and so leave the graphics

    I tried a couple of times to connect to the marketdelta and is more complicated than it looks

  8. The only program that I've seen that captures CD correctly is MD/IRT. I don't find MD difficult to use at all. The Footprint takes some understanding but it only makes sense in real time. Looking at static chats is almost useless.