Discretionary Trading and Flo

The hardest thing for me in both hybrid and fully automated trading is to leave Flo alone when I really should. I'm a trader by DNA and find it hard not to mess with Flo. However, there is a one huge benefit to discretionary trading in going down the algo route; you are doing testing, testing and more testing.

One of the things I teach my students is the importance of testing. Otherwise how do you know ahead of time what you should be doing? It's hard to put on a trade or hold a position without the confidence of knowing that is has a statistical success rate. Trading a new idea is risky- most often it doesn't work as you want. You certainly won't know until you have tested it.

Looking at the DAX on a bigger range bar using some of the pictures I teach, I get these stats and a lot fewer trades. As you can see, the 6 tick range bar I used today makes less profit per contract than the 2 tick chart of yesterday but the advantages of having the time to manually override and to be able to use limit orders, are something to consider. One of the considerations is the latency you have from price. I'm in the cloud and there was a sharp move in the ES where I was getting trades filled through my broker that had not yet appeared on my chart. This chart was powered by eSignal. Using broker's data may be something important if you have latency.

I know Flo shows a lower win rate than I advocate, but I can cure that with Hybrid Trading - getting out of obvious losers before they become losers and taking smaller profits early when order flow is slow. Or I can just leave it to Flo and be content with her "average" performance. This is a choice to be considered.

In the afternoon (London), it was ES time. The market range extended upwards and shortly afterwards extended to the south side. Neutral day. Of course I bought it as I should at what could have been support yesterday's VAL. It wasn't and the market hit an air pocket and I got stopped out of a Neutral day buy trade for the first time in probably a couple of years. My only saving grace was that Flo was short into the downdraft. That's discretionary trading. BTW, had I been able to hold on, the Neutral day fulfilled it's duties and went back into the middle of the range, but of course, I wasn't there. In retrospect, hindsight is easy, I should have bought the buying tail of yesterday's Profile. C'est la vie as they say around here.