Removing the Randomness

Info about the November Workshop can be found in the TABs above this post.

The purpose of bar charts is to filter out the randomness of the price movements (noise) and let the trader see the trend and the order flow. If you accept this premise then the setting up of charts and the choice of indicators becomes much easier. I start out with what I want to see and design or find indicators that show me what I want to see. The latest and greatest indicators, including what you see in this blog, are not much use unless their purpose is to help you see exactly what you want to see. As you know, I'm mentoring a few guys and I received a mail from one of them yesterday that I'd like to share:

Trying to make an algo has definitely helped me understand what a good setup is. I'm really looking forward to the workshop.

The workshop is not only for those traders who want to use a fully automatic algo or even a hybrid trader. It will help all traders as we break down the whole trading picture and then rebuild it bit by bit so everyone can understand why the picture works so well and what the order flow is doing. To me, this is a fundamental pre-requisite to getting to CP. If you don't know exactly what is happening with price, how the heck can you put on a trade? Do you trust those meaningless squiggly lines if they don't tell you exactly what is happening, what "they" are doing? These are, of course, rhetorical questions because we all know that in those circumstances, you just can't.

A chart is not the foreteller of the future but a description of the past and the present from which I can draw conclusions much like a child that learns that if he sees an ice cream and wants to taste it, he will get something cold and delicious. I am processing information from which I can draw conclusions because I know from seeing the same thing in the past many times that I know with a high degree of certainty, what is happening.

I can then put that logic, brick by brick, into an algo if I want.

Today's ES took off after the French lunch hour. It's an unknown how far a trade will go. That's why I scale out of trades and reload as I go if the picture is still intact and my trade location is satisfactory.


I was well and truly out of bullets as that last trade hit resistance. I hope I get a chance to reload.