Expert Systems

It has long been known that well designed processes and procedures allow less experienced people to carry out more complex jobs.

Taking this into our world, using the computer in real time to instantly identify the possible setups to trade has merit for many traders. The concept of hybrid trading (HT) - auto entry with manual trade acceptance and management- in which the auto trader, such as my FloBot, automatically initiates trades certainly fits with this idea.

HT has benefits for both the expert and beginner trader. For the expert, it allows the trading of more markets simultaneously and requires a lower level of constant concentration - certainly something for those of us approaching old farthood should think about. For beginning traders it brings in even more benefits: having a trading plan built into the algo and its management policies, having a "mentor" looking over their shoulder identifying high percentage trading opportunities, an enforced discipline and several other pluses, all resulting in the beginner achieving consistent profitability more quickly.

I've got 5 markets under HT at the moment and the results are very promising. I'll share experiences in the blog of both the day trading as well as the longer term trades. They are all based on the same methodology you have seen in the blog for the last 15 months. That doesn't mean I trade them robotically.

Today at about 8.30am NY time  I tweeted the Gap trade with a reminder to watch the zipper: $ES_F Gap trade possible but beware MP zipper dn to 1257.75 You can see in the video how I traded it.

Measuring the Health of Your Business

The SBA says that in the last decade, the small businesses of America employ over half of all private-sector employees and created up to 80% of all new jobs annually.  Hats off to you, the small business owner for that accomplishment. We certainly need you in today's economy.But yet in the same breath, being a small business owner is very risky. In fact, government data says in recent years for

Diesel frustration...

I spent the day at FAR trying to get the diesel motor running.
I sent the following note and picture to the vendor I bough the generator from. Any ideas from the peanut gallery? I realize the text is kind of rough, but it is part of an ongoing conversation....



I've attached a picture with parts labeled.
I still don't have it running, so I'll explain.

Today:
First thing I did was fix the return plumbing on top of the injectors.
I did not end up replacing the injectors as when I got the new bolts it all sealed up.
The return line that goes from the right end of the injector string down to the filter was rubber and leaking so I replaced it with the new metal part
I got from you guys.

Between each step below I'm loosening the screws #B and pumping the little pump until I get clear fuel with no bubbles.
I'm treating screw B like one treats a brake bleed, you need to close it while clear fluid is coming out so it does not suck in air.

So after fixing that and priming and bleeding I try to run... nothing.

The I remove the left most injector line nut #A (shown removed in the picture)
when I crank no fuel comes out the empty fitting, nothing not even a drop.

Then I remove all four nuts, and nothing not even a drop from ANY of them.

I open cover #3 and lift up the plate and turn the motor over to make sure gear inside is turning. It is.

So one of the guys says diesel pumps have shear pins and that could be it.

So I remove panel #D and turn over the motor, you can see the plungers moving up and down so the shear pin is probably good.


At this point I text you.
So for the next step I remove the screws #2 and then unscrew the left most two fittings #1 and the one to the left of it.
Inside are little plungers and springs, the plungers may have been stuck but the are now free.

Then I reinstall the springs and plungers and turn the motor over (after bleeding) and noting comes out.

So I remove #1 again and manually operate the prime pump and fuel comes out.

If I only screw #1 in part way the prime pump can make fuel come out. IF I screw it in all the way the prime pump can't
make fuel come out. If I only put number 1 into the point that the prime pump can make fuel come out and crank the motor No fuel comes out.


A couple of comments
The Hose #10 is really stiff and too big for the nipple, I really can't keep it from leaking air.
All of the banjo fittings on the inlet side of the world seem to have non metalic seals that are dried out and leak.
These were some of the seals I asked you for, but I've removed #10 and the banjo fitting behind it and all the fittings going to the first fuel filter,
I've brought these home and I'm going to get new seals and new hose before I go back out.


Some questions:

So at this point I'm lost? The only thing I see that could be wrong is that the inlet check valve into the plunger pump assembly is stuck open?
At this point is seems like I'm down to a fairly simple concept" plunger pump and two check valves.
Where will I find the inlet check valves to unjam?
Can I remove the whole upper pump assembly #9, if so do I just remove the 4 nuts, or do I have to do something else?


#J is fixed and I'm guessing it should not be adjusted?

#H moves all the way counter clockwise when you try to start, I'm guessing that that is the ONLY shutoff the electronics has for the motor?

#C What is this and does it do anything?

It takes be 4 to 4 1/2 hours each way to go the the site.
I've now been to the site 4 times to work on the generator. not counting time on the phone at home or asking researching at home
I've spent close to 50 hours working on this what should I do next?

Did you guys actually run this motor at your office? (based on the way it was packed I'd guess no.)

So realize this motor has NEVER EVER EVER run, so what else could be wrong?

What Must I Risk To Find Out If I'm Right?

There's a great interview with Mark Douglas, here  that one of my students brought to my attention. It's really worth watching and thinking about. This blog entry is based on that video.

Once a trader has a methodology that gives a high win rate, the ONLY thing that he should do when he wants to put the trade on is ask WHAT DOES THE MARKET HAVE TO DO TO TELL ME I AM WRONG?

The one thing that he should not be thinking is WILL THIS TRADE BE ONE OF, say, the 70% WINNERS. There is no way that anyone can know how the sequence of 70% winners and 30% losers will unfold. Yes, we know that there will be 70% winning trades, but we cannot know whether the next trade will be one of those. THE TRADER SHOULD NOT EXPECT ANY PARTICULAR OUTCOME from any particular trade. All we must do is know how much we need to risk in order to find out whether the trade will be profitable or not. I teach my students not to try and cherry pick trades. If the picture fits my trade plan I must take it. Traders are not good cherry pickers. We tend to pick all the rotten cherries.

If you are unable to maintain your discipline in keeping to your trading plan then you must really be NOT ACCEPTING THE RISK. I teach my students to carry out a whole series of steps in order to achieve CP. All the steps are required in order for a trader to quantify, understand and accept the risk on every trade. Using dynamic trade and risk management based on a known trader's profile is, I believe, fundamental to achieving CP.

If you are not achieving your goals as a trader, look at this aspect of your learning. Once you can quantify, understand and accept the risk on every trade in accordance with a discovered trader's profile, the whole world changes.

Sad news from Bearded Ben Bernanke today: he doesn't expect the jobs situation in the U.S. to get back to normal for 4 or 5 years. I am holding my breath that the recovery continues without job recovery. More people are trying to become traders, especially those over 50, as a way of earning a good living.  As small traders, we wait for the "they" to move the market for us and we just grab their coat tails for the ride. Our job, as I have said many times, is to learn a methodology that enables us to see that activity.

Videos of part of my day are back starting on Monday unless something happens. They let me explain trades better than just a pic. They won't be every day, but as often as I have the puff.

Every Day's Stats Matter

Only today matters. Not yesterday's results, not tomorrow's hopes. Just today. It's all the todays that you put together that make up your week, your month and your year. It's the todays that mean the difference between paying the rent, adding to your retirement fund and buying petrol for your car. It's the todays that buy your house, that buy that car and that educate your kids and provide for your loved ones. TODAY.

When I trade, I focus on only today. Yesterday is old news. Have I done my job effectively today? Am I doing my job effectively today. Bar by bar.

Flo put me long the ES @ 1273.25 and scaled out on the way up. The close down @ 1275.75 showed divergence so exited the last third there before Flo did (HT) and prepared for the Gap trade as I tweeted an hour and a half before the RTH open. I was waiting for the Jobs number to pass before positioning myself.

I talk a lot about the Gap trade because it's a very easy trade to understand and do. Also, you can backtest and get clear statistics which should give you the confidence and information you need to trade it. And finally, you usually only have to work a short time to hear the Ching Ching. The way I use context brings the win rate to over 80%, which is very amazing. It allows me to confidently trade size and take smaller bites per contract. I'm doing more work on automating this. MarketDelta allows me to access VA and POC prices and I want to try and explore that.

The ES Gap trade did not eventuate for me. Market looks like its waiting for tomorrow's jobs number and to hear Bearded Ben, but taking some money off the table just in case. Discipline is important and sometimes what you envision does not happen.

Hotpot Goes Barhopping

[Cross-posted from the Google Places Community Blog.]

Editor’s Note: While we’re in Portland over the next few weeks, we wanted to bring some local flavor to the blog by asking writers who live in the area to contribute Hotpot-style city guides: recommendations on where to eat, where to shop, where to hang. Below, locally based writer Geoff Kleinman shares how Hotpot recommendations guided him through a night of Portland barhopping. Be sure to join the conversation in the comments below.

One of the things I love about Hotpot is the way it uses my ratings and my friends' ratings to point me toward places that are the best match for me and my tastes. While I've discovered some great businesses in my Google searches using Hotpot from the comfort of my home’s desktop computer, I thought it would be fun to take Hotpot on the road using my Android phone, acting as my “person in the know” on a recent Portland barhop.

First stop: Irving Street Kitchen.

For the first stop, I wanted to find a place that was known both for its good food and good drinks. Irving St. Kitchen was recommended to me on Hotpot because I had rated Beaker & Flask 5 stars and my Hotpot friends had rated Irving St. Kitchen highly.

The Place page for Irving St. Kitchen had several Best Ever awards and most of them talked about the amazing drinks and bartenders such as Brandon Wise and Allison Webber. It seemed a perfect place to start our hop.

Allison Webber whips up something tasty.

When we arrived at Irving St. Kitchen and took a seat at the bar, Allison made us a few great classic cocktails. My favorite was a variation of the Negroni — a White Negroni that was flavorful, balanced and a perfect before-dinner drink.

White Negroni at Irving Street Kitchen.

Allison made some food recommendations including a beet salad with truffles, fresh salmon over lentils, and our favorite dish of the evening, a shrimp and crab fusion dish served over a savory bread pudding.

Shrimp, crab and bread pudding - True Fusion at Irving Street Kitchen.

We probably could have spent the entire evening sitting at Irving Street’s bar, but we were on a mission to hop with Hotpot. Using the Rate Places widget for Android, we gave Irving St. Kitchen a glowing rating, then used the Android Places app to look for other bars nearby that friends had recommended. Clyde Common came right up. It was just down the street and recommended by our friend Jennifer Heigl on Hotpot.

Second stop: Clyde Common.

Checking out Clyde’s Place page, we read that the restaurant is the home bar for noted bartender and blogger Jeffrey Morgenthaler. Several of the reviews referred to the barrel-aged cocktails, so when we sat at the bar we immediately ordered one.

Jeffrey Morgenthaler's famous barrel-aged cocktails.

Jeffrey wasn't behind the bar that night, but Andrew Volk was, and in addition to mixing up a few barrel-aged drinks for us, he also made an original Islay scotch cocktail that simply blew us away.

Andrew Volk works the Clyde Common bar.

Clyde Common is a little bit of a way station bar, and we found that our group grew a bit as we headed along to our next stop. This time around, instead of looking for a nearby bar, we wanted to see what would happen if we just asked the Places app to search for the "best cocktails."

Third and final stop: Teardrop Lounge.

So far Google Places with Hotpot hadn't steered us wrong, and it was doing a great job of being the “person in the know.” Teardrop Lounge came up on the list and it was just around the corner, so we made our way over. Many of the reviews on Teardrop’s Place page talked about its classic cocktails, so we sat at the bar and checked out the massive cocktail menu, which has close to 30 different drinks listed. A little daunted with the menu, we got help from bartender Brian Gilbert, who spent a lot of time with our group getting to know what kinds of things we drink.

Brian Gilbert helps us decide what drinks to order at Teardrop.

I ended up with a drink called “Unfinished Business,” which was served in a very cool antique glass with a huge block of ice.

One of Teardrop's many cocktail options, "Unfinished Business."

Having Hotpot recommendations as our guide for the evening took a lot of the guess work out of figuring out what to do and where to go. Even more helpful were the reviews and tips left by my Hotpot friends, so I knew exactly what to order.

Using Hotpot on your hops and crawls? Share your stories in the comments below.

Posted by Geoff Kleinman. Geoff is the editor of DrinkSpirits.com, a national blog helping people figure out what to drink, and OnPDX.com, helping people figure out what to do in Portland.

Longer Term Trading and Today's Gap Trade in Detail

I promised to show you some of the longer term stuff I do. It's based on exactly the same methodology I use for day trading, but use different instruments in addition: ETFs and options as well as futures. I run the daily charts after the close of the U.S. stock market and sometimes when I get up early here in Europe.

The chart below is the ES daily. As you can see, FloBot, our auto trader, has signaled quite a few good trades in the last few months. The last trade was signaled at the close on 30 December, being a BUY. The algo that Flo uses for these longer term trades is almost identical to the day trading logic I use. Same logic over any market or time frame.

I got this signal and then had only to decide how I wanted to trade it. I had lots of choices including:

BUY the ES future

BUY the SPY ETF

BUY a 1255 Jan CALL Option

SELL a 1255 Jan PUT Option

BUY a 1255/1265 Jan CALL Option Spread

just to name a few choices.

I don't have to make these complex decisions every time, as each of the choices has its distinct risk parameter. I have created a trading plan that takes into account context, and almost makes which way I enter a trade automatic. The context I look at is different to my day trades, as these trades last for a few days and I want to sleep not worry.

Each of the choices has not only a different risk profile, but the stop versus possible profits vary.

In this instance, the correct entry for me was to BUY a 1255 Jan CALL Option  around 16 points. I then saw them trade @ better than 26 points: a 10 point ($500) on a capital requirement of $5,000. I could have sold the 1255 PUT and made $450, but I bought the CALL as the volatility of the ES options are low. Buying the future would have made $750 per contract, but with a larger downside risk than buying the CALL. The risk with the CALL was that it was eroding (losing its time premium). Lots to think about, but plenty of time to do it as it's only once a day trading.

At about 10:10am (London time) I tweeted the Gap trade was setting up and that I would look to do something as RTH got closer. I was considering that the ADP Jobs prediction may have an impact. I was focusing on the bottom of the zipper of the RTH Profile of Dec 31st and the dual POCs of Dec 30th 24hr profile. That was my get out area if it looked like not bouncing. So I bought the bounce off my fav Fib @ 1257 with the CCI divergence. My scales were each of the EMAs and then just before the gap close. Price moved up before the ADP number, which was a good number as it turned out. My exits at the EMAs were both hit. Ching! Ching!

My last target for the final 1/3rd of the position was the top of the Keltner Channel. Doesn't always turn out this easy, as knife catching can be a sport that cuts more than just your hands. The structure and the plan were critical to taking and managing this trade. I was done and dusted before the RTH session even started.