To Override and not to Override

I started today trading the ESTX50 (Dow Euro 50) future on Eurex. The ES had weakened considerably overnight, so when the ESTX50 opened at 7am London time I expected it to open down and weaken. Flo didn't give a signal (I didn't expect that she would) so I sold the close of the first candle as you can see from the pic below.

I scaled at the first green candle which rejected the low (@ 29050) but did not close all my position, as I wanted to give price a chance to hit my Fib target which I had diligently drawn before the market opened. I was nicely repaid for my homework and closed out the balance at 2895, banking 20 points/contract on the last half of my position. I was finished trading for the morning after 1 1/2 hours of work.

I started again half an hour before ES RTH. The market was down and I just wanted to grab some points and run. Flo did the rest quicker and better than I could have in such a fast market and no slippage. I was finished for the day in minutes.

The flexibility of HT is amazing and I am always thinking of new ways of using it. There is no need to trade all day. Switching Flo on when there is money to be made and stopping when I have achieved it is a better way to go. You can find me talking about trading less and earning more in the blog about 200 posts ago. Using Flo like this is a more recent idea. I can backtest for different times of day and have algos ready to go when I switch Flo on at that time of day.

Backtesting

I have always been a proponent of backtesting. Mrs EL told me this morning that I haven't written about it in a while so I am correcting the ommission.


While backtesting (or hypothetical trading as the U.S. government disclaimer calls it) is not a guarantee of future performance, it's pretty certain that what didn't work in the past is unlikely to work consistently in the future, assuming there have been no major changes. Further, not testing is living in hope.


Now there is backtesting and there is backtesting. Testing a pattern is more likely to be robust than testing specific indicator inputs. What this means is that if I observe something that happens at the beginning of a trend move and can capture that in code, then when that pattern repeats itself I can trade it and I can back test it. If my algo says that when widget 1 crosses above widget 2 then it will be less robust as the volatility of the market changes.


Now in Flo's algos, we have a stop loss. That stop loss is really a drop dead stop that is used if the other exit rules are not triggered. This drop dead stop may not be the best stop loss in the context of a particular trade or even of a particular day, but it's a number that Flo has found by looking back many days and deciding that if the stop loss is less or more than that particular number then the profitability over the whole backtest period would be less. So that stop loss is kind of an average number based on the average volatility over the backtest period. The same can hold true for a target if it is done in a way to look for the largest single number rather than trying to find first logical exit with a view to re-enter with new signals, looking for a very high win rate.


Better exits are dynamic exits that take into account the day to day and hour to hour volatility changes in the market.

The useful thing with Flo is that I can choose to work shorter hours. I have the benefit of stats that I can rely on so I can scale size in accordance with my account size and risk appetite. Remember, there are losing trades and they can happen any time. All it needs is for "they" to come in size and the best picture or setup can be a loser.


I didn't need to work too hard in the ES. Someone asked about yesterday's ES trades and you can see them on the chart. The setup has 3 targets but with current volatility the third target is the same as the second so 1/3rd of the position is exited at 1.5 points and 2/3rds at 3 points.

Go Flo!!!

Euromania

Euro was giving milk and cream this morning in London time. I was trading away when an email came in from one of my students who was enjoying the same trades. Great to see people succeding.  

Nice trend move down with lots of pullbacks to sell. It was a matter of doing what my TP specified. And Flo did just that. As you can see, the last trade in the sequence is a loser. I was pushing the sequence to the end - managing exits manually - and the last trade is usually a loser. If it looks like the trend is not so strong - order flow - then I usually trade only 3 trades in a sequence, but the Euro usually gives more. The problem is that if I stop after 3 and miss a trade after that, then I cannot re-enter the same sequence as I perceive a higher risk.

Going Google across the 50 States: Google Apps proves the perfect choice for Mississippi creative agency

Editor's note: Over 3 million businesses have adopted Google Apps. Today we’ll hear from Rob Rubinoff, Interactive Director at Mad Genius, a branding and creative agency headquartered in Ridgeland, Mississippi. To learn more about other organizations that have gone Google and share your story, visit our community map or test drive life in the cloud with the Go Google Cloud Calculator.

Mad Genius is a creative fusion of branding, advertising, social media, HD video production, animation, media strategy, web design, web development, and more – a true soup-to-nuts creative agency. Each of these elements come together to create momentum-building ideas that drive results and help us stand apart from other agencies. Our clients range from national insurance companies to regional restaurant chains to local universities, and we have a talented group of people that help these organizations take their brands to the next level.

We started in 2005 as the offshoot of a film production company, and have been growing rapidly ever since. Two years ago, we landed one of the largest advertising accounts in Mississippi, which was a major milestone for us. However, it also meant that we had to move quickly to hire more people to staff the project. At the same time, we moved to a bigger office and started to re-evaluate the technology that powered our company. That’s why, as Interactive Director, I became a big advocate of Google Apps: the benefits of the cloud were what we needed.

We were originally using spotty POP3 email through our domain registrar, which was a legacy solution from when we were part of a larger company. Everyone had different versions of email clients, calendar, and other office software, and this created daily problems. There were times when we literally had to walk down the hall to schedule a meeting because we couldn’t share calendars with everyone in the company.

We talked to local IT providers who offered email solutions that would have cost us thousands of dollars. We also priced out our own Microsoft® Exchange server, which was not only costly, but also seemed like it would necessitate dedicated IT support. Everyone here already wears a lot of hats, so simplifying IT was essential, as was finding a powerful calendaring solution. What we needed was Google Apps.

Initially, there was concern that we might lose emails and disrupt operations during the switch to Google Apps, but we transitioned over the course of a week with no hiccups and continual access to email. Within another week everyone was used to the new system, and the office was thrilled. One of the immediate and tangible benefits came when our executives were able to access email from their desktops, laptops and mobile phones, with everything synced across each device.

Within the Google Apps suite, shared calendars have been huge for us; email and documents are icing on the cake! As we grow our accounts and expand our team (last year we opened a second office in Tampa, Florida), we need to be able to let people know what’s going on throughout the company, and Google Apps makes that not only possible, but also easy. We can view other people’s calendars, easily schedule meetings, and have created a half dozen shared calendars to track things like conference room reservations and vacation days. Plus, project management is vital in our business, and thus the ability to import iCalendar data into our project management system is key.

With Google Docs, we no longer send PDFs back and forth, which is a huge time saver, and we can brainstorm with team members in either office using a Google doc, since it’s basically like a giant shared notepad. We even use Google Docs to collaborate with clients and can elicit feedback and data in a format that is easily shared or uploaded into our system, avoiding data entry errors.

When it comes to groundbreaking agencies like ours, folks usually think New York, Los Angeles, Chicago; they don’t often think Mississippi. But the work we do is changing minds – and Google Apps is helping us get it done. We take pride in being innovative. We’re a young company, with passion for the work we do and a fresh approach to the way we tackle business. With our home base in Mississippi, our new office in Florida, and clients throughout the region, we need virtual speed. Google Apps has proven to be the perfect partner in keeping us connected and moving forward.

Posted by Rob Rubinoff, Interactive Director, Mad Genius

Discretionary or Auto Trading?

I am a discretionary trader. I look at the market and make my decisions to enter and exit based on my TP after taking CONTEXT into account. As a discretionary trader, I have a consistent win rate of better than 70% and make money most days.


I use an algo to trade. I don't look at the market at all. My algo, Flo, has been programmed to trade on my behalf. Flo takes all trades, regardless of context, and applies the rules I have programmed. Flo exits all trades based upon both scale out targets as well as rules that I have programmed. Flo's past performance tuning shows a better than 75% win rate and profitable every month. In real time, Flo's performance is less than her historical performance, still high win and profitable,  but Flo does not take all the context into account and therefore takes trades that I, as a discretionary trader, would not and she takes consistently bigger stops than I would on the same trades.


I am a Hybrid Trader. I use Flo to enter all the trades and then I decide whether to manage them myself or let Flo manage them with her algo. I have the best of all worlds as I do not have to focus as hard, can trade more than one market at the same time and do not have to be operating at 100% all one hundred percent of the time.


I've quoted from the book OUTLIERS before, where the author sites evidence that it can take 10,000 hours of practice to achieve mastery in anything - that is after you have learned the correct way of doing that activity in the first place.


Well, a well built algo such as Flo, correctly used, can achieve a number of things:
1. allows a less skilled trader to become CP quickly without having to put in all the hours
2. provides a historically proven and historically tested entry for trades that can be applied repeatedly
3. triggers all trades that meet your criteria consistently and immediately  during your chosen trading sessions
4. avoids analysis paralysis
5. avoids cherry picking trades - cherry picking is a road to missing CP
6. allows the trader to chose the degree, if any, of human intervention in any particular trade


The discretionary trader rules, but only after he joins that small group of CPers. 


I traded the ESTX50 future in the morning and the ES in the afternoon. A couple of nice trades. The afternoon ES Fib areas were not touched, as traders seemed anxious to exit once price was near those windows. Watching order flow helped.

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How Selective Should You Be In Trades?

Not all pictures are created equal, not all setups are created equal.


I size my trades according to risk - how much can I lose before I know I'm wrong. In this way, I try and make all my trades equal. I don't know how much the reward will be - any number I choose is just a guess, a hope. So my TP is based on my risk and my historical win rate. I also look at the average trade size and try and make that as big as possible. Scaling out helps as sometimes the last 1/3  or 1/4 of my position will give me more ticks than usual.


I have thought about not doing it this way. I have thought about only taking the trades that have the least risk, the trades where I can put on a 100% position. The reason I haven't done this is because there is no way I can tell which trades will make the most money. Often, a trade I take that has the highest risk, makes the most per contract. I have to take a less than best trade location, reducing my size to balance risk, and end up with a monster trade.


So, for me, equalising risk by trade size and scaling out gives me the optimum performance.