Grand Old Duke of York

There is a children's nursery rhyme called the Grand Old Duke of York that comes to mind when looking at the stock indices price action over the last few months, both inter day and intra day. The lines from the rhyme I'm referring to are:

Oh, The grand old Duke of York,
He had ten thousand men;
He marched them up to the top of the hill,
And he marched them down again.

And when they were up, they were up,
And when they were down, they were down,
And when they were only half-way up,
They were neither up nor down.

If you grew up in the U.K. or Australia you probably remember the rhyme. Our markets have been marching to the instructions of the Grand Old Duke of York. There seems no real reason for the volatility except perhaps fear, greed (the usual two suspects) and the need for many funds not to miss the boat. And, of course, the algos.

I'm seeing this after I wake up at 4 am London time as the days unfold, as well as from day to day as the market digests news and rumours. It's important to only trade the trend of the chart you are trading from, not any ideas of what you may think is happening as your inspiration is probably not in synch with the trading chart. Having no outside bias is important, although a vision about the way the market might unfold for the next few hours can be useful.

The effect of the intra day volatility is "opportunity". This can be seen if you untoggle a Market Profile for any day and watch the rotations of the TPOs. A goal of earning the day's range in points, while quite ambitious, is doable. So if someone's ambition is to take only a few points out of all that rotation, making a plan to do just that and achieving it must be even more doable. The way to achieve a goal is to set one and then design your trading campaign to hit it.

The chart below shows two trades. The first one is at 8.34 am NY time and the second is at 8.41 am. Both lasted only minutes and each made the 1.5 ES points target of the TP. Someone not yet trading full time can find trades like this outside RTH, make the trades and then go to their regular job. $300 with 2 contracts. A great way to get to CP.

Renko Trades and MFG

I've been following the MFGlobal saga, as have most traders . I'm sure that we have not seen the whole story yet. The sad thing is to see the shabby way that the futures customers are being treated with the funds still being held by the liquidator. The issue of segregated funds has always been a touchy one with me. I have always feared a trader taking a broker down, with me being in the same segregated bucket as he was. 


I never imagined that the auditing of the segregated account was so non existent, as it obviously must have been if funds are missing. Daily accounting for each trader's funds should be mandatory with independent exchange auditors making daily spot checks. Nothing will prevent every breach but a strong audit framework will surely make people think a lot more if the risk of getting caught is higher. We pay all sorts of regulatory fees that are included in the round trip costs of trading and it looks to me that we are not getting what we have paid for.

On a different note-


One of the guys in the Workshop loves Renko charts to trade from. I trade them from time to time and have also worked algos on them.


Renkos are a different challenge for an algo, as there are no wicks and the high and low of a Renko chart are not the real high and low of the bar. That means that in real time or SIM, you could have been stopped out of a trade but not stopped out when you run your back testing.


Also, they can be more pessimistic, in that your target could have been met in live or SIM but not met in back testing as the wicks remain out of the algos calculation.


Renko back testing needs a lot of manual intervention and eyeballing to try and get it to be more realistic. It's a very subjective process and not too scientific.


Nonetheless, I like trading Renkos as the charts are so clean. I was trading the DAX this morning and here are some of the trades. The first trade was leaning against the low buying tail or candlestick low rejection of yesterday. Notice how well the MomDots help trade management.

Timing and Stops

Trading is about timing. When I put a trade on I am trying to catch that optimum point where I can be "sure" that the market will immediately go in the direction of my trade.


That's a really big ask! If that was my expectation (and it is NOT) then I would be expecting to divine future market direction and the exact moment when the price would move in that direction on a basis that it would depart from my entry and continue towards my target without coming back through my entry price. As I said, a big ask.


I think of trading like driving a really powerful sports car on ice with summer tyres. Lots of wheel spins and slides before I get traction to go in the direction I want to go. In the mean time, I don't want to hit anything that wipes me out and stops me from getting to my destination. But I do want fences around me to stop me from going over the edge of the cliff.


But where to put the fences? Without fences, blowing out an account is in sight. Fences too close and the fences are the cause of the crash.


My solution is to stay in a trade until I know it's wrong. OK, what does that mean? Well, if I'm taking a trade with the trend, I'll stay in the trade until the trend changes. If I'm trading against the trend - Outside In - I'll stay in the trend until I get a pullback against the trend and I see that the trend is resuming. I wrap all that in a drop dead stop, so I don't make a career decision on one trade.


The Euro futures trades this morning were all in the direction of the trend. Down! At no point during those trades - see the screenshot - did the trend look like it was over. I didn't cut any of them at a loss. Should I have? Do you? Taking unnecessary losses is one of the causes of not succeeding, both discretionary and algo. Like the guy on the island said: It's the Plan, it's the plan.

Paralyzed by options

For the last two months I've been working on improving my physical self. Next year I turn 50 and its clear that some attention to self maintenance is no longer optional. I've been running, carefully controlling what I eat looking at things like nutrient levels unrealized food allergies etc... So far I've lost 25 lbs, I am sleeping better, fixed some weird digestive issues etc... I'm starting to feel a whole lot better. For the next few months this is going to remain my primary focus, but I'm starting to have some spare brain cycles to devote to interesting projects. The only problem is I have not yet picked one. Its almost an embarrassment of riches as I have far more things I'd like to work on than I could ever possibly do.

Here is the list of what I've spent some time on in the last three months:

• Exploring the possibility of starting a Nanosat/Microsat launcher business.
• Exploring the NASA NanoSat challenge.
• Working on developing peroxide compatible high performance tank age.
• Training my self to run, I'm up to running 5K, long term goal is to finish a 1/2 Ironman, the swim and bike are much easier for me that the run part.
• Learning to be a better RC helicopter pilot.
• Updating the Helicopter autopilot to clean up code and use more modern lower cost sensors.
  
• Helping my Son move to Seattle and getting adjusted to the "Empty Nest"
• Testing GPS units under high acceleration.
• Cleaning organizing my Shop in anticipation of getting back to a rocket project.
• Repairing my little catamaran and doing some delayed maintenance on the boat.
• Going to the shooting range and relearning to shoot well. This was the primary Father son activity with my Dad from age 8 to 16. Sad to say that I took my Dad to the range and he is too far gone down the dementia path to enjoy that, it was loud and confusing and he realized he was not shooting well, but could not put the cognitive skills together to figure out what he was doing wrong, one of the Sadest things I've done in a long long time.
  

Here is the short stream of consciousness list of projects I'd like to do, and that I've spent some time sketching or thinking about.

• Develop a tiny low cost guidance and control package for HPR class rockets.
• Develop a truly low cost (<5K) hovering controlled rocket vehicle for use by students, schools, serious amateurs etc...
• Develop an autonomous aerobatic RC helicopter.
  
• *Develop a integrated RC transmitter and Telemetry receiver display for UAV and controlled rocket use.
• *Develop a gas and go 100Kft reusable liquid rocket. (Glide back, guided parachute, or VTVL TBD)
  
• *Develop a high G integrated GPS and IMU system.
• *Break the VTVL hovering duration record.
• Build something like the Martin Jetpack.
• Build a Solar powered aircraft. (My last attempt is here:http://www.rasdoc.com/splinter/solar2004.htm)
• Build a manned solar powered aircraft.
  
• Get my FAA medical back and start flying again. (13 months ago I started using CPAP, so without a lot of paperwork and hassle that pretty much kills my medical.)
• *Develop a peroxide rocket that uses thermal decomposition rather than catalysts, allowing 95% peroxide and removing cat pack black magic issues.
• *Develop the full range of motors necessary to build a nano-sat vehicle.
• *Build a electric "turbopump" driven rocket motor.
• *Do more development on 3d printed rocket motors. (This is really a $$ issue)
  
• *Build and fly a two stage liquid rocket.
• *Build out and test the paper concept I have for a very simple to construct Rocket Motor.
• *Develop a set of compact brushless valves and actuators and Sell to NewSpace co's.
  
• Build, test and sail a trans pacific autonomous sailboat.
• Build a large envelope 3D printer IE a Makerbot on steroids.
• Start something like Techshop in the San Diego area.
• *Start something like the original Armadillo aerospace setup. IE get a building and have a group of volunteers working on some serious rocket projects with meetings/work parties twice a week or so.
• *Start a properly funded venture funded rocket business.
• Do some more public speaking. (I've really enjoyed the speaking I've done)
• Build and market an RC helicopter "Oh Shit" Autopilot, IE a small box on an RC helicopter that will recover from dumb thumbs and put the vehicle in level hover if you screw up and hit the Oh shit button)
• Do some more traveling and see parts of the world I have not seen.(South America, Asia)
  
• Buy a big sailboat and take a long cruise.

Everything with a * is applicable to the NanoSat challenge.

So many choices so little time.....

LUNCH MONTHLY COMPULSION FREE SCEEM

LUNCH MONTHLY COMPULSION FREE SCEEM

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                               ****12-12-2011****
  Monthly Purchase Compulsion will not be applicable

Nmart open 11 shopping mall on 11-11-11

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Is Paying For Education Worthwhile?

There was an interesting comment to the blog last week from a poster who said he benefited from all the free stuff in the blog, but was questioning if it was worth paying for education like the Workshop.


He wrote:

EL, I have been following you for a long time and I think the free information you provide your readers with on a daily basis is great. I know it has helped me a great deal but reading this post really has me wondering how this workshop is worth $5,000? It seems kind of obvious and basic, particularly if you have been following this blog for any length of time. I too have hundreds if not thousands of strategies that show 63% profitability. I also know that if I add more filters and backtest more I may be able to get one of them to 65%. I considered joining the workshop but then decided not to mainly due to the fact that no indicator, book or seminar has been worth any dollar spent so far. I know I would be pissed if I spent another $5,000 to learn how to write an algo like the one you posed above. I know for a fact that your algos have losing days and I think it would be instrumental for you to post those as well. Its clear you are trading standard deviations masked in EMAs, and CCI triggers. Is that all there is to this entire blog?

Firstly, thanks for the comment.


Let me start out by saying, I agree that no indicator that I have found or seen is worth paying $5,000 for. I often buy bits and pieces I see if I want to look at them, paying up to a few hundred dollars if it's good. My last such purchase was Pete Steidlmayer's VOLUME STRIPS software, which I am looking at. I don't know if it will be any use or not yet, but I certainly thought it was worth $350 to find out and to learn something new from the person who has been a proven innovator.


Back to the comment. Some people can work things out for themselves and prefer doing that. I had to do that because I had no source of deep knowledge to teach me, although I was a member of CompuTrac and I did go to a number of seminars from people like Steidlmayer, Dalton, Larry Williams and a few others. I always learned something.


For me, the purpose of education in trading is to learn something I did not know, to learn how to do something that would take me a long time to figure out, or something without which I would probably lose a lot of money before I learnt it for myself.


The attendees at the workshop and those that will buy DVDs of it will get not only the knowledge that has been transferred during the workshop but the mentoring and assistance that I give them afterwards. The Workshop has two parts: the delivery of the material over the week and then 3 months putting it into practice. In addition, the trade logic and easylanguage code I supplied meant that re-inventing the wheel was not necessary.


The Workshop was full of material that took me years to figure out. The support that the attendees get is based on 45 years of trading. All short term day trading is trading deviations from mean or return to mean. How you do it is not all that simple, otherwise most people would be making money rather than losing. We have a dozen basic pictures to trade and a great many variations and nuances within those dozen pictures. Also money management is another part of trading. I hope you have read those posts too, because that is an important part of trading.

Today was biz as usual in the DAX. That means it took no prisoners. The highlight of the morning (London time) was the Fib to Fib trade. As you can see, I had several bites of the cherry as I know that the way to eat an elephant is one bite at a time. Those food metaphors really mean is that I am a very short term trader and don't hold a whole position for a long move. I scale and reload or All Out and reload.