Watching STS-130

I'm in Florida to watch the STS-130 Launch. I have NASA Guest tickets and the Launch viewing area is next to the Saturn V display at the Cape. The Temps for last nights scrub were a tad below 50F but the wind was blowing and damp. I did not really pack appropriately for these temps, it was really cold. I left the hotel at Midnight and got back to the room at 7:15 am. My internal clock is saying WTF?

Once again I'm stunned by the scale of the Saturn V, the size of the launch vehicle necessary to put 2 men on the moon in one shot is just staggering. I post and tweet my observations of the launch when it happens. The couple sitting behind us on the NASA bus has come out for 9 shuttle launches and has seen 9 scrubs and zero launches. It looks like they will try again Tonight but Tuesday Mornings Forecast is for worse weather so they probably won't even make the attempt.

Kiki's FloBot V1

I have had quite a few emails about Kiki's FloBot so I indicated on Friday that I would provide some details of where we are so far. Below is a screen shot of Friday's trades and below that are some statistics. To make sense of what I am talking about, I need to tell you what you are looking at.The stats chart covers about a month of trades starting January 2009 and a few days of February 2010 and shows the results doing trades in two different ways, we were running both. The first line shows the results for an "average" good trade exit under current volatility conditions, which for us is a single target of $375/contract profit. The second line shows the results based on exiting the trade at what is my usual first scale: 2 points or $100/contract profit.

 

  

Click each chart to enlarge

  These are the results that would have been achieved letting Kiki's FloBot enter and exit the trades, assuming no slippage on a 1 contract basis.

What is interesting is that there was a 74% chance that each trade made the first scale out of $100 profit with a $200 stop loss. This gave a profit for about a month of trades of $2392 after commissions with a maximum draw down of $886.50. That means you could have earned $2392 with a minimum capital of $500 day trade margin plus $886.50 set aside for losses. Using my usual conservative approach, it would be earning $2392 for every $5,000.

Had you opted for the "average" exit of $375 and tightened your stops to $125, then your win rate drops to 39% but the profitability jumps to $3227 with the lower draw down of $756.50.

OK, so which is the best way to trade? Well, it depends on how you actually want to use an automated system.

My idea when I agreed to Kiki's idea to get this project going was to use the FloBot only to enter trades. I didn't, and I must say that at the time of writing, still don't believe that it is possible to program all the "context" requirements into the model. Maybe over time we can get closer but at the moment we are far away from that.

So the idea of using the FloBot to only enter trades will make me more profitable by:

• allowing us to trade more markets at the same time or to trade one market without needing the high level of focus as we need now, and,
• ensuring that trades are entered and not missed for both discipline and focus reasons
• allow the FloBot to exit the first 1/3 of my position at the scale out point - I get this 74% of the time, and I manage the balance as I do now.

The big plus point is that I can then have the best of both worlds by manually managing my trade after the FloBot's exiting the first 1/3. I can then decide whether to exit the rest of the position at the same 2 point profit or whether to run it and scale out progressively. Taking this route, I hope to maintain the 74% win rate and keep the average profits at the level that I am at now. Overall, this should translate into a larger monthly payday as I can cover more markets for less concentration.

I see this as a step forward for a trader as it makes the job easier. You don't need to work at the 100% level 100% of the time, which is impossible anyway.

So how should Kiki use it? We have spoken about this at length. We have several options:

1. Let the FloBot do all the work and just hang around and make sure that the internet connection stays up and that the FloBot doesn't get out of synch with the broker, or,
2. Let the FloBot only enter trades and manage the exits, or,
3. Use the FloBot as a mentor to make sure that Kiki's trades meet her trading plan

I think that what will happen for Kiki as a mixture of all three, depending upon how she feels on different days.

Winter fiasco

I clearly made a huge blunder by underestimating this storm. At around 9:30 p.m. Friday, we lost power to the house, and it didn't return until shortly before 5 p.m. today. This was a major storm that even the most flamboyant meteorologists didn't predict. By noon, the neighborhood had received at least 19 inches of snow -- I measured the amount with a drum stick -- prompting us to begin the Big Dig. We placed our refrigerated groceries on the back porch so they didn't spoil. Below, I have included a few photos for your viewing pleasure.

The weather turned ugly around 5 p.m. Friday, but things got really nasty when we lost power around 9:30 p.m. With nothing else to do, we built a snowman, had a snowball fight and shoveled the driveway... three times. There was an eerie orange glow in the sky around 10 p.m., and the horizon flickered a number of times, which presumably was the result of exploding power line transformers.

Neighbors began The Big Dig early Saturday morning, but the snow plows were nowhere to be found. A plow made several runs last night, but we have yet to see another one today. That made for more than a few disgruntled diggers.

My girlfriend, Tiffany, and roommate, Fielder, skip merrily up the main road. We took a half-hour walk around the block to see the damage, and found a lot of people attempting to get out of the mess.

I'm going to go out on a limb and say this guy is probably waiting for an epic thaw before moving his car. Most of our vehicles looked like this, and it meant that a broom was a better tool than an ice scraper.

By 3 p.m., we had shoveled our driveway and were able to get around. Unfortunately, the plows neglected our main roads, meaning the only people leaving our development were driving sport-utility vehicles or pickup trucks.

And finally, I offer a majestic view of the snow from my bedroom window. Despite the inconvenience of the blizzard, it offers a beautiful winter scene. Feel free to offer your own winter storm stories in the comments section.

Chart Templates for Sierra Charts - Thanks to Timokrates

Timokrates wrote:

    Hi Tom,

I'm currently trying to establish my whole setup in terms of broker and charting.
As you suggested I will go with OEC because of margins and also because it works with Sierra.
I'm using Sierra for quite a while now and it is pretty good and should do what I want.

With the help of others I was able to put your chart setup and indicators together and would like to share it. So if you like, you can put it on the chart definitions page.

Here is the link: http://www.sendspace.com/file/gy4kcq

I wish you a nice weekend - and have to say again that the way I see you trading and teaching provides me with some hope to find a way to trade. Like others I tried nearly all the stuff which is out there. But now I feel that I can achieve a level of confidence which I was not able to reach before. The main reason is that I believe a context like MP could do for me, what Elliott waves, multi timeframe analysis and all the other methods where not able to. PA, order flow an momentum are the rest and I'm very happy that you share your knowledge about that and put everything together to create a picture.

Thanks again and all the best,

Timokrates

Thanks, Timokrates this will be posted under the Key Posts, Chart Setting & Chart Definitions.  

There will be a post tomorrow about Kiki's FloBot.

Live Blog: The Storm

It is predictable that local news stations would be blowing up this winter weather with constant coverage and meteorologists offering numerous predictions. What I didn't expect is WTAE-TV to offer up-to-the-minute blogging of the storm. And while I would love to rip the news station for pushing such an idea, I honestly wish I thought of it first. So here goes my Live Blog of the Blizzard of 2010...

12:09 p.m. - Flurries begin to fall in Allegheny County. I pull a blanket over myself so as not to contract frostbite.

12:30 p.m. - I leave for my local grocery store to fight the masses. The shopping trip is needed to buy buffalo wings, chips and dip for this weekend's Super Bowl. Although I have plenty of milk and toilet paper in the house, I briefly consider buying out the store, then scalping the items in a little stand outside the Shop 'n Save.

2:03 p.m. - Well, that was a mess. As expected, hundreds of shoppers crowded the super market in a last ditch effort to buy stuff they probably already have. As I checked out, the cashier commented that it appeared I was preparing more for the Super Bowl than the storm. "You seem to be the only one," she said. "It's those weathermen and their four-letter word that creates all this fuss."

3:05 p.m. - A light dusting has covered the road passing by my house. Although it's hardly a heavy snow total, I'm sure the driving will be somewhat treacherous for evening commuters. In fact, the carpool lanes through Pittsburgh have been closed due to the weather. Still, you'd think PennDOT would've kept them open until after 7 p.m. today.

4:16 p.m. - The snow ain't stopping and the secondary roads are slick. There has been no hint of a salt truck on these lesser used roads, but main thoroughfares like Interstate 79 and Washington Pike near Bridgeville are clear. Walked by a man in my neighborhood while he was sweeping his sidewalk, and he told me the forecasters are now predicting up to 10 inches in the area. That shouldn't come as a surprise considering the enormous train of precipitation coming from the south.

4:46 p.m. - Rut roh, it's the heavy stuff. Just finished shoveling the inch or so on my driveway, and it's soggy snow. Might be wise for the working folks to do a once-over upon getting home. Tomorrow will be a bear after we get our total amount and have to dig out.

5:09 p.m. - Some people just don't know how to drive -- or park -- in the snow. My girlfriend, Tiffany, had a little trouble pulling into the driveway while coming over for dinner. Although she plowed into my yard, it did make for a very nice artistic design.

TRAFFIC ALERT: As Scott Beveridge mentioned in the comments section, Jim Lokay of KDKA is updating his Twitter account about the weather and traffic problems. I usually don't think news can be tweeted effectively, but Lokay seems to be doing a pretty good job. Click here to check out his traffic updates on Twitter.

Work Hard for the Money

It was as Donna said today. I traded more than twice as many trades as usual. These employment number days can get very confusing to the guys upstairs if there are different ways of interpreting the data.

Trades 1 thru 4 were continuation trades from yesterdays' downdraft. It was a matter of finding re-entries after closing out. As we were hitting new recent lows I was mostly all in and all out as I was waiting for the market to retrace some of yesterday's losses. I had a nice walk during London's lunch hour waiting for the numbers, finally a bit of sun in London.

Today was a great example of not listening to CNBC while trading. I did for the first time in many, many months. Very bearish numbers and of course one or more big hands covered shorts on the bad news. I would have probably traded better if I did not know that and just followed what I was watching. After an hour of confusion (mine), sanity returned and I turned off the TV and went back to work. Trades 5, 6 and 7 were very short lived. Trade 8 was into the hole. The Order flow then became really clear, probably because the CCI momentum turned at the same time so clearly too. Trade 9 I rode up through KC and his sunshine band.

Trade 10 I should have held so I didn't need to take another trade but I didn't as the congestion and the 6CCI looked like it would break up. It didn't and I was lucky to get in with really clear info on Trade 11 which I exited on the first hammer at the KC low.

All in all, a very tiring day. I had to focus a lot more. I had one eye on Kiki's FloBot as I was very curious how it would perform on a day like today. If you are curious too, tune in on the week-end and I'll post a chat and some stats.

 

Click to enlarge

I'll Enter the Re-Entry Discussion

I have been asked to talk about re-entry. Re-entry or continuity trades are just trades with the trend when the trend goes on longer than you have contracts left to scale out.

As it happens, today is a perfect example, hence the post today.

I have posted a screen shot of Kiki's FloBot with a bunch of these types of re-entry trades today. The FloBot code is quite modular having several different trade setups, but the trades I am showing today have all the other modules, except this type of re-entry, switched off for clarity.

What Kiki and I have done with her FloBot is to take profit early rather than run the trade so that it is forced to look for another trade,and you can all see more trades in the sequence.

To re-enter a trade I need to control the risk of re-entry as there is no point in just giving back the profit I made. My method is to require Order Flow to be strong. Then I just wait for a pullback with the long term momentum in tact and the shorter term momentum which changed in the pullback, to be re-imposed in the same direction as the long term momentum and order flow. Sometimes the pullback is not as clear because you get a horizontal congestion and then a continuation. The other thing to watch is the "rule of three". I am wary after 3 pullbacks and require stronger evidence of continuity. I usually get this from looking at the Profile to the left of where price is trading to find a zipper or gap or even very high volume VA with no support closer than my first proposed scale.