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Friday, October 28, 2016

BINARY EVENTS IN TRADING


“… and so, the key elements of the algorithm are … hey, you in the back? … are you paying attention?”
It’s Friday, and I don’t want to get too technical today because … well, it’s Friday … and knowing humans like I do, a lot of you will have the attention span of a teenager in Algebra class at 2 P.M. on the day school breaks for the Christmas Holidays. [“Oh wait … I meant ‘Winter Celebration’ period … another micro-aggression against ‘Snowflakes’ … OMG, when will I ever learn?”]

But before you anxiously await the “Simpsons” marathon on the big flat screen [“got your gym trunks all laid out with a ‘fresh’ t-shirt for the weekend don’t ya?”] and at least one case of cold “Duff’s” begging to be popped open for the occasion, I want to explain 2 key features in trading that you need to be cognizant of for maximum success; 1) my proprietary “Time Theory”, and 2) “booking & keeping” profits for the trading day.

Both of these are “binary events”, and are not mutually exclusive of each other; in fact, the first plays right into the other. Together, if you heed what I’m writing, not only will your trading be successful, your emotions get kept in check as well, and you find yourself in “balance”. And I’m just here to tell you [“ignore me at your peril & misfortunes, because I know some of you have to learn the hard way as Mr. Market shoves his foot so far up your ass on an early Friday afternoon you feel your throat getting sore.”] that you need to pay attention to both; and while they technically fall outside the confines of the volatility algorithm while you’re trading it on the M1, in an indirect way the algorithm’s “profitable signal probabilities” are influenced by both binary events.
My “Time Theory”, which I developed many decades ago in the trading pits and is as relevant today as back then, is as follows:
G(X) = ΔP – ƩT
G(X) = probability of making money on trading day ‘X’; ΔP = the change in price (or intraday volatility) of the market you’re trading (the higher the better); and ƩT = the time already gone by for the trading day as the market moves ever forward to its close for the day or week.
Simply put, the probability of making money today is HIGHEST when you’re trading an above average volatile market and your trades are made during the ‘early’ part of the trading day. It should be intuitively obvious to you why this is the case; 1) if it’s a volatile market, it’s gonna move, and 2) if your trades are put on during the early part of the trading session, if you happen to have a losing trade, there is plenty of time to make other trades to get the loss back with an algo signal. “Whatcha gonna do at 2 PM on a Friday if you lose money on a trade in gold? Where do you think this stuff is headed into the ‘wee hours’ of the close’? You think anybody is still left at their screens to trade this stuff? Yea, you and the bullion bank … good luck with that.”
This leads directly into factor 2; “once you’ve made your profit goal for the day [in gold use Oz., not money], or you’re reasonably close to that goal ONCE A TRADE IS OVER [not during], you have to have the discipline to stop, book the profit, and give the “middle finger” to Mr. Market and the bullion banks who desperately want you to stay and continue to play.” In other words, you make money and you keep it … come back tomorrow and grow your account some more; remember, opportunity is infinite, capital is finite.”
For me personally, at present my profit goal in gold is about $3 per Oz.; if I make a trade [or series of trades] and find myself up $5 or more, if the markets are moving and daily ranges have been very good, I may in fact might make additional trades; however, and this is important, I won’t risk more than $2 per Oz. on these additional trades; I won’t go below my profit goal; I may give back “some extra” I earned earlier, but I won’t sacrifice any of my profit goal [once earned] under any circumstances.
Turning to today’s gold trade, at the open it’s ….. crickets. God, what a bucket of slop this has turned into lately. And to make matters worse, of course the Chuckleheads traders in Asia bid it higher last night before Europe took it away; it’s what they do 90% of the time. GDP at 8:30 … can this move the market, cuz I’m not feelin’ like a whole lot of people are interested in trading today; whatever happens, no positions into the report.
Well, that escalated quickly didn’t it. And like yesterday, “folks, I just can’t make this shit up!”. Today’s [most likely only] trade directly below.

I got in at the exhaustion line [1262.50] and out on the immediate spike up [1265.80]; went another Dollar higher, but who cares. All-in-all, after commissions about $3.20 something and change in profit on the exhaustion line buy. And for you Newbies out there wondering why such a quick turnaround on the liquidation; Easy Peezee, the market is below the daily calculated white horizontal line, which means on any waterfall [exhaustion or other], on the subsequent rally up you got to hit the liquidate button to get a decent fill from the LP, otherwise if you wait for the “turn” they will take their “pound of flesh” and fill you off the market. My liquidation fill on this today was right on the market; and I got this fill because it was going higher when I did it.
The market historical evidence is very clear in gold; over 90% of the time when price hits the RM=1 exhaustion lines, especially on a ‘waterfall’ spike down in price, you will get very quickly a rebound in price from those traders who are short and missed the opportunity to liquidate and are in fact panicking to buy and liquidate their position AND also those retail specs who missed the ‘bottom’ and now think they need to be long.
This buying, when price is below the calculated daily white horizontal line will not [probability wise] usually last very long; it is imperative you liquidate on the way UP, and not wait for the turn in price back down. It simply doesn’t matter if it goes higher from your liquidation; when it turns it can be ugly, and you don’t want to have to be selling [liquidating] in a falling market now do you?
These type of trades have a very high probability of success, only very slightly lower than plum slope changes under yellow when price is above the daily calculated white horizontal line. They are the very highest probability of success trades you will ever see in trading; that doesn’t mean guarantees, so don’t do “stupid shit” like leverage yourself out of your account.
Here we are now a little less than 45 minutes later, directly below.





Ok, you tell me, given the fact the market has just jumped markedly higher AND interestingly enough gone to the upper exhaustion lines and now threatens the day’s high on this Friday, AND THE FACT WE “RANG THE REGISTER [again I might add] already today, do we in fact go back in and trade some more given this hopeful action? For me, “nope” not a chance in hell; given what I wrote earlier in the post, we got a $10 range now with this waterfall, and given recent history [last couple of months] that range I’m betting will hold the rest of the day [and if it doesn’t who cares], so where’s the move gonna come from and go to? Besides, I already booked my profit goal … why in God’s name would I risk that in a “do nothing” POS market on a Friday? “Seriously, do I look like the kinda guy who wants to have sex with myself and mentally ruin a perfectly good upcoming weekend because I did ‘stupid shit’?” [Umm, that was a rhetorical question, OK?]
I’ve been getting a lot of emails lately from people who want to know how I handle all of the stresses of trading, and my typical responses back to ‘em usually go along the lines, “you have no idea the pressure I’m under … the dog … the Mrs. … the turquoise waters & beautiful sand of the Caribbean … Cousin It … chief of Staff Milton Waddums … vegas Jr. … all the brokerage house & LP bullshit. Ya know, it ain't easy being me.”
But, I’m gonna share today my “totally-up-to-now” secret for maintaining “balance” and a healthy trading account along with happy life; I figure it’s time.
For years, as far back as I can remember, I’ve been taking this at least 3 times a day; more if necessary. And man o’ man does this shit work wonders. Directly below, the “secret” of trading & life!


“For best results, take at least 3 times daily with beer.”
Now, since I been takin’ this shit for years, I decided a while ago to help their marketing department promote this wonderful product. So, I took it upon myself to give ‘em some ideas for promotion; I sent them the following pic to use, and I think it kind of sums up what you feel like after taking a few wonderful pills [washed down with some Vitamin C therapy for sure.].
 

And you know what? I haven’t heard a damn thing back from ‘em yet; I’m wonderin’ if they all use their own product to excess?
Nothing like a little humor ahead of a weekend. “Admit it, there for a second I had you didn’t I? C’mon, admit it; who’s your Daddy?” Dog’s fired up for the beach … we’re both soooooo outta here!
Have a great weekend everybody!
-vegas
OPEN A DEMO AND/OR LIVE ACCOUNT AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”

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