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Tuesday, January 31, 2017

CROSS ASSET RISK STARTS WITH USDJPY

“It’s just one big game of watching dominoes fall down.”


What a relief it must be in Japan; with the BOJ meeting out of the way, and Kuroda and crew safe in a bunker somewhere wondering when the next brick will fall and take the Yen higher, morning sets in on the New York session with little fallout from their inaction last night. “Whew, that was close … stuff could have actually happened had we acted … let’s not make that mistake again”.

And so here we are in day 2 of “correction mode” for the stock indices, and all of a sudden the Trump reflation scenario everybody swore up & down would be happening is … well … not “reflating” or acting like economic activity is just around the corner; and why should it? It took Obama 8 years to practically destroy the economy, and Trump’s supposed to “fix it” within 2 weeks? More noise from the “talking heads”; if they were half as smart as they thought they were, they would know it’s called “volatility”.

Some really good USDJPY algorithm trades today; 2 in particular after gold went ballistic to the upside. Directly below the 2 trades.



With the way the Yen is acting, it’s almost impossible to hang on to this stuff for an extended period before either gold turns around and does something stupid, or a Pol does something stupid and opens his/her pie hole; it’s a toss up, but hang around in this market too long and your “protective” stop is like iron fillings to a magnet.

In other news, in the next few days I will be releasing some information on the –vegas PAMM [our managed accounts program]; right now, just sit tight [meaning, no need to open an account and/or send money if you haven’t done so] and let me get this puppy put together. I’ll have everything you need within about a week.

Chamber of Commerce day in Paradise, and that means I’m sooooo outta here … beach beckons ... until tomorrow.

Have a great day everybody!
-vegas
 

 


Monday, January 30, 2017

WELCOME TO THE MONDAY MARKET MESS

“Is this the line for decent fills?”


I come into the morning not expecting a whole lot market wise RE gold & USDJPY; after all, we got “Peter Pan” Kuroda & crew out tonight at 10 P.M New York time with their latest installment of “we can fly, we really can!”, and of course anything stupid is possible with this bunch, so to get a 140+ PIP move down today is a little surprising. I’m not complaining, just sayin’.

Politics over the weekend have a lot to do with market moods, and you would think Trump’s 90 day ban on Muslims from Obama’s 7 most dangerous countries list, so as to get vetting procedures in place, was the end of the Libtard world as we know it; anything more ridiculous than seeing Chuck U. Schumer crying? Seriously, with these assclowns, everybody is Hitler, all non Libtards are racists, and Islam is the religion of Peace [Yea, right.]

Anyway, some great scalper algorithm trades today in both USDJPY & GBPUSD. Directly below, 2 trades from this morning in GBPUSD.




I could just as easily chosen USDJPY for my examples, and there were many more than the 2 above in Cable. Point is, if you show patience and discipline the trades will come and you can capture the short term trend move.

Today’s post is kind of short by recent standards, but the rest of the week I got plenty to talk and write about. For now, I got some teleconferencing to do on the PAMM … until tomorrow.

Have a great day everybody!
-vegas
OPEN A DEMO AND/OR LIVE ACCOUNT [CHOOSE THE “ZERO ACCOUNT”; REFERENCE ID# 6952 WHEN OPENING YOUR ACCOUNT] AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”
 

 


Friday, January 27, 2017

WITHOUT THE ALGO YOUR BUTT WILL HURT

“Hmmm, from the chart it didn’t seem like a lot of money.”


Today is such a “teachable moment” day in situational awareness I don’t even know where to start … 1) BOJ does extra QE last night, letting the world know it doesn’t want the Yen to go higher [USDJPY lower], 2) gold has been brutally monkey hammered 3 days in a row, and now on day 4 [a Friday no less, meaning plenty of traders will be evening up positions ahead of the weekend], with a relatively tight range of about $8 and we are hovering near the lows, and 3) at 09:30 New York time we get a shipload of worthless ‘before Trump” economic reports which will shake things up. What could possibly go wrong?

Coming into this clusterfark, I check the news and see what “Peter Pan” Kuroda [“I can fly, I really can!”] did, and I’m looking at the hourly on gold directly below.


[Note; click too enlarge all charts]


I got a red trend line on this HR1, along with the Ichimoku cloud [support & resistance levels]; market is about $2 - $3 lower than the trend line prior to 9:30, but from looking at this, I know that if that trend line is broken on the upside, added to the fact that its “position squaring” Friday, we could get a nice burst up in price with buy stops.

Since USDJPY has been inverse correlating pretty well lately with gold, on a move up in gold spells a move down in USDJPY, and with the price destruction in gold lately it’s going to take a Herculean effort to get it above 1190 and keep it there; meaning, buying USDJPY near the bottom for a trade.

Here’s how I played it; 1) let the numbers come out at 9:30, 2) if we get no reaction from the numbers, I’ll look for algo signals to sell USDJPY on gold rallying at some point on short covering, 3) if USDJPY market goes bananas on the upside, it will mean gold busts 1180 decisively, and takes price into exhaustion line territory where I will buy, 4) if gold pops higher, meaning USDJPY goes lower, I’ll buy USDJPY if gold hits the upper exhaustion line at RM=1. In any event, option #4 is what happened. Directly below, first the gold chart and then the USDJPY chart.



As you can see from both charts, we got a double confirmation of a short term top in gold with an RM=1 upper exhaustion hit, and a short term bottom in USDJPY with an RM=1 lower exhaustion hit. When I bought USDJPY, I got the worst fill imaginable; a full 3 PIPS off the offer on my screen, which despite what any/all brokerage houses tell you when they swear to you nobody is trading off of you [which I know is bullshit cuz they all do it despite ECN, STP, and every other alphabet soup networking BS … they might not know “who you are”, but they see the order and want protection … a rotten fill is exactly what you want to see because it means a rally is imminent!]; don’t be na├»ve enough to believe they are handing out great fills in a fast moving market.

Don’t get me wrong, I’m not blaming LMFX here, I’m just stating FX trading “facts” as I know them from being in this biz for so many years; every brokerage house on earth “talks” a good game. They ALL got the best LP’s [oxymoronic statement if I ever heard one], deepest liquidity [except when it ain’t], and lowest spreads [except if you look]. Fact is, every LP allowing you to have an account is looking to rip you off; every trade, every day.

Now, I have a good long USDJPY trade going here from an exhaustion line hit, so what do I do now? Easy Peezee; I’m looking for a spike up to liquidate [sell]. Well, within seconds on a spike up I liquidated and actually got a much better fill than I had anticipated; do you think that would have happened if I had waited until price had stalled or started to roll over and go down? [Hint: “Hell No!”] And do you think I CARE it rallied further a few minutes later where I could have made even more money? [Hint: “Hell No! (part deux)]

In essence, the day’s trading was a “backdoor” algorithm signal; I didn’t want to sell gold at the upper exhaustion line, but felt given the circumstances of the day’s news events [especially “Peter Pan”], buying USDJPY on a break was the play especially if the correlation with gold held up [and it did]. It’s called “situational awareness” and I had the scenarios pegged in my trader brain [“please be careful when entering”] for how I wanted to play this Friday before it occurred.


I also want to add something to what I wrote yesterday; namely the “1%” theme. Three things of importance here; 1) your weekly total of 50 PIPS [10 PIPS a day] is more important than each single day. In other words, don’t sweat the small stuff if you finish a day with 8 or 9 PIPS or even lower, cuz there’s gonna be days where you will be above 10, 2) don’t dwell on the PIPS, concentrate on the trade; some trades are quick scalps because they don’t look or feel right, others you can “free trade” it for more given the right circumstances in the market, and 3) nothing in life is absolutely perfect; if you fall short a week or two it simply means you get to add a week or two to get what you want at the end. It’s no big deal; don’t put so much pressure on yourself that you end up doing “stupid shit” [and you know what that is without me even having to tell you].

Every single trading day there is opportunity within these above average volatile markets; right now USDJPY is pure “gold”. Right behind Yen is GBPUSD, which has been trading with good ranges and HVALUES. EURUSD has been very good for those of you that want “pure scalping”. Gold, for its part, is “iffy” due to 2 criteria; 1) the spread is high versus Cable or Yen, and 2) ranges and HVALUES have not been consistently high enough. The stock indices are a disaster, and I recommend for the moment you stay away from them. Crude oil is always a viable “last resort” if things die down; from where I’m sitting, I don’t think either Cable or USDJPY are going to “die down”, so crude [at the moment] isn’t an option for me.

One other subject I want to brooch before I head out for the weekend; the “life” of a trader. I’m not any different than any of you reading this; nobody shoved a “silver spoon” into my mouth nor ponied up “free money” for me when I started. I wasn’t born knowing any of this; I struggled, got knocked down, got back up and took more shots than a bowling pin. However, I scratched, clawed, and took “no” for an answer when those in the Pudding Business told me I was crazy. In other words, I learned the biz. And the one thing, and I know I speak for all those who have traded professionally, that is always in my mind is I never want to have to be in the Pudding Business.

Having said that, I know because it is how I “did it” when I started in my trading career; all you have to do is follow the volatility algorithm [scalper, regular, or combine them like I do] and make some PIPS for your dreams to come true. Too often, I here people who want to take $1,000 today and have $25,000 within 2 weeks, not knowing that you might as well go to Las Vegas and play Keno cuz your chances are better there. Trading is a “process”; and when you finally “get it right” [which I show you how to do], you can name your income.

What you need to understand is that it isn’t “guesswork” or “analysis” that gets you your goal; what gets you to your goals is “intraday volatility”. If you have it, there’s almost no way at the end of the trading day [6 – 12 hours] you can be down money if you trade the market via the rules & procedures in the scalper’s algorithm; you’ll get a shipload of signals. Give me any very low cost, tight spread, liquid market and if that market has consistently high HVALUES, it’s like walking up to an ATM and walking away with money. 




Remember Butch [above, best photo we got of him, but really he’s a marshmallow], head security honcho for the –vegas team? Hell, he’s in 7th grade now … startin’ to think about the ladies … you think a paper route is gonna pay those bills? … Butch loved crude oil, but I got him trading USDJPY now, and some of his 6 girlfriends even got him eatin’ sushi… “Even Winthorp here [err, sorry Butch, don’t hit me] KNOWS VOLATILITY IS THE ANSWER! … between Netflix, pizza, Mickey D’s, texting, surfing, & more pizza, ya think butch pours over charts and brokerage house research reports? … Bwahahahaha … AND IF BUTCH CAN DO IT, WHY CAN’T YOU?




Uh oh … I’m picking up very intense telepathic signals now … “go to the impenetrable bacon box in the kitchen and get me some sliced roast beef … and … LET’S GO TO THE BEACH!” I’m sooooooo outta here … beach beckons … until Monday.

Have a great weekend everybody!

-vegas
OPEN A DEMO AND/OR LIVE ACCOUNT [CHOOSE THE “ZERO ACCOUNT”; REFERENCE ID# 6952 WHEN OPENING YOUR ACCOUNT] AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”
 

 




 

Thursday, January 26, 2017

THE DELUSIONS OF CROWDS

“Can you spot the scumbags?” [Hint: All of them.]


It’s been a wicked last couple of days, especially those long gold & short USDJPY; practically the entire universe was of the opinion 1) stocks were going to collapse, 2) gold was going to soar [even though a certain somebody who shall remain nameless told you the “bullion wall” was getting built at 1210 – 1215 by dealers], and 3) USDJPY was on its merry way to 111, where all the shorts could cover and call it a quarter. “Err, not quite”.

Some things never change; and one of these “things”, is that when everybody thinks something [like traders in a pit who can’t wait to buy tons of stuff on a rally, or sell stuff in the hole on a break, and then stand there and tell you the losses are “Ok”.], most likely outcome is panic in the opposite direction. “That’s why we have the algorithms folks, to keep your donkey out of trouble; do you think I developed it for giggles?” 

And so the USDJPY story goes again today, as last night’s attempt to go lower failed miserably on the Chuckleheads in Asia trying to take gold back above 1205 [which failed], with the ensuing fast selloff just as New York traders are coming in to the trading day. It’s like every single day is another installment of the bull/bear storyline, with plenty of panic to go around as USDJPY jumps and plummets with every 50 cent move in gold. Quite frankly, I don’t care what they do with it cuz the scalper’s algorithm keeps me on the right side of the market with profits, and if I keep my trading to the busiest times of the day [11:00 – 23:00 LMFX server time], have patience & discipline to wait for the algorithm signals, and then execute what I’m supposed to do, then I know at the end of the day I have the necessary profits. Everything else is secondary and not important.

Directly below the trades today in USDJPY via the scalper’s algorithm.
 




EXIT QUESTION: When you make about 1% a day [on average], what’s your return on capital at the end of the year? 



“Admit it Flounder, you’re stumped!”


Well … at the end of the year you would be up approximately 1,100%. And how much is 1% using 10X leverage? … About 10 PIPS. And so, let me post this again today, so you can see again what simple math tells you where you will be weeks into the future with your trading account. Directly below the “roadmap” to get you out of the “Pudding Business” and “escape to success”. For your part, all you gotta do is follow the algorithm; or, if you prefer, let me do it for you in our LMFX PAMM [17% incentive fee only on cumulative profits], which should be ready in about 8 weeks or so [last I officially heard from management].

[click too enlarge]


I’ll grant you your opinions about trading; what I will not grant you is that the scalper algorithm trades are “chump change” or somehow not worth bothering to bend over and pick up; if your attitude is “well yea, anybody can do this … really it’s only 10 PIPS [maybe more if the market cooperates in a free trade], but I’m swinging for the fences”. MY SHORT TO THE POINT RESPONSE: “If you think roughly $5 million Dollars in 3 ½ years, starting with $1,000, is not somehow ‘significant’, then I can’t help you. If it was easy, you’d have done it already”.

The “keys” of course are 1) not getting “whacked” with large losses, and 2) hitting your weekly PIP goal. Given the fact the market gives you roughly 10 trades per day with the signals and the success rate is between 70/30 – 80/20, all you have to do is “do it” and the PIP goal is pretty much there every day.

Now, I fully realize there isn’t one of you in 10 million who are going to let $1K build into $5 million over 3 ½ years without significantly increasing the quality of your lifestyle, and I’m not suggesting you let everything “ride”; at some point, you make the decision that the money in your account is the necessary means for income, and that’s when your life changes. Where that’s at is different for everyone, and it makes no difference if you do it yourself, or let me do it via the PAMM; it just depends on how you want to handle it.

Beach beckons … until tomorrow …

Have a great day everybody!
-vegas
OPEN A DEMO AND/OR LIVE ACCOUNT [CHOOSE THE “ZERO ACCOUNT”; REFERENCE ID# 6952 WHEN OPENING YOUR ACCOUNT] AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”



Wednesday, January 25, 2017

A “RE-THINK” IS IN ORDER

“Always making the poignant observation!”


Long time readers know that I’m all about volatility and trading markets that have above average intraday movements that the algorithms can take advantage of and make money; now, I’m not talking about the VIX or other measurements often times referred to as the “fear indices”, or intrinsic or historical volatilities. Knowing what has happened and what to expect from the last 30 years of trading isn’t going to help me tomorrow.

In order of importance, what matters most to me is 1) intraday volatility with enough “action” that decent buy/sell signals can be activated, and profits made from those moves; not just one, but several, 2) the lowest cost of doing business I can negotiate or otherwise obtain, because I know this is “money in my pocket” [which is not insignificant over time], and 3) good volumes and liquidity so that slippage on fills is kept to a minimum. If I can get these conditions, I’d trade dirt futures if it was listed.

Several months ago, before the scalper volatility algorithm was introduced and then the regular volatility algorithm was updated to version 2, some of the FX pairs dotting the landscape on the MT4 were simply moving too fast to be accurately modeled by the algorithm; 2 things to note here, 1) sometimes you would need 30 – 40 PIPS to see algorithm changes, and 2) whipsaw action really bloodied the results. 

However, with the scalper’s algorithm, and the changes that have been made to the M1 signal parameters, it’s time to “re-think” one FX pair that meets all the requirements listed above and can be added to EURUSD and USDJPY for scalping; and that FX pair is GBPUSD.

Since Brexit, this pair has not slowed down, often putting in days with much better HVALUES than either USDJPY and/or gold; so we have the necessary volatility, and now that LMFX has a spread of 0 to ½ PIP, the “net” trading cost is roughly 0.8 – 1.3 PIPS; this is just slightly higher than exchange membership trading [which cost roughly $200,000 by the way]. In essence, you’re paying about 1 – 2 tenths of a PIP for the privilege of NOT PAYING $200,000, and so that’s a lot of trading over the years isn’t it? [Hint: about `100,000 1 lot trades]

Directly below 2 charts from some algo trades this morning in GBPUSD.




USDJPY had its moments as well, and directly below that chart. While 4 out of 4 would have been nice, 3 out of 4 winners is still good, and the gains more than made up for the single loss [which was very small].





Gold, for its part got taken out and shot, with another infamous, mild screw job with sell stops that saw prices go South in a hurry when prices busted 1197. And so it goes with another “bullion wall” getting erected between 1210 -1215 [like I wrote about before in previous blog posts], and the bullion dealers just “wait you out” and sell more; when you can borrow all the money in the world to sell, it’s hard not to make money.

Even though it’s still morning, I think the day is basically over, what with the DOW30 finally … finally … getting over 20,000 [Gartman is now long via Zero Hedge; Uh Oh!], USDJPY dancing the “round tripper from high to low, back to the high, and now in the middle, and gold getting monkey hammered once again. 

Beach beckons … I’m soooooo outta here … until tomorrow.

Have a great day everybody!
-vegas
OPEN A DEMO AND/OR LIVE ACCOUNT [CHOOSE THE “ZERO ACCOUNT”; REFERENCE ID# 6952 WHEN OPENING YOUR ACCOUNT] AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”
 

 

 

Tuesday, January 24, 2017

WHO WILL CRY FOR TRADERS?

“Getting that market to do what you want is tough isn’t it?”


It’s getting to the point where we almost have no markets anymore, in the very real sense that everything is being manipulated by Pols with pie holes. Very few moves are coming from what we would traditionally call economic reports or releases; those are so yesterday. What we now have instead are “projections” of what manipulations the Pols will effect; in other words, in the new world order of complete fascism [in the strict sense], who wins, who loses, and how can we benefit from the carnage?

The manifestation of this is, of course, “speed of light” trading followed by … crickets; rinse, repeat until every trader in just about every market is dead in the water. Nowhere is this more prevalent and on display than in the stock indices … seriously, I feel for those [dumb ass nitwits] traders that haven’t moved on to greener pastures … it’s like watching 6 cows go for the same blade of grass. “Ummm, excuse me … do you not see there is ‘nothing’ here but you, banks, & HFT’s”? I don’t know when, if ever, the FED is going to retire the “Plunge Protection Teams” scattered throughout the world’s time zones, or if they will ever stop trying to manage outcomes. One thing I do know; “the only guy happy about the state of trading today is the funeral director”.

And in case you’re wondering what affect this has on other markets, I direct your attention to last night’s close of USDJPY, where 28 minutes before rollover at 23:32 LMFX server time, prepared remarks from the incoming Treasury Sec. created a 30 PIP gap lower, reportedly because he stated a “strong Dollar” can be “problematic” for the U.S.; this according to the “talking heads”. In reality, he was answering a hypothetical question from some idiot Senator [who believe me was “fed” the question because there isn’t a snowball’s chance in hell he came up with it on his own] who asked what happens to the economy if the Dollar goes up 25%. Oh, you didn’t know that? The talking heads didn’t tell you this?

Ok, so what’s really at “play” here? Realize of course, can you just imagine the “truth” being put out over CNBC? “Sell stops in USDJPY were just run viciously Bill, on bullshit comments from Mnuchin when answering a question; my sources tell me that with no liquidity in the market 28 minutes from rollover, a large U.S. bank took the opportunity to run the stops of their own customers who were long from earlier in the day trying to ‘pick the bottom’. Volume totals are ‘sketchy’, but my sources tell me it was right around $2 billion notional value that changed hands quickly; roughly $6 million in profits and losses realized in a matter of seconds. Bill, they just keep doing it again and again; back to you in the studio.”

Gold is starting to act better, now that the Holiday BS is over and the world is back at it; ranges are still disappointing, but the new gold algorithm is acting well and helping to reduce “chop”. You have to remain cautious in this market while prepared to sit out large chunks of overnight action when price action slows down; even with the “Chuckleheads” in Asia most nights wanting to bid it higher, most of the volume & liquidity in this market is still in the New York session where I would most definitely prefer to trade.

Turning to markets today … still looks and feels like a stop hunt in gold & USDJPY … back and forth between new highs and then new lows … all the while the order books get cleaned on both sides. Again, political action is driving everything; when the next “Tweet” comes, you won’t need to be watching Twitter to know it, just watch the “one minute wonder” M1 go bat excrement crazy and that will be the reason. Markets are on such tender moorings, it doesn’t take much to get either longs or shorts to panic and send gold ± $3 or USDJPY ± 30 PIPS.

Here at lunch hour, munching on chips and my favorite PB&J, action looks like USDJPY wants to make new highs, as gold sinks in a much needed correction; we’ll see, but for now the 1210 – 1211 area is holding, with a shipload of stops under 1209. If gold can sell off later, look for the Chuckleheads in Asia to continue the sell off; it could get really interesting. Of course, it all depends on the Pols and what they say.

Some good scalper algo trades in USDJPY today, USDJPY just hit a new high for the day … I’m gonna give the market another hour or two with the scalper algorithm, but I’m not seeing any big trends here playing out … until tomorrow.

Have a great day everybody!
-vegas
OPEN A DEMO AND/OR LIVE ACCOUNT [CHOOSE THE “ZERO ACCOUNT”; REFERENCE ID# 6952 WHEN OPENING YOUR ACCOUNT] AT THE LMFX LINK IN THE “DOWNLOAD LINKS” SECTION OF THE WEBSITE TITLED “OPEN TRADING ACCOUNT – DO IT NOW!”
 


Monday, January 23, 2017

YES, THERE REALLY ARE “NON COMPUTABLE” PROBLEMS IN TRADING

“Hey, let’s go hiking!”


Today’s blog post is really just a continuation of the ideas & thoughts from the weekend’s special update; specifically today, I want to write about the 2 dynamic variables that occupy our thoughts continually [whether you admit it or not] when trading, and that is “time” and “price”. The concepts seem simple enough; trust me, they’re not.

There is a very simple reason why I have never been in favor of EA’s [expert advisors], which are of course the automated trading algorithms that the brokerage house executes on your account’s behalf without any input from you; the dirty little open secret is that neither you nor anybody else can “input” all the data or parameters necessary in the computer code to make it functionally profitable like you want. It should be obvious to everyone [but isn’t of course], that no matter the genius of the computer code or those that write it, the code simply executes [in a linear fashion] mathematical and/or mathematical logic [e.g. “if”, “and”, “or”, “then”, “else”] instructions based on the “input” guidelines. Nothing more, nothing less.

So, for example, let’s say my algorithm for the scalper USDJPY algorithm has been meticulously and scrupulously proof read, thought about, agonized over, and finally coded into an EA. And since you know the “rules” for buying, let’s set up the following hypothetical trading situation.

All 3 lines on the algorithm are sloping up; USDJPY has 3 M1 down candlesticks in a row, and in the 4th M1, it is sitting just a couple of PIPS in the red from the third down candlestick. USDJPY is trading at 113.10, with the day’s high = 113.36 and the day’s low = 112.55. From the algorithm’s rules, you know that if the M1 goes green to initiate a long position, and so you’re sitting there with the order box up, waiting for confirmation. 

If the algorithm was “EA’d”, the computer code is also waiting to execute as well. Of course, you have no input into this as the code will determine mathematically the course of action, while you sit comfortably at the beach drinking a strawberry whatever, and basking in the future knowledge of untold riches.

Without warning, the market wires receive unexpected “news” from the BOJ [Kuroda & crew] and the market reacts violently; a few milliseconds earlier, USDJPY is trading at 113.10. Now, a few milliseconds later USDJPY is bid at 114.25. You immediately see this and your first natural reaction is, “WTF is this”? I doubt very few of you, and for sure me, are NOT going to be hitting the “buy” button; I want to know what the hell happened. In any event, I’ll wait for some kind of break if I’m going to buy.


But here is what your “EA” does; 1) it sees a higher M1 that goes “green” and it places a market order to buy, 2) the LP fills you at the high offer price, with a 9 PIP spread at 114.36, 3) you have instructed the EA to use a 7 PIP stop loss, 4) once filled the market gaps lower in 20 PIP increments back to 113.80 on “knee jerk” selling, 5) your calculated stop by the EA at 114.29 [market order to sell] gets “run” because the next bid after 114.30 is 114.07 and then a nanosecond later its 113.80, and finally 6) your stop loss fill is at 113.80 for a loss of 56 PIPS.
When you get back from the beach, what’s going to be your reaction to this? [“Cuz I know what mine would be”.]

So you tell me, “well –vegas, I would have code put in that prevents this; if the market “bid” goes up 20 PIPS or more, then it would not execute. Problem solved I think”.

MY RESPONSE: “Ok, the market just jumped exactly 19.9 PIPS on the “bid” side from buy stops above the previous high of the day; you are going to get filled because 19.9 < 20. And again, your stop of 7 PIPS gets immediately taken out and you still lose anywhere from 15 – 30 PIPS from 1) wider spread, and 2) lousy fill from the LP because you were buying at the market on the way up and your stop was selling at the market on the way down; EXACTLY OPPOSITE OF WHAT THE ALGORITHM CALLS FOR FROM YOUR TRADING.

YOU: “Ok, I’ll just widen the stops a little bit, from say 7 PIPS to 20 PIPS. Again, problem solved I think”.

MY RESPONSE: “Ok, you’ve just decided to “hand” the market more money. Your buy still gets “screwed” no matter what number you fill the code with; what happens if the market comes back exactly 20.1 PIPS from the high bid to stop you out and then spends another 3 M1 going down 4 PIPS before gapping higher AND doing all of this to you again for the second time”?

Meanwhile, as a human not subject to “forced actions”, I can sit back and decide what the EA cannot under any circumstances calculate; which is to say, “do I want to be a part of this or do I want to stay away? Is this going forward a good trading environment or one that is almost guaranteed a losing proposition?” 

And so it goes “ad infinitum nauseum” adding code to cover the “what ifs” to prevent your account from getting wiped out while you are away playing and counting monopoly money; “I hate being the one to break the news to you, but it will forever be like this because these “non computable” problems will always be here waiting for you. THEY ARE INFINITE IN SCOPE & YOU CANNOT ESCAPE THEM! … deal with it, please”.

And all of this brings me back to “time” and “price”; “what’s acceptable in terms of measurement and what isn’t? What is ‘volatile’ and what isn’t? Where is the ‘line’ for chop and when isn’t it there in the market? What time is ‘right’ for making money and what time isn’t? Where, oh where, is the line for optimum profits, cuz I most definitely want to be on the right side of it? And so here we are; you can’t code these questions because in essence they are simply probability wave functions where, until you finish a trade and ‘book it’, infinite possible outcomes are viable and present. 

In other words, you can’t code “common sense”; all I or anyone can do is build a “framework” from within which you can thrive based on favorable historical market probabilities that have existed and repeat consistently. With this proper “framework”, you can then do things that further increase your probability of success; 1) trade liquid markets only, 2) trade only those markets that have the lowest “net” cost to your account, and 3) use the volatility of the market you’re trading to your advantage by setting a PIP [or $$ per OZ.] goal and remaining disciplined. Nobody ever suggested you have to be in every squiggle 24/5; pretty much every day there is a “move of the day” to capture.


The M1 signal parameters have been changed from time to measure deviations in price from a slightly longer time perspective; in essence, every minute the algorithm is plotting approximate 15° and 7 ½ ° changes in Gann’s ‘Square of Nine’ to give us [in my opinion] a very optimal look at changes in price momentum as we go through our trading day with as few “false positives” as possible given a minimum level of intraday volatility.

Obviously, if the momentum of price is “up” [3 lines sloping up] we want to be long, and if momentum of price is “down” [3 lines sloping down] we want to be short. If any of the 3 lines are not in agreement with the others, we sit and do nothing. However, we don’t want to be “long” or “short” from just anywhere, we want to be “optimally” in a position that has historical probability on our side [70/30 to 80/20], and so our threshold is 3+ M1 closing candlesticks contra-trend to short term momentum before we enter.

Now comes the fun, because with each person sitting out there reading this comes probability wave functions based on 1) your risk profile, 2) your short term profit objective, and 3) your PIP goals, etc. Throw in the element of the “free trade” concept when appropriate, which I have mentioned before, and the results can be as varied as the people trading the same algorithm. So, when I get people who ask, “hey –vegas, what’s the exact, right way to liquidate?”, only semi in jest do I say, “tell me where you got out, and let me look at a chart, and I’ll tell you if it was the “right way.”

This is why, in an earlier blog post I said, “have no memory”. This trade, that trade, this day, that day … whatever … the only thing that matters is did you make money today and did you achieve your PIP [or $$ per OZ.] goal? If the answer is “yes” … no worries, no introspection, no “what ifs”, no nada … go live life [it’s called “balance”] and come back tomorrow and do it again. Cuz if you do, you’ll find yourself smack dab in the middle of that “earnings projection” table I have posted several times in prior blogs, and by definition you have “escaped to success”.

If the answer is “no” from above, it isn’t most likely going to be the market that spoiled the day … it’s gonna be you! When I talk to people, invariably something went wrong in implementing the algorithm … and then to compound the problem it was time for “Plan B”, even though there was no “Plan B” thought out beforehand. 

If you spend your time trying to figure out where any market is headed before you trade, you’ll win just enough to keep you coming back to the analysis while your account is getting bled to death. The only “analysis” that is proper is to judge yourself on how well you followed directions; and make no mistake, it isn’t just with my algorithm. If it pleases you, there are thousands of trading methods, EA’s [God forbid], systems, what have you with their attendant requirements and technical indicators; the vast majority you don’t use because you’ve looked at them and their respective limitations are glaring.

What makes people “uneasy” about trading, either as a professional trader who makes his living off of it or just being successful with a “plus” balance, are 2 things; 1) people don’t like to think their lives are “probability wave functions”, and 2) nothing … and I mean literally nothing … in your life either prepares you in an educational sense or allows you to experience what trading is like before you get into it. 

And while people dance around the edges by saying, “well, I heard of a guy once who did it … I read about a guy that did it … and every once in a while I’ll read about a guy who did it”, what they are really saying is that they can’t possibly figure out, even with shiploads of alphabet degrees or Pudding Business experience, how this works cuz there is no parallel in the universe they can relate to or go to for answers … so it stays that mystical mystery.

Of the really good traders I have known over the years, all had that “go with the flow” mentality inside their trading methods; if things changed, they went with it. They didn’t sit there and try to “intellectualize” remaining the same, while at the same time watching their incomes drop. You want to see a really pissed off trader’s wife or girlfriend? Go ahead, tell her she has to “cut back” her lifestyle for a bit and then give her the “intellectual” reasons why the market is not behaving. Yea, call me and let me know how that goes.

Bottom line is recognizing limitations that heretofore were unknown, and then doing something about it. You can have the worst algorithm in the world, and if market conditions are right for an extended period of time, you can make stunning amounts of money. Where many traders “trip up” is their lack of realizing this is not the end of the road but just the beginning; there will be many periods ahead that will bring out into the open your algorithm’s flaws. Question is, will they be tiny ones that you can live with, or ones that seriously hurt you when conditions change?

What I am most interested in as a trader, is getting to the market early enough so there is plenty of time left in the day to make money, followed by successive profitable signals that I can capture profits, even if I have a losing trade or two. In the meat of the day, where liquidity and volumes are highest, I want as few “false flags” as possible, knowing that double and triple reversals in price are rare and usually accompany news events. Once I achieve my goals, there isn’t much chance I’m going back in and potentially give it back.

With the changes I have made, unless intraday volatility really falls off a cliff in gold [some days it has] & USDJPY, the “meat of the day” should have the fewest “false positives”; that doesn’t mean there won’t or can’t be any, it simply means there will be much fewer than before. And now that President trump is in office, let the volatility games begin!


Turning to markets today … it’s all Trump folks … whatever he tweets … whatever he decides to do. Here at mid morning markets are a complete mess, with gold & USDJPY putting in rallies & breaks all over the place; gold as illiquid as ever, with not much better conditions in USDJPY, as I have seen panic on both sides of the market within about an hour. Directly below, earlier today, a very good sell signal in USDJPY.
 


Beach beckons … I’m outta here … until tomorrow.

Have a great day everybody!
-vegas
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