“Believing in probability theory is a tough pill to swallow!”
There are three major problems facing people who want to be “traders”
professionally; 1) no “established” right way to find the “promised land”,
2) your life experiences work against you and not for you, and 3) you have to
“trust” probability theory to guide you or you are toast. And while I have
written before about the first two, today I want to address the third item on
the list.
Many years ago, when I commuted into “Murder”, Illinois every day on the
commuter train to trade on the exchange floor, I would inevitably see and
talk with the same commuters on the way back out of the city to Suburbia;
most people don’t realize it, but you really have three sets of lives; personal
life, work life, and then your commuter life … and each and every day you’d
see the same people … over the years, you would get to know them.
Quite often, they would say to me, somewhat with a degree of jealousy mixed
with sadness, “Ok hotshot, how much did you make today”? … and I’d show
them and get the usual, “WTF man, you’re shitin’ me right”? … and then the
next day, to see if I was somehow fibbing, they would want a glance at my
brokerage house statement from the previous day … after a while they stopped
asking to see, but they never stopped asking how much. And when they’d say
stuff like, “Man, I should leave that shit Loop job and come trade … really
should”. And my response would always be, “Ok, let’s do it … you can stand
next to me in the pit … I’ll teach you … you’ll have more freedom than ever
before and make 20X what you get paid now”!
And right there, with reality staring them in the face, they would inevitably
back down … not cuz of money … cuz they were scared of the “unknown”.
And the stated excuse would be, “I don’t know anything about it … zero”. And
my response would be along the lines of, “No worries, I’m right there … you
think I’m gonna let you fail”? ... and then explain my modus operandi via
probability theory, and how with proper techniques and coaching from me,
there was no way you couldn’t get rich unless you ignored what I was saying
and decided to “wing it” on your own. And through all the years I commuted
into the exchange and met hundreds of people, not one of them ever took me
up and decided to change their life for the better … and I know why.
Humans, especially “30 to 40-ish” U.S. men, like a degree of certainty in their
life, and wrapping your arms around probability theory for your financial
livelihood has all the drawbacks of being a professional alligator wrestler.
“What if I’m wrong? What if I have a long losing streak? What will my family
or wife say if I fall flat on my donkey? How will I handle being labeled a loser
and idiot? And besides that, I don’t know where to start or what algorithm to
follow … what if it’s bullshit, then what”?
And when you clear those hurdles comes “trusting” your trading method or
algorithm … and the $64,000 question becomes, “can you trust, believe in your
heart, and follow directions of something you didn’t develop, have spent zero
time analyzing, and know nothing about? … can you do it? Can you put your
entire life on the line and follow it”? People who have lost money trading over
time, in a collective sense, spends thousands of dollars searching for anything
that they think can make them money … and the hucksters in the financial
trading realm are only too happy to oblige with total crap.
Now, as many longtime readers know, I’ve written before how it took me
approximately 3 months on the trading floor to finally follow my own
algorithm … so, why so long? “Cuz I wasn’t willing to “give it up” and thought,
even though I created it, that somehow on the “fly” from the pit, I could out
think and out smart the market, and I didn’t fully trust it”. I didn’t change
things until, in complete desperation, I came to the conclusion that I’d either
follow it or go work at McDonald’s. So, I’ve walked in many of your shoes
… I’ve been down that path. It’s easy to develop an algorithm, it’s quite
another thing to trust, deploy, and use it without blinking.
However, the “hard work” to become a professional trader doesn’t stop just
cuz you got an algorithm … as 2017 showed me, you can’t count on anything
to remain the same … this is trading, and as the saying goes, “shit happens”,
and you have to be ever vigilant about necessary changes to your algorithm,
or even a complete rewrite if that’s where the evidence leads you.
The two hurricanes that hit the Caribbean in September 2017, and put me out
of trading action for 2 months, in reality was a blessing in disguise … it
allowed me to fully concentrate on unacceptable trading results, and starting
from scratch it led to 2 very important documents that are over in the
“Download Links” section in the right-hand column; “The Scalper’s Algorithm:
The Final Solution” and “The Teacup Handle Turn”.
Markets come and go [gold], they get active and then they die [stock indices],
or they were very popular “back-in-the-day” and are now completely
irrelevant [silver]; no matter, the one element that never changes is “collective
human psychology”, and nowhere does this apply more than non-correlated
“The Magnificent Seven” FX pairs I follow. I will add, that both were
developed [and tested] to address probability “tail risk” in prior algorithm
versions, specifically “The Flying Wedge of Death” [FWD] AND limited range
dyas where “chop” takes over and rules the entire day … not necessarily a
“doji” on the daily candlestick chart, but close. And with increasing frequency,
especially over the last year with central bank manipulation of everything,
these types of days are becoming more apparent than ever before. The
algorithms address those conditions and defeat them!
So, the question remains; “Can you trust it and do it? Not me, but you”? And the
dirty little secret is that unless you do your own research and work, you’re
gonna have to trust something to trade … simple as that. And here is where
that problem comes right into your face, up close and personal. The whole
premise of the blog is one of “continuing education” for your benefit … plenty
of “grey areas” I try and cover and give you information I don’t think you can
find anywhere else to help you trade.
Turning to today’s market … good grief, what a bucket of slop … 10 hours
into this clusterfark, and EURUSD has an approximate 33 PIP range, where
price has yo-yoed violently back & forth between 1.22900 and 1.23200 on
vicious spikes from both sides on a Friday with zero news. I’ve written before
about days like this where you can literally get destroyed buying the tops
and/or selling the bottoms, looking for the range to expand and it doesn’t
… add it all up at the end of the day, and you can’t believe how much money
you’ve lost.
I only saw one good “setup”, and liquidated on the spike up … after that, I
didn’t see another acceptable setup the rest of the day. Looking back, this
was a classic “Flying Wedge of Death” [FWD] day, and the number of trips to
the extremes was very high … what made it worse, on the turns it was “panic
city”.
Only one trade today … PAMM up slightly less than 0.2%.
From the inception of modern financial trading in the mid to late 1970’s to the
financial crisis of 2008, outside of technological changes that are obvious,
trading “action” was fairly consistent over all financial markets. From that
crisis in 2008 to February 2016, markets were in a “transitional” phase, where
volatility across the MT4 board dropped; since February 2016, the time the
FED consciously decided to save the oil industry, central bank manipulation
in all markets, to one degree or another, has been overt and rampant; as a
result, what used to be “tail risk” is now normal; “tail risk” now is the normal
action from 20, 30, and 40 years ago!
Daily ranges “back-in-the-day” were much higher, with much greater intraday
volatility in FX; hell, GBPUSD was so volatile back then, the futures contract
was HALF what the other FX Dollar pairs were on the CME, and traders on
the floor called it “the widow maker”; that market routinely had 250 - 600 PIP
range days, when the active market day only consisted of the U.S. session!!
Even though EURUSD has only been around since 1999, take a look at daily
ranges from 2000 - 2008, and what you’ll find are consistent ranges from 150 -
300 PIPS … how often does that happen now? “Cuz when you got ranges like
that, it’s pretty damn hard to get a “doji” or FWD, and it definitely would
be considered “tail risk” by any trader back then”. Point is simple: you have to
take what the market offers you, and “pushing it” to make a random
perceived target will only lead to big trouble.
And while I can’t, of course, completely eliminate risk, I can trade the very
best “setups” that have a very high probability of profit success … and when
you’re “up” on a trade very quickly, all the cards are in your hands … and
when you see that “spike” that is larger than others, you don’t hesitate and
liquidate. In this way, the FWD can be negated and rendered impotent. The
“doji” is more complicated; if the range is normal or relatively high, then yes,
it too is rendered impotent. However, if the range is small, like today’s
approximate 33 PIP range, you have to ignore the potential trade, cuz you
simply can’t rely on the assumption it won’t expand and hurt you with a loss,
and now there’s no time left in the day to make it back; this only happens
about 2% -5% of all trading days, with the usual suspects being near Holidays
and/or Friday’s [today].
You can expect the number of “setups” to be low in either the “doji” or FWD
type days; market action at the extremes are simply too chaotic for our
established patterns to manifest; extreme “chop” is the hallmark. I’m a little
disappointed the market lacked range today, cuz the intraday volatility is
definitely there to be traded … however, I’m not interested in “coin flips”. I
can say, though, that both algos are performing “as good as it gets” in
EURUSD, and as long as the daily ranges are there with decent intraday
volatility, they will continue to perform exceptionally well for anybody that
uses them. From that perspective, I’m very pleased … onto next week … I’m
outta here … until Monday mi amigos … Onward & Upward!!
PAMM spreadsheet directly below.
Have a great weekend everybody!
-vegas
OUR TURNKEY FOREX “PAMM/MAM” IS NOW OPEN AND
OPERATIONAL; SEE “PAMM/MAM MONEY PROGRAM” IN
“DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN
FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND
START YOUR JOURNEY FROM WHERE YOU ARE AT TO
“ESCAPE TO SUCCESS”!
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