“Often times, losing money is the very best catalyst for understanding!”
I spent a good deal of last night in total analysis of yesterday’s “ass whoopin’”,
and although it’s never pleasant, it’s something you have to do to survive the
jungle of trading, over years and decades of dealing with “the beast”. And the
most important thing you have to first recognize, and then implement, is the
fact the money you lost has to be gained back through market information
… for those of you who trade your own account, none of us, pros or complete
Newbies, are going to gracefully skip through a career of trading without
coming face-to-face with “the abyss” … one way or another, you look in the
bathroom mirror and say to yourself, “WTF was that?” and then set about
figuring out what went wrong and more importantly why … from there, you
can implement changes that hopefully completely minimize the event into
“one off” territory.
In tomorrow’s blog, I’m gonna write about the process I went through to
identify the key “logical fallacy” that Cousin It & CoS Milton Waddums failed
to recognize in the crude oil algorithm… and believe me, I’m not blaming them
in the least, cuz even when it’s right in front of your face, it’s not easily figured
out … sure, once I explain it to them, you can see the light bulbs go on, and at
once you can’t help but feel like a “complete dunce, cuz it’s simply right there
staring you in the face! … are you blind”? … “hell yes, we all are blind, cuz
limitations or errors in mathematical logic can be infinite in scope, and they don’t
exactly email you to let you know you “F’d” up … no, you get shown by Mr.
Market with no explanation whatsoever, and the less money you lose by having it
happen sooner rather than later, the better off you are … NOW, this is
information that is more valuable than money”!
Ok, the problem has been solved … the necessary algorithm changes have been
made, and I can tell you all right now, simply cuz I’ve done the math and spent
over 4 hours last night looking at 2 years worth of Brent Crude Oil action
covering every single frickin’ day, that had 1) “doji days of nothingness, 2) trend
“chopfest” days, 3) the infamous “Flying Wedge of Death” [FWD] days, 4) pure
up or down trending days with above average ranges > $1.40 per barrel [which
by the way is the average range of each day during the last 2 years], and
5) those days where the market moves little [> $0.90 per barrel] or somewhat
below average [$0.95 - $1.30 per barrel], that all these types of days which
account for over 99.99% of all trading days, have very high probability of
success for the day of making money. Only one type of trading action day can
present “problems”, meaning potential for losses is high and dots the landscape,
and in those instances there almost has to be major news that has been released
that is directly responsible for impacting price. Other than that, it’s clear
sailing!
Turning to today’s Brent Crude Oil market … outside of a few minutes of Saudi
oil news, it’s been a total "chopfest" … not a problem with the algorithm changes
I’ve made. Without making those changes, today would have been as bad as
yesterday, or even worse.
Only one trade today … PAMM up slightly less than 0.1%.
Now, today isn’t about making bucks, or “getting back in the saddle”, and
showing Mr. Market what’s what … that’s a fool’s errand … today is about
“being right” and making anything greater than $0.01 … up ‘till Noon EST.,
there were about 5 algorithm trades total … I took the first one and was
immediately up on the trade … the other 4 came and went over the first 3 - 5
hours, and my goal today was to evaluate algorithm performance in real time to
make sure I haven’t missed something … “well, I didn’t miss anything, cuz
outside of the Saudi news “Thelma & Louise” reaction, it’s been a total “chopfest”,
with both longs and shorts getting alternatively taken out back to the woodshed for
a beating … in other words, normal Brent trading action … and in all of the other
trades, trade initiation led to being up in the position immediately … so, in this
“clusterfark” normal action, all 5 trades responded the way I wanted them to
… like I said earlier, money for information, and we got our money’s worth! This
afternoon, another group of trades … all winners that would have been up money
from the algorithm buy/sell signal.
Now, I’m not saying every single trade will be a winner, cuz there are some
variables here neither you nor I can control; e.g., intraday volatility at the
moment you make a trade, or the scumbag LP raises the spread from 3 cents to
6 cents as your attempting to take a profit … you get the idea. Another thing is
your timing … especially upon trade initiation, “you snooze, you lose”. But, and
here’s the critical point … “over a series of trades during the day, there are only
TWO scenario that can defeat you … TWO … and like I said before, one
scenario you can see a mile away so you’re prepared for it and there are no
surprises, and the second scenario is common to all algorithms, which is
surprise news when you’re in a position and the market gaps against you in a
nanosecond … nothing you can do here but move on and not dwell on it".
I’m gonna try and have the complete oil algorithm [used for both crazy Brent &
it’s somewhat psychotic cousin WTI] finished by the end of this upcoming
weekend, so those that want to trade oil can do so without qualms. And when I
lay it all out, you’re gonna love it … the philosophy, theory, mechanics, and
visual presentation is so easy to follow, a retarded kitten could make the trades.
So, that’s coming very soon.
Tomorrow’s trading will return to normal, and unless the 0.01% “tail risk”
shows up, meaning one of the TWO loing scenarios shows up [not likely, but
it’s no guarantee of course], things will return to profitability day-in, day out
… and even if it does show up, I know how to deal with it, cuz the
“fingerprints” of this kind of day are so very easy to spot … like my mentor
Bert used to tell me over and over again, “choose the form of your destruction,
and then go defeat it”! Well, gone are the days of worrying about the FWD, or
“Doji” days, or anything else for that matter … in a market that is as bat guano
crazy as Brent Crude Oil, volatility isn’t something we need to worry about.
So, a very light profit day, but all algorithm trades I identified were winners
… and that’s the most important thing going forward. This isn’t the
“Holy Grail”, cuz there is no such thing, but it’s as close as I’m going to get to it
as I’ll ever get … and starting tomorrow, I’m gonna lay it all out … I need a cold
one … I’m outta here … until tomorrow mi amigos … Onward & Upward never
looked so good!!
PAMM Spreadsheet will be updated early this evening directly below.
Have a great day everybody!
-vegas
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