Oh boy, welcome to the email tsunami I got after yesterday’s blog post hit the
wires … the “Period 4 Algorithm” for scalping and people have questions
… and I’ll start by reminding everyone that when it comes to mathematical
results, there are an infinite number of ways to get a result … for example, to get
the result “4”, I can simply add 2 + 2, or I can do [(2) * 1] + [(2) * 1] and get the
same result … in trading, the path to get to your result is as important as the
result, cuz of the limitations of mathematical systems in being 100% correct
100% of the time, which is impossible.
And so, YES INDEED, whatever indicators you choose to use to trade they do
have an AGENDA and you must know the limitations of the indicator and the
why/when of the matter when it fails to yield a profit … there are a whole host of
reasons I became a trader many blue moons ago, but I realized the inherent
nature of probabilistic systems can be used to my advantage, and also knowing
I don’t have the cash to get a casino license … well, the next best thing is to
exploit probability theory and get rich trading.
I don’t want to give the impression it was “easy” back in the day … that’s
nonsense … nothing is “easy” in this game of trading, and there are tradeoffs
from one paradigm to the next … as I hinted yesterday, I was going to present
this only to PATREON subscribers, but PATREON’S stupidity & shortsightedness
is your gain.
I get emails from all kinds of people and traders, and I know we all bring to the
table our own set of trading bias, agendas, and reasons for wanting to trade … I
myself am more of a scalper, with a slight lean to holding positions if they keep
going in my profit direction … not only does it fit my personality, but IMHO it
keeps trading cash flow positive under ALL CONDITIONS … but, it can be argued
there are other just as good [I don’t think better] ways to “skin the cat” and get
what you want. When I was doing research for the supertrend algorithm, the
“Period 4 Algorithm” was simply “split hairs” off from supertrend in terms of
results … results I might add that aren’t statistically reliable over long periods
simply cuz I don’t have the history that goes back far enough to compare, and
quite frankly I don’t need to know the exact differences, I just need to know when
it works BEST and THE HOW/WHY WHEN IT FAILS … and over many periods, it
will mirror signals given in the supertrend algorithm and they are the same … so
bottom line is simply this … the “Period 4 Algorithm” is simpler, and it isn’t a
replacement, but simply an alternative for those that prefer scalping.
So often I hear from people that get miffed when they have a successful scalp, and
then 30 seconds after they get out, the market skyrockets higher still leaving them
in the dust … to be a successful scalper YOU NEED A SHORT MEMORY and can’t
give a shit what happens next … you simply wait for the next signal whether it’s to
be long or short … you can’t have your cake and eat it too! … decide how you want
to trade, and what your goals are for profit, and leave it at that … most successful
traders from the trading floor that were there for longer than a year, weren’t
especially bright … a box of hammers had a higher collective IQ than more than
half the floor … but what they had was discipline & patience, and they all knew
the “gig” was better than working any job in the “Pudding Business”.
You have to remember the paradigm we live in now for most markets … VIX is
being manipulated by the central banks, and it leads to some very harsh trading
conditions in many markets … what I consider dead trading bullshit, somebody
else trading $1 million+ EURUSD [$100 a PIP] on an institutional platform with
ZERO bid/offer spread, or maybe 0.1 PIP spread, and paying $5 or $10 per million
dollar trade in commissions, has an entirely different outlook on what’s going on
than me … and in somewhat LOWER VIX environments, the “Period 4 Algorithm”
will work better for scalping than the supertrend using both the m15 and m1 in
conjunction with each other … and in this “binary event game” there’s only
winning and losing, and in the final analysis nothing matters except winning
… otherwise you’re back in the “Pudding Business”, and who the hell wants to
be there?
One big problem with the supertrend algorithm is volume, especially in MT4
markets, cuz it’s skewed … volume totals of spec activity get thrown into the
figures right along with institutional activity and many times it’s very hard to tell
what specs are doing … contrast this with “go charts” and any crypto pair, and
you’ll notice the striking difference between crypto versus gold and/or any
“Stock Bellies” market … the difference lies in the fact that crypto is almost 100%
spec driven, and therefore you get the FOMO, the panic sell offs, and the volume
spikes at the bottom when specs puke, and then here comes the “buy fuel” for
the scalp.
I’ll have more in the Adobe pdf I’m creating for the “Period 4 Algorithm”, but one
word of caution when using it … it’s subjective, not objective, and depends on
the market you’re trading, but generally speaking avoid crossovers for signals
that have to go to great a distance from the bottom [for longs] to give the signal
… like 5 or 6 m1’s in a row up before the cross off a deep bottom puke … that kind
of cross has significantly higher probability of failure or “false positive”, than
crosses that are much closer.
For those that want how MT4 calculates the “smoothed” MA [a/k/a SMMA], the link
is directly below.
https://www.metatrader4.com/en/trading-
platform/help/analytics/tech_indicators/moving_average#smoothed_moving
Cuz of the complex calculations involved for SMMA, I recommend using Turnkey’s
MT4 demo and/or live MT4 accounts for charts on MT4 for any market using
“Period 4 Algorithm” … it’s come to my attention that other houses just don’t
get the calculations right and the MT4 charts aren’t what they are supposed to be.
I want to reiterate, the “Period 4 Algorithm” is for scalpers, and it works best in
normal VIX AND LOWER on the m1 with no need for anything else … meaning
scalping [long and/or short, no bias either direction] in FX pairs works very well,
especially the majors and their respective crosses … gold most of the time, and
we’ll see how the gold market behaves come next Monday when we get into
Basel 3 and the scumbag bullion banks are “buh bye” from gold … silver I’m
leery of, but I’m watching how it trades versus the algo, and I’ll let you know once
we have a little time pass on the wristwatch from the start of Basel 3 … stock
indices I’d still stick with LONG ONLY cuz of the “88/6/6” paradigm, but it works
well here as well … in other words, pretty much ALL of the traditional
MT4 markets.
I said some blogs back, that if I ever traded FX again, it would be cuz the
“Pod People” have invaded … “well yes they have!, and in my head they left the
alternative scalper algorithm “Period 4” … I’m normal [yea I know what you’re
thinkin’!, and the dog is lookin’ at me kinda funny], but in my defense I said that
1) out of frustration, and 2) before I created & developed this algo … besides, I’m
a trader and can change my mind, especially when it makes me more money
trading … all kidding aside, the key here is depth of markets and what’s the best
place to trade today … no doubt, come next week gold will be right at the top of
the list, but for now I leave it the hell alone cuz of the unknown risks via Basel 3
… and I get that feeling in my gut that “Stock Bellies” are in for a very rough
Summer … not necessarily down, just drifting aimlessly and losing volumes &
liquidity … hell, the DOW30 when it moves is already close to a slippage
nightmare, so alternative markets in FX is a definite plus, and Turnkey for all of
their warts, is at the top of the FX food chain in LOWEST cost to trade with
excellent latency … it’s almost NOON in New York, and already it feels like the
DOW30 is closed … it traded better at 4 AM EST than it does now!
Let’s take a closer look at Cable [GBPUSD] & EURJPY [a favorite cross of many]
… directly below, the “Period 4 Algorithm” on the M1 from today.
You can clearly see the LONG trades on both, and how fast the algo reacts to
small changes in price, so even with Lower VIX the algo works very well … I
would simply add 2 caveats … 1) don’t take the signal if the distance from the
bottom to the signal is too far, and while I realize that’s a tough PIP figure to get
exactly right, and it’s highly subjective, the more you watch a market the more
you get a feel of what’s too far, and 2) if the HULL MA goes “flatish” in it’s slope
for over 15 - 20+ minutes, leave the market alone and come back when it gets a
slope … and unless you have a death wish, stop trading FX after the London FIX,
otherwise you’re at the mercy of scumbag Wall Street banks … that leaves about
a 14 - 15 hour window from 8 PM EST [New York] - 11 AM EST [New York] to trade
these markets, and leave the rest alone … and what goes for Cable & EURJPY
goes for the entire FX space … one last item … pay attention to the 20 Day Range
MA when scalping, cuz if price exceeds more than about 20% of the average, you
got to leave alone the buy signals at the top of the range, and if shorting the
signals to sell at the bottom of the range.
Tomorrow sees the BOE with an interest rate meeting at 07:00 AM EST [New York],
and that leaves us with about 4 hours to trade Cable … that’s the event risk for the
day, so we’ll see what happens and follow the “Period 4 Algorithm” for our trades
… and at 08:30 a whole bunch of U.S. data that more than likely moves Cable
more than the BOE … we’ll see.
Quite frankly, I don’t know what to expect come Monday in gold … bat shit crazy
[BSC] or dead in the water? … and has the entire “Stock Bellies” space gone
“sleepytime” ‘til the Jackson Hole clusterfark in August?, where supposedly the
FED makes a “bold move” … dunno, but right now “Stock Bellies” feel dead
… and so I’ll say again, it’s nice to have alternative markets to trade “IF” you have
the proper algorithm to trade ‘em … not a problem any longer.
And just like that, around the 12:40 PM EST timeline, “Stonks” take a puke out of
nowhere, and a quick peek at the algo and it was already in “sell mode” anyway
… I bring this up, cuz many will “fudge” the algo and stay long / short too long of
time as it starts to walk away from your profit direction … don’t do it, just “Nip it
in the bud” and start again.
I came into today thinking the DOW30 might have some follow through to the
upside, and that market has hit the wall … very sub par range day versus the
20 Day Range MA … it might get better as we move towards the close, but it
might get worse as well … there isn’t any volume in here and price action is
terrible … if you followed the algo today you’d probably be up a couple dollars,
but I’m very much a trader that says, “show me something”!, and “Stock Bellies”
today haven’t showed anything.
No trades today in anything.
Gold did show some life right around the NYSE open, something that lately has
been happening with regularity, and the algorithm gave a good buy signal on the
move up to extend the range … since then a bag of dog poo … directly below
the gold m1.
Crypto, especially the alt-coins have died … weak volumes and almost no
movement … tomorrow sees me move over to ETHUSDT where at least there is
some movement.
Outta here … “the future’s so “GOLD”-en bright I need sunglasses”! 😎
… Onward & Upward!!
-vegas
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