TEACHABLE MOMENT IN TRADING INSANITY

 

“Thank you, Mrs. DAX30 for spilling the beans!”

“Well, that escalated quickly to the downside, didn’t it”? First came the Daimler 

earnings warning cuz of “tariffs”, but it wasn’t until the U.S. saw the sun come 

up that the DAX30 got hit with some insane action to the downside with 2 bits 

of news; 1) the U.S. Dollar “nosedived” on worse than expected economic data, 

and 2) U.S. Supreme Court says internet sales tax “OK”, reversing a 1992 

limited ban, and thereby gives the green light for cash strapped states [like all 

of them] to make online businesses collect taxes for them … “what could 

possibly go wrong here”?

And in a nanosecond, there goes AMZN in the backseat with  

“Thelma & Louise” off the nearest steep cliff. And seein’ how the NDX100 hits 

an all time high last night @7335.6 [on the CFD], there’s plenty of room on the 

downside for some “profit taking” [thank you Bob Pisani, CNBC bull peddlers], 

and away we go! None of which is any kind of good news for the DAX30, which 

brings me to today’s “teachable” moment in market insanity and what to do 

about it.

About 98% of all trading days will see daily ranges in the DAX30 of 

approximately less than 250 index points; about 1.8% to 1.9% will see ranges of 

250 - 350 index points; that leaves about 0.1% greater than 350 index points. 

And while we didn’t see total “bat shit cray” today, we came “Hoover Dam” 

close … and the dirty little secret is, that it almost always has been created by 

external political or geopolitical news events that shake the core of the market, 

and bring into question the sustainability of stock prices higher … and that 

creates “panic” on the sell side, where only God knows the level at which people 

will go to sell anything down the rabbit hole … “price shocks, here we come in 

your face”! Bottom line is this: “when intraday price action starts making 3 - 5 

index point moves in fractions of a second, it’s time to back away and let nature 

take its course … anything you do will spell trouble … sell it [take a look at 

earlier today and what happened 4 times … 50+ point up moves that turned on a 

dime and killed shorts within minutes], and you get to panic again real soon on 

the upside … buy it on a rally, and watch how fast it drops when the short 

covering is over … say goodnight to about 20 points if you’re lucky”!

But here’s the “real deal” teachable moment about today’s DAX30 trading 

action, something I mention in the manual and show extensively; “as bat shit 

crazy as this day was on the downside, as bad as the news was, and outside of a 

total meltdown in U.S. stocks, especially NASDAQ, the action on the upside 

[try 5 frickin’ times!!] in the DAX30 was greater than the volatility on the 

downside in shorter amounts of time! … in other words, the blistering short 

covering melt ups were something to see and behold … so fast and vicious, some 

of the gain in price couldn’t be captured no matter how fast you were”!

As I point out in the manual, 1) above average crazy markets in terms of 

historical volatility, 2) markets that have insane intraday price activity, and 

3) markets that have incredibly low costs of doing business [spread & RT 

commission], which all 5 of our markets exhibit and have, 

do NOT … REPEAT, DO NOT, go straight up or straight down, and are 

1) extremely unpredictable, and 2) regularly show super mega spikes up and 

waterfall spikes lower, and then go “sleepy time”, thus frustrating hardened 

traders looking for follow through and never getting it, except enough to keep 

them looking for it.

Now, the only way you can CONSISTENTLY make money in these markets, 

and the data backs me up on this, is to 1) not follow any kind of “trend”  

indicators for trade initiation, cuz in a fast market they are too slow, and you 

end up buying a breakout high and sell breakout lows … exactly what you 

don’t want to do, 2) understand and comprehend the nature of the market you 

are trading, meaning that in either of the stock indices we follow, the NDX100 

& DAX30, both have “bias skew” to the upside, meaning you can buy sell side 

panic breaks and make money over 99% on every trade, and 3) you never, ever 

chase price, meaning buy rallies and sell breaks … nothing will lead to your 

account going down faster than this one point. 

And all this points to what I have said repeatedly of late; “the purpose of trading 

is for big money to get small money to do trading they don’t want to do [buy highs, 

sell lows, and then panic to get out], thus transferring money from small money to 

the accounts of big money … and they do it constantly and consistently every 

day/week/month/year, and most retail traders don’t have a clue they’re being 

manipulated … turn the shit around on them, and attempt to beat them at their 

own game”!

Turning to today’s DAX30 market … “Oy, the double whammy of Daimler’s 

warning & Supreme Court tanking NASDAQ … but, as anybody who thought 

“I’ll just get short and stay short” found out, staying short is extremely risky and 

it leads to panic buying when they goose the index higher on those buy stops 

… rinse, repeat 5 times, and you got today”!

Two trades today, both from the long side … PAMM up halfway to 0.1%.

Probably about a dozen buy signals today … a large portion of them I couldn’t 

make the trades for one or another of two reasons; 1) the signal comes after 

price runs 20+ points in literally 2 seconds, or 2) I get the signal, and in less 

than a second price jumps 10 - 20+ points before I can get a long trade off 

… frustrating, but nothing I can do about it, cuz I’m not buying a 20 point 

jump [one signal today it was 30 points] … hell, I want to sell that if I could 

have gotten long, not buy it. 

And in every case today, that I saw, not a single buy signal was wrong or 

unprofitable, if you somehow could have gotten the trade at the signal … a 

couple early on were close, but as I have said before, when it isn’t working for 

you, and you’ve been in the trade more than a few minutes, you either have to 

liquidate it or give it a very small amount of additional time to work out, and 

if it does, as soon as it’s profitable get out.

Today sees small gains in spite of a large 250 point range day to the downside

… “sure, with hindsight it’s an easy sell, but sells early got rammed up people’s 

noses with short covering rallies that were blisteringly fast and vicious … it 

wasn’t until U.S. stocks got the “Thelma & Louise” treatment after the Supreme 

Court decision, a half hour to an hour after the NYSE open, that things got 

extremely messy on the downside for a time … and then again, the explosion 

higher that wiped out shorts for the FIFTH TIME TODAY … sure, a piece of 

cake. Only by following the “Force Volatility Algorithm” did I not get long on any 

of those massive rallies, cuz it sure looked like the low was in for the day three or 

four times … but the algo says NO!, it’s not how we do things, and you need to 

wait for a signal … and it’s a damn good thing I listened! … yea, somewhat 

unlucky on the immediate gap higher in price on multiple buy signals, but as I 

said before, ain’t buyin’ a 20 or 30 point blast up … and once Europe closes at 

around 16:00 server time [Noon EST], it’s over and things die quickly in the 

DAX30 … now what”?

And although I say it in the manual, I’m gonna say it here to, and that’s this,

“gone are the losing days, unless there’s an alien force that causes a mess up 

(cough, cough, see yesterday for details), cuz there’s only “ONE” realistic way to 

have a losing day … and it’s so improbable I’m not even worried about it! Sure, it 

could happen, and today’s action & news should give you a strong clue as to what 

that type of scenario that is, cuz after the NYSE open today, it sure looked and felt 

like upticks were gone forever … and then a funny thing happened, like IT 

ALWAYS DOES … BOOM! … another “in your face” rally, that burns the 

eyebrows off anybody that is still short hanging on for more, or anybody that just 

got short recently … you couldn’t shove money down the toilet faster and lose 

more if you tried! … so how come we never just keep going down and never come 

back? … history has never seen it … why should it happen now? … even during 

the ‘87 crash, a 36 “sigma” event the world of finance has never seen before or 

since, the market rallied numerous times to trap shorts; it wasn’t until the final 

45 minutes of that day that things turned ugly, and who the hell is gonna be 

buying then for a short term trade? … and I should know, cuz I was standing in 

the SP500 futures pit as it occurred”.

Yes, we can have losing trades, but if you follow the algo, they will ALWAYS 

BE SMALL … to get a losing day, look in the mirror to see where you “messed 

up”, cuz it’s about the only possibility unless some truly strange and “never 

before seen” shit is coming for us in the future. And so, all my trades today on 

the long side, and if it wasn’t for some truly bizarre market action with gaps in 

price via the bid/offer to the upside, today would have been a big winner … on 

the long side … on a day when this stuff went down 250 points in exactly 1 hour 

and 25 minutes, and then rallied 50 points in 25 minutes … the FIFTH TIME, I 

might add. Oh, and the good news from today; “hey, I didn’t “F up” today, and 

actually got the order tickets right … do I get a participation ribbon or 

anything”? Much more on all of this in tomorrow’s blog post.

So, we’ll see what tomorrow brings … the future’s so bright I need sunglasses! 

And with that, I’m outta here … until tomorrow mi amigos 

… Onward & Upward!!

 

I’ll have the updated PAMM Spreadsheet here, after tomorrow’s trading 

… right now, I’m using all my spare moments outside of writing the blog and 

trading, to finish the manual on time, for Sunday nights release.

Have a great day 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”

  

 

 

TEACHABLE MOMENT DAY IN GBPUSD ALGORITHM

 

“Remember … he who panics first, gets to panic again later!”

A very “teachable moment” today in GBPUSD, and I’m glad it came sooner 

rather than later … directly below today’s M15 candlestick chart with the 

GBPUSD algorithm. 

 

It should become obvious to anyone that has been around markets longer than 

about 1 day, to realize and understand that the main limitation of the Cable 

algorithm is, quite frankly, “chop” … and especially “chop” around the blue 

box … cuz really, what’s the difference between “chop” here at the boundaries, 

versus anything you would get following any type of MA’s [moving averages]? 

… well, of course, the answer is nothing, they both have the same problem. If 

every day, the market was “required” to move away from the first M30 

[2 M15’s], we’d have guaranteed trading profits and found the “holy grail” of 

trading! “Alas, Skippy, come on down from the clouds, cuz there ain’t no such 

thing”!

So, as today so elegantly provides, it was a nothing day filled with “chop”, and 

a slight move lower hunting for stops, before it came roaring back to about 

where it started … and while anything can happen from now to the “official” 

close at 8 P.M. EST, where it sits now is “unched” on the day with another  

“doji” pattern on the daily candlestick. “Oy is an element best avoided at all 

costs”!

And so the question becomes for every trader, “where do you pull the plug on 

movement around the blue box boundaries to avoid getting chopped up all day 

long with small losing trades that go nowhere”? And for me personally, that 

number is “3” [three] on any side of the blue box … and you’ll notice above a 

white “X” on the chart … that’s where I “pulled the plug” on trading today, 

even though up ‘till that point I hadn’t made a trade … from that “X” on, it 

can do what it wants without me, cuz I know from a probability perspective, 

that from that point going forward the rest of the day, there isn’t a very high 

probability the market is going to make a sustained move anywhere, and all 

that is gonna happen, is that I take positions and find myself “trapped” by 

gapping ticks that go up or down 3 - 5 PIPS in less than a second. “You sell 82’s 

and it goes to 80.9, and then before you can get to the “F” in “WTF was that?”, 

it’s 84 or 85 bid on it’s way to 88 2 seconds later where you liquidate your short, 

and by the time you close the liquidate box and get back to the screen, it’s back 

at 81 … no worse feeling in the world, and it comes from buying or selling “in 

the hole”, and it puts you at an immediate disadvantage to the market and 

subsequently forces you out”.

In the GBPUSD manual, I don’t cover this, for the simple reason every trader 

is different in far how out they want to go … my personal “max” has always 

been “3” [three], but that’s me … you could be 4, 6, 9, or whatever to the end of 

the day … my point is, it’s gonna have to be something or else you get “monkey 

hammered” with losses, and end up losing a helluva lot more than bargained 

for on a day with nothing going on. Directly below, the M30 in GBPUSD for 

August 1, 2017, where the market had one of these kinds of days, and even 

though it went about 20 PIPS, it came back to the blue box way to many times 

… my guess is, if you attempted to keep trading it all the way to the end, you 

got chopped up pretty badly … no need for that, cuz it doesn’t happen that 

often; simply call it quits and come back tomorrow. EASY PEEZEE!

One of the big reasons I didn’t get short or long early, on any of the breaches of 

the blue box boundaries, is that the retracements off of all of these, both short 

and long, never came back around in that classic “teacup handle turn” I’ve 

written about before … in other words, as an example from the long side, sure 

it breached 1.3608 a number of times, but every time it did, when it topped out 

and started to retrace down, it never stopped and started to go back up again 

and threaten the high, it just kept going down back into the blue box … ditto, 

only reverse on the short side, and this is the main reason, I don’t want to buy 

rallies out of the blue box, or sell breaks out of the blue box, cuz it can easily 

trap you and come right back … if it’s good, it will stop, retrace a little and 

then move. Take a look again from the other day when I “FUBAR’ed” the 

perfect sell, directly below … the sell isn’t at the breach, the sell is the blue 

rectangle I’ve put in on the retracement back up, and when that rolled over, 

“THAT WAS THE SELL POINT”!

 

Today, we didn’t get any tradeable movement away from the blue box until the 

orange arrow #5, and even that was a complete terror on the way down, as all it 

did was break 4 rally 3 the entire time, with some small sets of sell stops set off 

below 1.36500 … and every time the market hit those stops, the next 

millisecond saw price rise by 2 - 4 PIPS … and when you start seeing that, you 

are either at the low, or very, very close … and when it turns, it’s “lights out” to 

the upside, taking no prisoners and not coming back.

Another reason I’m not really in “sell mode”, is the fact that, “just how many 

days in a row, and how many PIPS does this stuff continue to go lower with no 

move higher”? We’ve been down now 12 trading days over 800 PIPS … and 

you’re beginning to see serious support emerge on any moves lower. The 

action I’m seeing, is reminiscence of bottoming formations … they take some 

time to unfold, and the key is lower highs every day in the series of moves lower 

… well, we’ve got both now, but it’s starting to get very choppy and ragged, and 

we have some HR1 trendlines from the top that are starting to become relevant 

and bear watching … cuz when the trade thinks the bottom is in, and it’s time 

to cover some short positions, look the hell out on the upside, cuz it will be quick 

and vicious in scope … something like 60 - 100+ PIPS in 35 minutes, with 

straight up panic and gaps at the top to take out buy stops … we aren’t there 

yet, but we are getting “Hoover Dam” close. And I’m betting it will coordinate 

perfectly with the GBPUSD algorithm, and after going lower, it comes back up 

and through the blue box and simply goes bananas to the upside … could be 

tomorrow NFP Friday, Monday, or Tuesday, or even later, but it’s coming, and 

the longer it takes the stronger it will be … right now, Cable is a “coiled spring” 

about ready to explode.

Turning to today’s GBPUSD market … no trades today, simply cuz there was 

no trading to do … market didn’t make any serious move until the 5th orange 

arrow, and even then it didn’t go down much, before coming back quickly.

Tomorrow’s NFP Friday, and so we got that to deal with, but watch a breach of 

the daily candlestick highs for some serious buy stops … who knows when it 

comes, but a surprising weak jobs report could be the ticket … in any event, if 

that’s the case, it’ll be fast and brutally vicious to the upside … I’m hoping 

Cable goes slightly lower, and then comes back through the blue box, and if 

that happens, things could get equally exciting … it won’t last long, but who 

cares, cuz if I’m long and it’s gapping higher, we’re gonna be selling the short 

term top … we’ll see what happens … I’m outta here for a very cold one 

… until tomorrow mi amigos … Onward & Upward!!

PAMM spreadsheet is fixed, I just haven’t had time to make the entries … I’ll 

post updated results tomorrow.

Have a great day 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”!