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The last 12 hours were interesting for my strategy. At about 2000 ET, it was a little over +$2000. When I awoke, it was -$2000, give or take (mostly take, I suppose ). Now we are sitting at +$100.
The micros are suffering and dragging the boat under. NQ by itself is +1241 from 1800 last night, which is not too bad. We shall have to see what it looks like at end of day. I expect it to get beat up this afternoon.
I think I will take this strategy and just run it all of next week on NQ, as it has been the best performing all week. The micros appear to need some different parameters. I would have expected the micro NQ to match the NQ, but that is definitely not the case.
I missed Friday's journal entry because I was really busy. It was pretty much of the same. I collected enough data to realize two things:
My system is not tradable as-is
There are some really great things that I learned, including a way to use the indicators for discretionary trading. In other words, I believe I have a methodology for discretionary trades. What I don't have is time to further develop it, at this time. I would need a solid three weeks to spend just with this model I have, to make sure that it isn't just a mirage. I don't have three weeks uninterrupted to dedicate to this. So it will go on the shelf while I work on some of the things we have brewing.
I was able to stay out of the fray this past week and today. I had considered taking a short position Friday at the close in MES (and wish I had), but that would have been just a hopeful short entry. The COVID-19 news wasn't going to get any better in a couple of days. In any case, I have been protected throughout, so I am thankful I have not taken any unwise trades.
I am looking into a couple of things with equities. I am responsible for a couple of educational savings accounts, in which I can only trade equities and only long positions. I have 4 different ideas using the Fisher Transform indicator to signal short term trades. Here is what it looks like (15 minute timeframe):
It scales to different timeframes. Fisher Transform is tricky because of the number of signals it produces, so it needs something complimentary. I am looking into Parabolic SAR as one option.
I would use TradeStation to generate the signals, then enter the trades over on the other platform. It would technically be algorithmic, but the trades would have to be entered manually. I will have to look into possibly using TradeStation to send the buy signals to my broker. The equity side of things is pretty important, because we will want to get on the correct side of the recovery.
We are working backtest and walk-forward of one of our systems under development, so we shall see how that pans out.
I have a ton of client (non trading) related work this week, so I will not be spending a lot of time in the market this week. I will keep my eyes open for any trading opportunity that may present itself.
Holy.... where did this week go? I realize I haven't done my journal entries all week. There is obviously a lot happening right now. Anyhow....
We continue to develop our various strategies, despite all of the distractions. We have found some opportunities in the index futures that actually work, so we are running that on MES and may move to the ES if it is behaving as it should. It just started running last night, so it is too early to make much of it. I hate starting things this late in the week, as there just aren't enough trades to be meaningful. The model is simple, but robust.
Here is a chart from some current action:
I am using a couple of indicators from John Ehler's Cycle Analytics for Traders. His writing can be pretty arcane, but there are some gems in there. It took me a long time to understand and apply his concepts to my trading. To me, it has been akin to chasing the Firebird feather.
I ordered a handful (a college student handful) of trading books this week:
New Concepts in Technical Trading Systems, Wilder, J. Welles
Trading Psychology 2.0: From Best Practices to Best Processes, Brett Steenbarger
Dynamic Trading : Dynamic Concepts in Time, Price, Pattern and Trading, Robert Miner
Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications, John Murphy
Beyond Technical Analysis: How to Develop and Implement a Winning Trading System, 2nd Edition , Tushar Chande
Since I am essentially a market technician, I realize that I need to do a deeper dive into all things technical. I scored good deals on the above books and I am sure they will pay for themselves. It will keep me busy, at least.
I stumbled across the Chartered Market Technician Association (f/k/a the Market Technicians Association and a/k/a the CMT Association) website last night. I have no real need to become a Chartered Market Technician from a career standpoint, but I think going through the charter process might be a good thing. I would love to geek out in their knowledge base.
The Current Market Situation
No one likes the unknown and COVID-19 has introduced a new kind fo unknown to the markets. Black swan, fat tail... whatever you call it, it isn't a good thing for equities. Thankfully my equities exposure is actually pretty low, mainly in education accounts for my kids.
One of the things that drew me to futures trading was the ability to work either side of the market and trade any market condition. I don't short stocks and the rules are different now anyhow. Having done a lot with equities many years before working with futures, it took eons for me to wrap my head around shorting the market. How could I sell something I didn't have? I'm okay now.
I have a few mantras that I have, but this is one of my favorites: I don't care if the market is moving up or down, as long as it is moving.
This quote came from the 'Nigel' chapter. My reading of this chapter was very timely. We have produced a few hundred different strategies, but have come away with only a few that are worth trading. It is exhausting and can be discouraging. The Strategy Factory helped us a lot in this regard: if it doesn't work, throw it on the scrap heap and move on. Don't beat the dead horse.
The other big takeaway from the chapter is the importance of having many models. Explore every idea, ask questions, be creative, but methodical. Have a process and avoid bias.
I'm still working, but I am going to get this out of the way, since my trading week is done. My strategy ran well today. It does not take a ton of trades (2-3 per day) due to using a 30 minute chart, but they are generally quality. I had one loss and one win, with a minor $ loss (I don't discuss $ specifics from live results). All-in-all I am happy with the execution.
I have a lot of documentation of the research, ideas, and testing that I have been working on this past week. I think it was a good week. Lot of new and good things happened internally, with lots of new ideas and new workable strategies. I will set my strategy to run Sunday night on the MES June contract (MESM20). That is all I have for now.
Have a good weekend everyone and be smart about person-to-person contract.
Happy Monday gang! I hope so, at least. All is well on my end, preserving capital and taking low-risk opportunities as they appear.
I ended up working some of the weekend, not because I love work, but because I am full of ideas and it is just as much of a hobby as anything. I finished reading Trading Sardines, which I recommend to any trader of any level of experience.
Right now I am doing some experiments with John Ehlers' Early Onset Trend, featured in TASC, August 2014 (Click the link for the code). It is an interesting indicator. I have a version on Sierra Charts (available on their support forums) and the one published in TASC. As usual, Ehlers is trying to jump the gun by a bar or few, and get to a no-lag state through use of cycles and noise reduction.
I like the one on Sierra Charts better because it uses only one line and changes color when a change in trend occurs. I will attempt to replicate this in TradeStation, as the indicator in TASC has two lines. The one thing about this is that it only has a long bias, so I am fairly certain Ehlers intended this for be used for equities. I know it can be adapted for a short bias, but I am not sure when/how to switch between the two. Below is the Sierra Chart version, with the indicator at the bottom:
I like how it works at the market open (1800-2200 ET) on ES. I think it presents some low risk trading opportunities.
Here is an alternative setting for the Early Onset Trend (EOT) in Sierra Chart (roofing filter off). I think I like this one better, as it seems easier to identify the start of the long trend. This essentially the same chart as earlier.
This is probably not the best example of tradable signals, but I just wanted to compare and contrast the two settings.
I had a good trading day (live), but only discretionary. I entered a short MES position last night 3 minutes after open, exited and took a total of 6 round trip trades. My execution was very good on my later trades, but my two earlier exits were poor. My profit taking this afternoon was good with good re-entry points, playing the swings. I used a combination of limit and market orders, with protective stops along the way.
I had to do my grocery shopping first thing this morning, so I missed a good exit when the market rallied a little. Still, all trades were profitable with one open short position (is there any direction you would rather be right now?). All-in-all, I rate my trading a B-, mainly because I left money on the table. I mainly decided to trade because I watched Sunday night gap-downs for the past several weeks. There is no good news around COVID-19 that was going to come out of the weekend. I didn't pull the trigger on prior Sundays and regretted each time. Trading opportunities like this are only several in a lifetime, so I will take them.
I was unable to activate my current MES strategy because a halt on trading (circuit breaker or limit down/up) screws up the calculations until things normalize. There would have been no entries. . Hopefully I can active the strategy, but I have to be sure we don't have any circuit-breaker situations occurring. My strategy is smart enough to not trade when this occurs, but the recovery period after it can be weird. I think it might be ready tomorrow morning.
I missed my update yesterday because I have been busy working. The only disruption from COVID-19 has been that our kids are not in school, so they are home. And the whole thing is a bit distracting.
I ran my MES strategy yesterday and not much happened. There was one stop loss and an additional one small loss, so 0% win rate. It worked, but it did not adapt to the whipsaw. We did some further analysis on the strategy and it appears to work best when ATR is high on a 30 minute chart (>10). Since ATR has been high for the past month, it explains the success in this time period only. In backtest, it did similarly well with high price swings. However, I am pulling the plug on this early, as it will eventually fail once some normalcy comes to the market.
ATR Revisited
About a year ago, I read an article and promptly forgot to save it. It was about how to use ATR, as described by Cynthia Kase. She is an energies consultant and devised a way of use ATR for stops (Kase's DevStop). I have been searching for it in vain, but finally found a reference to it in Trading Systems and Methods 6e, buy Perry Kaufman.
Other Strategies
We have a new strategy/system that is ready to trade. Since my wife/partner has developed it, I don't know too much about it, but I will be running it through some tests.
Not much to report today. I did client work all day, and only spent about 15 minutes looking at 4000 tick charts against a couple of our indicators. I got the idea to look at 4000 tick charts from Linda Bradford Raschke, which she mentions as her preferred chart in her book Trading Sardines. 4000 tick charts are interesting. I will post more on these versus timeframe charts once I have some time to do more compare and contrast. In the meantime, I think I may be able to develop a profitable strategy for MES.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,057 since Dec 2013
Thanks Given: 4,409
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Stating the obvious this in once in a decade market conditions and I wouldn't read anything into this weeks performance into long term performance. (Good or Bad).
Assume you saw Kevin's recent video's on this subject