Millionaire in 10 weeks & Conversation with broker | Psychology and Money Management


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Millionaire in 10 weeks & Conversation with broker

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Montreal
 
 
Posts: 128 since Jan 2013

Millionaire in 10 weeks & Conversation with broker (Part 2 - Trading System)


https://futures.io/psychology-money-management/47565-millionaire-10-weeks-conversation-broker-part-1-money-management.html

This is the link to Part 1 (Money Management). I strongly suggest you go back to it and read it FIRST or else you may have trouble understanding this Part 2.

So... as I was saying in Part 1, the climb to the Million $ mark is AAAAALLLLLLLLLLLLL about having a killer Trading System. In fact, I would even say that my Money Management Technique on Part 1 is just 1% of this and the Trading System is 99% of the job.

Part 2 is about my past years of research to find that "Safe" Trading System that will help me climb this Million $ ladder.

Before that, here's a little recap on how we can do this climb to the Million $ mark using the new Micro Futures at my new broker AMP Futures where the intraday margin for the Micro eMini Russell 2000 Contract (Symbol: M2K) is only at $25.

At $25, we already know our initial investment cost and we also know that the Micro Russel (M2K) pays 50 cents per tick it does.

Now it doesn't take a math wiz to do the math here and know that it only takes 50 ticks X $0.50 per tick to make a profit of $25 and since the initial investment is also $25, this means that you have made a nice 100% ROI and can now buy a 2nd M2K contract and trade with 2 M2K contracts instead of just one.

Also mentioned in Part 1, if it's true that we can make 5 pts and get a 100% ROI, it's also true that if we lose 5 pts, we get a 100% DrawDown and that's what I tried to avoid here. yes I had my orange backups at every level but the goal is not to always lose those 5 pts all the time. yeah I know, easier said than done.

To do this, we need to be at the cutting edge of research and using trading tools that weren't even here 5 years ago. It's what I call the difference between "Dinosaur Trading" and "HD Trading".

Dinosaur Trading is trading with old technologies, old trading instruments (Stocks, Forex and even eMinis) and still use charts with old bars like minute bars for example.

HD Trading is using the newest charts super precise and price based bars like Range and Renko bars and using brand new trading instruments like the 2019 Micro Futures because the M2K cost only $25 per contract removing 90+% of the fear of losing money (if you are still afraid of losing a HUUUUUUUGE $25 M2K contract, maybe trading is not for you ;-) ).

Dinosaur Trading Vs HD Trading

What is Dinosaur Trading you ask? Well, no need to Google it because I just invented it. ;-)

Basically it's doing things the old fashion way with outdated bars like Minute Bars. What's wrong with Minute bars you may ask? After all, the big institutions and Elite Traders are still using them.

Well... Minute Bars have 2 the main problems:

1- A minute chart makes too many bars when the price is standing still.

If the price hovers within the same pt on your M2K or RTY chart, chances are if you use a 1 min chart, you will get 60 bars that are all lines up like cute little ducks side by side while in fact all these bars are totally useless because, the market is not moving at all so no need for tons of new bars.

2- When the price explodes, a minute chart doesn't make enough bars.

For example, let's say that the price did 5 pts within 1 minute. This means that you will see 1 HUGE 5 pt white or green candlestick bar. Once again totally useless for traders because when the bar closes, it's too late, you missed the boat, the big move has been done. Even worse, if that 5pt bar turned against you, you not only lost that trade, you lost your entire initial investment. You can't risk losing 5 pts in one trade, you will get wiped out in no time before you can even start this Million $ climb.

Here's a 5 min chart of IBM. Notice that big 5 Minute red bar. Wayyyyyyyy too long for my taste here.

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Now let's take a look at Kase Bars which are bars that are based on price movement, NOT ON TIME.

If the price goes above or below that bar, only then a new bar will be created. This means that this big red bar was cut into smaller bars.

This way, when it did that big red bar, instead of making just one big bar, it made many little red bars like on a staircase. This chart below is a 0.1 pt Kase Bar chart.

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NOW THIS is what I call "HD Trading".

You can shrink these price based bars (Kase, Range, Momentum, Kagi, Renko) down to 1 tick if you want to.

Here's one based on 3 ticks bars (0.03 Pt Kase bar chart).

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Do you see the type of Super High Definition Charts we can have these days? THIS is how we can cut our losses. Most of my losing trades are only 5 ticks or 0.5 pt.

Ok, now that you know how I will reduce my losing trades, let's talk about how I will make those 5 pts that will allow me/us to make the climb to the Million $ mark.


Moving Average Vs Squared Moving Average

We all know that to find the present trend, Moving Averages or MAs are one of the best tool there is and I agree but they have flaws. They lag, at least too much for my taste and it's the same for Simple, Exponential, Hull or Weighted MAs.

I would like to think that I improved on MAs because I am Financial God but sadly for my ego, I didn't do it because I'm smart, I stumbled on it by pure luck, playing with my indicators.

At TradeStation, we can create very cool indicators from scratch even for a basic programmer like me but I didn't know how to program what I had in mind (a Price Based Donchian Channel) so I asked a pro to do it.

He gave me the basic code and I had fun playing with code to modify it and what I did is add a center line on my new Donchian Channel. I then removed the upper and lower bands and that created what I named my Merlin Squared MA.

As you can see here, I have programmed this Squared MA to be light blue on the way up and magenta on the way down. In comparison, I have a 50 Simple MA going down in Red and up in Green.

You can see that my Squared MA stay magenta all the way to the bottom while the 50 MA changes from Red to Green all the time.

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Same thing here...

That 50 Simple MA is all over the place.

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Here's another screenshot where I have a 100 and 200 MA compared to my white/blue Squared MA.

You can see on the top left that my Squared MA turns from white to blue and 100 and 200 also but they are a bbit late to change their color.

On the way down the 100 and 200 are either too late or too early to change color. Anyway, long story short, I prefer by far my Squared MA to any other types of MAs available on most trading platforms.

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So what I did is added a 2nd Squared MA and made one "Bar High" and the 2nd one "bar Low" and that created what I call the Merlin_Cloud as shown below.

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Next I added a 2nd cloud, 1 with smaller numbers to have a Short TimeFrame and another for a Medium TF and I got my Merlin_2Clouds indicator to tell me not only the present trend but also showing me where the price is really extended when those "dips" occur within or below my 2 clouds.

Here's yesterday's chart.

You can see in the green circles the best entry points are when the price drops to the level of the clouds.

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You can see in Thursday's chart something even better yet...

The price went up not only to the level of the Medium TF Cloud (dark blue) but sometimes even above it and that usually gives us the best entry points possible.

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Anyway, long story short, I used my 2 clouds indicator to tell me the trend (white is up and blue is down) so the clouds were white so ready to trade on the Long side and got in a bit late because I arrived about 30 minutes later than the best entry possible around 1,573.

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The point of all this is that my M2K contract cost me $25 and with those 5 pts, I was able to make a profit of $25 making me a 100% ROI on my initial investment giving me 2 contracts to trade on the next trading day.

In other words IT IS POSSIBLE to make 5 pts and double your M2K contract.

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Any questions?

Merlin


Last edited by MerlinWorld; July 27th, 2019 at 06:20 PM.