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Experienced Orderflow traders: What's a good cut & reverse drill performance?
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Experienced Orderflow traders: What's a good cut & reverse drill performance?

  #1 (permalink)
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Experienced Orderflow traders: What's a good cut & reverse drill performance?

Hello Traders!

I've been looking more into Orderflow reading (using Bookmap) and started doing some of the popular orderflow drills.

I am however missing the overall perspective and experience to gauge what a "good performance" in these drills would be or what's possible for someone who has "mastered" orderflow.

So for example regarding the cut & reverse drill, what could be considered a decent result?
Not losing more than the range it traded during the drill?
Breakeven?
Matching or surpassing the range traded or multiples of that?
I'm completely missing a frame of reference here to judge what is possible for the experienced traders in this regard.

I'm primarily focused on the 6E / EURUSD future at this point but I'd be interested in any experience you'd be willing to share.

Thanks a lot & have a great day!
Tom

(Just for completeness: by "cut & reverse" I'm referring to the drill where you have to be always in the market, you are only allowed to reverse your position, never go flat)

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  #2 (permalink)
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  #3 (permalink)
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TradingTom View Post
Hello Traders!

I've been looking more into Orderflow reading (using Bookmap) and started doing some of the popular orderflow drills.

I am however missing the overall perspective and experience to gauge what a "good performance" in these drills would be or what's possible for someone who has "mastered" orderflow.

So for example regarding the cut & reverse drill, what could be considered a decent result?
Not losing more than the range it traded during the drill?
Breakeven?
Matching or surpassing the range traded or multiples of that?
I'm completely missing a frame of reference here to judge what is possible for the experienced traders in this regard.

I'm primarily focused on the 6E / EURUSD future at this point but I'd be interested in any experience you'd be willing to share.

Thanks a lot & have a great day!
Tom

(Just for completeness: by "cut & reverse" I'm referring to the drill where you have to be always in the market, you are only allowed to reverse your position, never go flat)

Hey Tom,

I ran a search for Cut & Reverse and yours is the only thread going, sorry to see you didn't get an answer to your question but I thought I'd chip in and just share I'm also experimenting with the drill, however in the ES. How are you finding it, has it helped your trading? I've had a number of different results on different days. So far best result was finishing up -2 ticks on 15 trades.

The big thing I've found is trying to not make an excessive number of trades. Cutting trades quickly is an obvious goal with this drill, I ended up having a horrendous day when I forgot this, but I've also found that when you get on the right side of the market it can be a challenge to lock in some profit given that you might not actually want to reverse at the same location you would want to close a trade out. That lead me to thinking I should probably give my trades longer to work during the drill. It's a challenge for sure.

I'm not sure if you are a Jigsaw customer or not but Peter's video is in the members area if you are and haven't seen it.

I'd be interested to hear how you got on.

Regards,
Trambo.

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  #4 (permalink)
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I think these sorts of drills will only be useful for expert level traders or for learning how to place trades. While I'm not familiar with this specific drill, I have practiced a drill where I force myself to take trades like every minute. I found that the real benefit of this sort of drill is to help you understand your own error rate and to become more selective. However, if you do not have a lot of experience then this sort of drill is somewhat likely to hurt any confidence you have. I think you will be negative for sure. I think the value therefore would be to recognize: hey these trades are working but these other trades are not.

As for mastering order flow, I do not think the lesson is to come from drills like these. Tape reading or order flow trading is one form of market cognition. I believe that expert level trading is the confluence of two things working together: implicit learning and market cognition. Implicit learning allows for the possibility of learning difficult to detect patterns in the market. Before machine learning, these sorts of patterns might would have been virtually impossible for software to detect. The second aspect that expert traders have is high levels of market cognition. Tape reading can lead to higher levels of market cognition because it keeps the trader highly engaged in the market. Traditional algo systems, turing machines, can only embody or encapsulate specific forms of market cognition. As for tape reading, based on my experience I do not think just anyone can learn it. I suspect (but don't know) that you probably have to be a strong implicit learner.

As for developing master tape reading, it must be encapsulated within a structure or structures of market cognition. Market cognition is either an encapsulated logic or an ever unfolding and developing logic that can is focused on deriving the factors that drive markets and/or the other participants positions and intentions.

Tape reading or expert trading is an active cognition process. It is not something taking place in the "external world" but the "internal mind". Practically, what this means is that one can accelerate then process of learning to tape read by engaging with the market at higher levels which means placing actual trades whether simulator or real.

Discretionary traders can generally profit from a higher percentage of days then systems but their profit factor is lower.
The other factor that is very difficult to overcome though is the cost of slippage, fees, and mistakes. Selectivity is the hall mark of most systems because you have no control once you are in the market: your stop loss may or not fill.

That's the last part and it is difficult, very difficult to get right. I am leaning in my own trading to move toward graybox systems to help me with selectivity.

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  #5 (permalink)
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This drill has nothing at all to do with learning how to place trades.

It's part of the education program at many prop firms.

Absolute performance is not relevant though - it's whether you are improving or not that counts.

It's all about getting tuned into the ebb and flow of the market, so at first you should expect to be offside a hell of a lot.

Once you are getting onside more frequently, the market conditions are going to influence the P&L way more than how good you are.

So on day 1 - it might be a runaway day and each time you trade in that direction you kill it. Doesn't mean you were that great though. Then day 7 might be a tight range and you get cut up - doesn't mean you got worse.

These drills all come with the caveat that it's not all about P&L. If you make it about P&L, it won't be as useful.

Think of it like this - if you just sit and watch the market for 10,000 hours, you'll probably be asleep for 9,000 of them. The drills give you an anchor point or reference point around which to observe the action. They give you a goal of improvement.

It you make the goal P&L, you can turn a positive experience into a negative one because of the losses. Best to avoid that if you can.

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  #6 (permalink)
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I would judge my performance based on how close my reverse was to the actual pivots. Compare to what the mode rotation is in your instrument. So in ZB it's 4-5 ticks. I want my reversal to be less than 4-5 ticks from where it actually pivoted. Preferably 1-2 ticks. That's when you're doing better than just random. But I think part of the exercise is to help you realize that you simply can't pick the pivot every time. You start to realize when it would be better to just not be in the market.

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  #7 (permalink)
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DionysusToast View Post
This drill has nothing at all to do with learning how to place trades.

It's part of the education program at many prop firms.

Absolute performance is not relevant though - it's whether you are improving or not that counts.

It's all about getting tuned into the ebb and flow of the market, so at first you should expect to be offside a hell of a lot.

Once you are getting onside more frequently, the market conditions are going to influence the P&L way more than how good you are.

So on day 1 - it might be a runaway day and each time you trade in that direction you kill it. Doesn't mean you were that great though. Then day 7 might be a tight range and you get cut up - doesn't mean you got worse.

These drills all come with the caveat that it's not all about P&L. If you make it about P&L, it won't be as useful.

Think of it like this - if you just sit and watch the market for 10,000 hours, you'll probably be asleep for 9,000 of them. The drills give you an anchor point or reference point around which to observe the action. They give you a goal of improvement.

It you make the goal P&L, you can turn a positive experience into a negative one because of the losses. Best to avoid that if you can.


Thanks Peter, well put. Easy trap to fall into but will try and avoid it.

Regards

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  #8 (permalink)
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TWDsje View Post
I would judge my performance based on how close my reverse was to the actual pivots. Compare to what the mode rotation is in your instrument. So in ZB it's 4-5 ticks. I want my reversal to be less than 4-5 ticks from where it actually pivoted. Preferably 1-2 ticks. That's when you're doing better than just random. But I think part of the exercise is to help you realize that you simply can't pick the pivot every time. You start to realize when it would be better to just not be in the market.

Absolutely agree - I would also bear in mind that the pivots you trade doing cut & reverse might not be visible on the chart.

A single "up" candle on a 5 min chart might contain a number of micro reversals that are tradable. Doesn't mean you have to but they are there.

I would also not be too concerned about nailing "low of day" type pivots - which are by nature a lot more messy on many markets.

I agree with what you say about not being able to pick it every time - but you should actually be able to do a reverse on every pivot - the concept of "missing one" might be a bit misleading. You cannot "miss" a turn - you can be early or late. Late does not mean bad either. Think about it - you miss the low of the day on Crude by 4 ticks and then it runs up 100 - perhaps the "miss" by 4 ticks is just 4 ticks worth of confirmation and an entry 5 or 6 ticks from the low is actually the premium one.

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  #9 (permalink)
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TWDsje View Post
I would judge my performance based on how close my reverse was to the actual pivots. Compare to what the mode rotation is in your instrument. So in ZB it's 4-5 ticks. I want my reversal to be less than 4-5 ticks from where it actually pivoted. Preferably 1-2 ticks. That's when you're doing better than just random. But I think part of the exercise is to help you realize that you simply can't pick the pivot every time. You start to realize when it would be better to just not be in the market.



Thanks Seth - great way to look at things.


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  #10 (permalink)
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Experienced Orderflow traders: What's a good cut & reverse drill performance?


@DionysusToast out of interest do you think thereís much merit in trying to log and journal the sim entires whilst conducting cut and reverse?

Also, I hate to ask a fairly one dimensional question but what general trade frequency would you expect on the ES for the first hour after the open with this drill. Iíve been experiencing about 13-15 reversals so far during the first hour (average volatility from what I can tell) and getting the feel I might be reversing too often.

Thanks


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Last edited by Trambo; November 14th, 2017 at 10:20 AM.
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