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JetTrader: Developmental Live Cash Journal


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JetTrader: Developmental Live Cash Journal

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  #1 (permalink)
JetTrader
Edmonton, Canada
 
 
Posts: 187 since Apr 2011
Thanks: 12 given, 162 received

Whenever I get close finishing a system or a system component upgrade (or sub-component upgrade), I like to do some public proofs with real cash, for psychological reasons. This developmental journal will be for that purpose and that purpose only. I won't be going into too much technical detail of each trade, or how the signals are derived, as that will take me beyond the scope of my purpose. I merely like to do public trials of any new additions to my trading system, just before I fully integrate the new work.

I am not a retail trader, but I use a small retail account for proofing purposes such as this.

For informational purposes, the anticipated trade types will be:

- OmegaWave on the H1 time-frame
- CD Harmonic Intercepts on the M1 time-frame
- AB-127 Recovery from CD Harmonic Intercept Failure on the M1 time-frame


A lot of other indicators will be used in conjunction with each signal/entry, which again, gets beyond the scope of my purpose. Just know that I am looking at additional parameters before each entry. This is a sub-component test of a much larger system that I think might be ready for final integration into the larger schema.

Essentially, this sub-component signal would serve as a final trigger/filter for an already existing primary signal - at least that's what I think its value to the overall system will be. Or, these test results could identify an 'anti-primary signal' of sorts, or quite possibly a new kind of 'dual-primary signal' where I would then have to work on a weighting algorithm to determine which signal has dominance over the other for primary status. At any rate, this is how I integrate new work.

My trading philosophy.

Why am I in this business and how do I plan on achieving my goals - should be the two dominant questions every trader asks him/herself at some point, sooner rather than later in the process.

- Buy a new car
- Buy a new house
- Put the kids through college
- Travel the world on a private Yacht
- Own a small fleet of 747's
- Start a global Non-Profit to help people in need
- Add a few dollars to the month income to help pay the bills
- Build real financial independence and real wealth

All of these and more are valid reasons why one would want to be in this business, but how one goes about reaching any one of those goals, is what typically separates those who achieve the desired outcome, and those who don't. I trade according to a Revenue Model. That means, I trade to specific revenue targets over time. Let me repeat that: Revenue over Time. My goal is the former. To build real independent wealth. For me, that simply means the ability to fund any project that I can dream up. And, that means, I need the ability to generate massive amounts of capital over the course of a fiscal year, all growing geometrically to the point of what is critical mass for me. For me, critical mass is somewhere between 1-2 billion in working capital. The revenue annual revenue generated from such a base, is sufficient to fund all ideas and projects that I have going forward.

Those are my personal/business goals. Yours may vary.

I don't wander the markets, looking to "make money." I systematically seek to build wealth and that requires a schedule of revenue growth, set to a specific time in the future. That level of trading requires precision to a specified target for each trade and a specific number of trades per unit of time. My benchmark unit of time for revenue growth is 1 month, or approximately 20 trades per calendar month. That means, in order to keep the revenue model on track, I need N number of pips per trade, through 20 total trades per calendar month. This is the timeline for my revenue model approach.

Why use a Revenue Model approach - why not just wing it?

Revenue model trading focuses my development and research on specific signals that yield a specific range of MAE/MFE. This reduces development time and development costs. Yes, there are now costs associated with my research and development. How? Because, I am now a full-time trader, all of my personal and business expenses comes directly from trading. Therefore, anytime spent doing research and development, costs me time out of the real market and that costs me real revenue.

The Revenue Model approach says: research, develop, design, engineer, test, analyze and accept only those technical tools that produce a minimum expectancy MAE/MFE range, that is sufficient to fulfill the revenue requirements of the model over the period of time specified by the model. That single declaration keeps me from wandering the market looking for "pips" at all costs and it forces only the best signals to the surface through hard core research. This is also a more restrictive signal development process, but since I already have a production trading system, I can afford the wait time until such signals are found/discovered. At this stage in my career, it could take me months or even a year or more, before I am able to bring a new signal into the system. That's because every new signal goes through a certification process - which is time consuming, but in guarantees a minimum of revenue production as a result.

Trading on purpose. Or, trading with a purpose.

Which simply means trading on a time based schedule, and it comes from the basic tenet that all businesses have revenue targets set over time. Good business managers set specific revenue targets over time and then measure the progress during revenue generating periods, so that adjustments can be made if/when necessary, to keep the revenue model intact. I've always treated my trading as a business and thus, my research reflects that same approach. The level of protocol established in one's research for trading signals, will show up in their trading results long-term. It will also have a lot to do with the kind of belief in the goals that one sets for themselves as a trader. The purpose defines the mission objective.

Controlling costs and maximizing revenues.

For me, the two most important factors for controlling costs and maximizing revenues are: MAE and MFE. Oddly enough, when you plot the MAE/MFE trajectories (simple lines from entry to MAE and entry to MFE) you get a specific two-dimensional geometry of price behavior for the duration of each trade executed. That geometry says a lot about the signal used to create it and it provides a wealth of opportunity for enhancing the signals clarity and strength. In fact, it has become such an integral component of my testing and analysis process that I gave it a name. I call it the Signal Mode Shape, or the SMS.

As I run through these trades, I'll be looking for minimal SMS configurations. The eventual mode shape of a signal is also its signature. However, to fully understand and/or appreciate mode shapes, you have to be well versed in the concept of what I call Trajectories - why they matter and why they help to demonstrate technically, that Trends don't exist as a matter of physical certainty. Quickly, one comes to realize that Trends are indeed extensions of Trajectories in larger time frames, and that the only real tangible and measurable (quantifiable) price behavior that exists in the markets are Trajectories coupled to periodic retracement across multiple and connected time frames.

Whenever one thinks they are observing a "Trend," one can be assured that they are observing an extension of a Trajectory, in a higher (larger) time frame. That will be true, 100% of the time. One of the keys to successful trading, is learning how to recognize points of high probability pivots in larger Trajectories, that will ultimately appear as "Trends" in lower time frames. And, in order to do that, one needs to develop tools that map the very nature of price behavior itself, inside every bar of data produced by the market. And, that is accomplished by developing tools that measure the relationship of every Open, High, Low and Close, in every bar and across every time frame. This will provide one with the basic Signature of every market they intend to trade. From that point, one can begin the process of developing some fairly accurate trading signals.

Until one understands the differential between a Trajectory and a Trend, it is very hard to know where to set a stop, or even if a stop is needed. Sometimes, stops can be the trader's worst enemy, especially when they are placed randomly and without an appreciation of the dominant Trajectory. In fact, one of the secretes to my trading is that I do not use stops. Essentially, I am the stop. I set a certain number of hours per day to be available for emergency action messages form my system and I act accordingly. False stop placements, or stops placed right in the middle of a dominant Trajectory, is an almost guaranteed loss of capital. It is like being robbed in broad daylight by a man with a wooden gun, as price begins to move back in the direction of your original trade. [how many times as that happened!] No doubt, we've all been ripped off like that many times in the past.

Ok, enough of Trajectory Concepts 101. I'll start the trading journal as soon as I tie up a few loose ends out where I live. My next post will be a description of precisely what these trades are all about.

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  #3 (permalink)
JetTrader
Edmonton, Canada
 
 
Posts: 187 since Apr 2011
Thanks: 12 given, 162 received


- OmegaWave on the H1 time-frame
- CD Harmonic Intercepts on the M1 time-frame
- AB-127 Recovery from CD Harmonic Intercept Failure on the M1 time-frame



- OmegaWave on the H1 time-frame:
Omega was the first indicator that I created, almost 10 years ago. It was patterned after Wilder's ATR. Like ATR, it measures the volatility in all bars and for all time frames. It is the purest form of real momentum in existence. There is no other form of market momentum as pure as ATR. Omega, goes a few steps beyond ATR, by plotting multiple moving averages of the Deltas produced by the High and Low of each bar within a specific range of dates. Those MAs produce the OmegaWave effect that can been witnessed inside a chart's indicator window. In addition, I use a modified calculation to produce the Deltas that Wilder, first created. So, my Omega Indicator will not produce the same Delta that is obtained with a basic ATR Indicator.

Research shows that all currency pairs produce an OmegaWave, but that not all OmegaWaves are reliable for the purpose of executing momentum trades. However, the secret to understanding the OmegaWave effect is very simple. The higher the volume, the smoother the OmegaWave. The smoother the OmegaWave, the more reliable the momentum. Poor OmegaWaves, produce momentum price action that is subject to rapid stalling characteristics.

The idea, is to enter a trade during the highest period of momentum, while the OmegaWave is in its Expansion Phase and at the intersection where Omega (the bar's High/Low Delta) crosses one of more of the MAs produced by the OmegaWave calculation. Essentially, these MAs are what I call Tactical Omega (fast) and Strategic Omega (slow). There are other advanced Omega derivatives, but they will be beyond the scope of my purpose, here. Again, the quality of the trade, is typically dependent upon the quality of the instruments OmegaWave Form.

The OmegaWave essential has four (4) physical phases: Expansion, Upper Compression, Contraction and Lower Compression. It should also be no secret that each of these physical phases are usually timed with the four major market sessions of: Asia, Europe, U.S. and Australia.

All time frames (M1, M5, M15... MN1, etc.) produce their own OmegaWave signature. However, research shows that the H1 time frame produces the most uniform and consistent OmegaWave of all other "standard" time frames in existence, regardless of the global trading session currently underway.

Again, I created this indicator roughly 10 years ago, with modifications extending over the same time period. Omega, has the largest influence over the trading system, because there is no market outside of Omega's range. Omega, is all there is. Ironically, the first indicator I created, became the last and most important class of indicator.

The first shall be last, and the last shall be first.

- CD Harmonic Intercepts on the M1 time-frame:
A simple review of my other thread on Harmonics, should provide the needed information to follow along. Essentially, I'm always looking for an early edge on the market. I'm always looking to do what the market is not yet convinced it must do, or will do at some point in the near-term future. I like to be in position before the market moves. Harmonics, is a tool that allows for early detection of potential market moves. The fact that all Harmonic structures have six (6) dependent price points that follow a specific sequential pattern in time, is a slam dunk welcome mat for setting-up and optimizing triggers.
Because, I like to get there before the market does, I began studying Harmonics to find out why so many Harmonic patterns fail. What I discovered is that so many people were focused on entering the market at point "D," that they never seemed to realize that one of the longest legs in most Harmonic patterns is the CD leg and that failures in Harmonic patterns, typically extended point "D," running the stop of most traders somewhere above the 127 to 161.8 region of the BC leg.

So, my thoughts were - why bother. If the pattern is truly Harmonic, then point "C" most hold. If point "C" holds, then one gets a free ride to point "D." If point "C" does not hold, then the pattern must turn into some form of AB=CD, where point "C" degrades, becomes point "B" and price moves past point "A," giving rise to the AB=CD pattern. If price stalls in this region, then it forms either an Ascending Triangle, or a Descending Triangle. Either way, price cannot remain in this region forever, as long as one used a small enough time frame to isolate the pattern at the beginning.

This also runs counter-intuitive to the common belief that larger time frames are the best time frames to use while hunting for Harmonic patterns. If one uses a larger time frame, then the region where price stalls (between points "A" and "B") can be significantly larger and take significantly more time for the formation of the break-out Triangle to occur. This forces one to remain in a stalled trade for longer periods of time and reduces revenue generation for the amount of time one is stuck in a stalled region of price.

Thus, my use of the M1 time frame for hunting Harmonic patterns. Trade confirmation is quick. Stalling regions of price are relatively short and as long as one uses a large enough XA leg, the pips available are typically sizable enough to warrant being trade-worthy, depending on the revenue model's requirements for pips per unit of time.

Read it a few times until it makes sense. I don't want to belabor the point too much.
- AB-127 Recovery from CD Harmonic Intercept Failure on the M1 time-frame:

This simply means that if the point of entry is point "C," then the Stop & Reversal is the failure of the CD leg to occur, which by definition must occur at point "A." So, there is a Stop and Re-Entry back into the market in the opposite direction at point "A," which should extend to 127% of the AB leg (at least).

Again, a re-reading of how I use the CD Intercept inside my thread on Harmonics, should provide enough information to follow on here. Most people are looking to trade point "D" to some projection point. I'm not interested in entering after the Harmonic pattern is complete. I'm interested in using the structure of the Harmonic pattern as leverage to take advantage of the fact that point "D" will either happen, or not happen. If it happens, I get a free ride to point "D" from an entry at point "C." If it does not happen, then the structure turns into a simple AB=CD pattern, where the Stop and Reversal entry in the opposite direction takes me to recovery.

The simple theory here, is that no market can remain compressed forever. If that happens, then there is no market to trade and we all go home to find other careers. Markets thrust, and then they retrace - all day long. That's all they do - regardless of the time frame.

All of it predicated on and coupled with the OmegaWave. There is no more important indicator in all of my trading. Everything stems from Omega. Trajectories are merely directional price vectors within an Omega expansion. Thus, in every so-called "Bullish Trend" there are Bearish Trajectories and in every so-called "Bearish Trend" there are Bullish Trajectories.

Knowing which Trajectory is dominant and why, is the ultimate hat trick.

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  #4 (permalink)
JetTrader
Edmonton, Canada
 
 
Posts: 187 since Apr 2011
Thanks: 12 given, 162 received

I'm already into my first EURUSD trade. However, I keep getting logged-out of the BigMikesTrading forum - seemingly on a timed basis of inactivity.

The OmegaWave trade types can take a while to develop, so I can't possibly post live while always having to re-login and click my way back to the journal. That takes time - and my OmegaWave entries are based on precise price levels.

So, is there a way (Big Mike) to not have my forum session constantly timed-out? If not, the OmegaWave type trades won't be possible on a live basis and that's what this was supposed to be all about. The Harmonic type entries can be done, because the wait time for the exit is typically a lot longer. These OmegaWave deals can be over in a matter of seconds, minutes, or they can run for an hour or two max (typically).

Here's the pic of my EURUSD OmegaWave Short:


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  #5 (permalink)
JetTrader
Edmonton, Canada
 
 
Posts: 187 since Apr 2011
Thanks: 12 given, 162 received

Ok, image is fuzzy. Going through TinyPic.com (a pain).

Red Ling on H1 chart shows entry (if trade type is short), while green line on H1 chart shows entry (if trade type of long). Currently up +22 pips, but I was very late to my post. I'll also have to work on sharpening the image.

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  #6 (permalink)
r3algood
Little Rock, Arkansas
 
 
Posts: 198 since Jul 2011
Thanks: 106 given, 108 received

Looking forward to reading more posts from you.

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  #7 (permalink)
JetTrader
Edmonton, Canada
 
 
Posts: 187 since Apr 2011
Thanks: 12 given, 162 received

I'll explain the entry technique in a bit on the three (3) trade types, so one will know what to look for on the chart.

Right now, as you can see - I'm using the M5, M15, M30, H1 and D1 screen set-up, with a little digital black-box on the bottom. You can see my live FXCM developmental cash account dealing window on the bottom right.

In each chart, you simply see one of my indicators: OmegaWave.

Gray line: Omega-Tactical (fast MA)
White line: Omega-Strategic (slow MA)
Blue bar: Omega-Absolute Value in Compression
Yellow bar: Omega-Absolute Value in Expansion

OmegaWave is in compression when Omega-Tactical is < Omega Strategic.
OmegaWave is in expansion when Omega-Tactical is > Omega Strategic.
OmegaWave is nominal when Omega-Tac = Omega-Sac.

Each chart contains the same indicator. However, not every fast MA and slow MA is carries the same value. The values I use are something of a *trade secret* but with a sharp eye, one can play with the values (according to my original post that describes the math behind the OmegaWave) to arrive at a similar Wave Form.

The two MA you see directly on the price chart, are nothing more than an EMA8 over an EMA21, with the Green line being EMA8 (faster) and the Red line being EMA21 (slower). Not to be confused with my post above that talks about the green and red horizontal lines representing Long and Short entries.

1300 (GMT) hour is over. I took 18 pips while typing all this up. I won't be dong this much typing while trading in the future as it throws off my concentration.

1400 (GMT hour has just begun and the H1 OmegaWave looks like this (until I can correct the fuzzy image problem):


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  #8 (permalink)
JetTrader
Edmonton, Canada
 
 
Posts: 187 since Apr 2011
Thanks: 12 given, 162 received


r3algood View Post
Looking forward to reading more posts from you.

Good to have you.

Because this is all manual and given the TinyPic hoops and form log-out issues, I'm only going to be able to focus on one trade type at a time. So, I'll do the OmegaWave types from 1200 GMT until the Wave subsides. Then, I'll move over into the Harmonic types, if I have enough time in my trading day. I don't work 20 hours a day anymore (thank goodness).

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  #9 (permalink)
JetTrader
Edmonton, Canada
 
 
Posts: 187 since Apr 2011
Thanks: 12 given, 162 received

Current H1 OmegaWave condition:




Note H1 Chart. Price is currently between Red and Green (horizontal) lines. OmegaWave entries are dynamic - so the entry location changes depending on where the H1 bar's high and low happens to be when Omega-Absolute (the Yellow bar) intersects with Omega-Tactical or Omega-Strategic (which ever is the smaller value).

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  #10 (permalink)
JetTrader
Edmonton, Canada
 
 
Posts: 187 since Apr 2011
Thanks: 12 given, 162 received


OmegaWave Short Entry:



Short was triggered (at red line) for -28 pips (typing and posting delays cost me some pips too), as the Long was then triggered (at green line).

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