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Slow-go and YOLO


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Slow-go and YOLO

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  #1 (permalink)
 trepidation 
San Jose, California
 
Experience: Intermediate
Platform: Sierra Chart
 
Posts: 138 since Apr 2018
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I'm going to start an account with $3k trading two systems. The first system is going to be very rigous and calculated. Half of these profits (if any) will go towards digging for black gold in crude. I may share general knowledge such as over all trend and market profile, but I won't be sharing any setups or trades. I will however track my PnL on a weekly-ish basis. If I blow up, this journal dies with the account.

There's no goal except to make money.

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  #2 (permalink)
 trepidation 
San Jose, California
 
Experience: Intermediate
Platform: Sierra Chart
 
Posts: 138 since Apr 2018
Thanks: 25 given, 156 received

If you look at the ATR, you can tell that these are emotionally driven markets seeing as the daily range is leaps and bounds above the ATR. What this means is that you have to take advantage of the opportunity and let runners run, but know that this is like an oasis in the desert and it will dry up. People who don't adjust and continue to use hard profit takes and small R:Rs when the oasis is filled with water will find themselves missing alot of the move and probably only breaking even at the end of the period simply because the volatility ebbs and flows unexpectedly. After this oasis dries up, people who continue to let their winners run will find themselves chopped out of their trade. It's key to remember that it's feast or famine and we're at a feast phase.



You can find my original market profile post here where I got lucky and called the drop.

Looking back on today it was a powerful trend day and I was caught flat footed expecting a retracement. In hindsight, it made sense for the gap and go because we gapped past a low volume area after finding fair value. I'm sure the question on everyone's mind is where in the world can we drop to.


Looking on the daily we see that we ended the day on a road bump which is a good place to retrace before I would say we find hard support around $3030. It's possible we do a full V retrace right where we are, but currently there's a distinct lack of liquidity here seeing as we were able to drop 3% back to back. Down at $3030, it's important to note that this will only become hard support if the bulls choose to defend this area. If you pull out your handy dandy fib tool, you can see that this is actually a good area for a perfect ABCD harmonic to conclude. There's a confluence of structure that suggests that if we get down there that that's hard support.


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  #3 (permalink)
 trepidation 
San Jose, California
 
Experience: Intermediate
Platform: Sierra Chart
 
Posts: 138 since Apr 2018
Thanks: 25 given, 156 received


Well, my analysis has been completely off point. I think part of the reason is there's so much opportunity and I have so little experience with these kinds of markets that I'm reading it wrong entirely because I'm expecting classic technical analysis to yield clues. It kind of is on the smaller timeframes, but it comes in waves and bursts. How do you judge the markets when it drops 20 points in 10 minutes?

The other thing I've noticed is as the volatility has increased, the correlations between the markets have increased meaning that they're moving in lockstep. This is true for gold, yen, cl, us indexes and the treasuries. Refer to the ES10 column to see the 10 minute correlations between ES. Basically, if you get one market (that's highly correlated) wrong, you get them all wrong and if you get them right you get them all right. One of the challenges of this however is that you still need to manage your money based on the market as well as your own risk profile. You would think that this would be a blessing because it would allow you to confirm moves by looking at other pairs. So far it's just been confusing.


Looking at the market profile for ES, it seems we've had a couple trending sessions before Thursday where we had a normal after hours followed by what appears to be a neutral intra-day. This suggests we might have found fair value and this could be where the actual bounce could be as opposed to where I drew some meme lines.


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  #4 (permalink)
 trepidation 
San Jose, California
 
Experience: Intermediate
Platform: Sierra Chart
 
Posts: 138 since Apr 2018
Thanks: 25 given, 156 received

I didn't realize how badly I've been trading my system until I backtested this week's results and "perfect entries" versus my discretionary entries. A big assumption here is that I would get filled at the correct price. Perfectly trade, my system would've generated about $1000 dollars this week. Instead, I'm down $300 because I've been trying to outsmart the market. You can't really outsmart the ocean... but you can certainly drown trying to...

I'm glad I caught this "bug" shall we say early before as this amount of drawdown is not too difficult to recover from. I'm adjusting my setup, so that there's less risk of discretionary trading. Primarily, I'm removing the number of charts I'm looking at and will only be looking at market profile AFTER a day has completed. In this way, I'm hoping to remove market bias and put more trust into the signals generated. You might say that I'm looking at too much information and need to put the blinders on and stay focused.

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  #5 (permalink)
 Grantx 
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@trepidation how do you interpret and use volume profiles in your decision making? Interested how you use them as I never could get the hang of it.

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  #6 (permalink)
 trepidation 
San Jose, California
 
Experience: Intermediate
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Posts: 138 since Apr 2018
Thanks: 25 given, 156 received


Grantx View Post
@trepidation how do you interpret and use volume profiles in your decision making? Interested how you use them as I never could get the hang of it.

I like to use Market Profile (MP) over Volume Profile (VP) because market profile is more consistent from day to day where as Volume Profile differs from day to day and is more prone to be noised up. What ends up happening (from my observation) is most people use VP for volume nodes without consideration of the profile shape (I could be wrong though). You could say that they're looking at a smaller resolution than MP.

Have you ever wondered why prop traders by and large trade treasuries primarily and almost all specialize in counter trend trading? That's because the indexes like ES are schizophrenic. Have you ever heard the phrase, "Never date crazy?" Well, most retail traders flock around ES because she gives them attention and teases them, BUT she's crazy. Once, retail traders blow up a few accounts (myself included) they either learn how to date crazy or avoid crazy. Compare crazy to this mysterious market that has almost a uniform pattern every cash session (this is also why it's very important to separate RTH and ETH). Look at these charts and tell me if you can see a pattern. I didn't cherry pick these. I randomly scrolled through the past month. Given this information, do you think that you could come up with a consistent trading approach to target these markets? It's harder than it sounds, but this should be eye opening if you've never considered this.





Edit:
I wanted to add that I grouped normal with Non-trend and there are a couple distinct differences, but they form a very similar shape. I also mislabeled one or two profiles as I did it in a rush and MP is subjective.

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  #7 (permalink)
 Grantx 
Legendary no drama Llama
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Yeah. Definately see certain tendencies but nothing usable beyond that.
Profiles have zero predictive qualities. You can extract probabilities that you can use to lean on but that still requires a lot of additional work behind the scenes. The profiles themselves really only give you a superficial overview but there are deeper questions you should be looking to answer. To be a successful reversal player you have to know the numbers and be totally dialled into what your odds are. There is a lot of information you can extract and use off those charts but you get nothing just by looking at it. Do you know your probabilities?

A disclaimer because I always come across the wrong way:
I respect what you are saying. I am not challenging your knowledge at all. This is purely my opinion based on my failure to properly understand market profile. I hope you continue to post because I find your input to be thoughtful and intelligent.


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  #8 (permalink)
 trepidation 
San Jose, California
 
Experience: Intermediate
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Posts: 138 since Apr 2018
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If it were easy, I'd be sitting on a yacht with a million dollars. I don't have any rigorous probabilities. I've only looked at 3-4 months of recent history and that's enough for me. If my account explode, so too does this journal. I'm going to use some simplified examples and cherry picked charts to illustrate my points for intra-day trading. For example, I'll be using renko charts to smooth out price action. I don't think they're effective on their own to trade though. You can use the previous day's profile to gauge your location. I think you're thinking like a trend trader and expecting MP to predict market direction. I think that's too high of a resolution. Candlestick charts can do as good of a job. However, once you've found a market tendency, then comes in the pattern recognition and finding opportunity from those patterns. Prop traders and NoBSDayTrading (I haven't bought his course or anything, but he's the example that comes to mind) uses the enhanced DOM to look for opportunities, but you can use charts too if you know what to look for. This is where Initial Balance comes into play. Treasuries have different trading hours than the Indices, so you have to choose which IB you want to play or use as a reference point. You can also use the two as a clue for the market by gauge the relationship off of each other.



Here's an example of a non-trend day. Probably the most boring day type, but also some of the easiest money you'll make.



Here is an example of what appears to be a non-trend day that transforms into something else. The Renko chart is too smoothed for a good indication why, but you can can see something of a turning point




Here's a variation profile and I wasn't planning to go into this much detail, but I think it's important to illustrate some concepts and get a feel for why some things happen. This profile initially looks very hectic and just looking at a chart it's very random. The two points I want to talk about are the edges of the IBs and why one held and the other failed using a 5 minute footprint The short answer is liquidity. The long answer is it's complicated.



So at point 1 on the renko, we get a reversal and then a sharp decline in price. That doesn't tell us much. When we drill down to the footprint, we see there was a large absorption of 2125 and that killed the buyer's momentum. So much so that there was literally no more interest in purchasing at those higher prices for the rest of the day. The technical term for this might be "failed auction"



At point 2, we see that there was alot of trading between the buyers and the sellers and that's what we kind of expect on the edge of initial balance. However, when we revisit that area we see that there's a marked decline in interest from the buyers and after we break that level we see more interested, but no where near the amount of interest from the first time.




Because of the nature of the treasury markets, levels are more important and there's the ability to analyze turning points and observe the interaction between buyers and sellers. Is it easy? No. Will you always get it right? No. Will it make you more consistent than index trading? I think so.

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  #9 (permalink)
 trepidation 
San Jose, California
 
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Posts: 138 since Apr 2018
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I think the shape of the previous profiles are pretty telling. It almost feels like the market is searching for a direction. ZN, ES, CL, and GC are all exhibiting a similar... price indecision. However, this is distinctly different from fair value as price is actively hunting for liquidity. The major upcoming fundamentals I see is on Friday with the Unemployment Numbers. So far, this week has been a choppy ascending triangle.

I know someone who has been killing it in this market, but I've mostly been on the sidelines.


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  #10 (permalink)
 trepidation 
San Jose, California
 
Experience: Intermediate
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Posts: 138 since Apr 2018
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I've made a total of 5 illegal discretionary trades total that I shouldn't have taken because I traded with non-yolo capital costing me $800. Surprisingly, they were in GOLD and ES when I was supposed to be aggressively speculating on CL. Part of it was the beginning of the week was brutally slow and then Thursday and Friday picked up. I actually got a little scared that my setups wouldn't work because of the insane market volatility. I had setups occurring back to back to back which doesn't normally happen. The result is I left $1000 on the table, but I'm not particularly upset because this was really unexpected volatility. Crude dropped 10%. By golly. The plus is that the good setups were really good and I ended closing out the week up $200. The result is I'll end a little under $2900 for the week. If I can keep myself in check and I continue to get good setups, I should be in the green next week and finally have some legit YOLO capital to play with.

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  #11 (permalink)
 trepidation 
San Jose, California
 
Experience: Intermediate
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Posts: 138 since Apr 2018
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Broke even last week after getting above $3k and then promptly dropping back down. The main challenge I have to overcome is the volatility in the market because my regular setups have stopped working. Well they kind of work, but I would have to increase my risk above my tolerance on such a small account because the volatility decreases my strike rate when I use tight stops. I'm working on overcoming this and in the meantime have been building strategies for the micros since a single is incredibly lucrative right now. Additionally, the fluctuating margins that Ninja is imposing prevents me from trading certain contracts at all. They're right to impose larger margins, but it doesn't help a speculator.

Nothing really report except that once the administration and fed have actively engaged the markets, the volume in the traded market has dramatically dropped off despite the wild swings that are still occurring as measured by Fat Tail's Relative Volume. Honestly, I'm not even sure how to read it. On an interesting note, I met a trader who traded beside KewlTech (as colleagues and not a teacher-student one). I know he's a bit of a controversial person, but da-yum do they make money when markets trend like this. I would honestly say that they're playing an entirely different game than 80% of the traders here--myself included. It's not necessarily the way they trade, but it's more at how they approach the market.


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  #12 (permalink)
 trepidation 
San Jose, California
 
Experience: Intermediate
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Posts: 138 since Apr 2018
Thanks: 25 given, 156 received

Feel free to correct me, but be on the look out for a relief rally in the coming days. If you believe in the market maker hedging theory, a large part for the massive dump is because of the massive open interest in puts. Because the market makers end up being short gamma, they are required to hedge due to being smart (and regulations) and they end up hedging in the direction of price. This means a shock to the system will cause a chain reaction that will spiral out of control as we've seen here. Alot of those puts expire on the triple witching which occurs on 3/20.

The other issue is the liquidity crisis that has plagued the bonds as the dealers are unable to provide liquidity due to the inability to leverage beyond a certain point again due to regulations. The regulations that were designed to prevent a financial crisis have created a financial crisis because of an external black swan event. Whether the regulations are good or bad is up to debate. As some of you may have been aware, the Federal Reserve issued Section 13(3) to re-establish the Primary Dealer Credit Facility. The Treasury department also hours ago approved the Money Market Investor Funding Facility. Simply put, the Federal Reserve is temporarily expanding money supply via (essentially) free loans via the Primary Dealer Credit Facility. The primary dealers pledge collateral and in return get loans from the Federal Reserve. The Money Market Investor Funding Facility allows the Federal Reserve to buy back safe investments (including bonds issued by the Fed) by loaning 90% of the price of the bond. These are 2008 powers that were activated during the financial crisis of 2008.

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 trepidation 
San Jose, California
 
Experience: Intermediate
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Posts: 138 since Apr 2018
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I thought I'd share my PnL. Here's a comparison (without fees) between my actual PnL versus my theoretical PnL if I didn't get greedy and take any discretionary trades. What. A. Difference. I'm unable to take any of my bread-and-butter trades because the volatility (and Ninja won't let me), so I've focused on perfecting my TA. It's much easier to see on my theoretical PnL where I realized that the volatility was killing my strategy and also where Ninja stopped letting me trade it haha. After reassessing my situation and realizing the volatility was providing outsize opportunities in other strategies, you can see how much smoother my PnL curve becomes. Traders who are scared of this market are the ones that haven't learned that our natural instinct is a weakness in the markets. People like to harp on about having a good Risk-to-Reward and this is the market. This Trending Market is where it happens. Regular grindy choppy sideways, perma-bull, market-maker-hunted-my-stop markets are where you have to play extra safe and are unable to get good ratios. Remember when a swing was 8 ticks? Don't get me wrong, my brain understands what a boon this is for traders, but my gut is constantly scared of this market.



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