I add to and edit this journal as time allows and as I find new ideas worthy of posting.
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Thoughts on trading the financial markets - updated 2012-0125-0828.
The following commentary is associated with trading financial markets. This is not to be taken as any kind of trading recommendation. It is compiled as a long term flow of thoughts, observations, and knowledge derived from others and from my own experience. It is an ever-evolving document. I update and use it to keep a current assessment of my approach to trading the markets and to apprise those with whom I collaborate.
Other reasons for this journal:
Good Karma and Saving Time: This is not a self-marketing effort, I happily have nothing to sell. Rather, I have been the beneficiary of a wealth of knowledge freely given by many generous traders to help me and others. Much of it has been of value to my trading, and aside from a few con artists, it was all put forth with very honorable intentions. Since I have never met God, I am not sure what he, she, or it is like, and as such I've not yet had the chance to ask whether or not fostering good karma and subscribing to the golden rule is one of our expectations. But I figure odds are good - better than any of my high-probability trades. So it is with this in mind that I hope that some benefits I have received may be passed on to others through my effort here. This journal also serves to relieve me from lengthy, convoluted and potentially error-prone replies to emails asking how and what I trade. E-mail me to let me know if you glean anything worthwhile from this, if you feel it needs improvement, or if you have any comments or questions.
Additional rationale: Although I may be only talking and writing to myself, I find it helpful in my trading (you may as well) to act and reason as if I am describing to someone else, an aspiring trader maybe, the proper psychology and methodology of trading. This helps to keep me on track and avoid deviating from my plan and what I know I must do. If I am explaining to someone else, the proper working approach, I had better follow it myself. So I compile my thoughts. Much of the first part this is common knowledge. You are welcome to read . . . if you find it useful, great!
As noted earlier, this journal is dedicated to my wife, my rock and support through the years of my trading education. I hope she is forever blessed by my success. Thanks darlin'.
The first portion below is a mishmash of mostly disorganized thoughts, anecdotes, and excerpts of emails that I have written in response to others' questions . . . for most of which I have abandoned attempts at further organization. I do, however, review it to reconfirm it, sometimes adding a thought or two if necessary, and I will some day pare it down to a more reasonably sized document. If you wish to skip the introductory and philosophical discourse and go directly to reading about methodology, use the menu links above.
As noted in the introduction, learning to successfully trade for yourself in the financial markets may be the most difficult thing you'll ever do, although there are claims that it is easy, especially from those selling you their ideas. Easy or not, it should be approached as if training for a new career because it is. Plan for grueling hours of study, tests, years of education, tuition costs, and considerable frustration. An additional issue I mentioned but is worth repeating, is that unlike back in school, you aren't graded on a curve. Doing better than 95% of other traders doesn't mean you pass. It might in fact mean you fail because that might not be good enough. Losing less than your peers won't cut it. Consistent profit is your only hope. You will have losses but the winners can mitigate the losses and sustain you.
Okay so trading's not easy, but we have to try anyway . . .
Here are some Trading Principles:
Define success.
Find a PLACE to concentrate without interruption.
Be patient.
Be disciplined - leave all emotions outside that place when entering.
Have a plan.
Test ideas simulated before before committing real money.
Own your strategies. Don't rely on others.
Is it a High Probability Trade?
Be prepared to adjust when the market changes. (This one is important)
If a strategy is not working, shut it down.
Manage risk sensibly.
Prepare for technical catastrophes.
Never ever allow a loosing trade to turn into a long-term investment.
Give good advice to yourself, just as if you are advising another how to proceed properly.
Walk away from your monitor - sometimes you need to clear your head, take a break.
Know your demons.
What is your idea of success? Start by defining a reasonable goal clearly - you can always change it. Is it becoming filthy rich off the market? Earning a comfortable living? Supplementing your current income? Simply breaking even because you enjoy trading so much? Think about it; change it as you see fit. It can be as simple or as complicated as you want. My goal is multifold: to earn enough for my wife and me to live comfortably, to give away 20-25% my earnings, not counting what the government takes from me, and also to have some additional money left to pursue interests I have, i.e. to study in fields which others get paid for but for which I am not qualified - fields such as music, researching the origin of the universe, stuff like that. I feel that if I am able to increase the equity in my account by an average of one percent a day - certainly doable, this should eventually put me in that position as I continue to build my account. - Set a goal for yourself.
When trading, I postulate that most people will do better with a quiet and private place from which to operate. You should be able to eliminate disturbances, and be willing to ignore phone calls, etc. Unfortunately, the attention needed for trading is greatly disruptive to the responsibility of watching young children and vice versa. The two are not a good combination. Interruptions can cause you to miss both positive and negative incidents including major technical glitches, all of which can destroy your profits and your account. On the same hand, trading can have a very negative affect on your enjoyment of and responsibility to your children. You must separate the two.
But . . . having your trading computer close at hand if the rest of your daily life and surroundings are typically tranquil can avail you with opportunities you would otherwise miss. Using audio signals to alert you to changing conditions is an excellent way to carry on without having to be actively watching the monitor(s) all the time.
Like INTERRUPTIONS, IMPATIENCE is a serious problem. There are many hours and, depending on methods, sometimes days, that we must be willing to do nothing, sit quietly on our hands, observe and aggressively remain idle. Even more dangerous, EMOTIONS are a real enemy. Success will be very difficult with any of these "big three spoilers" affecting trade decisions, especially emotions. I have walked out of my office wanting to either scream or cry, throw my monitor through a window, and throw in the towel. I have let my ego direct me to take the same bad trade many times in a row because I KNOW I AM RIGHT or I want revenge from the market. I should quit for my own good but stubbornly I don't. So maybe I get past the current roadblock, find a solution to make an idea work, profit potential is looking good, and I think I might actually have "the market" figured out, elation settles in . . . then "the market" changes and I crash again. In time I begin to control and overcome emotion and focus on discipline. Likewise, I have felt invincible or cocky after a series of good trades and the market has introduced me to humility. Lose your emotions - not your money.
So what what's it all about? You need to survive because this business is all about survival, not this minute, today, tomorrow, next week, or even next month, but long term survival. You may need to start again at what you perceive to be square one, where it seems you have perhaps been many times. But thankfully, unless you slept through all your prior efforts and experience, the new square one is actually several squares ahead of the true square one.
Make a plan that lets you survive. Survival means that initially you must manage risk by testing simulated before trading real. There is no way around this unless you have nearly unlimited funds to burn through. So your plan should include a reasonable, achievable description of initial success and survival, testing, slow improvement and losing only pretend money, because you will lose. Stick to the plan. Learn, test, practice, find what things work, what things don't. Change your plan if necessary, but don't deviate from the plan until you decide it truly needs changing. Then change it and religiously follow your new plan. And one more thing . . . sweat the loss of your pretend money just as if it is real. Give yourself a reasonable account and don't reset it every day. Force yourself to be financially prudent. And one more thing about your plan; if you cannot manage to describe and maintain a plan in your head write one down.
Example Trading Plan
Own your strategies, build and formulate them, know what they are doing, know how to change them. Don't indiscriminately trust other's strategies. Trading is subjective - what works for others may not work for you or me. There are so many variables in trading: account size, risk tolerance, attitude and personality, emotional self-control, trading instruments, execution technique, market perception/bias, etc. But wait . . . if a strategy is 100% automated, shouldn't one expect the same results to be had by all users. Logical, but I know from experience that differences in platforms, indicators, data feeds, etc. are more common than one might imagine. Even within the same platform, data feed, and brokerage you can have different results on different computers. They can be caused by many factors including internal clock time, chart startup time, chart/data errors, bandwidth, CPU speed, the way money management and margin/leverage is applied in a strategy based on your broker's rules regarding account size, etc. Half a minute even a few seconds variation in clock time can be enough to trigger a trade on one system and bypass the same trade on another. Automated strategies that live on the edge, as many do because of over-optimization, can be quite fickle and subjective. So own and develop your own strategies in your brain and on your system. That way you can't blame others.
Is the trade you are about to enter really "High Probability"? Have you tested the strategy and discovered the conditions in which it works? Are those conditions present now? Are there correlating markets in which the strategy is also working now to confirm its validity? Observe or test backwards for a short period - would that trade have been successful in recent market action? Mark your charts with recent instances of the trade's triggers - is it working? These and other questions should be considered before risking money, and finding a way to answer the questions quickly is essential so a timely position can be taken. Market action can trigger the same trade repeatedly over a short period, but if there is no follow-through, the risk is too high and the probability is too low. Remain agressively neutral until conditions dictate otherwise.
Because the market is always changing we must be willing to change as well which in turn makes it very important to own and understand all our strategies - to adjust and adapt. It is often said that a good strategy can be depended on to work over time. And years of backtesting may bear that out. There are strategies that work that way but are you willing and able to go through the associated extended draw-downs that may cause you great suffering. I am not.
I approach the market in this way: Strategy's losing? It's not working because IT'S NOT WORKING, so don't throw more money at it. Denial is not a strategy. Nothing works all the time, or necessarily for very long, especially in this rapidly changing technological age when sophisticated computerized trading algorithms can adjust in a millisecond. So do you need to adjust in a millisecond? No, but you CAN monitor the situation and adapt as needed. Sometimes those algorithms are controlling vast amounts of money which can move the market, drawing other automated systems in with them, potentially causing a cascading effect, chipping away at profitable systems and stops. This can go on for minutes, hours, and much longer. If you are hemorrhaging money, shut down your trading and stop the bleeding. Turn it back on when things return to normal or search for an alternate strategy that works now. This approach is different than you will hear from many traders and books, but I find that it works well for me.
Manage risk by determining how many losses in a row can you sustain and still reasonably expect to trade your way back to a profit. Account size, leverage, delta, and many other factors come into play to determine our optimum position size and amount to risk. The important thing is to keep your level of risk manageable and understood - don't risk collapsing your trading business by taking too big a position or holding a bad trade for too long. I monitor and adjust position size manually based on my account condition, equity curve direction, my risk tolerance and the current market behavior. I am very cautious about scaling out because of the added complication, additional risk of errors, and additional difficulty in testing and maintaining records. But if a move appears questionable or if a trade is entered as a scalp, I may scale out to lock in some profit. And occasionally I may also scale in, to increase position size if a trade is positive and I get a second signal supporting my position. Once again, testing is very important - potential losses must be viewed in the context of today's environment because market behavior changes. Risk management, trade position sizing and money management are subjects for in-depth personal study - too complicated for this commentary. There are many good books and articles written with workable approaches.
Be prepared for technical problems such as power failures, internet connection failures, computer freeze-ups, system failures at the brokerage or at the exchange, and just as important, problems caused by erroneous entries. How can YOU avoid taking a huge hit if one or more of these things happen at once. Figure it out and prepare for it. An uninterruptable power supply is essential - powerful enough to run your entire trade system including computers, monitors, modem, router, and telephone in case you need it to call your broker in an emergency. A frequent cause or errors - don't rest your hand on your mouse over a buy/sell button. Mistakes happen . . . glitches happen. Speaking of your mouse - don't use a wireless one - they never run out of batteries at a good time. Or at least have a wired backup mouse plugged in.
Exit a bad trade. Admit when you are wrong. Be objective. If you are holding a position and you would advise someone else to get out or perhaps even take the other side of the trade, that means that you should at the very least, exit.
Give your best possible advice to yourself. If you've not tried it, you may be surprised how much it helps your objectivity, especially on those difficult days, to pretend you are responsible for showing a good example and training someone else in the proper trading methodology, logic, and psychology. Be sure you listen to your own advice.
Just as with exiting bad trades, sometimes you need to exit a bad state of mind. If you are tired and you are not thinking clearly, or if your emotions are starting to build negatively, walk away from your desk to clear your head. Take a break, talk a walk, get some fresh air and exercise. Take a day or two off if necessary. If you miss a big trade so what - there will always be another one - your survival had better not depend on the next trade.
Know your demons. We all have demons - if we don't know them in advance, trading will bring them out. Try to learn and understand your physical and psychological shortcomings and how to overcome them in times of stress, panic, failure, and just as important, in success and elation.
A little posturing and background:
My approach to trading financial markets is difficult and tedious but compulsory for me. The lessons I learned from skilled and seasoned traders came after initial overconfidence and many tuition dollars lost. My current attitude came not as a revelation, but rather as an evolution resulting from hearing and reading proper perspectives and rules repeatedly and learning from my mistakes.
Accomplished traders told me it would take many years to learn to trade successfully. Wrong - I thought, not me - I'll just do what they do. After the first year of struggling and losses, I worked up to believing maybe it could take another year or so. Later I realized why some professionals have losing weeks or even months even after they have been trading for 15, 20, or 30+ years. Even the best strategies don't work all the time.
Many traders will tell you to backtest a strategy over years of data. If it makes a profit over time, forward-test it, then turn it loose and trust it. I won't argue against that method. I have seen evidence that it works. But it's not right for me. Nothing in the market ever stays the same. The question is, how will you will find a way to survive when things are not working according to your tested plan. For that reason I need a variety of ammunition in my arsenal - alternate strategies. When something that was working is now failing miserably . . . it is time to shut it down and find something else that will work now. Despite historical evidence that a strategy should work, draw-downs can go on for a very long time. Don't beat your account to death just because a strategy "should work". Look into some thing that worked previously, or something new. Many times a previously failing strategy has come back to life, accommodating the market's current phase, and is successful. If I keep looking, something will often jump out and work even when things seem crazy-hopeless.
Most of us don't have the sophistication of knowledge, trade platform power, or deep enough pockets to outwit the big guys, so we have to ride their coat-tails by observing market behavior. When the big trading institutions are trying to outsmart and out-trade each other with their super-computers and host of analysts and programmers, how hard can it be to out-trade me? Pretty damned easy - I am not a highly educated software engineer, nor do I have a staff of programmers and a super-computer-network linked up to the floor of an exchange. What I do have is the patience to wait until they show their hand and everyone lines up for the same feeding frenzy.
Fortunately, I am willing to grind through this mess day after day. The odds are heavy against me. My attitude and approach discussed above is what works for me. Others have to figure out through trial and error what works for them. I will repeat . . . be very, very patient and don't commit real money to anything until, through trusted simulation, you have proved to yourself that it works, and not until you understand the conditions under which it doesn't work. And even then, go easy at first - committing real money presents its own new set of issues and emotions.
Trading Instruments:
I began trading stocks, then moved to options, index options, index futures, etc. Each move looked easier an more obvious then the previous, and each move appeared to be the answer to my problems. But the market was unobliging. Years later I still toil, but now it's routine rather than mentally savaging. I prefer spot/cash currencies, a.k.a. forex (Fx) or foreign exchange, but not because Fx is any easier than other markets - in truth it is probably more difficult. But I prefer the liquidity of a true 24 hour market (the biggest world-wide) with over $4 trillion crossing the wires every day. Currencies never expire. They are easy to understand, with the ability to easily adjust leverage, a very flexible capacity to control position size. I also like trading futures, but with futures, I can't trade a fraction of a contract - with Fx I can.
I find it appealing that there is no single exchange where everyone's currency trade clears but rather hundreds of banks and networks to which the world's biggest institutions (and I) demand and receive instantaneous access. This helps to make technical failures less likely and manipulation more difficult. However, every financial instrument including Fx is traded by people who try to, and to some extent, succeed in manipulating the market.
With currencies, I can take a very small position and hold it indefinitely or take a large position for a few seconds, or anything in between. Currencies can sometimes trend seemingly forever, but there are also long periods when they will churn painfully sideways or trend very slowly with sickening, unpredictable volatility. I use those difficult periods for devising and testing new strategy ideas and retesting old ones.
If I want to trade, I have to trade what moves, so in addition to currencies, I may trade gold, silver, crude oil, a few other commodity futures, and equity index futures. I will trade futures when the currencies are behaving badly which can go on for a long time. For my style of trading, the instruments I trade behave better than individual stocks, which are more easily manipulated and influenced by tedious to research external, internal, and fraudulent actions. In support of that belief, due to my earlier stock trading history, I have a file drawer full of legal documents (which I am ignoring) inviting me to claim my share in class action litigation against various market entities that have indirectly and fraudulently drawn me and others into losing stock trades. The effort and time needed for documenting each and every transaction would be better used elsewhere, so the attorneys are winning that round.
Trade Service Vendors:
For market data and brokerage account I use Interactive Brokers (IB). Although IB's trade management interface is very good, their charting is inadequate for me and their platform is deficient in auto-trading capabilities. But IB has a low commission "universal account" through which I can trade virtually any instrument, and they have an open architecture which allows third parties like chart vendors, to access their system. I have heard complaints about IB's lack of concern and marginal customer service, but I have had no notable problems since I began with them in 2002. I use Sierra Chart for charting and trading and have been with them almost as long as IB. Sierra's response to inquiries and requests for system improvements has been very impressive, both accommodating and fast. I have used other vendors including Tradestation, Scottrade, QCharts, NinjaTrader, and more, but I find IB and Sierra to be the best combination, very versatile and favorable for my style of trading. They are also reasonable in cost, enough so that if I want to take a few months off trading, it does not bother me. For auto-trading and indicator programming Sierra offers a C++ environment, ACSIL (their own proprietary language), and an Excel spreadsheet style programming interface. IB offers both a Mac and PC interface, but Sierra is limited to operation on a Windows OS.
I elect to use Sierra's "Spreadsheet System for Trading" because it is fast and easy to program and because I don't want to spend years learning to program C++ or other languages. Anyone with a basic understanding of Excel operators and functions can easily program trades and custom indicators or studies using these spreadsheets. Sierra also provides a couple hundred standard and proprietary indicators. Through Sierra, I can simultaneously run auto-trades (entries and/or exits), trade directly from Sierra's charts, trade from a price-ladder/DOM interface, or from a very simple trade window which all link solidly into IB's trader-workstation. I promise, I neither work for, nor receive any benefits from either Sierra or IB; I just promote them because I feel they deserve it.
It is good practice to employ an additional brokerage(s) to handle backup for all the instruments traded. In the event your primary brokerage becomes unavailable, a position can be neutralized by taking the opposite position with an alternate brokerage. For this service, a no-fixed-cost or very low-cost but trustworthy vendor with online and telephone service should be selected.
Modus Operandi:
Note: The information below is compiled here for my use and is not a trading suggestion or recommendation. You are welcome to read it. If it helps anyone, I will be happy - hopefully the karma will benefit me.
As anyone knows who has read then returned later to this section, it is an evolving document. As you are reading it now, the next iteration may be either in development stage, being written, or at least in my mind.
My technique makes me a short term trader, usually intra-day, sometimes intra-hour, although due to the 24 hour liquidity of currencies, I will happily hold currency positions for several days if all is going well and I get a good bite on my position. With the leveraged risk of currencies, however, I don't feel comfortable holding even a medium-sized position through a weekend due to potentially being trapped during a catastrophic geopolitical/economic event.
A trend isn't over until it's over, and even then it may revert back. I have done more damage to my account fighting against the trend than any other action. So, most of the time I trade with-trend which is of course, subject to what one uses to measure it and to the time frame in which observations are made. Those don't matter much to me, since I am always adjusting to changing conditions - bar increments bigger, smaller, then back up again. I am happy to trade trends within trends, very cautiously using methods that also allow trading both directions during sideways markets. But most of all I am acutely tuned into price action. Watching price action is something that must be learned by hours and days of observation. The result of a particular price action on one instrument can often be different than on another. But there are many patterns and events that produce similar results across most instruments. Price actions can be watched in various ways using bar charts, time and sales, bids and asks, etc. Although practice won't make perfect, it makes profit.
I am flat, out of the market most of the time, but time-off works into my plan. While flat, I may forward-test one or more trade set-up strategies continuously (simulated) on multiple charts/instruments. I don't discard strategies that aren't working - there is a reason for which I developed each one and that reason may again become valid. While a strategy is not working (i.e. Sim trades are failing), my brain and my system remains in a simulated mode. This can last for minutes, hours, or days. I test various strategies, different chart periods/ranges/ticks/time frames, test and revise old strategies into new ones, and simply fish for something that will work now. Nothing I have ever found works all the time and I hate taking losses by blindly following some strategy that in-theory should be working. For that reason, I avoid any strategy that is in a drawdown phase. Why suffer. While I am backtesting/forward-testing and fishing for something that works, I am obviously also identifying strategies that are not working. If a strategy has not worked leading into the current market phase/condition and up to the current moment, why should I employ it and expect it to miraculously work now. Which reminds me of Albert Einstein's definition of insanity - doing the same thing over and over again and expecting different results. Yes, the market can suddenly change, but I will let the market tell me it has changed rather than trying to predict when, while hoping I'm right. I try to learn as much from what is not working as I learn from what is working.
When holding a position, as the market goes in my favor and I get additional entry signals, I may add to my position, sometimes doubling or tripling my initial position. This requires placement of multiple stops to back-up each additional entry. This can work against me if the market is volatile and choppy - large retracements can quickly swallow a nice profit. When I sense pending retracements, I will move my stops to break even or better and when parabolic moves occur, I will often move one or more stops very near the market, taking partial or all profit. If I manage to set four or more stops for each side of the position, I usually combine them in an attempt to keep the number manageable, preferably 2.
For exits I use various combinations of fixed stops, BE stops, indicator based exits, time/price-based programmed exits, and manual intervention, but I don't fix profit targets because I don't want to place a limit on the upside. I do use targets but only as an additional way to exit manually/discretionarily.
Automation: Although my charts give me clear visual signals, depending on market conditions, I can be either overwhelmed or get sleepy watching six or more charts-of-interest tick along. For that reason, at the least I use automated audio alerts, or far better, automatic trade entries whenever possible. With automation I miss few opportunities. Another advantage of automation is that if I trust it, I will not be making foolish discretionary trades from spurious or imaginary signals, a recurrent weakness in my history. During simulation I monitor the Maximum Open Position Profit vs. the Maximum Open Position Loss. When the the Max Losses are greater than the Max Profits, the strategy is failing. If the pattern begins a shift to Max Open Profit becoming greater, I assume that that trend-following strategy is beginning to work. If I happen to be at my trade desk at the that time, I switch the system from Simulated to Automatic-Live or manual live entries. I take into consideration the difference between Max OP Profit vs. Max OP Loss. The ratio must allow for slippage and commissions, and stops should be determined accordingly along with a consideration for ATR (average true range). Due to various correlations, typically, several instruments or currency pairs start to generate profits at the same time. The immediately preceding Max Open Profits and Losses give me an idea of what levels of profit to expect on subsequent trades.
Often a series of price patterns will repeat, continuing long enough for a series of trades to yield a good profit before reverting back to losses again, at which time I switch back to Sim. Sometimes not, and the trade series yields a loss. A good series of profitable trades can make make up for many losers.
When the pattern turns negative, I switch back to Sim and revert to testing. Often the trend is short-lived which will produce losses because I go Live after it starts and quit after it ends. But if the trend lasts long enough, my profits are far greater than losses. Sometimes the trend tricks me, appears to end but really doesn't, and I jump back in. Sometimes I choose to shut down the Live trades early because I can see the move is unsustainable and weakening on the charts and I want to avoid churning away a nice profit. Yes, this on/off switching is discretionary; perhaps some day I will have a clearly definable plan when to automatically switch off and on. Anytime - in the middle or at the end of each day, I can look back at all the Live and Sim trades by loading the recent records (both Sim and Live) into my database. I compare Max Open Profits vs. Losses, trade duration, and the other obvious statistics, and make adjustments for future trades, either mentally, in my strategy code or both. Virtually every kind of statistical test can generate spurious conclusions including my technique. But it's fine for the time being and I continue trying to improve it because it works and I truly enjoy the challenge.
Market phases:
The way I see it, the market is either IN a phase or CHANGING to a new phase. Phases can sustain for a long time in terms of short-term trading, sometimes for several hours and even days. Phases can be trending, sideways, consolidating, distributing/accumulating, whatever - it doesn't matter. What matters is that some phases are offer profit with certain strategies and some do not. If you can identify a tradable phase and match it with a strategy you can take advantage of it. Quick identification and evaluation to find a strategy that works sets you up for a profit. The advantage of a system like this is that it is adjusting to current conditions rather than spending a lot of time under drawdown, while hoping and praying for a long-running strategy to come back to historical profits.
The reason that I believe in this approach to trading is because I have noticed that the market's behavior has changed over my years of observation. The only explanation I can offer is technological advancements. High-frequency trading (HFT) or computerized algorithmic trading has become a major factor in the market. Recently HFT is claimed to account for 50-75% of daily volume depending on the day. HF trades only last a micro-second and are often used to front-run other trades that are visible to these trading algorithims but not to the average trader, or at least before the average trader can see them. This is due to extremely high speed access, proximity, and computing power of these firms. When the speed of these trades is combined with properly controlled volume, tiny profits are skimmed from each transaction. But because it is possible to make many trades at very high volume within a second, huge amounts of money are extracted from the market. Is this unfair, yes I suppose, but until someone decides it is illegal, we have to live with it. HFT's effect on volume also precludes much of the value formerly placed on watching that indicator, so there is little reason to watch that that now. The best approach is to try profit from HFT rather than trade against it. I believe that these algorithims are used to alternately trade against, then with, conventionally expected price patterns e.g head and shoulders, pennants, flags, ABCs, etc.. I suppose, they may even be able to produce the price patterns. When the trades are against known patterns the average system is losing and vice versa.
Many charting packages offer a backtest feature. If controls of speed are offered, check backtest accuracy by running identical tests at different speeds, then compare results. Pick the highest speed where acuracy is acceptable for initial tests. Then test slower with the robust strategies, after which you then apply the strategy forward, testing in real-time.
I read economic news daily and try to stay abreast of new developments around the world, but it really is not all that necessary as a trader. The market will almost always tell you what is happening before you can digest the news. More importantly, I am intensely aware of scheduled pending US and international economic news/report releases and place audio alerts on my calendar prior to any potential market-moving events. I don't particularly care about receiving/learning the news immediately because someone else will learn and analyze the news faster and more accurately than me, either legally or illegally. I just need to know the schedule in advance. And if there are news leaks, they tend to reveal themselves early in the price action.
Occasionally, I may choose to take a position immediately after a news release if it appears that the move will sustain. If I have adequate faith in my strategies I don't need to manually enter - one or more of my auto-trades which I turn on after the announcement will do it for me.
I perform longer-term strategy backtests, but not while I am trading live, so as not to disrupt the market data flow and analysis. I also forward-test strategies for several hours, all day, overnight, several days . . . whatever. I save all statistics using Sierra's activity log and load them into an evolving database that I created so I can analyze the data. I evaluate trades by time of day, Maximum Open Position Profit and Loss, individual strategy success, instrument(s), depth of losses (stops), etc. I note interesting tidbits such as . . . Certain hours of the day or night and/or days of the week will yield significant profits vs. other times which routinely incur big losses. Since currency markets run 24 hours I observe middle of the night stats. When North America is closed, having dinner, or sleeping, the other side of the world is releasing economic news, interest rate changes, opening exchanges, businesses, banks, etc. I note that certain currency pairs or commodities may behave more predictably and successfully than others, even when averaging all my strategies together. But there are anomalies to discover. Many traders suggest that Sunday nights and Fridays are bad periods for trading. But my statistics show that I have several strategies that overall show small profits, but are losers once commissions are factored in. But if I merely eliminate Mondays, Tuesdays, and Wednesdays, often considered as best days to trade, the profit factor changes from a weak 1.16 to an easy to live with 1.60. I also have developed strategies that work positively through many US afternoons - typically thought of as a time to avoid trading.
I save strategies I have written that were successful as well as those not successful. Regarding those that aren't working, many hours were spent compiling and revising the strategies for a reason, because they made money, or showed a good deal of potential. The market changes and the strategies stop working, but a market may return to conditions that supported previously profitably trading methods. Make note of the market's condition when a strategy is working so you can recognize it and use it again. And keep something else in mind, when you tweak a strategy even a little, you are really writing a new strategy, so any statistics from the previous version are completely invalid and have no association with the revised version. So technically we are not tweaking strategies but writing new ones each revision.
Strategies, Triggers, and Methodology:
Everybody wants to know a profitable strategy and thinks the value begins there . . . but value truly lies in your own testing, observation, and discovery.
FYI - as declared in Modus Operandi, this Strategies section, as most of this journal, is an evolving document. A revised and more refined iteration is always in the works. But read on - nothing here is unsound or I would immediately remove it.
I HATE taking losses, but I have no choice - there's no hope for a "holy grail" never-lose a cent strategy. Nothing I have ever found or expect to find qualifies. I have many strategies that work in various markets at various times but not all the time, several examples of which I site below. There is evidence and claims of computer algorithms that are sophisticated enough to identify and self-adjust to any market condition, but those are the work of a programming staff at Goldman Sachs and their ilk, and clearly beyond my ability. Perhaps there are independent traders who can write code at that level - never met one.
Charts and Indicators:
Range Bar Charts: Range bars are my favorite method of plotting price action, for setting up and triggering trades, and for general viewing of financial markets. Very simply, a new bar prints as soon as the range (size) of the current bar exceeds a prescribed amount in any direction. Time based bars can look quite different from one chart program to the next because of start times, computer clock issues, etc. a few seconds can make a visible difference. This can cause patterns to be missed or spurious ones to appear. Range bars can curb this problem better than any other plotting method, however, because each bar is the same size, certain types of candle patterns related to changing bar sizes won't appear. This could be a big issue for those employing certain Japanese candle stick patterns or similar types of patterns.
Range bars offer a predictability that no other chart plotting method offers. There are a few similar custom studies such as Renko, Kagi, P&F, and Three-Line-Break charts, but to me they don't offer any advantage and in most cases create problems such as printing misleading phantom bars when there are gaps in the price. With range bars (sometimes called "kase bars") I know at the opening of a bar and the limits of where it will close. As the bar progresses I can easily visualize the two points at which the next bar can open. There are indicators if desired (or you can create your own) that will plot the potential limits of the current range bar. Range bars enable me to easily identify a sideways market. Range bars will, with many strategies, reduce the triggering of losing trades in sideways market conditions vs. other bar types. If spurioous trades are being triggered, it is easy to increase the size of the range to help mitigate these. Range bars give excellent opportunities for price action based strategies. With range bars I NEVER have large "data-spike" bars or large candle wicks/tails - something necessary to avoid for strategies that are designed to enter and exit at bar close. Range Bars also enable me to more quickly take advantage of changing momentum.
Linear Regression:
You will find frequent references to Linear Regression (LR) here and in almost every strategy I use. In my opinion there is no better indicator of market direction, volatility, and continuity. I use LR studies/indicators as well as manually draw LR channels with a LR chart drawing tool. Anchoring the left side of LR channel indicators near selected highs, lows, news releases, etc. allows me to see when a market has broken out of any short-term to long-term trend. I also use it in other ways, some of which are noted below.
A note about Fibonacci:
I tyically employ Fibonacci (or "golden ratio") increments when experimenting with and adjusting tick bar or time periods, standard deviations, channel lengths, moving average lengths, etc., not because the numbers hold a magical power, but because there is a beautiful logic to the way Fibs increment themselves up or down. I like both the pace and ratio at which they move. One also must consider that they are well known as a major component in nature, architecture, number systems, geometric shape sequences, etc., and most importantly, in many technical analysis techniques, meaning other traders employ them as well. So ignore such a viable numbering system at your own peril.
Some of my strategies involve determining a trend by using multiple linear regression channels/lines of different lengths. If the currently (one or more) employed LR Channel(s) confirm the trend direction, and other filters concur, then I trigger a trade entry at the failure of a countertrend trade. See example below. For a trigger I use a chart-based moving-average style indicator with an Average True Range (ATR) input which in effect continuously simulates a trailing stop in either direction for an arbitrary/imaginary counter-trend trade. When that synthetic trailing stop is triggered (meaning the counter-trend trade has failed) and all other filters align, my strategy can either alert me or automatically enter a trade in the opposite direction, i.e. reversion or with the trend. Typical inputs or settings for the strategy are as follows. Bar periods/ranges are based on your preferred risk tolerance and trade time frame. For range bars I pick a time period I like (8 minutes for example) and adjust the range to the same ATR for that time period, typically 6-20 times the value of each individual tick in Fx, but less in equity and commodity futures. I don't often use tick bars any more, but when I do I typically employ something between 144 and 610 tick bars. Some common linear regression channel lengths are 34, 55, 89, 144, and 377 for the mid-range, moving up to 987 or 1597 units for the high range. I elect to adjust in Fibonacci increments and may skip a level, jumping from 144 to 377 for example if I want to spread the spacing out a bit.
Notes for the above chart: Blue colors indicate downward bias and aqua = upward. Linear Regression Channels lengths are 55, 89, 144, and 377 (magenta). The price bar colors are controlled by a simulated 1.5xATR, 21 period trail-stop. In this example a short trade set-up could be triggered where the bars turn from aqua to blue (a few bars from the right edge) indicating a failed move upward. The current price in the upper half of the LR Channel is a big plus. The mid-chart plot is Time & Sales with Linear Regression lines plotted on the T&S bid, a crucial part of my trading which will be discussed further below. This example shows a condition where all T&S Lin Reg lines are negative, indicating a strong immediate downward bias. This condition usually only lasts for a few seconds but may return frequently if momentum is strong. I watch these T&S lines for exhaustion. When the sellers (for example) come in strong with all these lines down but can not push the price down any farther, the market is set up for a possible reversal. If other filters support a reversion to the upside, this can often be an easy place to enter long. The lower region of the chart (not cited in this example) shows Linear Regressive Slope conditions of four varying lengths and the bottom line shows the condition of a 2.0xATR 21 period trail-stop.
Upon entry I expect rapid favorable momentum, a good indicator of whether or not the strategy is working and the trend momentum is sufficient for a trade. If the position is rapidly down 30 ticks and the Maximum Open Profit during the trade is 5 ticks, something is wrong. If this happens a couple of times in a row it means the market in out of phase with this strategy or not ready to return to trend. My expectations . . . the 30/5 ratio should be the other way around.
Regarding the above methodology, if the market becomes more volatile, maybe still trending, or cycling as expected near the LR Channel limits, I may require that the entry occurs only if the current or previous 1-3 bars are within a certain range of the linear regression channel lines, e.g. upper 20% of the LR Channel range for a short or lower 20% for long. I pick a channel deviation between 0.6 and 1.6 depending on volatility. I may employ recent breakouts with pullbacks along with Lin Reg, then require that at least one high of the last three or four bars of a pullback came within 10% on the top line/highest high for a sell and vice versa for a buy. This may be combined with the approach described above.
I like to wait for a pullback after a breakout and then look for strong momentum in the direction of the breakout to enter. Breakouts are arbitrary and peculiar to each instrument. But for anyone wanting to create some trades from price action, breakouts offer a convenient vehicle for simple (I love simple) price patterns. I like to combine the Linear Regression, slope/direction and proximity with a simple move outside of recent highs/lows for short/long, perhaps also with the trailing-stop simulator on my side. An example of a breakout might be to buy with the trend if the highest high in the last 144 bars is higher than the highest high that occurred between 144 and 377 bars back, AND the market has pulled back to the midline of the linear regression channel being used to determine the trend, AND a counter-trend trade or trailing-stop in the sell direction has just failed.
Anchored Linear Regression: I often anchor the left side of one of my LRCs if warranted. On Sunday evenings when the Fx market opens, I look to see if there is a significant gap from Friday evening's close, indicating a change in sentiment over the weekend. A gap may may prompt me to anchor the left side of a trend-identifying Linear Regression Channel to the Fx open or perhaps the previous Friday's close. If there is no sentiment change, I will either anchor the LR Channel near a recent significant high or low, or allow the LRC to return to a specified length. If anchored, from that point on, until there is clear change in trend with a new high/low, that LR slope direction is the trend.
A trigger filter (mentioned above) that I add to most any strategy is measuring Time & Sales (T&S) - shown in the above chart, to which I apply multiple lengths of Linear Regression (LR). This filter only allows a trade to be taken when all T&S-associated LR channels slope in the same direction indicating a T&S momentum consensus. I apply LRs to either T&S bid or ask at the following period increments: 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, and 987. This works for the major currencies and liquid equity, bond, and commodity futures. When trading less liquid instruments, one or more of the longer periods may be omitted. Above strategies filtered in this manner along with really tight stops typically allow me to take very small losses and jump in at points of strong momentum.
My automatic exits may be triggered by the above-described simulated trailing stops or by the slope-reversal of short term Linear Regression Channels (34-55 bars). I may also decide to adjust stops manually, as described above, to minimize losses or move to break-even, overriding my automatic exits. Doing this when it becomes choppy can turn potentially big losing days into very small losers and occasionally into small profits. Depending on market conditions, I may use an automatic exit strategy that contains a secondary instruction to take me out of a trade within a prescribed time limit if P/L is not positive; so I pay some attention to trade duration.
I also like to employ price patterns as triggers typically with trend identifying indicators as described above, the simpler the better. Sometimes a very simple 3-bar or 4-bar pattern may trigger profitable trades for a period of time. Broader price patterns like head & shoulders, wedges, and other geometric patterns can tip me off to a change in trend or a return to previous trend. These may be used as trade set-ups, but are not used as the triggers in trade strategies.
Below is one example of a simple price pattern that can work surprisingly well. This simple pattern and similar ones were brought to my attention in a book by Suri Duddella. As mentioned above, watch for it to start working in simulation, then run it live until it starts to fail. I have found that this and many other simple entry triggers combined with a short term momentum filter like T&S-LR above will yield positive results in a majority of trades. You just need to determine when to exit with your profit. You need to test it on your own chosen instruments, play with bar period/range and combine linear regression proximity and direction to filter entries and determine trend.
Explanation: If the High 3 bars ago > High 2 bars ago, and Close 2 bars ago < Close 1 bar ago, and Low 1 bar ago > Low 2 bars ago, and High 1 bar ago > High 2 bars ago, and High of current bar > High 3 bars ago then enter a long position.
Tradestation style formula is: If H[3]>H[2] and C[2]<C[1] and L[1]>L[2] and H[1]>H[2] and H[0]>H[3]
S-1 PATTERN EXAMPLE ABOVE
Another approach. Changes in momentum interest me a great deal. But finding a tool to catch these at the right time is tricky. Once again, linear regression comes into play for me here. I look for a progression of different length LRs angles to be rolling over into the opposite direction in a series, starting with the shortest length through the longest. I usually require that the shortest or next to shortest LR has already confirmed the new slope direction, but the remaining LRs do not all need to be leaning in the same direction, only rolling over toward the same direction. Here is a visual example. Although this is very difficult to physically watch for, it is very easy to program for automatic alerts.
The two charts above and below (stripped of other indicators) show five different lengths of linear regression channels. Note that on both charts, the shortest period LRC has a lower slope factor than the next longer and this pattern progresses through all five forming sort of an arch. This arch can form earlier, even with the shortest LRC still pointing upward. This rollover indicates a change in momentum over all periods, the shortest period being the strongest. Also as a bonus here, a head and shoulders price-pattern is forming around the congestion. To trade this, a sell stop entry can be placed just below the right shoulder/congestion area. In the lower chart, the arch pattern continues with more strength to the downside and the trade would be executed. This trade went on for 10+ hours for a profit, retracing several times but never giving you any heat. There are better examples of nice winners but this one was the first chart I looked at.
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Here is another trade set-up I use a lot which can be employed to enter longer-term positions or for scalping, even counter-trend. This trade uses Price Action and Accumulation/Distribution Flow plotted on a 5 to 13 period moving average, combined with a series of Linear Regression Lines calculated on Time & Sales as mentioned above. The LRCs can be applied to either the T&S Bid or Ask. The LRC periods are as follows: 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, all Fibonacci numbers, but you can use any increment you prefer provided they are spread out. Time & Sales and associated LRCs plot independently of any chart bar-period and print every tick, thus the need for bar periods up to 987 or more.
In the above chart, there is a clear downward bias. Although I prefer to use this T&S trigger for reversion trades, this particular trade was counter-trend. The A/D Flow (aqua line) moved above its 5-period moving average (black line) for at least 3 bars near the right edge of the chart, diverging from the downward trend of the price action, and continued after that to show upward bias. There was a small retracement and the apparent resumption of downward price movement, but instead price paused and appeared to find support.
Note: The A/D Flow and corresponding MA on this chart and the bottom one are associated only with each other. Although they appear in the same region as price, they plot independently of any scale on the chart.
At the time that the price appeared to find support, the Time & Sales (shown below but temporarily hidden on the above chart) showed a very strong selling effort (all LRCs pointing down). This selling pressure could not push price to a new low or even back to its most recent low, a sign that weak sellers are doing everything they can to push down the price, but the strong sellers have stepped aside and may be getting ready to turn the market around as buyers, a condition I refer to as exhaustion.
The T&S LRCs above is an example screen capture showing what Selling Exhaustion looks like. It is difficult while managing a trade entry to screen-capture the real corresponding exhaustion occurrence(s). This condition can also show strength to the downside if it is accompanied by downward price continuation. The condition usually occurs for only a few seconds although sometimes recurrently. Audio signals alert me to the fact that selling exhaustion and AD Flow/MA divergence are happening, enabling me to monitor this on as many charts as I want. This simple T&S measurement can also be used as a trigger in combination with almost any set-up, indicator or group of indicators.
In the short-term view, the initial support turned into short-term consolidation which can be seen below in the single-tick (black and white) range bars. The shorter-term AD Flow also showed strength above its MA. At this point you could have placed a Sell-stop entry below consolidation or a Buy-stop entry above consolidation, or both, assuming that the divergence would eventually be broken in some direction. My experience leads me bet on the buy side here because of the sellers' exhaustion and failure to reach new lows. This trade was good for 26 ticks and lasted a little over 6 minutes before price resistance was hit and consolidation returned. Although I chose to exit manually, a sell stop exit could be placed (upper yellow line) below the newly-forming upper level congestion. On the chart below, the short-term AD Flow condition changed from positive to negative, crossing and holding below its moving average, T&S LRC buyers' exhaustion (all lines pointed upward) frequently occurs at these congestion-tops signaling time to exit.
One caveat regarding this strategy is that when it's working it works great, but it must be observed before jumping onboard to see if it is truly working. Because you are setting up trades based on opposing forces (Time & Sales opposing the direction of the A/D Flow), it could actually be that the T&S is indicating strong enough buying/selling capacity to drive the market in the direction of T&S and against the predominant A/D Flow. In this case it will be obvious simply by watching price action, as the market will jump out of congestion quickly in the direction of T&S. When I see this occurring I would bet with the T&S until it begins to revert the other way - or sit on my hands until I see a clear indication that the A/D Flow dominance has resumed.
Additional note: The green bars above are a fast-moving Bid/Ask plot - tick-by-tick price action that I rarely observe but remain on my charts for use occasionally with instruments that develop bigger spreads.
The chart above illustrates one more variation of the T&S Exhaustion method of triggering trades. This is not a trade strategy, only a trigger. This trigger method carries periods of failure, where the trade goes against expectations, but it is easy to see when the failure is occurring as well as when the trigger is working properly. Automating it in a simulated mode makes very easy to monitor multiple charts by simply watching profit/loss. The two phases typically don't alternate back and forth, on and off with rapid frequency, but rather will amble along in failure mode for a spell, then will switch on and behave properly in a holding pattern, enabling one to take advantage of a series of profitable trades. If trading is active and live when it begins to fail, I can limit losses to very reasonable/small amounts. And when it begins to work, it typically produces a series of very nice, minimal to no-heat, profitable trades. This can be used successfully with virtually any set-up or indicator you prefer that has a reasonable win/loss ratio or profit factor. The on/off phases of this trigger also often correlate across many instruments, so when you see it begin to work in one market, you can be ready for other opportunities.
Finding a good trigger to enter trades with minimal heat has always been one of my, and many other's biggest challenges. With many triggers, by the time you figure out a trade is a loser, you have taken much more heat than you prefer and are tempted to hold on, hoping and praying for a move back in your direction just to help minimize your loss. I choose this trigger method because it produces low heat both when it is working properly and when it is not.
In the illustration directly above the upper chart region is Price (one-tick range-bar) plotted with a sim-trailing-stop white/black bar colorizer, A/D Flow with 13 period MA in aqua and black lines, and an arbitrary Lin Reg Channel (not used). None of this is critical but is just one potential method to help confirm the trade's validity and follow-through.
The "critical trigger" middle region consists of ten linear regression lines (using fib increments - 5 periods through 987) plotted on Time & Sales Bid or Ask - it doesn't matter which. The buying exhaustion occurred three times in succession as marked on the chart meeting only resistance at a lower point than the recent high (green horizontal line). This is a very dependable point at which to enter. I also plot this on my longer term set-up charts because anywhere you plot it, it runs independently at T&S tick speed, not at the chart's bar speed.
The bottom region is a plot of Bid/Ask Volume Ratio changing colors on plus or minus. The bottom right edge contains two (not needed) 13 and 21 period Lin Reg channels. The A/D Flow and or the B/A Volume ratio should show support in the direction of your trade, or at least a rollover toward the direction of the entry, after which you can use these or any preferred method of indicating follow through to keep you in the trade.
This trade trigger is used only after a set-up occurs on a longer term chart ((e.g. Lin Reg Reversion, Failed Counter-trend, MA Cross, whatever) on a (e.g. 10x-range-bar or 5-minute-bar, 233-tick-bar, or whatever you like) and you are now looking for a signal to enter.
Scalping: Many traders hate scalping because it is tedious and requires frequent and intense trading activity to accumulate reasonable profits. However if you find a reliable price pattern or the right combination of price-pattern and indicator(s) on very short term charts, scalping can be either a great backup for when longer-term strategies are not working, or your favorite and most dependable technique. Note - minimizing your trading costs and a keen awareness of the bid/ask spread is paramount when scalping. These days, with HFT controlling such a huge volume, scalping has become much more profitable and easier in some instruments. Because it is difficult to automate scalping trades, discretion may be necessary. Ideas and further discussion is forthcoming here . . .
Candlestick patterns: Despite their reputation as some kind of voodoo/black art, Chinese candlestick patterns have always interested me and hold a good record for successful trades. But experimentation is essential to find which one(s) work with each particular instrument. Some of them occur so rarely that they are virtually unworthy of watching or testing. Some occur too frequently and must be combined with other filters/indicators. Some work exceedingly well for a period, then settle into a period of marginal success. Test them with impunity and see which ones can help on your chosen trading instruments. I have had days of great success repeatedly trading the same pattern over and over. A couple of favorites are Bullish/Bearish Belt-Hold Line, Three Outside Up/Three Inside Down, and Hammer/Inverthed Hammer. When I employ these with Linear Regression Channels and a Simulated Trailing Stop (see the first chart example), they work remarkably well - examples are coming.
. . . Successful trading should be boring - having a technique or strategy as well as an attitude that does not elevate your blood pressure is essential. Although the profits aren't often huge, the strategies and triggers here provides exactly that for me. I just sit back and wait until I get an audio alert for the setup, look backwards at the chart to be sure I agree, take a position, manage my stops once I am profitable, or get out if it goes against me, This kind of process can go on indefinitely as long as I follow the rules - boring, boring, boring, and low stress. I love it.
Although I would prefer to enter all trades automatically, at the very least I always use audio alerts to bring my attention to a chart where a strategy is setting up for a discretionary entry. I may add to a position if the market moves in my favor and I get additional an entry signal(s). Depending on conditions I may or may not exit manually. When I began this business, automated trading was typically either unstable and in early development stages, or too expensive for retail traders. It would have been easy back then to run successful automated strategies if the software/hardware was available. Now, with so many computerized, algorithmic, extremely fast, and high volume trades occurring through the big institutions, hedge funds, and on-location exchange-based traders, you never know which market condition will prevail at any given moment. You either have to be quick with your reactions and be ready to change your diagnosis or have the stomach and the account for big draw downs that I associate with swing trading.
An Interesting (and I think Important) Note About Failed Trades:
Never forget that you can learn just as much or more from what doesn't work as from what does. Research and study the reasons why, if your trade strategies are failing. Are you willing to bet against your own strategies? Why not . . . Trades fail and it may be impossible to know exactly why, although I have theories. Here's one. While a strategy is working there is strong support throughout a broad spectrum of traders, big and small. But sometimes (too often) things turn around and begin to go the other way - proven strategies begin failing. Are the big-money traders now betting against the little guy? Hmm - you can bet they see the thousands of small bids or offers sitting there as targets. And they can tell when the consensus has weakened meaning the majority of other big money folks are sitting on their hands. They still want to make some money even in the lulls, so why not steal it in small increments from the unsuspecting little guy. This is when I will bet against my own strategies and make money. Before you start trading live for the current session, simulate or observe a few trade signals and mark your charts. Are they working? Are they sitting idle in congestion and going nowhere? Or are they failing miserably, going far enough to move through your stops. If the latter is occurring, this state can continue for quite a while in a particular instrument or across several correlated or similar instruments. At this point it makes sense to trade against my signals, and I often walk away with a profit as long as I have reasonable goals and don't push it too hard. Have a look at this phenomenon and let me know what you think. You may be surprised at its potential.
The End:
I have learned to be ready for anything. Technical glitches are our second worst enemy following our own shortcomings. Both my Mac and PC systems, including modems, routers, monitors and even speakers are powered through a UPS that can handle a power failure long enough for me to comfortably exit all positions. In case of brokerage system failures, opening an account with a second backup broker is a good insurance policy. In case of local internet failures, I keep phone numbers handy for brokers, and for others that I know and trust, who either trade the same system or are at least competent and comfortable enough with computers to log-in and exit positions on my behalf. I use stop limit orders when logical to force placement of stops outside my system onto a broker's or exchange's server. (Order Types)
I receive emails asking about my techniques and strategies. Above is an overview as well as some details of my techniques. I realize that there may be some ambiguity and convolution in the information due largely to my continual adjustment to current market conditions. I will add to and edit this journal whenever I have the time and develop new ideas, so if you have visited here before, you may want to refresh your browser to display updated material. I hope this helps anyone who takes the time to read it. E-mail me if you care to discuss the above or anything associated with the financial markets.
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