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Better Late Than Never
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Better Late Than Never

by The MoleNovember 5, 2015

My apologies for the late post this morning but it’s 25 Celsius (~77F) here in Valencia and I spent a bit too much time running errands after a late start. Not being completely useless however I at least would like to alert you guys to a juicy ST entry opportunity on the spoos right now:

2015-11-05_zero

The Zero is produced a very slight divergence last night (keep in mind it’s a small signal range) but I’m more interested in the trend line I just dropped for you subs. Watch this one like a hawk as we don’t to see more than one or two closes below it (preferably near it and at best above it).

2015-11-05_spoos

Now here’s the setup – as we’re currently dropping toward the 100-hour I am looking to grab a small long position near ES 2095. My stop is going to be near 2090 – depending on the Zero signal (meaning if it’s supportive) I’ll plan to flip for a short position if stopped out.

That’s all for now – I’ll chime in a bit later. Suffice to say that watching the Zero is tantamount as I expect it to show participation should momentum start flipping to the downside.

The future is now – so don’t bring a knife to a raygun fight. If you are interested in becoming a Zero subscriber then don’t waste time and sign up here. A Zero subscription comes with full access to all Gold posts, so you actually get double the bang for your buck.

Cheers,


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • http://evilspeculator.com molecool

    BTW, regarding the previous thread’s discussion about back testing and symbol correlation:

    Backtesting inherently has serious flaws and I can attest to that. Invariably backtests exaggerate earning periods and underrepresent drawdowns. Only forward testing works – I also believe that a preferred approach of system development is iterative forward testing. I will be covering that in more detail in the future.

  • Huey

    That sounds interesting. And thanks for rubbing in the nice weather, I woke up to snow this morning!

  • vladv

    look forward to the details

  • wandering196

    It’s snowing where I live as well, but I can hardly wait to get my skis on!

  • http://evilspeculator.com molecool

    This may turn into a real sell off…

    .

  • http://evilspeculator.com molecool

    We only get the cold and rain down here – so there are no redeeming qualities to the cold.

  • http://evilspeculator.com molecool

    I’m out of my longs as my stop has been touched. Let’s see if the selling pressure continues here – if so I would short on a little pop higher.

  • Bill

    Flipped to short per setup.

  • http://evilspeculator.com molecool

    The signal range is still pretty small – would prefer a -1.0 followed by a little pop higher. Not ready to drop into shorts just yet.

  • http://evilspeculator.com molecool

    Ah – you didn’t see my comments – that’s fine, no problem. Bear in mind that selling pressure needs to continue here. If we see the signal go divergent make sure to obey your stop.

  • http://evilspeculator.com molecool

    Well, obey your stop in any case 😉

  • http://evilspeculator.com molecool

    Well, you may have flipped just in time, Bill! 😉

  • http://evilspeculator.com molecool

    Volatility definitely about to pop on both the hourly and daily.

    .

  • Bill

    Yes sir I did.

  • tradingmom

    This is the place where I start to look for signs of a reversal to vwap. We’re at the bottom of the range, divergence (slight only) on the zero, and a few areas of support on different time frames.

  • tradingmom

    If the zero is strong coming into vwap, there is a megaphone on the 5/10 min charts targeting the 2010 area.

  • Bill

    Looking to re-short at VWAP if the zero looks good.

  • http://evilspeculator.com molecool

    Alright – here’s the bounce back. I’m still skeptical here and will try another 1/2R long with a stop below 2084.

  • http://evilspeculator.com molecool

    I look at participation there – if the Zero holds I’ll stay long. If it starts dropping I’ll pull my long and flip.

  • Bill

    Holding now so I’ll wait.

  • http://evilspeculator.com molecool

    Moving my stop to break/even now – the Zero line and VWAP need to hold in the coming two hours.
    .

  • http://evilspeculator.com molecool

    Nobody here today – is it some holiday I’m not aware of?

  • tradingmom

    I shorted 2100.

  • Bill

    Lunch time so I can stare at the zero. Waiting for a sign.

  • whatstreet?

    Stalking… I’ve got 30m and 5m systems with volitility filters turning the system off right now. Really thinking I’d prefer to trade the systems live with small amounts rather than paper trade forward? Looking forward to your thoughts on the iterative forward testing

  • Bill

    Long with a very tight stop.

  • Huey

    Is that a psychological preference? Either way should help you practice trading your system, but maybe you don’t care enough when there’s no money at risk?

  • Ronebadger

    very busy at work…watching a very small short position from SPX 2105

  • Huey

    No setups for me in equities. Would like to get a sharp move up or several days of down to sideways to shake out this melt up trend.

  • Billabong

    After reading a number of pieces regarding the Santa Claus rally over the last few weeks, it became apparent that people with market exposure are conditioned to either the seasonality of the issue (tied to taxes) or we’re Pavlov’s dogs. Why isn’t it possible to have a surprise moment in the next 7 weeks? A demonstration of a black swan, randomness, anitfragile moment that does something so unexpected that, people relieve the experience for the next twenty years. Santa Claus rally? Maybe or maybe not….

  • RoastBeeph

    The Santa Claus rally hasn’t occurred in half of the last ten years, if I remember correctly. I am fairly sure I read that but maybe I am making this up. Anyone confirm?

  • RoastBeeph

    Been busy at work too. Haven’t been able to post as much due to our fall busy season. 🙂

  • Billabong

    Doesn’t it depend on the definition and timeframe of a Santa Claus Rally?

  • BobbyLow

    I like Scott’s analogy the best when it comes to Paper Trading, Forward Testing with Very Small Size and Trading Full Size in real time.

    I’m going to paraphrase:

    “Paper Trading is like walking a plank that is sitting firmly on the ground. Then when you begin trading with token amounts of money the Plank is raised a few inches. As your size becomes larger so does the distance between the Plank and the Ground.

    After graduating to full size positions in real time the Plank might appear be 10 or 20 feet off the ground. So by this time you had better have your Plank walking down solid or you’re probably going to fall.” 🙂

  • RoastBeeph

    I am strictly talking about red months of December. I think I saw that 5 of the last 10 Decembers the markets were in the red for the month.

  • ridingwaves

    that crazy skew reading in the last 60 days could be someone hedging for just that

  • whatstreet?

    I think it is psychological. I want to see if I ‘panic’ out of a position (early or late) if real money is involved. Maybe that’s just a side skill that needs to be addressed? I’m totally cool with, say, a 1R gain turning into a break even exit on paper. With money though, story could be different.

  • whatstreet?

    Thank you for repeating that Bobby. I’ve clearly gone back and forth on it. Nothing is broken by continuing the paper testing, so why try to change it? Live small amounts by the start of 2016 was the original plan, so I may stay with this. The paper trading has been highly educational in just a short amount of time.

  • BobbyLow

    Has anyone else found Forex Pairs to be exceptionally Bitchy over the past month. It might be my imagination but I think I might be seeing a lot more front running and spikes than usual.

    I’m almost ready to only chart and trade the /DX without After Hours included.

  • http://evilspeculator.com molecool

    Well, it’s your job to find out. Go to work.

  • mugabe

    here’s the data

    http://www.moneychimp.com/features/monthly_returns.htm

    or just look at a chart

  • mugabe

    yes – are we talking the orthdox or catholic calendar here?

  • http://pugsma.wordpress.com/denalis-turning-points/ denali92

    It is a month away…. More important thing to remember is the NOVEMBER Buying opportunities – Yes, did not occur in 2013 or 2014, but before that:

    2012: Opex Day
    2011: Friday post Thanksgiving
    2010: Opex Tuesday and Monday / Tuesday post Thanksgiving
    2009: Friday post Thanksgiving (futures were down limit thanks to Dubai)
    2008: Opex Friday
    2007 Monday / Tuesday post Thanksgiving

    We will get to December in a month.

    Key for now is whether we will see the persistence of Nov 13 or Nov 14 again or the buying opportunities of every year between 2007 and 2012 OR as Scott and Mole would suggest – something totally different…

    2007 – 2012 were more interesting months for traders compared to 2013 and 2014.

    -D

  • tradingmom

    I’m pretty sure the week of thanksgiving is one of the most bullish in the whole year. The monday afterwards…not so much.

  • mugabe

    always get a bull market in turkey futures then

  • http://evilspeculator.com molecool

    “We will get to December in a month.”

    Very good point – this is actually a good example of attempting to predict the far ahead future via various stats and insufficient sample size (even my 50 year charts are a small sample size as Scott pointed out).

    Why worry about this right now? The market is a dynamic system driven by millions of participants and hundreds of millions of executions per day. We understand that some months have a historical bias but even knowing that we should be focused on what is directly ahead of us. Much more important to me is whether or not we’ll paint another week in the plus by Friday.

  • http://pugsma.wordpress.com/denalis-turning-points/ denali92

    In general, YES! But 2007, 2009 (overnight and at the open) and 2011 are reminders that it is not always that way.

    Always good to be aware of the historical possibilities,

    -D

  • Huey

    I like that analogy. I’ve typically thought of paper trading and very small size trading as mutually exclusive but it makes sense to build up slowly to full size. With my last system I just started with small size and when I reached a goal I jumped right in. In hindsight I can see the benefit of working up to full size more slowly, as I made a bunch of mistakes in the beginning of full size trading that ultimately led to me abandoning the strategy all together.

  • http://evilspeculator.com molecool

    Bad seasons to be tasty and wear feathers for sure.

  • http://evilspeculator.com molecool

    Look guys – this debate is completely futile. I have seen various iterations of this literally thousands of times over the past few years. THERE IS NO SURE BET – we all know that. What we should be focused on is the immediate future IN CONTEXT WITH THE HISTORICAL probabilities. That may give us a slight edge by assessing shifting dynamics. Sorry guys – BUT THIS IS AS GOOD AS IT GETS.

    Everything else is simple mental masturbation. Not useful for taking entries today, tomorrow or next week. And frankly that is all I care about. Trading is like fighting a war – it’s great to have a general outlook and LT plan. But the immediate focus is to NOT DIE and FIGHT ANOTHER DAY.

  • BobbyLow

    I don’t know how long you’ve been paper trading and I would think the more different types of markets you can be exposed to the better.

    I for one think that there is a definite place for back testing with the caveat that things have a way of changing in real time. For example, I back tested my current system going back 15 years on crude. During this time there was just about every kind of market there is. And most recently, I modified my time frame on my charts making it a little faster. I back tested that to see what if.
    So for me, it all begins with back testing because without it how the hell does one know what to forward test? 🙂

    Anyhow, wish you the best and remember that whatever you do, doing it correctly is the most important thing.

  • wandering196

    we are soldiers not generals

  • Bill

    “We will get to December in a month.” I only give it 50/50 odds.

  • BobbyLow

    Crude is saving my ass so far today. 🙂

  • Huey

    Yes! It looks like volume and volatility are declining so maybe the market type is changed… Last month I was down every week for -6R total. This month is at least starting out much better.

  • http://pugsma.wordpress.com/denalis-turning-points/ denali92

    agreed.

    and right now, historical context provides ZERO EDGE!

    -D

  • mugabe

    I’m all in on that one

  • whatstreet?

    I’m a believer in robust backtesting too. I think you HAVE to know max drawdowns and lengths, or else how can you set rules for your system to stop?
    I have backtested 6 years of the 30 minute system and have been “paper trading” it since early October. I have quotes there because while I have the live chart up, I’m also building or testing other ideas. So I occasionally miss the moment of entry or exit as I’m not looking. Starting last week tho, I’ve been watching the screen full-time and taking entries/exits (on paper) as they happen. It’s been a huge help in learning patience and decision making.

    Now… A 2nd scalping system based on intra-day 5 minute chats has been “paper traded” (again, sometimes eyeballs weren’t on the chart) since early August. The potential looks great, but I haven’t found a great way to backtest it,so I’m skeptical of course. But it has 138 trades over this 3 month span. And we did have some pretty nice market phase changes over that time too. Make me think it doesn’t need years and years of backtests applied to it.

    Any thoughts? Probably up to the individual. For now I’m going to paper trade both systems in live action.

  • BobbyLow

    Thanks for sharing this. My net Forex results for the month was about the same as yours. I’ve already looked back at each trade and believe that I did everything correctly. Things will probably change back again but for right now it’s like every Forex Position held overnight has to run through a larger gauntlet than normal to survive the Asian and European sessions while living long enough to reenter the NYSE session.

  • http://evilspeculator.com molecool

    You are right – volatility has been declining but that doesn’t mean it’ll continue to decline. Look at the charts I posted yesterday.

  • http://evilspeculator.com molecool

    A lot more noisy – meaning small ranges followed by quick explosive runs. VERY difficult tape and Scalpius’ performance has suffered as a result. Also similar tape on the futures side.

  • http://evilspeculator.com molecool

    Drop down and give me fifty.

  • BobbyLow

    One thing that I found is the longer the time frame that you have back tested whether it is the 30 Minute, Hourly, or Daily, the more reliable your stats would be. For example even with my 30 Minute – ATR system I’m currently using, I can usually leave my computer and go to the Gym and come back with everything working as it should. Even if I have to leave my computer for a few hours, I still have my platform on my smart phone and will know before hand at what prices, I need to make a change.

    I can’t see how this can be done on a 5 Minute System meaning that if you are not constantly monitoring your charts you can’t make a trade. So when you’re back testing your taking every trade. But in reality you can’t do this. This is where back tested stats can severely break down.

  • BobbyLow

    Thanks Mole. I’m glad I asked because I thought I might have been seeing things that wasn’t there. 🙂

  • http://iberianviews.blogspot.com/ catracho

    NFP tomorrow…so let the fun n games get out of the way

  • whatstreet?

    OK. I hear what you’re saying there. Thank you
    FWIW, on the 5 min SPY it needs condition A to be present and condition B(simple indicators)… then look for the trigger C. I can anticipate time frames where no trades will be possible. It also has a higher time frame market-type filter that allows me to anticipate whether there may or may not be trades, so taking all trades isn’t too difficult as long as I’m not called away for an emergency. Thus, I think a backtest should be pretty good, but I’m going to have to find the software or pony up the money for some.
    –I tested the 30min system by looking at every chart for 6 years on barchart.com and copying down the stats. Was tedious, but actually fun!
    Back to the 5 min scalping: I’m conflicted because 1) maybe it’s just on a nice 3 month run, OR 2)maybe extensive backtesting isn’t a great use of time.

  • BobbyLow

    Another factor about 5 minute scalping is that it takes a toll. I’ve done it and quite frankly I no longer have the stamina to do it for an extended period of time.

    “I tested the 30min system by looking at every chart for 6 years on barchart.comand copying down the stats. Was tedious, but actually fun!”

    I wish I had done something like this many years ago instead of finding almost every wrong headed way of doing things. The fact that you enjoy doing this type of grunt work is a great beginning and should work greatly in your favor.

  • whatstreet?

    Interesting about 5min fatigue. No matter what… it’s going to be an interesting journey!

  • Scott Phillips

    Yet again you fundamentally misunderstand the nature of statistics.
    Because something has happened 5 years in a row (i don’t think it did but whatever) doesn’t mean that it won’t happen again. It also doesn’t mean that it will.

    It literally means nothing. This is not my opinion but a matter of indisputable fact.

    I’m sorry Denali if you cannot grasp this simple thing you are very foolish

  • Billabong

    Saudi European discount announcement? Channel $43-50?

  • BobbyLow

    I don’t know.

    Right now my stop is in positive territory (barring a quick big gap against position). I wouldn’t be upset if we got down to 43. That would put my stop at around 44 and change which is about +$3 on /CL and about +$11 or $12 on SCO .

    That is if everything works out nice and neat which it rarely ever does. 🙂

  • RoastBeeph

    Gold’s been my ass saver. I am thinking of dipping my toes into QM (mini version of CL). Odds look pretty good that crude will keep going down in this channel for a little bit. Pretty good probability of at least $44 IMO…might short QM tonight.

  • BobbyLow

    If you have some bonafide evidence based on your system that you should get short now then go for it. But I’d be very skeptical about getting in short now based on anything else especially gut or news of any kind. Crude has been in woodchopper mode for weeks.

    I got in Short at a little over $47 so whether or not you are late to the dance or not is another issue. Nobody really knows if price will go right back up and test $48 or continue down and retest $43 and then $37.

    Of course this has to be your decision. However, it’s better that your decision is based on sound technical reasons that you are familiar with and fully understand. This way win, lose or draw, you would have done the right thing.

  • Billabong

    Patience, discipline and consistency (PDC). Always another train pulling into the station…

  • hellbent

    If the number 7 has been drawn more times than any other in the Lotto….. Twice as many times as 13…. It makes no difference at all to their odds of being drawn right??

  • http://evilspeculator.com molecool

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  • TheRooster

    RoastBeeph, how are you calculating the probability of hitting $44?

  • TheRooster

    me too – i have not had a good month in FX and have found easy profits early in the trade evaporating

    it’s times like this is when I personally need to focus – in the past i havent been ready when the markets start making their moves as it is easier to skip signals when markets are chopping

    no more of that for me…….

  • TheRooster

    FYI since 12th Oct have made 32 trades for a net 2R………..

  • TheRooster

    Mole, I assume you do still backtest though?

    I have found valuable info in my backtests although the caveat is that you need to understand the limitations of your testing platform, methodology and time series to interpret results.

  • BobbyLow

    Congrats on at least having a positive net through what’s been a very challenging Forex Market for a lot of us.

    I’m looking forward to the weekend to recharge. 🙂

  • TheRooster

    no congrats necessary – my fx trades over that period have been net losers but had some winners in Platinum, Facebook (one of the few stocks I trade) and livestock futures which got me over the line.