Now Reading
Great Call Flawed Execution
44

Great Call Flawed Execution

by The MoleNovember 24, 2015

Let me precede this post by openly stating that in general there is no such thing as making a ‘great call’. Well there is and then again there isn’t. Now that I sufficiently confused the heck out of you let me try to explain. You may recall some of my past write-ups on volatility, market cycles, as well as knowing when to be active and when to be sit on your hands. A very simple way of summarizing all of the above is that there are periods I would refer to as ‘easy time’ followed by the more mind numbing ones which test not only your patience and testicular fortitude but also your ability to stick with your script.

Assuming a solid understanding of how the tape flows, how volatility flows as well as affects price movement, and perhaps a bit of natural talent, it is quite possible to predict medium term turning points within a margin of a few days during easy time. So great – if that’s all it takes we’ll all be billionaires by Christmas, right? Well, the only problem standing in the way of spending the remainder of your existence attending Las Vegas pool parties is an annoying little detail: Easy time only occupies about 20% to 30% of market time.

The remaining 80% is spent screwing around, either correcting or sucking in hapless retail runts in preparation of the next shake out. In other words – preparing for easy time.

2015-11-16_top_and_high

By my personal definitions the short before the sell off on November 10th was a pretty easy call. We had produced a ton of context and the timing was perfect for the shake out. A few ticks higher would have shifted the odds into a short squeeze scenario.

Similarly the bounce on the 16th was in the vicinity of long term support and the short term context was favorable. Some may disagree and I would love to take credit for having a crystal ball but in this game it’s all about probabilities. And at that very moment in the early morning on November 16th the odds supported a bounce, which fortunately transpired.

2015-11-24_NQ_update

Yesterday’s call was a bit of a crapshoot as there was less context. It was more of a hunch but it was backed up by sufficient daily and short term context. Of course proving that the Mole indeed does not have a crystal ball I put the stop for my clever little hedge a few ticks too low. So it’s fair to say that I nailed the highs – with my stop 😉

Yup, it happens to all of us – so next time it happens to you smile and remind yourself of the fact that you are in good company. Heck, I should print t-shirts! Or perhaps given the recent thread on birthdays bedpans with Evil Speculator logos on it may turn into a seller.

2015-11-24_spoos_volume

Anyway, easy time is officially over as we are now in corrective mode within a high volume range just a day before participation is about to dry up. So if you wisely put your stop a big higher than the Mole then I suggest you do nothing for now. The context on the daily is a bit iffy – we may hold here but given the lack of participation it’s quite possible that the kiddies not invited to the Hamptons are going to have themselves a bit of fun.

Not much out there today but I managed to scrape together a juicy setup for my intrepid subs:

evil_separator

It's not too late - learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don't waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Please login or subscribe here to see the remainder of this post.

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.
  • RoastBeeph

    Stops can be so annoying at times. It just seems like programs out there are designed to take out stops. I can’t count how many times my stop was at the top of the move.

  • Ronebadger

    Boy, you said it. I’ve been stopped out many a time by a penny or two…like the bots were just looking for my stops. I’ve taken to monitoring closely during trading instead. I only can trade stuff during the NYSE hours only.

  • http://evilspeculator.com molecool

    An annoying necessity as they protect us from ourselves.

  • BobbyLow

    Absolutely. When we get into sloppy times, I use a looser stop than normal to try to avoid whipsawing.

    BTW, pleasant little surprise in crude this morning. :) We’ll see if this move is for real.

  • mugabe

    what about the times when
    a) your stop saved you a lot of money
    b) your stop was almost hit but not quite
    Possibly we have a tendency to focus on when we were ‘unlucky’ with stops.

  • mugabe

    my recent experience has been that a looser stop just takes longer to get hit:) not a big sample size, mind

  • BobbyLow

    I’ll probably catch some flak for saying this. And in a lot of cases can actually agree with you. However, if you trade the same “commodity” over and over again there comes a time when the tapes says “I’m in sloppy time mode and a firm direction will come when I’m damn good and ready”. :)

    This could be called “Recency Bias”. But I would argue that when “recency bias” has occured over many years, I would call it reading the tape.

    A way out of this would be to stay out when price gets sloppy. This does not work for me. As a matter of fact staying out actually hurts me because it tends to make me overthink.

    So the bottom line for me was that I still have no idea how this trade will turn out. But on November 16th my rules told me to go Long. This entry followed a beautiful extended Short Position. V changes in direction are pretty rare so I expected slop prior to a real change in direction or a continuation of the former direction. Therefore, a loose stop was necessary under my RBT.

  • Ronebadger
  • Billabong

    I wondered how long it would be until someone addressed the term “great call”. In 2013-14, we were severely chastised for using that term … a term not used by professional traders. If I remember correctly, it was tantamount to using intuition and not a developed skill. People should recognize skill for what it is and leave “great call” for the black jack tables….

  • BKXtoZERO

    Help for your Crude Oil set up?

  • mugabe

    new series of game of thrones?

  • BobbyLow

    Whatever it takes. :)

  • BKXtoZERO

    I’m in….. stop 6.75 UWTI

  • BobbyLow

    I see that you are in the 3X and that’s fine. I use the 2X myself and that’s up to individual preference.

    If I can make one suggestion it would be to run your stops from /CL. I say this mainly because these ETFs/ETNs are fairly accurate by the close but can get way out of whack in relationship to the underlying Crude during an active trading day.

    For example even though my position is in UCO, my current stop which is in a manual trail is currently based at /CL being Below $41.86.

    I’m around most of the time so this is easy for me to monitor. However, if you can’t monitor it then you could put in a disaster hard stop to keep from being severely whacked when you are not around and monitor /CL when you are.

    Another thing is that I do not include After Hours on my /CL Chart from which I make my entry/exit decisions from. This Chart only runs from 9:00 AM to 2:30 PM EDT. The reason for this is that I can’t trade UCO during the middle of the night and it is subject to opening gaps. So it stands to reason that the chart that I make decisions from is based on the same playing field.

    Anyhow, just my 2 cents. :)

  • BKXtoZERO

    I entered last Friday (keeping it small) and do need to raise my stop. First 2 moves off the lows, strictly speaking for higher highs and higher lows (NOT EW!) I should and will raise my stop to the underside of the second move up to protect what I have. Thanks!

  • BKXtoZERO

    Looks like nothing much so far. I have yet to really nail and ride a “trend”. In UWTI I have taken some nice moves, equal to 5$ moves in crude or more. I have yet to nail a extended trend of say 10-20$. I was VERY quick to take profits on UWTI in last 12 months and it basically worked. I didn’t realize it was in a range until later, but it worked and I was just lucky taking what it gave over and over. Still waiting for the move to remember……

  • http://evilspeculator.com molecool

    Go Putin go!!!

  • http://evilspeculator.com molecool

    Putin is actually pretty good at that game.

  • BKXtoZERO

    I figured if I didn’t post it you would.

  • BobbyLow

    A $5 move in Crude is a good move. BTW, I just ran the numbers on my last SCO (2X Short Crude) trade that /CL went from $47.10 down to $41.48.

    So a coulda, woulda, shoulda 3X for you would have been the Sister of UWTI which is DWTI which would have gone from $92.39 to $141.00 or a $48.61 per share Gain on the same trade.

  • BKXtoZERO

    My other wooda shooda (philly accent) is NUGT again. I saw the low, then I saw the pullback and sat on my hands both times.

  • kudra

    DUST is where you want to be now.

  • BKXtoZERO

    I am OUT….. (OOT) 10% is 10% and it looks like weak bounce in downtrend to my eye

  • http://evilspeculator.com molecool

    Zero snapshot: Very nice bullish divergence at the lows today:

  • BobbyLow

    Good for you and this could very well be as far as it runs.

    About the only thing that I could add from a constructive point of view is that you made an intuitive decision to close your position. I’ve done this many times in the past. And sometimes I’ve been right and sometimes I’ve been wrong.

    One of the best things about a Rules Based System is that there is very little need for decisions based on intuition or gut. You will know exactly when to get into a position and when you are going to get out of a position. It’s a lot less stressful this way. It takes a lot more patience but one of the only ways that I can get 4R – 5R Runs or better that more than make up for a shit load of small losses. :)

  • BKXtoZERO

    Bobby I have work to do. I can hear responses when I post. I know it “could” still turn into something, but, I know Mole likes to see a spike low for one thing, (me too) and I like to see a solid reversal and strong move that tells me I can stay in. Next the trend is down. I’ve spent some time so far looking at indicators trying to find a system for CL. So far it has been all gut, RSI and some EW 😉 In terms of risk management, my “rule” is to keep losses in the hundreds $ and gains in the 1000’s $. That is kind of a rule isn’t it?

  • TheRooster

    mate, if this happens repeatedly you may be putting them in a place that is ‘obvious’ and jammed with orders that the market will go seeking.

    Alternatively you might be giving undue weight to the times you were stopped out near the top/ bottom and felt ‘unlucky’. I would keep a log of how often it happens so you can work out if you need a new stop methodology.

    If you put a lot of trades being ‘1-ticked’ is going to happen at times.

  • Scott Phillips

    Running your charting and stops on CL is the only way to fly :-)

  • BobbyLow

    You’re getting closer. :)

    BTW, I was so juiced up after last night’s game, I didn’t get to sleep until after 2:00 AM. I loved the fact that the Patriots said Fuck you to ESPN and didn’t send any players out to talk to them after the game. ESPN is the National Enquirer of Sports Journalism.

    Rex’s Defense played us tough as usual but his undisiplined style transfers to his entire team and that’s why I think he’ll never make it as a head coach.

    The Pats lost another two wide receivers to injuries on top of all the other key players that are already out. It doesn’t get any easier and its on to Denver.

  • Scott Phillips

    Gut – sucks, at least mine does. I see no reason why your gut would be more reliable than mine :)

    RSI – demonstrably not an edge (objectively and I challenge anyone to dispute this with real evidence) but can be useful for system building.

    EW – complete and utter horseshit.

    You are a triple threat 😉 Why don’t you take the baby steps towards developing a setup (it doesn’t have to be complicated) with an edge. Everyone here, myself included would be happy to help you build an exit algo and stop management around it.

  • Scott Phillips

    Stops reduce the performance of almost any edge you want to test.

    Which is why some traders complain that “you can’t win with stops”, like Neiderhoffer, who has blown up 4 times (literally lost the house and pawned the silverware to get a new grubstake) because he traded without stops.

    Especially hard on stops are systems with non-existent edges like “buy when RSI is X and sell when RSI is Y” (or stochs or williams %r or whatever).

    The problem is that you are thinking in terms of making money. You should be thinking in terms of SURVIVAL. If you don’t have stops, you will blow up one fine day, and then you won’t be trading.

  • Scott Phillips

    Exactly so. Our memory sucks for all things. As humans we remember pain (there is a reason you remember touching the hot stove) but there isn’t a strong evolutionary reason to remember pleasure that well.

  • Scott Phillips

    Depends on market phase. A stop should be chosen at a place that invalidates your rationale for taking a trade

  • BKXtoZERO

    “algo” as in programming or something rules based involving bolingers and MA’s? (and thanks for your offer)
    I will likely ask questions and do work at night which is the only time I get decent amounts of kid free/wife free/boss free time. Of the 3, the wife is the hardest! Besides 1 hour in the AM My lunch hour is the final hour of trading.

  • Scott Phillips

    Exit algo is a set of rules for exiting a trade. Not automated :)

    Look, you are making progress. You aren’t completely retarded anymore, and I applaud that :-) It took most of us a long time.

    Unfortunately you are in the state where you know enough about the pitfalls of trading to think you might navigate through them with Mole or someone else’s help.

    I’m here to burst that bubble. Taking Mole’s setups you absolutely 100% will blow up your account. What will happen is you hit a rough patch and start cherry picking, and picking the nasty ass rotten cherries.

    Look at those who have come and go over the years. The ONLY ones who survive have a consistent thing (method) they do every day, and stick to it day in and day out.

    Read Bobby’s comments. You can tell Bobby is legit, because he isn’t too interested in what the market is doing or what other people are doing with their systems. He does what he does, again and again.

    Mole likes to pretend there is high art and magic in his stuff, but it’s 95% checking the markets in the same way every day with the same indicators on, looking for the same inflection points he always looks for and placing INTELLIGENT BETS on a direction independent outcome.

    The time you spend trading is actually holding you back.

    Imagine you want to be a racecar driver. It is your dream, very few people ever get there. You have limited time, and limited funds.

    Instead you compromise a little on your dream and drive a taxi in your lunch break.

    Do you SERIOUSLY think that a taxi driver is going to end up in an F1 car? Even after decades of driving experience.

    What you are doing now just isn’t building skill. For example in the last two weeks I sim traded (on replay at 30x actual speed) 3 min chart for 160 hours of emini price action, posting a respectable .26 expectancy over hundreds of simulated trades. I built some real skill in that time, and got an idea of just how much further I have to go (a LOT).

    Think about that. I don’t think it’s a stretch to say that I’m among the best traders here. And I spent around 7hrs trading over the last week, and many many many times that learning. In fact, learning by replaying the market in fast forward is incredibly efficient because it forces you to make decisions under tremendous pressure which simulates real world conditions.

    Over time, what this means, is that I will get better at an increased rate. This is how winning is done. You can be a winner too :-)

  • Scott Phillips

    Trend following systems typically run their stops on a closing basis only. i.e. if it hits X price on close, they are out the following open.

    To avoid disaster risk they mostly employe a real hard stop a little further away, at a point that should not be hit. This way they get the best of both worlds, not being picked off by bots, and having some degree of protection in the event of disaster.

  • Scott Phillips

    You are exactly right, and there is a perfectly valid reason for this phenomonon.

    Think about it. You get a big move up. Really big trend. There are sideline bulls wishing they got in, waiting for any pullback. There are permabear Skynards picking at tops again and again. There are shorts covering. There is profit taking.

    All this together makes the market choppy, unpredictable and hard to trade. It’s what the dumbass wave fuckheads would call a wave 4 (except sometimes the wave 4 doesnt go on to be a wave 5, its just a topping process).

    Markets trend because the crowd is on board. When there are different crowds, and those crowds are confused markets start to look confusing.

    As a general principle they quite reliably cycle from being easy to hard (Ivan concept)

  • BKXtoZERO

    I actually beat Mole to this and entered Friday. I didn’t post as that day I cut up a deck and hauled it to the dump along with sheet rock knocked out of 2 bedrooms or 1.6 TONS of trash…… I had been watching and late Friday I almost forgot the market was even open. It is my every other Friday off 9-80 crap. Anyway thanks for flattering me that I moved a little past total retardation. Ed posted to me about 6 moths ago that he simply bought crude or sold it using either bollinger levels or MAs. I have that pasted in a file. I still needed rules beyond that for money management and exact entry/exit triggers. I appreciate your help. When you have time, I’m not sure how you would work this, maybe you can give me small tasks to start on. I’ll read up and each part will take me a while at the rate I am going with work and work on a house. This winter I should finish the house stuff at some point, then I will hit this much harder.

    For starters, I have no “real” trading platform or good source of data. I use TDameritrade retirement for charts. Nothing fancy. I bet you would say to start with a better data source. What is decent and free? am I back on the “Tard” list?

  • BKXtoZERO

    maybe this sounds dumb, maybe not but for me, that is part of the consideration to even enter a trade to begin with. I try to watch for levels that I know hurt other traders. I look at patterns and consider where pain levels are before I get in. Then I place my stop. I am not claiming a crystal ball or even a great record I can post so this is my armchair theory. I’ve done OK with CL and posted those trades here before but not much else.

  • BKXtoZERO

    enjoy the ride.

  • captainboom

    An idea I’ve picked up here is to consider trading a ‘non-standard’ time frame. e.g. I’ve seen 25 min, 39 min, 2 hour, 3 hour, 6 hour, 2 day, etc. time frames used. I think stops can tend to cluster at ‘obvious’ levels due to many people using the default times that charting software provides.

    By using a non-default time axis, you may benefit by having your stop at a level that isn’t as crowded.

  • Ronebadger

    What about the bearish trendline connecting the zero-peaks?

  • http://evilspeculator.com molecool

    )
    ( /( ( (
    )()) ( )))( ‘
    ((_) ) ((_)() )
    _((_)((_) _(())_)()
    | | || __| ((_)/ /
    | .` || _| // /
    ( |_|_||)__|( _/_/
    ) ) ( /( ) ) * )
    (()/( )()) (()/(` ) /(
    /(_))((_) /(_))( )(_))
    (_)) ((_) (_)) (_(_())
    | _ / _ / __||_ _|
    | _/ | (_) |__ | |
    |_| ___/ |___/ |_|

  • BobbyLow

    If you are familiar with TD Ameritrade then download Think or Swim which is owned by Ameritrade. TOS has an excellent platform and that’s what I use. There’s a learning curve to TOS Charts because they are not as dumbed down as the Ameritrade side but it will be worth the effort.