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No Crying Over Spilled Milk (Or Beer)
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No Crying Over Spilled Milk (Or Beer)

by The MoleJuly 25, 2014

I’m sure you all know what I’m talking about. Here we were trying to short this bitch several times in the past two days which on my end resulted in three ignominious stop outs – the last one at 1982. Only 1.5R lost, so it wasn’t a big deal but pretty much what I told you yesterday ‘would happen’ of course ‘did happen’ the next day. There was no reason for my stop to be at 1986 – it was too far in enemy territory. And then equities got Amazoned and here we are fifteen SPX handles lower. So what do we do now?

I tell you what we’re going to do. ABSOLUTELY NOTHING. We did everything in our power to exploit an entry opportunity near an inflection point and we simply didn’t get in. That’s life and unless you were on the inside there was no knowing ahead of time that Bezos would slip on the banana peel last night. Don’t beat yourself up – actually better yet, get used to it. Which is why we don’t take large risks on the equities side – or any correlated market for that matter. 1% is the max and if you’re a stock market junkie then always keep a close eye on being as delta neutral as possible (look it up or ask in the comment section).

Now on the ES futures we’re near 1971 right now and there are no major support zones nearby. ES 1966 looks like the next best line in the sand as the 100-hour BB is lingering around down there.

The S&P cash however has been holding its 100-hour SMA and we’ll have to wait until Monday to see if it holds.

But the real news of the day is the one that hasn’t been reported. While everyone else is talking about yesterday’s losers I’ve been taking a long position on the Dollar side (yes, I can’t believe I just said that). This is actually a weekly setup I shared with my subs last night and originally we’ve been expecting ole’ bucky to do the same old thing which is fold like a chair near any major LT resistance. Now I can’t promise/expect that this time it’ll be different but those two NLBL breaches do look promising. The fun may begin if we see a pop aboe 80.993 – so make it 81. That’s where the 25-day SMA sits right now and we’ve got plenty of air looming above.

This is the first time I’ll show the turkish lira here and I have to confess that I haven’t traded this one before. So I’ll ease myself into this one with 1/2R. I however do like the double inside day – and I’ll play the outer one on the stop side. I hope that’s clear as I don’t think my drawing is. Long Sunday on either breach of today’s candle (high or low) – but set your stop on the opposite side of the Thursday candle.

More setups waiting below the fold for my intrepid subs:

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And now it’s time again to kick back and crack open a bottle of your favorite alcoholic beverage. As you all know in my case that of course would be a bottle of Hefeweizen. A simple Paulaner is one of my favorites – it’s smooth but has that typical Bavarian disciplined but hefty flavor. Simple pleasures…. Well, I hope to see you all next week 🙂

Prost!


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.

  • SS_JJ

    Mole, are you still short GC or you took profit and closed that trade?

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Par excellence post. I come back for the commentary, not the beer.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    150 held. but look at April/May. (choppy)
    no reason to celebrate.

    http://stockcharts.com/h-sc/ui?s=GLD&p=D&yr=1&mn=0&dy=0&id=p17921140600

  • http://evilspeculator.com molecool

    Stopped out per the stop at the 1R mark I showed you guys. I thought that was crystal.

  • BobbyLow

    It’s time to call it a week. Going to carry +2R of unbooked profit split just about evenly between my Long USD/JPY and Short NZD/USD over the weekend. I understand that what the market giveth, it can taketh awayeth. My stops should be wide enough to handle Sunday night shananigans so we’ll see what happens.

    All things considered, I wound up with a positive net for the week so I can’t complain.

    Have a great weekend.

  • http://evilspeculator.com molecool

    Enjoy and have one on me.

  • Kidd Cudi

    is “Sunday night shenanigans” a thing? sounds like a late-night TV spot…

  • Kidd Cudi

    since you brought up amazon, I thought I’d scribble on it a bit… Thoughts? Worth a short?

  • Kidd Cudi

    Upon analyzing R ratios, I answered my own question: It’s only a 1:1 deal unless you’re sure it’ll break through the minimum drop line.

  • SS_JJ

    Just wanted a confirmation that I understood clearly.
    Planning to reverse the trade to long?

  • SS_JJ

    I’ll celebrate after taking profit of the next good trade

  • newbfxtrader

    https://www.tradingview.com/x/QlUQjBai

    Bit too late for a short but you could try a long at support.

  • Kidd Cudi

    despite the fact that, apparently, entries do not matter, BBRY has set up a pretty nice one.

  • Billabong

    Mole, I think your response to my comment on your previous post warrants more discussion and will probably cut/paste it again on Sunday.

    Also, I will post/announce my results for my first 100 trades on the campaign of 1000. It will be an FYI for board participants. I will say it is positive and will improve on the 2nd 100. Needless to say, it was a lot of work eliminating WAG’s and putting discipline into the whole process.

  • Kidd Cudi

    WAG’s? So much slang

  • Scott Phillips

    Wild ass guesses and other stupid stuff

  • Scott Phillips

    Exactly so. It’s a trade that probably has a 60% chance of returning $1 for every $1 that you risk. So it’s a valid trade, but really nothing to right home about.

    And because weak hand bears will want to bank some profits and latecoming shorts (like you) will be getting in after the horse has bolted you can expect a choppy time for the first few days of next week. If your thesis about a trading range is correct (and it is the highest probability) then any expected choppiness will be magnified by the trading range.

  • Scott Phillips

    It’s a thing, since many longer term players adjust their stops and orders over the weekend and you can get a large opening gap caused by a supply/demand imbalance when the market is at it’s thinnest.

    My suggestion for holding intraday positions over the weekend is to plot the size of the opening gap each week on a spreadsheet and make sure your stop at market open is at least 2 standard deviations away, so as to ride out any but the most extreme opening gaps. There is also a lot of research by Scott from masterthegap.com who has a very good method about choosing gap’s as potential fills.

  • Scott Phillips

    For the 1000th time. Plot the futures not the ETF, one day that will fuck you up and no mistake

  • Scott Phillips

    Candle patterns are a negative edge on stocks on daily charts. The gap risk throws everything out the window

  • phylum

    More succinctly, it’s your initial risk.

    How you manage the trade from there is up to you …. CM, MM and all that

  • mugabe

    Long term, it’s been basing for the last 2 years:

    http://scharts.co/1kgeo4G

    Looks good if it can hold recent lows

  • http://evilspeculator.com molecool

    Why would I do that?

  • http://www.ProfitFromPatterns.com/ Ivan K

    ENTRIES do NOT matter … reinforcement!

    A visual comparing the vast difference CM (Campaign Management) can make to your end result … charts below.

    The charts also graphically illustrate the concept of not throwing the baby out with the bathwater!

  • mugabe

    think your charts have got lost somewhere

  • mugabe

    So perhaps there is a holy grail after all, but it’s ‘boring’ stuff like position sizing and campaign management (cutting losses, letting profits run ,etc.)

  • Kidd Cudi

    it’s also an inside bar on the weekly, which has much less gap risk, although you’d obviously have a further spread from top to bottom.

  • strider

    Do you guys trade DX thru NYBOT or is there another way besides FX? IB charges around $90/month for their data and I’m not interested in coffee, sugar, etc.

  • Spalding

    What Ivan’s charts clearly show, is the importance of having a plan before one enters a campaign. These item’s should be know before entry:

    1. When to enter and how to enter.
    2. When to exit on loss or gain and how to do this.
    3. How one’s net loss or gain effects the next campaign.

    Entering at yearly high’s or low’s does not matter, however slippage on entry does matter and on small ranges can mean the difference in a winning or losing campaign, so one’s actual (price entry) does matter.

  • mugabe

    pls ignore. i can see them now

  • saltwaterdog

    I see why you may have felt a long was possible… per the sheet linked above (http://evilspeculator.com/?page_id=37269), there was a long setup (and on my data, actually two) at the time

  • Scott Phillips

    Nybot is the best way. You can get a data fee waiver through the CME data waivers that are available with most brokers.

    OTOH if you don’t plan on making $90 / month from it, really you should be trading FX and not futures as the position sizing discrepancy inherent in futures contracts will fuck you up

  • Scott Phillips

    Entries are important, but only a small piece of the puzzle, and easy to get right. A short, off the top of my head list of entries I am 100% certain would be edges.

    – entry on close outside a flat bollinger band
    – entry on touch of flat bollinger band
    – Hammer candle at a pullback to support in uptrend
    – inside bar counter trend where a breach of the inside bar will start a short squeeze
    – inside bar on a pullback to support in a trend
    – close outside bollinger after lowest standard deviation in 100 bars
    – pullback to longer term EMA in low volatility uptrend
    – overbought/oversold oscillators in sideways markets

  • Scott Phillips

    This shows neatly why most people will never be able to follow a system. Most people here would say their own results are inferior to those above. But looking closer the system above spends 2/3 of the time either going sideways or going down, then makes a big leap.

    This is typical of the systems designed to run all the time, using the “milk a market” theory. Even with great results at the end, they require emotional skills which most traders simply do not have and will not develop to run.

  • SS_JJ

    To account for a probability of a rocket move up?
    http://stockcharts.com/h-sc/ui?s=$GOLD&p=D&b=5&g=0&id=p16168982351
    http://stockcharts.com/h-sc/ui?s=GDX&p=D&b=5&g=0&id=p16168982351

    Let’s see the follow up move on Monday, if there is one.

  • newbfxtrader

    UUP would be long and UDN short if you dont want to trade futures.

  • http://evilspeculator.com molecool

    My point was that I already was in a campaign which has to conclude before I engage into another. And my question was not rhetorical – I wanted to know what valid technical long entry he was referring to.

  • strider

    thanks. i’ll stick with fx

  • mugabe

    One of the most remarkable charts I’ve seen in a long time:

    http://scharts.co/1owoeit

    (Didn’t find it myself. Was posted by someone at Stocktwits)

  • newbfxtrader

    Looks fine. Was trading in a range then broke to the upside. But a long way to go before it rreaches previous glory above 200 near the 2000 peak.

  • mugabe

    Yes, but that’s a 9-year base or long saucer we’re talking about! It almost looks too good so will probably fail. Lol

  • newbfxtrader

    Not bad at all. Aim for the 2002-2003 resistance around 75 ish. If that breaks then we have a real run…

  • mugabe

    yeh, there’s a bit of (v old) resistance there but after that it’s blue skies. I’m counting the money already, lol.

  • newbfxtrader

    Lol as the old saying goes always count the chickens Before they hatch…

  • mugabe

    That’s right. Even if they don’t hatch, you can still enjoy counting the imaginary ones!

    It’s like vacations- the best part is planning them, not having them

  • Spalding

    Scott, Ivan has invented some ways to “milk the market” or “not lose” even during “bad cop” or “hard times” as ya’ll used to call it. So we could call them “consolidations” or “sidways corrections” in market speak, before a move up or down. We are looking to be on the right side of the trend but there are still ways to profit or not lose during consolidations or whatever one would call them. Ivan may have already shared some of this info, like trading the equity curve during a draw down, etc…. One way would be to move to a defensive posture and not trade when results fall below one’s equity curve’s moving average and then resume when the MA goes above. This takes time and patience of course and that is the challenge.

  • mugabe

    Useful free site with screens for patterns:

    http://sharptraders.com/index.html

    The cup and handle and breakout screens throw up some interesting charts

  • Scott Phillips

    Much better idea

  • Scott Phillips

    There are some ways to minimize the downside, sure.

    Inherent in the “milking a market” approach is that you are adopting a campaign management which is by necessity inefficient. This is what we do with Crazy Ivan, we use Ivan’s Protect-R which is very good for this type of marginal edge.

    The truth is that a sideways market and a trending market, a low volatility market and a high volatility market are all so different that you cannot expect the same things to work for all of them. You can talk and talk and talk and call it whatever you want, but there it is. I’ve traded Ivan based systems for well over a decade, and seen many many systems from Ivan and his students. None of them are objectively high performing systems.

    It is not possible to have a system that performs above “average”, objectively, with one size fits all systems. So that I’m absolutely clear I think that this approach builds objectively average systems that can never superperform, and which are emotionally difficult to trade. This is my experience, and the experience of others I know.

    A far better approach is to say “what type of market do I want to trade? Trending or sideways and where in that market do I want to enter?” Design an entry for that market phase (early in a nascent trend, catching the meat of the trend or catching the last gasp) and build campaign management that will be optimized for that market phase.

    When I saw the quality of the systems that Van Tharp’s students were designing my eyes were opened.

  • Billabong

    This was a great reply by Mole to me on his 24 July, 3:14 pm update entitled “Entries Do Not Matter”.

    That’s just one piece of the puzzle – the lessons to be learned are all about abandoning natural bias, assumptions, and avoiding to force your views on the market. Make no mistake – there are extremely talented chartists/analysts/traders out there who NEVER manage to make that important step. As much as I respect Tim for instance I would count him in that unfortunate group. He has recently changed his views it seems but it’s easy to recognize that the same old bear is still lurking below that new exterior, just waiting to spring to action at the slightest medium term correction.

    There are some people who are simply unable to get to the point of detachment. It’s a sad fact and unfortunately the best advice you can give them is to step away from trading and pursue another more rewarding activity. Due to the sunk cost effect (another cognitive bias) they however often become obsessed with wanting to be traders and wind up destroying their accounts and even their life.

    When you go to other blogs I see NONE of this being discussed – it’s completely absent from the daily discourse. There’s a 90% focus on charting and T&A which only accounts for about 20% of your trading reality. What’s sorely missing is campaign, money, and self management – the other 80%. I have been able to stimulate more conversations on this but am a bit disappointed by the muted response. This post is a good example.

    In essence I do know what is needed to get you guys on the right track. However I am having a hard time pushing above the noise level – there are just so many pertinent sources/blogs/sites out there now. I am still pondering on what would be the right format – a structured approach basically – to turn retail rats into consistent successful traders (short of auto-trading everyone’s account – hehe).

  • Billabong

    The only time I believe entries matter is when someone isn’t mindful of their entry and is totally mindless. Someone who enters with no inkling of TA supporting an entry and it’s one giant WAG.
    Being detached or in the zone and staying there is almost impossible. We had that five week period Jun-Jul that was great. In the zone, using lots of energy to stay in it, and exhausted when the run ended.
    The danger of going to biased blogs isn’t so much their bias, it’s the seeds they plant that directly impact my work. Even here, I have to watch out that seeds aren’t planted that have a negative impact based on the personal system I use.
    The markets are like the giant waves in the ocean, the ones that go for 100s of miles…

  • http://www.ProfitFromPatterns.com/ Ivan K

    What matters most from my experience is CONSISTENCY … consistency in market / s of choice … consistency in starting time … consistency in timeframe / s of choice … consistency in approach … naturally this implies having a plan aka RBT … detachment from the outcome … and discipline … are also a given.ll

    To acquire these takes time … and far, far, far more time and application than what is first imagined … and far more than most are prepared to devote … it is also extremely rarely done on a solo basis … yet most attempt to do so solo … hmmm!

  • Billabong

    I have a campaign of 1000 trades. Today is the end of the first 100 of those
    trades (1 Apr-27 Jul). As you will see, the numbers aren’t great, but it’s a step in the right direction. The first step was to work on my position sizing, improve my discipline, start being patience and be consistent. In Phase
    I, the $100 SL and limited size positions worked wonders in stabilizing me and putting
    discipline back into my trading. This phase consisted of 51 trades with a 4.3 R on 28 wins (55%). Phase I also
    included the hand written diary and trading log. The written and review part is a lot of work
    and well worth the effort. In Phase II, the objective was to continue improving both my discipline and patience,
    continue reducing my mistakes, and be more mindful of what was going on in the
    markets (are we trending or in a trading range? Is that a hammer hammering out the bottom? Is that IP/OP going in the direction of the trend or a countertrend? Is there follow through?). As always, campaign management is critical, making sure I don’t put myself in a position to blow my account up. During Phase II, I also added another trading system for sideways markets (unlike Richard Denis, I don’t want to take every trade in a sideways market until it breaks out). I also widened my stops and increased position size and The results were better. This phase had 49 trades with 19 R on 22 wins (45%). During both phases there were 9 mistakes costing me 7 R. Out of 9 mistakes, a late exit accounted for 8 of them and 1 was an unnecessary trade.

    Icnclusion, I’m happy with the progress and 19 R with 9 mistakes can be improved on.

    Phase III is this campaign’s next 100 trades. The SLs have been widened and position sizes
    increased again. In Phase III, I will
    use the current systems for the whole 100 trades for a full evaluation. My goals focus on improving my campaign management,
    improving my discipline, continue to work on patience (allow the market to come
    to me), use meditation to my advantage, reduce the number of mistakes, continue
    to be consistent, and enjoy the victories / reflect on the losses for
    improvement.

  • Billabong

    Discipline, patience and consistency are the big three in campaign management…

  • http://www.ProfitFromPatterns.com/ Ivan K

    In the whole process of risk-taking (including entries) … as it is in any endeavour in life … I suggest.

  • Scott Phillips

    Well done sir! You are to be commended for having the courage to make your results public.

    For everyone reading here, THIS is how winning is done. Measure your performance objectively and not in fantasyland. Take the time to review your performance (and it IS a lot of time). Face the unpleasant emotions from trading mistakes and poor performance head on. Admit you have a long way to go.

  • Spalding

    So, when to “protect 1R” and when does one let the trade run? If one Protects 1R too early you risk missing the upside by stopping out too early, but if one fails to P1R you can take a win and make it a loss. What to do? Think about Ivan’s systems… there is a way to be profitable more than 33% of the time using Ivan’s systems while trading the trend and in “sideways” markets. He has discussed them here, we just need to put them together. I don’t think trying to isolate the large upside or downside event is going to be easy… there will be many misses. Best thing is to be present and catch the larger moves while thinking about how to trade the “sideways” mkt..

  • newbfxtrader

    Good work buddy. Keep it going!

  • newbfxtrader

    Ok Dec contract. No more funny business. We could have a bottom in the making.

  • Billabong

    Thank you!

  • Billabong

    Thanks. It’s a long haul for all of us…

  • Scott Phillips

    You miss the point. There is no way to optimize for both trending and sideways periods and so by definition when you attempt to do it you get an inferior result in both.

    You cannot effectively make the decision about when to let the trade run and when to protect 1R without isolating the specific thing you are doing.

    Ivan’s patterns are a very small edge overall. An edge, sure, but very small. Based on literally several thousand trades that I’ve taken using Ivan systems the winners average 1.1R and the losers average .9R (mainly because of the rule to exit after 3 periods if you have not made 1R). The win rates for Ivan systems are generally slightly better than 50/50 in the good times and slightly worse in the bad times which is fine.

    If you were, for example, to isolate sideways markets and only take short setups which first touched an upper bollinger, or short setups after an overbought indicator of choice, then you could build a campaign management which would have a reasonable chance of making a multiple R win. You would have a system

    If you were to isolate trending markets and wait for a long setup which existed after a pullback to support (my core systems do exactly that with a very high SQN) then you could design a campaign management where a decent amount of your trades, around 1/3 of winning trades, would end up at 4R or better. My daily chart systems do this with an SQN in the high 3’s and an expectancy of .5

    By trying to do both, you end up having very poor performance in either. Objectively, one size fits all systems never perform very well. Ivan’s are no different in that respect. They are an edge, but a small edge. They happen to be perfectly suited to Ivan’s personality so he can trade them at extremely high efficiency.

    In terms of system building, the “milk a market” approach is demonstrably inferior

  • newbfxtrader

    even better. Lots of room to upside you know where to flip to the downside.

  • http://www.ProfitFromPatterns.com/ Ivan K

    My understanding of the Richard Dennis approach is slightly different … ” to take every trade in a sideways market until it breaks out” … as per Billabong’s comment above … I believe that one of Dennis’ rules was to … only place an order for a new campaign is WHEN the previous one had not produced a profit … in other words he was mindful of the Dependency Factor of his RBT.

  • newbfxtrader

    https://www.tradingview.com/x/BJxIVYKm

    ATM its a pullback in an uptrend. Easy to flip if it doesnt hold nearby.

  • Spalding

    ” There is no way to optimize for both trending and sideways periods and so by definition when you attempt to do it you get an inferior result in both.”

    Actually there is a way to optimize for each of these periods but I am not going to step on Ivan’s work by sharing it here.

    “You cannot effectively make the decision about when to let the trade run and when to protect 1R without isolating the specific thing you are doing.”

    I don’t make the decision. The market does this for me. Let your personal equity curve be your guide. Which is harder to trade, a trending market or a sideways market? Tailor your campaign management to suit each phase. By using his setups, you can profit in both.

  • Scott Phillips

    It should take about the same time and cost about the same amount as to become a doctor lawyer or engineer

  • Scott Phillips

    I repeat. There is NO way to optimize for both trending and sideways periods.

    None, zero, zip, zilch.

    You can get a workable tradeoff which works in the long run.

    Equity curve approaches which is what I assume you are referring to (which I also use with Crazy Ivan) take advantage of high system dependency, which is a feature of average systems. Sure it kinda works, but really, it’s putting lipstick on a pig.

  • newbfxtrader

    If it cant hold here soon….

  • newbfxtrader

    Hmmm that only takes 12 yrs or more….

  • BobbyLow

    Great job Billabong!

    “The first step was to work on my position sizing, improve my discipline, start being patience and be consistent.” Then in Phase 2 reduce mistakes and add another system for sideways markets. These things are all excellent and necessary elements. IMO BTW, I had to add a backup system as well)

    “The written and review part is a lot of work and well worth the effort.” I can also relate to this. Between backtesting, forward testing live with real money, recording what was done right, what was done wrong and what could have been done better, I used up 3 boxes of mechanical pencils, 4 packages of lined paper (both sides), and 6 one subject college ruled notebooks. 🙂

    The last phase for me is the psychological phase which actually proved to be the most difficult. And a big thanks goes out to Scott for helping me over the top on this one and having more faith in my ability then I did. I have to work on this every single day or “stinkin thinkin” will find its way back.

    It looks like you are on your way to making your own luck. And speaking of luck, I think Thomas Jefferson said it best “I am a great believer in luck, and I find the harder I work, the more I have of it.”

  • Scott Phillips

    Call it 4 years of full time exceptional effort

  • Scott Phillips

    This one is suspect. Look at the large range candle making the ultimate highs. A sign of strength late in a move like this (from 8.75 to 9.35) is most often a sign of exhaustion.

  • Scott Phillips

    Shows all the sign of a trend change. Strong move down from the lows, very shallow retest. Looks good

  • Scott Phillips

    Losing traders will not make the effort to transform themselves into winning traders…. because that is the sort of thing that winning traders do

  • Scott Phillips

    EURUSD short entry, trade number 171 for the year

  • Scott Phillips

    NEW POST!

  • Billabong

    I was referencing a third party … Curtis Faith. Mr. Faith said they either made a decision to trade a sideways position or not, if they did, then they would need to take every trade. He never indicated whether it was good or bad. I like your response because it adds clarification.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Personal reference ? Always valuable to canvass diff ideas.

  • http://evilspeculator.com molecool

    Thanks for reposting this – I didn’t really expect much of a response, just musing out loud.

  • http://evilspeculator.com molecool

    The very same applies to martial arts. Out of 100 people who try it only about one or two accept it into their life. Consistency and perseverance are key (plus a tolerance for pain and disappointment).