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Setups Vs. Predictions
53

Setups Vs. Predictions

by The MoleNovember 4, 2013

When one has spent any considerable time in the financial blogging racket invariably a few basic lessons will have to be learned in order to assure long term survival. Many oh so promising analysts or chart jockeys try their luck in launching their own digital den, perhaps even manage to accrue a respectable audience and eventually some prominence, only to eventually meet ignominious demise upon encountering the brick wall of blogging exhaustion. Trust me – I have been there – and once was only a few inches away from throwing in the towel. As it so happens the Mole has suffered more genetic damage than most which however aided him in offsetting any blatant lack of talent with sheer tenacity. Anyway, here’s are the thre lessons I’ve learned.

First and foremost – don’t let the bastards grind you down. Thanks bono – that was actually one of the big ones for me and fortunately I started to develop a bigger (but less shiny) coat after a few years. The financial sphere is littered with opinions and you know what they say: They are like farts (and have about the same value). So hard to hold em in. When one slips, everyone’s gonna know it and at least one person is gonna leave the room.

Second – and that is one that became a bit of an epiphany or so about a year in: Most retail traders do not understand the difference between a setup and a prediction. So let’s just assume we’ve got a retest variation sell on the SPX today – which as coincidence would have it would be the case today:

From a professional trader’s perspective we had a short setup at Friday’s lows today. Since we climbed one more candle (assuming we close that sideways chopfest as is today) this means that the RTV-S trigger now advances to 1761.56 (or whatever low we’ll paint today) and will be valid throughout tomorrow. That is it – a setup – nothing more and nothing less. And given the tape of the prior weeks the probability of it triggering and then resolving successfully is probably rather low. Does that mean I would not take it? Absolutely not – a setup is a setup.

But wait – not so fast. If you post this on your blog (which I coincidentally just did) the majority of retail rats are going to read it and then take away the following: The Mole thinks that prices are going to resolve to the downside – the Mole has turned bearish.

Say what?

Look folks – there is a difference between a setup and a prediction. The former is what professional traders look for – the latter is what retail victims look for. The former exists – the latter only exists in your imagination. Because you care too much. And you cannot embrace chaos and ‘not knowing’ as a part of your trading existence. That is your problem – not the market’s. Ask yourself this – how well have the combined weight of all the predictions you have encountered in you time worked out for you? Made your millions yet? Yeah, didn’t think so…

So I don’t think I have to keep beating this dead horse – hopefully the point has been conveyed and perhaps will take seed sometime within the scope of the unfolding decade. If not then best of luck to you sir, and welcome to the other side of my trades.

Oh yeah, and third – you are only as good as your last trade. Trading is a bit like joining an AA group. Don’t think for a second you can ever be cured of your cognitive biases and you are only one trade away from reverting back into the hopeless emotional sack of excrement you turned into when you wiped out your first account back when. What you’ve learned since then (and what kept you going) wasn’t really so much about the market. It was about you. Because it’s you who is the problem. The market is rather happy without you futzing around and spewing about opinions. So get over yourself and focus on executing each trade with razor sharp precision. The system is the system is the system. No excuses and there are no bad guys. Oh yes – there’s one – guess who?

Anyway, that brings me back here. There’s not much I would touch with a dog poop collector today – a glance across the board instills the distinct impression that market makers are happy to give both sides a good whipping. Bonds futures may be the exception as I’m seeing a short setup here assuming it drops below 133’25. That 25-week SMA may hold up. A long is possible but not before 135’25. You can use both inverse as your stops.

That’s it for today – have fun but keep it frosty.

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.

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.
  • RacerXX

    great article Mole

  • SS_JJ

    I like the Mole signal here

  • SilverEagle

    Floor just fell out of the hourly ZL after pointing up strong all day. Participation gone?

  • SS_JJ

    yup. Bots in charge. AH and overnight tape should be interesting

  • Sean

    I haven’t been doing this long, but something looks extraordinarily weird with this chart (vis-a-vis tick/volume/price action) …

  • SilverEagle

    What are you looking at Sean? New to this too – would love to see what’s causing the spidey-sense to tingle.

  • Skynard

    Large moves generally precede that kind of signal range. I view it as exhaustion.

  • Sean

    The combination of high tick values, declining price, and that weird patch of volume during the down move just looks really funny, then tick & volume flat-line for the day… maybe somebody very big was doing some beginning of month re-balancing before their tee time?

  • SilverEagle

    Now that I see the image of the chart, I can see exactly what you mean. Messed up.

  • bdoone

    I’m surprised nobody commented on that 1/2hr of +1300 TICK. Must’ve been stuck/bad feed…Its not going to stay +1300 while SPX sheds 6pts…just another ‘anomaly’ we’ve been seeing lately like the phantom VIX print last week which, of course, has been removed…not to mention all the temporary exchange halts lately…something is going on, strange shit.

  • http://evilspeculator.com molecool

    Boy – you guys are literally falling on top of each other! 😉

  • http://www.tomekfranzl.com tomek

    Epic post Mole, should be added of your hall of fame/must read collection.

  • http://evilspeculator.com molecool

    hehe – thanks mate :-)

  • http://evilspeculator.com molecool

    hehe – thanks mate :-)

  • newbfxtrader

    I got nothing boss. Waiting. Lots of sideways action right now.

  • http://www.tomekfranzl.com tomek

    And here is my NQ IP chart/entries for tomorrow:

  • http://evilspeculator.com molecool

    Yah, I don’t blame you guys.

  • CorporalCarrot

    Great post Mole.

    I had a great day today. I set out my plan as per chart I posted, and then traded it as it occurred. It wasntmy most profitable day, but good discipline and position sizing. I went in heavy on the 100 hr retest and added down to 1762.xx since I thought there was only a couple of points before I would know if I was wrong. Lightened up into the bell.

    I’m not sure what people are seeing here in terms of weirdness / bots etc. To me the last several days have been a normal pullback after all time highs and only to be expected. I have little doubt we will see a new attempt at those Highs this week, the great thing about this is the narrow range. It’s not like you need massively wide stops before knowing you are wrong and can flip short.

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

    By focusing on the RTV sell setup … pretty much to the exclusion of the valid buy setups … the bearish bias is pretty self-evident … a trap for players of all ages and levels of experience.

    The battle-lines have been drawn for both the ‘current’ long side … as well as any potential short engagement … black and white RBT’s make for a boring life … perhaps one reason why they are not so popular.

    If discipline is the reason / justification for gravitating to another person’s rigid RBT approach, then that is a bandaid approach from my perspective … it does not address the root cause of the issue (ie lack of positive trading results due to not following ones own approach) ,.. namely the lack of ability to employ discipline.

  • http://www.kizi1.org/ Kizi

    Great, i like video today!

  • CorporalCarrot

    I’m adding long here again where the 100 hour meets the lower bollinger. Trades indicated along with the few lottery tickets held into close from yesterday (having sold the midday trades at the close and outside upper bollinger). I like the risk reward here as there’s only a few handles before knowing I am wrong.

    Think today will be decisive. We get through this churn and retest highs or go back for another retest of 1750.

  • http://evilspeculator.com molecool

    I’m in the wrong business! How exactly does Starbucks get away with pricing $4.50 for a cup of dirty water – in China from all places?

    http://www.bbc.co.uk/news/business-24619544

    FYI – for some context:

  • http://dartht.blogspot.com/ Heisen_Gerb
  • http://evilspeculator.com molecool

    Yeah, nothing interesting on the ST front right now. Let’s see what equities decide to do now… the RTV-S remains on the books.

  • http://ibergamot.blogspot.com/ i Bergamot

    One of the Best Posts EVER !!!
    Thank you Mr Molecool

  • Rightside_ot_trade

    Yeah, obviously there’s only a small segment that will go,
    mainly managers at the one we go to in a factory city outside Shanghai,

  • CorporalCarrot

    Is the zero lite broken or is that Really the signal and participation?

  • Sean

    Lost some hourly support on the SPX, but not quite ready to be short yet… the daily NLSL will be key.

  • SilverEagle

    Anyone think they potential trend day has legs?

  • Skynard

    Loading up again on the BB touch, gap resistance:)

  • SilverEagle

    Think i got my answer.

  • CorporalCarrot

    Yes it is an uptrend within downtrend day.

  • Fearless

    Bears totally f****d this up, again.

  • SilverEagle

    Maybe I’ll learn my lesson one of these days – fortunately I have kept tight stops, but being burned time and time again on all of these short setups.

  • CorporalCarrot

    So I bought most of the way down but as per my earlier post was in disbelief at the drop based on the complete lack of participation on the zero.

    Went in big at 1757 based on the above plus the RSI showing deeply oversold on my timeframe. Have lightened up now back at the 100 hour (Cmc markets system I haven’t changed from default FIFO donut has wiped earlier entries but my effective cost base here is somewhere around 1753)

  • AmazingLarry

    Thanks for the mental smack down, boss. You’re so friggen right; the retail puddle heads are so braindead when it comes to pointing out an inflection vs a prediction. As I recently wasted 10 min of my life trying to tell one that the charts are not for fortune telling, they are for empirical validation, quantification and qualification if risk entry, he still could not wrap his head around it. This works beautifully for me/us as losers on the other side of the trade are vital.

    That said, I did a little harmonic math on the SPX a few weeks ago and kept seeing $1783 as a cycle turn. Didn’t bet on it and totally welcome the market to laugh at such silliness but sometimes it’s fun to do. It’s actually a relaxing mental exercise for me outside if endless math qualification.

  • Dyellowflash

    Interesting. U seem to be as strong in the force as I am… I was trading the WS/YM index instead, went long at the WallStreet open, had 3 good fills right at 10-25 pips near the bottom and had TP-ed everything as well bcos I dont keep anything overnight here.

  • Skynard

    Abovee 1760 /ES would have to agree with ya.

  • CorporalCarrot

    I’m not strong in the force but my basic thesis is that this is a raging bull market until proven otherwise. As such the last several days must be given the benefit of the doubt as being a consolidation in an uptrend. As soon as price indicates a turn I will have no hesitation getting short.

  • CorporalCarrot

    Bears are irrelevant in the market to the point of not existing to all intents and purposes.

  • CorporalCarrot

    Further trimmed longs between 1763.11 and 1763.36. Letting lottery tickets ride now in effect.

  • CorporalCarrot

    Selling lottery tickets. Out.

  • http://ibergamot.blogspot.com/ i Bergamot

    Made this annotated chart for a friend
    Gold roadmap
    Chopping in a Box

  • http://dartht.blogspot.com/ Heisen_Gerb

    another morning fakeout?…..return-to-mean b!tchez.

    time to focus on currencies, or go fishing, or something.

    http://s24.postimg.org/8kxilaomt/morning_fake.png

  • Skynard

    Full short the /ES:)

  • CorporalCarrot

    Still a scary lack of signal on the zero despite the rise off the lows.

  • http://evilspeculator.com molecool

    Well, that has been the point for almost four years now. Whenever I see a steep drop that’s not confirmed I know there’s that ‘magic’ buyer stepping in just in time – meaning a few handles after a short trigger. Pretty much textbook at this point. Equities can easily bubble higher on minimal participation. I have rarely – very rarely – seen a sell off that behaves the same way. When in doubt expect a snap back.

  • Skynard

    Short again at gap fill, dollar will likely test 81 by the looks:)

  • CorporalCarrot

    Well it’s the reason I didn’t flip short this morning and made good money on the long side.

    I’m not sure what others are seeing to encourage shorting this thing now though.

  • SS_JJ

    like they had any say on the tape direction…

  • http://evilspeculator.com molecool

    There is nothing to see there, mate.

  • http://evilspeculator.com molecool

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    ¨°º¤ø„¸F R E S H „ø¤º°¨

    ¸„ø¤º°¨ M E A T“°º¤ø„¸

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  • http://www.frivjogo.info/ Friv Jogos

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