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Burning The Temple
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Burning The Temple

by Trading GangsterMay 21, 2019

Hello denizens of Evil Speculator! Just as Mole is off to visit his indigenous peoples of Austria, I’m back from a week of honoring my Fucks Given Reduction (FGR) process in the California desert at Lightning In A Bottle (LIB). Fresh and ready to go deep into some stuff you can actually use to trade with. As a bonus to my Cali trip, I got to spend a time in Venice with a man who goes by the moniker The Trip Advisor, who is behind-the-scene responsible for the biggest hit Post Malone has.

His morning affirmation routine is simply like nothing I’ve ever seen and deeply inspired me to completely change mine up. On to talking shop about  trading…

As traders, over time we tend to gravitate towards certain markets and certain types of trading. Some  of us might be day traders or swing traders. Some momentum traders, others mean reversion.  Some are forex scalpers. Others are trend following futures traders. And then there are options traders which can fit into many different pigeon holes.

Over time I’ve learned my chops and mastered the nuances of my particular area of expertise, intraday stock trading. It’s hard to be a master of many markets when there are so many specific pieces for each particular market that are necessary to understand in order to have a long term edge.

As Van Tharp says, we don’t trade the markets, we trade our beliefs about the markets. And these beliefs can really leave us stuck in the mud, unaware that our problem is our beliefs, not the markets.

For a long time, I didn’t understand the options traders who looked at option chains all day and we’re crunching numbers. I thought to myself, “they just don’t get it – automated day trading stocks is WAY better!” Duh!

Likewise, they think the same thing about automated algo traders – we spend hours writing, testing, debugging APIs, etc. In the end, it’s two different paths that lead to the same place. I realized I needed to put aside my beliefs and address the hard facts: these are guys putting triple digit returns on the board year after year. Slowly, I became interested in what they were doing and expanded my horizons.

I realized it could really improve my day trading of stocks and understanding of how all markets work and affect each other on a deep level. Since most of my trading is already centered around volatility trading and this is my growing area of expertise, I started feeling like an idiot for not incorporating options into my trading arsenal years sooner.

It was time for me to burn the temple – torch my sacred views of the best way to trade and expand my reality with options. So today I want to give a brief demo of how bridging these two worlds can work and dramatically improve the trading of both in the ADD inducing world of short term trading.

Hacking The Expected Move

If you’re familiar with options and the greeks, it can be overwhelming for new options traders. Delta, gamma, theta, vega. It’s a lot to wrap your head around for new traders, especially if your math chops aren’t on fleek. However I think of these much differently. For the type of trading Mole and I do, the most important piece of all these things is what’s known as the expected move.

Here is a screenshot  from the Think or Swim (TOS) platform and we can see as of Tuesday morning pre-market, the expected move between now and Friday’s close is +/- 5.796.

In most platforms these days, it gives you the expected move and implied volatility of the underlying. Another way to get the ball park expected move is to take the at-the-money (ATM) call and put price and add them together.

What is the expected move? It’s simply the expected move of the stock between now and the expiration of the option with +/- 1 standard deviation (67%) of probability. So if you were to buy the ATM straddle, 67% of the time you would lose money or break even. 33% of the time you will turn a profit. If you can figure out how do that with a 1:1 risk/reward ratio, you can see how shorting the expected move has a fairly massive edge (2:1). However the devil is always in the details…

In reality, this is where many edges lie in many option trades, the expected move. Do we think the stock is going to move more or less than the implied volatility is predicting? If you can master this one thing (and have your risk management shit together), you will have a long lucrative career trading options.

Closely related to the expected move is the range (high – low). The range is related to the expected move (volatility) of the stock and they both share the magical property: they are both strongly mean reverting. And we’re not talking about me looking at a chart and saying “Man, that MF’n chart looks like a mean reverter.”

We use math to determine if something is mean reverting and for our purposes, we’re going to use the Hurst Exponent. If you’d like a full explanation of how the Hurst Exponent works and the geeky math behind it, I refer you to Quant Jesus, Dr. Ernie MF’n Chan’s second book:

Essentially how the Hurst Exponent works is we feed it a time series, such as the daily closing prices of a stock or the daily range of a stock. The Hurst Exponent returns a value between 0 and 1.

  • values close to 0 indicate the data is very mean reverting
  • values around .5 indicate a random walk or in non-quant geek speak: random ass moves
  • values closer to 1 indicate strongly trending data

So without further babbling, let’s pump some data through the Hurst Exponent and see how we can use it to make some ca$h money dollah dollar bills. Make it rain… make it hurricane.

The Hurst Exponent In Action

What does this have to do with hacking the expected move? You will soon see.

Let’s start by pulling in the daily closing prices of AAPL and plotting some things. First a simple chart of the closing prices of AAPL.

Next with some simple pandas magic in python we can down sample the daily data into weekly data to arrive at the weekly returns. The weekly returns are simply the close-to-close returns or in English, the percent change from last Friday’ price:

(this Fridays closing price – last Fridays closing price) / last Friday’s closing price

From this chart, you don’t need to be a quant dork to see that the weekly returns are mean reverting.

To work in volatility we need the unsigned returns. In English, what this means is we’re going drop the +/- from the percent returns to calculate volatility or just take the absolute value of the returns. I’ve then converted it into a z-score and plotted it, this is what that looks like:

And finally the weekly range, also in a rolling 52 week z-score:

Now let’s pump all of this data through the Hurst exponent magic box:

  • Apple daily closing prices: .530
  • Apple weekly returns: .008
  • Apple weekly absolute returns: .017
  • Apple weekly range: .031

We can see that the last three are very mean reverting, based on their values near zero. Not exactly shocking, it’s quite obvious from the charts, but math confirms.

Why am I working in weekly returns in ranges? Most of the options we’re interested in trading on a short term basis need to be liquid. The most liquid stocks tend to have weekly options, hence we’re concerned what the expected move is over the course of a week. We want to turn and earn baby – the more often we can make trades, the more we can potentially earn.  Liquid weeklies, and even the 3x weeklies on SPY offer lots of trading potential. Turn and earn baby!

Putting It Together

With mean reverting data such as weekly volatility, there are many methods of predicting mean reversion data. In finance, the most well known is GARCH, which is a method for predicting volatility. It’s used widely throughout the financial industry for measuring risk and market exposure based on volatility.

In fact, the guys that came up with it won a noble price for it. Even if you’re not a math geek, most traders can wrap their heads around the concept of GARCH. And I highly recommend you do that. Once you understand the concept at a deep level, it will immensely help you as both an intraday stock trader and options trader. Probably 90% of the work I do in the quant algo world revolves around this.

However GARCH isn’t limited to working with just volatility, the concept works well on most mean reverting data –  we can use it to predict weekly range as well. In the modern era, there are a battery of machine learning methods for predicting mean reversion data that are super simple to implement into trading algos.

Dummying It Down

Even though all of my trading revolves around mathematical relationships, most of my insights come from observation. Without breaking out GARCH or scikit-learn in python to make volatility prediction algos, let’s make some observations of the weekly absolute returns chart again.

Some observations:

  • Most of the moves to extremes are usually followed by moves the other way. A weekly move around Z -1.0 is usually followed by a move z > 0.
  • Likewise, most of the extreme weekly moves with Z > 1.0 are usually followed by a move with Z < 0, or a quiet week.
  • Of the last 400 weeks, there are 153 weeks with Z > 0 or 38.2%
  • Of the last 400 weeks, there are 247 weeks with Z < 0 or 61.8%

We can see that these numbers ball park correlate to the expected move being approximatley 67% or 1 standard deviation of probability

So how can we use this? The simple answer: based on mean reversion, if we’ve had a big move, the next weeks move is likely to be quiet, less than the expected move. Hence we put on trades designed to turn a profit when the actual move is less than the expected move. And if last weeks moves was down near Z -1, we can expect a move of  Z > 0 the following week.

I can’t hand you the keys to kingdom, but for the astute trader I’ve opened pandoras box and given you enough to put the rest together yourself  and start crushing it.

 

 


About The Author
Trading Gangster

  • zzezzezz

    Excellent post! Thank you

  • Julie 35 – 25 – 36

    TG Thank You !
    JULIE

  • BKXtoZERO

    Looks like the VIX “buy signal” here worked (so far)

  • HD

    Thanks for the post.

  • Sp00nman

    Awesome post TG! Definitely a lot of great info and ideas to learn/build on.

  • BobbyLow

    Lots of good Info TG. I guess Mole put both of our posts up at the same time. Oh well. 🙂

  • Julie 35 – 25 – 36

    SPY Volume today’s bounce very weak and declining on the 60 min chart
    JULIE

  • BobbyLow

    Don’t forget my house is open for business too Julie. LOL

  • Julie 35 – 25 – 36

    Hi BL Looking forward to your post ! Chief for a week ! Love it BL
    JULIE

  • BobbyLow

    My post is already up. Somehow both Tony’s and mine got posted at the same time. On the top of the screen it says “2 New today”.

  • Julie 35 – 25 – 36

    $COTTON My other longer term trade Yes ! SLV longer term trade consolidating in a congestion zone JULIE https://uploads.disquscdn.com/images/3de10065c35ea82d6fea6e0877290c22048ea2623ba5b1801da64053e4e2176b.png

  • BKXtoZERO

    Re post tomorrow! You deserve your own day. I am at work but will read when I get a chance

  • Julie 35 – 25 – 36

    SPY Totally wimp and decreasing volume today’s bounce. At 61.8% retracement from yesterday and upper cloud boundary.Better get legs with more volume I pointed out several days ago to watch the lower trend line coinciding with the lower cloud boundary for a bounce which is occurring https://uploads.disquscdn.com/images/a23da1f1e71a3dd113c2154708d389253980daa86371e1c49eab4d19719b3fa8.png JULIE

  • mSquare

    Small-caps gaining considerably better today with $RUT +1.3% v/s $SPX 0.93%. IWM is trading 50% relative avg volume though…

  • Julie 35 – 25 – 36

    MSquare SPX Overbought now 60 min chart. If it does not fail here it will @ approx 2877 which is daily upper cloud boundary matching conversion line (21) Totally weak bounce JULIE https://uploads.disquscdn.com/images/e1b1317fa5dc335655e1ce4d03eb7428d7f591882bea8c3b4272aee5b2d2ede9.png

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    Wow, thanks TG and BL. What computer operating system does Python work on? I currently have Win 7, but am looking at the thought of also getting a Linux computer. Does Python work on both? Where is the best place to get Python that works on Win 7 ? I have programmed on DOS operating system with Fortran Language back in the 1966’s and some basic programs under DOS. But that was quite a while ago. Thanks.

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

    semiconductors.
    one of these years – I’ll have deep enough pockets to buy these bounces.
    OTM calls, X factor my (honeybadger) money $$$

    https://uploads.disquscdn.com/images/6ae8000ce6d7e4e6d9427644767d2ff2009a6c0f110f1da63c11f4f1f4b194f7.png

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

    Where there’s a will there is a way. I’m no expert, but GOOG is your friend.

    https://thonny.org/

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

    need to see a reverse quick, otherwise, it’s more bully.

    don’t tell me your a short seller, I’LL STRANGLE U.
    😉

    https://uploads.disquscdn.com/images/0c88660e92b0aec1c03636a61bb100bcf37366307e5555a08219a1b68549925c.png

  • Julie 35 – 25 – 36

    Hi GG As pointed out yesterday 1 -2 i then up fpr ii (today) Then watch out .. You had better keep a eye on SPY volume today per chart and comment below
    JULIE

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

    hey, I can’t count that low.
    A-B-C 1-2-3, that’s as far as i GO.

  • Julie 35 – 25 – 36

    GG How about $COTTON Love it ! SLV next !
    JULIE

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • Julie 35 – 25 – 36

    GG LOL!
    JULIE

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

    ps. did you look at the Monthly?
    no place to play games.

    https://finviz.com/futures_charts.ashx?t=CT&p=m1

  • Julie 35 – 25 – 36

    GG I showed you $COTTON COT net short Commercials ! Don’t go against the Commercials .. Ride their coat tails GG .. You had better learn this lesson ! !
    JULIE

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

    the hedgers are about to go POSITIVE.

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    Awesome all 2 systems I like NO MAC for me THANKS GG

  • Julie 35 – 25 – 36

    $SPX Just love this weak bounce today Again not a failure here then fails @ 2877,78
    JULIE

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

    up 24pts? I’d hate to see Strong.

  • Julie 35 – 25 – 36

    GG Play it longer term not 1 hr .. not 5 min .. not 1 min
    JULIE

  • Julie 35 – 25 – 36
  • http://gerb-reloaded.blogspot.com Gold_Gerb

    you’re so right. But like Bobby said – I’m running out of time.
    ACK.
    https://uploads.disquscdn.com/images/a82207ef36c0b792eb9a1e70113cee643fa7ceb12b713670981e58f6b92cc5f2.png

  • Julie 35 – 25 – 36

    Guys You had better look at the daily chart not 5 min and 1 m https://uploads.disquscdn.com/images/7b7e1ffc7e12cb0dcda6a4fe151ac83bfd0de3dbfd31e43988577eb53899fe59.png in charts. SPY volume complete “POOP” today MACD below center line and signal line RSI below 50 JULIE

  • Julie 35 – 25 – 36

    EXAS Guys Anyone want a great short set up.Bearish close below the uptrend line and moving averages Pound it hard ! # topping tails on candles https://uploads.disquscdn.com/images/a2c6dd7ce6b51e464fb9164aa15eb6f64220521cf90d6a8f2ec256e3795c0d32.png failing at a resistance and 61.8% retracement Today a bearish shooting star JULIE

  • Julie 35 – 25 – 36

    Guys Back to work Everyone Have A Great Rest Of Day !
    JULIE

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

    Nordstrom’s down 9% AH.

    told’ya. Better to short those ladies *not* shopping, than BAC.
    =P

  • Julie 35 – 25 – 36

    USO .. Forming the right side of a cup . The bounce off support ; lower parallel channel drawn and 55 ema The 5 ema has gone above the 21 ema which has turned upward with 4 closes above 21 ema IBD William O’Neill says ok to buy right side of cup forming above rising 21 ema JULIE https://uploads.disquscdn.com/images/049f8de9c756a60e0da059bb56cae970b33a71089921cd2ecee31374cd7d6625.png

  • sutluc

    Thanks for the post Trading Gangster.

  • http://www.captainboom.com/ captainboom

    FWIW, I run Macs, and if I need Windows I run it in Parallels. Works great. Python will run natively in Terminal on the Mac, as it’s got a Unix kernel.

  • Julie 35 – 25 – 36

    GG You on board ? Have any envelopes GPRO approx 6 bucks ? I think that’s where it’s going for a tradeable bounce JULIE

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

    sure, but you need to make me a cheesecake.
    😉

  • Julie 35 – 25 – 36

    OK ! LOL! Will a strawberry cheesecake do ?
    JULIE

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

    Raspberry!

  • Julie 35 – 25 – 36

    OK ! Homemade for sure !
    JULIE

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • Julie 35 – 25 – 36

    GG were close .. One item of very importance .. Present correction Bulls gonna be surprised on depth Going down to approx 2650 GG
    JULIE

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

    I hope so. for some reason, my dopamine Monday, dropped me Tuesday. Thinking of hanging it up for a few months. Tradewar nonsense. bah!

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

    *Warning* – watching this will make you FAT.
    https://www.youtube.com/watch?v=FL1RK24G9wE

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

    ps. run a fib fan, support right around 6.40 to 6.50 depending on time.

  • Julie 35 – 25 – 36

    Trade war is just an excuse .. Correction long overdue and going to occur anyway. Double top with ATH’s Grizz says very difficult to maintain (in his notes) Now ATH’s without a double top different type of “Cougar”
    JULIE

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

    are you watching the USD? it’s been drifting higher, I think it could break out from 98 to hit 100.

    lower Market, higher dollar?

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • Julie 35 – 25 – 36

    Bonds too GG .. Bonds indicative of problems arising credit cycle
    JULIE

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

    High Yield, or Treasury?

    chart please..

  • Julie 35 – 25 – 36

    OK Give me a minute .. Relative resistance
    JULIE

  • Julie 35 – 25 – 36
  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • Julie 35 – 25 – 36

    Same page GG ! Love it !
    JULIE

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

    some lipstick for the pig.

  • Julie 35 – 25 – 36

    Possible H & S developing beneath the declining 55 ema and MACD below center line Not good technically
    JULIE

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

    I dunno about H&S, but definitely stuck in a range.

  • Julie 35 – 25 – 36

    LOL! GG
    JULIE

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

    Time to turn-in. L8ter Coug.

  • Julie 35 – 25 – 36

    Me too GG thanks GG ! See ya tomorrow !
    JULIE

  • https://evilspeculator.com Sir Mole III

    Python works on EVERYTHING! I am partial to installing Anaconda but Tony hates it. What we’ll probably do is put together a tutorial on how to set up a python installation that everyone can follow in order to take advantage of some of the tools we’ll be offering.

  • https://evilspeculator.com Sir Mole III

    Really sorry about that. I mixed up the days because I was stressed and in a rush as I had to change locations. My bad 🙁

  • https://evilspeculator.com Sir Mole III

    I posted yours in the morning and Tony (who wasn’t aware) posted his a few hours afterward. My fault though – per my comment below…

  • Dyellowflash

    The spike after mkt hours took out my Dow shorts, but my Russell and s&p remained. Clocked in about 7-8 points of profits b4 UK opened, then refilled using the house’s money from that TP during that scary looking spike up during early UK session. 1/2 of my SL is the day’s high around 2869s, 1/2 of my SL is that spike high around 2865s. I might be wrong, Zero hrly and 5m looked to be favouring the upside, but this time around, someone else is footing the bills for my shorts.

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

    Wednesday,
    the whole trading day has to fit in that sliver of black, under the yellow arrow.

    /NQ
    https://uploads.disquscdn.com/images/bde992b77379831b7d57765822c4173e619b9905b528fdd31ea1aac61b8a87eb.png

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

    For those monitoring TIME yesterday, rally found sellers again 2:00-3:00 and follow up gap down. How many times do you have to see it to trade it?

  • Dyellowflash

    Epic stuffs on the 1m zero.

  • HD

    2850 muey importante

  • Dyellowflash

    At this point, the zero indicators actually favor the long side, but mkt cant even make one bullish 5m candle, so I wont be closing any shorts for now.

  • Dyellowflash

    Just got to love life. Mkt made a powerful 5m candle 4 mins after I said it cant.

  • Mark Shinnick

    We’ve been in a period of vol crush acting against much of the bearish action, some things like soxs have maintained trend.

  • Sp00nman

    Ya that’s what I see too. Vol sellers come in and crush it and then the market follows.

  • Mark Shinnick

    …really confounds and confuses bears…throwing them off the bus. Conflicting bull price action throws them off too. The energy here keeps building.

  • HD

    VIX is just a calculation. 150 point hit in 9 days 5% IV= VIX 20, 7 day rally 50 points 1.5% IV= VIX 14. Just a measurement. My work says it doesn’t matter who’s buying or selling the /VX, VIX will always just calculate SPX price action, in hindsight.

  • Dyellowflash

    Zero now seems to be turning negative. On 5m and 1m. But very tentative. Price still looks bullish against the zero. We just switch from zero positive price negative to zero negative price positive within 10mins or so. That’s rare too.

  • Mark Shinnick

    Yes, while dynamically its like Pygmalion and golem effects, a human emotion compounding of expectations.

  • Mark Shinnick

    Tools have their own time frames so try not to get locked-in to any.

  • HD

    The human element of it is in option pricing but as we have seen now for 2 years – it’s a smarter market and the options have not been a fade. The other thing about the options use of VIX is I don’t think a majority of market participants use options. Even in our little pit here there are only 1-2 people using them. equities, futes, funds, then maybe options.

  • BobbyLow

    WTF was that spike? ES spiked about 6 Points in about 1.2 Seconds flat.

  • Dyellowflash

    Sorry, it was my brokerage. That spike took out my Dow and ES both on the dot. Happened like 4-6 times a day anyway.

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

    no idea..stop run?

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

    or mine!

  • BobbyLow

    And then sold off again. So that leaves big wicks on both ends which tells me to stay the fuck out.

  • Dyellowflash

    Its me… my brokerage has been hitting my SnP and and DOW SLs. I counted 4 times stopping me out on the dot thoughout this whole day.
    https://uploads.disquscdn.com/images/9c2232355db9c1e2b7470dffe1bf98594bf54be86f457767363cb0f201b578a6.jpg

  • Mark Shinnick

    Any fast market stuff like that seems to turn out to me to be important. In this environment things are tightening/constraining…maybe only to then re-define the range some more before resolution.

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

    seems a FED board member opening mouth about lowering rates – shows how the market is poised..

  • BobbyLow

    It bit me.

  • Mark Shinnick

    We are on notice here of range conditions …fed by tight stops.

  • BobbyLow

    This stuff happens but being on the shit end of a move like this is a head scratcher.

  • Mark Shinnick

    …just a reminder of where we are.

  • Dyellowflash

    I marked every stopped out by my brokerages, everyday for the past 10 yrs of trading. This is what today’s looked like: https://uploads.disquscdn.com/images/33ef13597b9992d4642eb18c97c80f6aa33b18c243a40412b372850c33bd622c.jpg

  • BobbyLow

    Sometimes it seems like that’s what happening but you and I have different brokerages and I got whacked too. At other times, I’ve also had price come down to .25 of my stop and not get hit so sometimes it’s just a crapshot.

  • Dyellowflash

    My profit for the day was 5R b4 the last stop. Now its 3R bcos they stopped me out above my SL. They must have been very angry. They will usually do that kind of sabotage (stopping me above SL) when they got very very angry… though IDT I did much except by making the comment in the earlier post that “someone is going to foot the bills for my shorts today”. I guess they dont like it at all.

  • BobbyLow

    If they’re stopping you out before you want them to, then maybe you need to change brokerages.

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

    yes – small positions wide stops until the market shows its hand…

  • Dyellowflash

    Zero said that up move was fucked. So i put my shorts back. Now TP-ing them for the 2R back.

  • Dyellowflash

    nono. They stopped me out above my SL… i mean i set my SL at 63, but they pump it through 72.

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

    yes that’s norm – unless you set a guaranteed stop loss – in which they honour your stop but front load it on the trade..

  • Dyellowflash

    yeah, i have IG which has guaranteed stop loss, but they sabo those trades as well. Only zero or zerofx is a match for these sabotages but it will always be a close run thing.

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • Julie 35 – 25 – 36

    Guys Take your stops off first 30 min of trading That’s when they do their stop running Again market in correction and short the bounces only if trading very short term
    JULIE

  • BobbyLow

    Julie I just wrote an answer to GG about this and he deleted his comment so I’ll put his answer on your comment because it’s related.

    One of the main things about trading futures is how fast the money flows. The charts run mostly the same as etf’s etc., but the money flow from most futures flows in and out of a fire hose instead of a garden hose. If you trade futures without a stop then you better have a potty on the floor right next to you because if you leave to take a pee and have a runaway move go against you you could have severely bled your account by the time you get back.

    So yeah, use stops trading futures whether it’s high volatility or low volatity. It doesn’t matter as long as you want to protect your account.

  • Dyellowflash

    Yeah, in my case, tight stops every time. Stops runs imho are brokerages psy attacks to make u not put a stop so that they can wipe u out once and for all and for good measure. The greater the volatility, the better to put a tight stop. There is always a tiny 1m candle somewhere to base a stop. Let them stop me out 10 times in a row for 200 Dow pts and 1 win of 400 points is enough to rob the bloody brokerage.

  • Julie 35 – 25 – 36

    BL You have to trade in the correct direction and currently the direction is down. Short term traders must trade in direction of the 21 ema and if price is above or below the 21 ema. Currently price is below a declining 21 ema
    JULIE

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

    ….oh…and be sure its in the right direction 🙂

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

    LOL!

  • BobbyLow

    You have to trade in the right direction. No Shit. But it doesn’t work all the time Julie this is why you use stops with FUTURES!

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

    LOWes, surprise to the downside.

  • Julie 35 – 25 – 36

    BL I do not trade futures or currencies .. Too many sharks BL. You must be careful trading oil too . Too many sharks in oil also
    JULIE

  • Dyellowflash

    The 1m mole arrow is a good counter for brokerages that sabo. Its about 1-2 ES pt precise. So if its wrong 10 times u wont lose more than 20pts. And there is one right now 😉

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

    really? just read this little guide, and you will be good to go!
    😉

    https://zhuanlan.zhihu.com/p/59773711

  • Dyellowflash

    I think this is it. I have shorted around 75% fills now at ES 2861-63. I was wondering if there is a chance to short just around 2870, but the zero arrow shows up and I like what I am seeing so far at the zero 5m indicator, so I am in.
    IF there is a single green candle bigger than the red candle at 1130 or price is above to go above and held, that will probably end my bearish bias for today/tmr.

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

    thanks BK. it’s not a fish head pattern. maybe an EEL.
    ;-D

  • BobbyLow

    There’s plenty of sharks to go around. I’ve traded both futures and currencies and now trade Futures and ETF’s. IMO, Futures are a fairer trade. I was long Oil via an ETF and closed my position after this morning’s open at breakeven after all my gains were eaten up. If I had been trading /CL Futures which I can’t afford to trade because we’re talking each $1.00 of Oil is worth $1,000 in 1 Contract of /CL, I would have got stopped during the middle of the night for a decent profit.

    But to each their own. I strongly believe that I should never tell anyone else what to do. This is because as I’ve said many times, we all have different methods and time frames that we’re trading. One way does not fit all.

  • BobbyLow

    Long wicks/tails on my hourly /ES Candles are keeping me out. If things settle down I might consider getting back in sometime today but it doesn’t look good to me right now.

  • Mark Shinnick

    Buying labu, tight. Maybe som sox too.

  • Mark Shinnick

    …maybe re-visit that a bit later.

  • Mark Shinnick

    Ok…so rebot.

  • HD

    Feels like they may already be in the Hamptons.

  • Kishore Kumar

    Nice discussion on STOPs here! Tight stops ALWAYS get hit. Far out stops hit you bad. After trading Futures for over 10 years, and stock options before that for over 20 years, I have now, for about a year, been trading only SPX weekly options, on the expiry day, without stops. Could not be happier!

  • Mark Shinnick

    Whew…massive return of mental capital 🙂

  • BKXtoZERO

    That pattern was negated but a new fish prey pattern developed, break up now or be eaten by the fish
    https://uploads.disquscdn.com/images/dd04dcff19585a07da3e364cafee0d8e14f5c759779329d396fb8ca680ee3b4b.jpg

  • Dyellowflash

    i tried that b4, my brokerages supported the price 1cent above the expiry in-the-money right on the close 7 out of 10 times. So when i buy/sell options, i make it a pt to close it once its about 2-3x profitable.

  • BobbyLow

    Bought back some OILU. Purely spec.

  • Darkthirty

    kim kardashians ass got bigger…..

  • Julie 35 – 25 – 36

    BL OILU .. Is that 3X long ?
    JULIE

  • BobbyLow

    Yes.

  • BobbyLow

    Understood and good for you.

    I’ll still use stops on futures and this is where a substancial amount of back testing comes in. I just looked back on my latest back test and there were a few times that I got stopped on a spike like today’s but it did not happen often. By back testing there is a way to see where you want to place your stops based on what your chart says. Is any of this method guaranteed? Hell no. But over a few hundred trades in the test, I found out that yes shit will happen but on average my overall results have a more than decent chance to be very good.

  • http://iberianviews.blogspot.com/ catracho
  • Julie 35 – 25 – 36

    BL I am in COTTON and doing OK Two instruments BAL and JJS for longer term Thinly traded but follow to a “T”
    JULIE

  • Julie 35 – 25 – 36

    Catracho Following also …USO
    JULIE

  • BobbyLow

    I’ll take a look at them thanks.

  • BobbyLow

    Could very well be the next leg down because we have oil coming out the wazoo now but the good ole Middle East problem is helping to keep prices up. Today was the third week in a row with a build in supply. However, . . . .

  • Julie 35 – 25 – 36

    Guys Sometimes a huge spike up or down on a one min chart is a false print It’s the big boys communicating to each other of a possible future direction.
    JULIE

  • Julie 35 – 25 – 36

    BL… LOOP Louisiana Offshore Oil Platform … We need some of those Louisiana pelicans to tell us what is going on ! Sheesh !
    JULIE

  • Julie 35 – 25 – 36
  • Julie 35 – 25 – 36

    Guys Now the market will change to Holiday volume … IMO Best to trade lightly
    JULIE

  • Julie 35 – 25 – 36

    SPX Guys Another option is for Wall St to throw a curve ball at us and SPX to triangulate here ! Who is thinking about that ? Not many !
    JULIE

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

    fomc minutes in 20mins. watch up for another prime time sabotage coming. I have unloaded 1/2 of my shorts. Left half on breakeven stops.

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

    off to lunch.

    this one’s for the ladies.

    https://www.youtube.com/watch?v=CBQ01X-1AlI

  • Julie 35 – 25 – 36
  • HD

    Good eyes! BK and I were discussing that yesterday.

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

    You know my opinion on triangles already :-).

    We won’t know until it breaks.

  • Julie 35 – 25 – 36

    HD IMO If so a B wave and another leg down
    JULIE

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • Julie 35 – 25 – 36
  • http://gerb-reloaded.blogspot.com Gold_Gerb

    ugh, big feet.

    She’s not from MT is she?
    https://xlcountry.com/five-bigfoot-sightings-in-montana/

  • Julie 35 – 25 – 36

    GG That photo of Big Foot has been proven a phony No way can an animal run or walk and look back at the same time ! Not even a “Gerbil” can do that !
    JULIE

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

    Bigfoot deniers. Just believe dam it!
    😉

  • Julie 35 – 25 – 36

    Shorting EXAS per chart and comment yesterday .. Small position due to impending Holiday JULIE https://uploads.disquscdn.com/images/f643c8e112d562a93dd966c2edd5fa9730572769f8a21b62f945478c50e977da.png

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • Julie 35 – 25 – 36

    GG Already gassed up all vehicles ! ready to roll this Holiday !
    JULIE

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

    just try to avoid running over small pedestrians.

    https://www.youtube.com/watch?v=PdpN9dvVTQM

  • Julie 35 – 25 – 36

    You Guys ! Your all Animals ! LOL!
    JULIE

  • Julie 35 – 25 – 36
  • http://gerb-reloaded.blogspot.com Gold_Gerb

    those shoes clash with the Silver. (ahem)

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

    I hate to say it, looks like bulls are winning.

    https://www.youtube.com/watch?v=-r679Hhs9Zs

  • Mark Shinnick

    …try to run..try to hide.. yeah

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

    Looks range bound to me, but we are nearer to the bottom of the range than the top..
    Dow key to down side 25100
    NDX 7270
    above NDX 7600 then a beak of ATH
    Dow 27k..
    https://uploads.disquscdn.com/images/b2c5d486d718481bcf5711b59fa886e2556ecebeaa78893e3016740844bf8275.png

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

    Worth watching CGTN to get the Chinese POV on the Trump shenanigans…

  • HD

    2850 held, Another TL break in progress. c of B up in the coil.

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

    bullish is still not confirm yet on my technique. yet.

  • Dyellowflash

    *not yet = i still have to take a short entry ;(

  • Mark Shinnick
  • Dyellowflash

    feel as if swimming in a pool of king cobras, trying to eat snake galls.

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

    just another day.
    ha ha ha.
    https://www.youtube.com/watch?v=YIMigVo1pyA

  • BobbyLow

    Maybe some days it’s best to give the market a tip of the cap and move on to the next day.

  • Julie 35 – 25 – 36

    BAC As stated last week waiting to break below 28 to pound it south. Triangulating for another leg down. Watching https://uploads.disquscdn.com/images/6c3b715bc8d183c854ab747bce464349935039cf4e1ab488081d46a28afedfdc.png as I am going to put lipstick on this “PIG” JULIE

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

    {face palm} – BAC obsession. at least I understand the underlying reason now. he he

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

    could I interest you in a mind-blowing RSI 27 JCPenney?
    $1 dollah.

    https://stockcharts.com/h-sc/ui?s=JCP&p=D&yr=0&mn=6&dy=0&id=p73526981548

  • Julie 35 – 25 – 36

    Unreal GG GG Let’s watch F for pullback to gap fill and 55 ema JULIE https://uploads.disquscdn.com/images/ab7e71f96d107ee3561d73b89fc66362f9bbd5fbcc6c627812490362e288b42b.png

  • Ronebadger

    NOW, I know how to handle cobras…

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

    one ugly island reversal.
    RSI 48 FTW.

  • Dyellowflash

    Normally, I would have chill off long ago. But today, I got stopped out on the dot today for a total of 10 times b4 a mkt reverse/retrace. I also made 5Rs in total today. Got to trade it all the way so that the bloody brokerage can understand the meaning of the word – futility.
    That said, the mkt is very close to making a long signal in my technique, so for better or worse, this is my last short for the day/week.

  • Ronebadger

    Check out the ADX line on the 1HR SPX chart. It doesn’t ever get much lower than 8 … Big move coming?

    https://invst.ly/auzxa

  • BKXtoZERO

    BK annual status update… Trading tvix is friggin hard. I had 3 positive years and doubled my account last year. This year I missed most of the spikes. At present I am about 2% off my highs but all I have mustered this year is down up flat…down a bit…. VERY hard and frustrating because I have traded well like that exit at 24 and some well timed 10$ hits earlier this year but it is definitely fighting against the forces that be….if they wanted me tired and discouraged mission accomplished. Lightened up my 22 entry today at 20.9

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

    just like options. by the tail, and be damn quick about it!

  • Julie 35 – 25 – 36

    SLV Back within it’s bullish falling wedge oversold. Patience Guys .. The pop above resistance approx 13 and it’s 5 ema gonna get juicy ! JULIE … Juicy Julie .. LOL! https://uploads.disquscdn.com/images/6a05aafe1ccfb3822dac9b27ad7d4ce07442ad8abded97f109d2f9673d34fb70.png

  • BKXtoZERO

    Is that a typo? Pop instead of….poop?

  • BobbyLow

    I think you’re probably trading some real fast charts and congrats on having the stamina to do it. I’m trading an hourly and on days like this I can get chewed up pretty bad. So once I get hit and it looks like the slicing and diceing is going to continue, I have to back away and live to fight another day.

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

    for the last time, it’s a channel, ARGGGGGH.

    maybe if I make the RAFF orange, you’ll remember.
    https://uploads.disquscdn.com/images/53e9fcb1962a67d0a0ab1f4cac3cdeafbb3806f346a13f42e56f310ebee6413a.png

  • Julie 35 – 25 – 36

    BK If they can’t take you out they will wear you out .. When the going get’s tough the tough (BK) get going ! Have A Great Memorial Weekend BK
    JULIE

  • Julie 35 – 25 – 36

    GG Actually I showed the same chart previously. Your a little late there pardner ! Gotta keep up !
    JULIE

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

    You will reign some day BK. Indian Buffet as far as the eye can see.
    LOL.

    https://starecat.com/content/wp-content/uploads/al-bundy-sitting-on-a-throne-game-of-thrones.jpg

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

    well, none of your charts are all that memorable.
    (snort)

  • Mark Shinnick

    Sector having a almost really fucked day…just holding on.

  • BobbyLow

    You’ve done well BKX. If this shit was easy “even a caveman could do it”. 🙂

    Seriously though, sometimes trading can be in ranges of easy, to very easy to fantastic to “even a caveman can do it”. Other times it can be in a range of not so good, beginning to suck, really sucking and what the hell am I doing in this business.

    Don’t ever forget that it’s the market’s job to fuck with your confidence and to get you to stop doing what you know deep down really works.

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

    Time check

  • Julie 35 – 25 – 36

    Your problem GG … You can’t read ! Laughing so hard I am crying.Coworkers are going to come in and see what the “Heck” LOL!
    JULIE

  • BobbyLow

    Are we there yet?

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

    Well, if your charts weren’t in Braille..

    I might!

  • Julie 35 – 25 – 36

    GG .. LOL! A fun day !
    JULIE

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • Julie 35 – 25 – 36

    Well said BL
    JULIE

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

    riveting ..

  • Dyellowflash

    cleared half of my shorts from the day’s third and final spike. moved the rest to breakeven. Done in the final minute of NYSE hrs.

  • Julie 35 – 25 – 36

    SPX Closes below it’s 5 ema Everyone Have A Great Rest Of Day .. Remember Holiday volume so trade lightly and carefully

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

    US markets closed Monday? UK also

  • Darkthirty

    Resolution up 3030 down 2730

  • Julie 35 – 25 – 36

    Guys Bonds TLT Poised for a breakout OBV (not shown) is positive and rising MFI above 50 Favorable daily volume pattern i.e. volume greater on up days than down days.If not a breakout then a bullish ascending triangle. Equity Bulls watch bonds because they are telling you your days are numbered. Again Bond market seven times larger than equity market JULIE https://uploads.disquscdn.com/images/4b0d9cb631c1941bf72d0c2ce03bbba051758c795f74a38c51d2f410aa5a1292.png

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

    Prepare your catheter bag.

    Muwahaha. could be an interesting Mac Tonight.
    https://uploads.disquscdn.com/images/ac1dcb72446e09f3a5b20b47f28c8ab42ce949b376fb9102680206fe2db0a3c2.png

    2 whiskered, 4 hr candles sure make it look easy.
    Bobby’s correct! Let that candle finish.

  • Julie 35 – 25 – 36

    Hi GG Pork chops for dinner tonight Grizz does kitchen cleanup.Not sure if you noticed BUT closing NYSE $TRIN @ 1.39 indicating selling pressure today.New lows @ 89 which is rather high Above 50 associated with increasing levels of fear Market on edge GG
    JULIE

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

    I’ll take your word for it. I respect the TRIN, but never fully understood it.

    Night breakfast calls!

    Maybe by tomorrow, I’ll be in the Black!

    https://vimeo.com/106637216

  • Julie 35 – 25 – 36

    GG IMO Hold your position QID They will do everything possible to make sure a big drop does not occur before the Holiday A big drop will spook consumers who may be reluctant to spend over the Holiday This always occurs before a Holiday or 3 day weekend. The low volume just before a Holiday is very easy for them to manipulate the market. Again do not run scared if there is a pop to the upside because it’s manipulation and will not last. When the big boys return they will sell into it
    JULIE

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • Julie 35 – 25 – 36

    One item GG if you would delete . The Chief’s VIX boll band sell signal .. My husband’s notes Must be careful as there must be an increase in NYSE Down volume corroborating the boll band sell signal. Quite often there is a situation where this does not occur and the sell signal will not work.GG Do not want to upend our Chief He is a great guy and for the most part it does work as they do move together
    JULIE

  • zzezzezz

    I’ll take a short around /ES 2040

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

    at the current rate, 2040 would hit around October.

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

    2840? there was a full reversal on Monday at 2839.

  • Dyellowflash

    i think he mean he will take a long right? nobody would aim to fill short at a lower price in the future… of course there are pple who fill based on breaking a support line or pattern, i dont think he is one of them. I aint too.

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

    last week he pulled off a good knife catching trade.
    so I had to remove him from ‘cray cray’ to not-bad trader.
    😉

    I await his reply.

  • Dyellowflash

    yeah, that’s what i think too. whatever technique he is using, he manages to be even more precise than me on a few occasions during the last weeks.

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

    learning from each other. nugget by nugget, I collect wisdom & techniques. Or at least that’s the goal.

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

    Did you notice the dirty swan dive premarket?
    Not a guarantee, but a high occurrence of buy low, sell to the retail suckers kind of day.

    https://uploads.disquscdn.com/images/2d501d97141a41cd0e170550ffa6e8d66de1db9ac3d51b2fd48bc99931bb73c3.png

  • Dyellowflash

    yeah, noticed it last week. NYSE opens = uptrend days, NYSE closes = downtrend days.

  • Julie 35 – 25 – 36

    Dy .. SPX Cash I have an important level at 2848 i.e. a lower trend line intersecting 60 min cloud lower boundary
    JULIE

  • Dyellowflash

    not sure what makes 2848 impt, but it seems good to me (holding shorts) that we are now below it at 2845 for the time being. I am not a price level person. I trade based on my patterns and mole’s zero..

  • Julie 35 – 25 – 36

    I wish he had a zero for the daily and weekly charts. My trades are longer term than 90% of the guys here including the Chief
    JULIE

  • Dyellowflash

    he does have a daily zero which is very useful… i almost forgot to ask him to help post it for us. The daily zero.

  • Dyellowflash
  • Julie 35 – 25 – 36

    Thanks Dy!
    JULIE

  • Dyellowflash

    that’s an example from 2014..

  • Julie 35 – 25 – 36

    USO Definite distribution today Watching 12.53 and approx 12.25 support Doesn’t hold either then 12.06 comes to play
    JULIE

  • Julie 35 – 25 – 36

    $OVX Oil $VIX Inverted to track oil IMO easier to read and track Attained necessary 10% above it’s 10 ema for a decline .. Must go below it’s 10 ema and 20 sma … Looks ominious JULIE https://uploads.disquscdn.com/images/263ea7e30125acba12ada66cccdda3e666058fd893eade1c47fdd5ad926d3a54.png

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

    Are you old enough to remember when digital meant a prostrate exam?
    😉

    Not to Fear, FORD has a robot that can come to your home!
    The DIGIT.
    https://www.cnn.com/videos/business/2019/05/22/ford-autonomous-delivery-robot-orig.cnn-business/video/playlists/business-robots/
    LOL.
    I wonder if he comes with a 9mm handgun mount?

  • Julie 35 – 25 – 36

    Hi BK I am still up .. Loving it ! Market in correction .. Everything working … Plan the trade and trade the plan. NOW BK LCI is one of the most shorted stocks NYSE with 75% float shorted. NOW a great short is when a short squeeze is complete LCI very little follow thru with weak volume after the gap down and selling climax Support @ 6.01 and a bearish close tomorrow below 6.01 is the re short. The high volume low will be retested. The heavy blue horizontal lines are resistance and support in a congestion zone left side of chart and IMO will soften a further decline BUT money to be made on a re short Short term overbought up into the 5 ema and mid Raff regression https://uploads.disquscdn.com/images/61e30dcbaa624216429d8279f62ba563b1365c873944553950c195584145f991.png JULIE

  • BKXtoZERO

    I can’t short in my account…no margin…no options…which is good. Tvix is about the dumbest thing I could find to do.

  • Julie 35 – 25 – 36

    BK … What about inverse ETF’s ?
    JULIE

  • Dyellowflash

    Looks like my cobra experience went well. TP-ed 200 dow pts 25580s and off to the next trade when NYSE opens later.

  • Dyellowflash

    Just keeping 1 contract of SnP and 1 of Russell to mock the brokerage who tot they can kicked me out of the trade. https://uploads.disquscdn.com/images/85012c9ea16f6b6ff8762108444572f14b6e1a000fdc92ce399443bd3e159c8b.jpg

  • http://www.captainboom.com/ captainboom

    Are you using SPY or /ES options?

  • http://www.captainboom.com/ captainboom

    Late to comment, but it was a Munchkin tweet. Got me too. I was short with a stop 1 point in the money, and they took me out with 4.5 points of slippage. Dirty bastages.

  • Kishore Kumar

    Neither! SPX options only, European style. They settle for cash upon expiry. For IRS purposes, they also get the same treatment as Futures. Options on SPY and /ES do not offer the advantages of SPX options, and, if they go into money, the broker can close the position on his own whims, unless your account has the ability to deliver, upon expiry, the underlying assets.

  • Ronebadger

    Try SPXU

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    Awesome. Am building a new floor in my life. With my new part time job, will explore a real apartment soon and get away from the motel that I have been stuck in since my car was killed by a hit and run driver. I am currently very near to one of the DART rail stations and that makes traveling for my job much easier. Dallas apartments have this stupid rule, you have to have an income 3 times the apartment rent cost, or you wont be able to rent an apartment. My new part time job will provide that extra income requirement. And there is a nice apartment complex near enough to move all my stuff by a hand truck. Getting quite excited to have my own apartment again. And, I can rent a van truck for a day every so often to go and get my furniture that is very far to the north of Dallas, Have a Great Time on your vacation

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    thanks, I have been away from programming for such a long time, but I loved it when I was doing that, am currently somewhat bored with accounting and tax work.