nelo

Bryan, I would love to I always strive to make my own decisions and you only can go most of days green after experience and discipline. On days I do not go home green I know exactly why, and it is not because of the method or market but because of lack of discipline. On the other hand when I am focused, disciplined and not experimenting or "improving" anything then yes, I go most of these days green. So I am working hard to make my live trading as boring as it can be and be creative only when markets are closed After I found good method and money management I realized what it truly means that "trading is simple but not easy". Well, not as simple as moving average crossover or watching some price-based indicator alone, these are just artificial gimmicks which do not give you any edge, the real edge can be your experience and knowledge what really moves the market. Nelo

Yes I have joined the group Mav, six months ago or so, after staying in the room and just watching several weeks every day - that is actually the best way to find out if it suits to you. It is more a method than a system, covering all parts of trading (psychology, money management, etc) and it helped me. It is not a simple buy/sell system and you will still need to invest a lot of time and effort into making it your own. I could say many positive words and how Greg and other guys are helpful but it might sound like marketing and just distract you, so just come and see for yourself, the demo room is free, watch how they go green almost every day and then decide if it suits your style, they do not hide anything from the methodology from members. I am NOT financially affiliated in any way with the TTZ, I am just satisfied with the value that I got for my money.

In the beginning try to find a position sizing method which fits your psychology. It is important also later but in the beginning you maybe do not know so well that can happen and how will you react. So think about money management not only from math point of view, but what is more important from psychological point of view. I found trading one contract quite difficult from psychological point of you, since I either took only a small profit from large move (fear) or loss when I wanted a bigger profit (greed). Two or three contracts and scaling out helped me a lot. And regarding formulas, I spent long time testing various very complex position sizing methods and found three most useful: Fixed Ratio, Fixed Fraction and Larry Williams method. I should point out here that I daytrade single market, so it is different it you trade portfolio of 30 stocks with some automated strategy etc. The last one (Larry's) is which I like the most: contract traded = (account balance * risk percent) / largest loss You set the risk percent based on your knowledge, skills and risk tolerance, usually between 5% and 15%. I like it because it takes into account two subjective numbers: your personality (risk percent) and your system (largest loss). You might hear to risk 1-2%, it is even safer and I also advise to start from that. Traders never bust because they risked too little, they bust because they risked too much!

Try http://www.thetradingzone.com, Greg, the guy who founded it operates a paltalk (free demo) room and they are calling many trades live during the day just as they happen with high degree of accuracy.

1/ Kelly number is based on huge amount of statistically consistent data - what most traders do not have from their trading - that is the first reason why it is so dangerous. 2/ Anyway, let us assume that you could have. Markets are changing (they are not like telephone line noise). What you get is based on past results, current trade "Kelly" is unknown variable, fluctuating wildly based on market conditions. 3/ There are also technical issues. Kelly works if you can bet infinite fraction but you can bet only in increments of one contract. If you bet that portion of your account at once and lose just few times in a row you might end up with too little money for your risk or margin to open even one contract. That is why in this direct way it is only useful for perfectly optimized diversified portfolios (~30 uncorrelated securities or more, various strategies, timeframes, etc.). Anyway, portfolio theory will be very long story. 4/ Then there are psychological issues. After 3 loses in a row you would lose about 80% of your account - can you stand it? With $10,000 account you can forget using Kelly this way. There are other issues but what I found useful for average trader like me is using Kelly relative to maximum drawdown. Let's say you have $10,000 and think you are a consistent trader in changing market conditions. You start with single contract and make at least 100 trades. From that you calculate Kelly ratio and your maximum drawdown. Let's say your max DD is 3,000 and your Kelly is 40%. Then your risk could be 0.4 * 2,000 = $800 per trade. If you were risking $200 per trade you could trade 4 contracts. For average speculator there are simpler, safer and more effective MM methods so you do not need to worry about Kelly too much.

That's simple, many do it using google: "download tradestation indicator". After some years of testing thousands of indicators you maybe find this site useful, if you won't lose all your energy of course.

Unfortunately, the original TTM indicator does not paint bars in a correct way. It cheats. It paints bars in the past. I did not see this one, since I do not have tradestation and picture was not attached. I use Neoticker and things like painting bars in back are not allowed because in reality you will never see the chart like that real time. What looks great on a screenshot is impossible to trade. If you paint that bar which you should, the actual bar when the signal happens you will find out the indicator is useless. This will save you a lot of valuable time and if you were considering buying the TTM original also money.

Jerry, In (almost) all books is suggested to strive to achieve 3:1 RRR (reward to risk ratio). I do not doubt your method works (with enough practice) since I am watching it and there is nothing unreasonable. But the RRR seems more like 1:3 (taking trade on 1SD), so with one loser you have to have 3 winners to break even at least. This leads to huge and fast drawdowns - if it is not compensated with a great winning probability. Every method has some psychological draw-backs, or requirements, for someone is more suitable scalping and for someone trend following. What psychology set-up or "traders mind" would you recommend and what expectation a trader should have to successfully follow your method? Maybe you could also share some of your path, how did you discover your style. I believe most of us will appreciate it. Thanks for great videos and sharing your experience.

Darth, you are not alone, I read the MoM and I am not much smarter from it. It is quite difficult for me to grasp just a little piece of useful information from it. What is useful can be certainly written on one-two pages, the rest is pure alchemy for me (yet). General MP theory as given by Dalton is without strong experience like rubber, you can exactly described every move by it, but only after it happened. From my short experience with Jerry's method, the first SD from VWAP position is very close to VA in MP. Since it counts trades instead of time it is much more relevant to market nature (market is not moved or confirmed by seconds but by volume). One of the main difference is that MP is based on psychology while VWAP trading is based on statistics (which mirrors psychology of course). Actually, Dogpile, today was a great selling day - the least expected happened. I guess because we are in a strong downside move.

Jerry's point is that a 1 point swing from VWAP with 100 contracts is different from 1 point swing from VWAP with 10,000 contracts, during the same time period. So the formula in his first message is correct. I suspect that treating VWAP as moving average and calculating SD as the difference between VWAP and price as in bollinger bands is incorrect. Though, I do not know how much it differs. Jerry, one thing just wonders me, why you did not take VWAP in your formula, so Variance = SUMi[Pi(pi - VWAPi)2] ? This would make more sense to me.

I cannot wait for the explanation how do you use the deviations and how do you identify when the trend is intact (and buy tops/sell bottoms) and when to trade extremes (sell tops/buy bottoms). Is this something where VWAP / deviations can help (comparably as market profile does)? Thanks.

Jerry, do you calculate the standard deviation added to VWAP from price only or from the difference between VWAP and price? Both lead to slightly different results. Thanks, Nelo

As I see the relation between PVP and POC, PVP is more precise and correct view on the market. It was difficult concept and complex to calculate so "time" proxy was chosen by P.S. for "value acceptance". 30-minutes MP and POC are just very simple (yet powerful) proxies for PVP and volume based profile in general. The concept of PVP and HVL / LVL is independent on anything, it is just pure trade-based information, no time is required. I like time-based MP for simplicity, but for example little action and interest during lunch hours shifts the perceived value, it is not accepted in true sense, just nobody really wants to trade that time - 30-min based MP treats lunch time as great period of acceptance but nothing will fool volume profile. Another advantage of volume profile is that it is much more detailed - the reality is that there is never (mostly) single accepted daily value as MP shows, but there are many levels with different strength. This might be considered as disadvantage since it makes it harder to read (to be honest I still struggle to use this advantage properly, right now mostly for timing profit targets). Anyway, the concept of volume profile is logical, as elemental as it gets, chart independent and provides detailed fundamental view on market. These are the reasons it is useful for me.

Dogpile, till now I used vwap for some time just as strong level (together with HOD, LOD, opening range and yHOD, yLOD and yClose). For directional bias very simply - price over vwap = bullish, price below = bearish. Not in so sophisticated way as Jerry uses. For few weeks I also observed volume profile but it was much more detailed than 30-min MP and complex that it was simply too much to watch, so I dropped it. I absolutely agree with you - person cannot compete with computer power used by institutions (which invested billions into algorithmic trading and creates every day more and more sophisticated programs). Ones advantage must be something computers cannot compete with next few decades, and that parallel processing of high-level patterns and feeling for market dynamics.

nickm001, this is the kind of picture worth 1000 words, it is great to see developing poc and vwap together. The concept certainly makes sense, however in practice I have many times gone into problems in situation as happened from 11:00 - shorting into rally to vwap. I guess this is the situation where third standard deviation comes into play but if Jerry could comment it I would highly appreciate it.

I hope we can stop the discussion about the video format and let Jerry help us as Soultrader is keeping on doing (thanks for allowing to place videos on your site to stay permanently available). Notouch - you do not need to install anything, just do not view the files on your trading computer. From this point of view there is no difference between AVI and SWF - the trading computer is only for trading, if taken seriously even browsing and emailing can be dangerous. Jerry - swf's are fine and the recommendation from Thrunner for those two tiny swf viewers are great. They are virus-free (I checked them both), banner-free, trojan/adware free, they have tiny memory footstep and do the job as expected. The FLV format is efficient (better than common AVI), virus free and platform independent (not like EXE). Notouch - they are less resource demanding than M$ mediaplayer or Quicktime monsters, as well as the FLV format is more efficient than AVI as Jerry said. Personally, I got rid of Quicktime a while ago since that was the really untrusted big monster which was instead of doing its job sitting in the background, full of annoying banners and upgrade popups and stealing data and bandwidth. You can hardly find anything worse than Quicktime (nothing against Apples effort, I do not hold short position of their stocks nor want to buy long cheap either - at least within few days, but their intention seems to be other than to create a good free player). Let us focus on trading, this is why we are here and if I have to download !#$^ to be able to view interesting training lesson I would gladly do it!

Dogpile, I think you are constantly missing the point here and the difference between modal and average function intra-day. VWAP always changes smoothly during the day, similarly as moving average it is unbroken, continuous function. Like a moving average - it is every day different as well as POC but this is not the point. POC level development can be smooth for a short period of time during the day, but suddenly some completely separated hill can develop on the other side of the day's extreme and POC will jump immediately tens or hundreds of ticks - this always happens in double distribution days and several times during any day. There are several "candidates" for a POC during the day, jumping up and down and it is up to your judgement which you take into account and only one will be POC at the end of the day. But there is just one, always smoothly moving VWAP. This is what everybody here means as 'abrupt' behavior of POC and this is intra-day behavior.

Great thread, Jerry, thanks. The first message in it put a lot of light into VWAP usage for me. I watch it for daytrading and until now I just took it as a market sentiment indicator - price above VWAP = bullish and vice versa. But the trick is to figure out (to a certain degree of probability) that the market went too far from VWAP and is about to return. Also I found that the market very often bumps off the VWAP (refuses it), it is a good price level as well. Jerry, we are definitely very interested in the video or further ideas, examples how you use VWAP for trading.

Just think guys, uptick rule in futures will never ever happen: 1. the futures prices are bound to the cash market, they cannot drop like a stone due to arbitrage 2. futures market orders are completely symetric and selling short is a fundamental element of these markets, not like companies stocks. In futures markets there are ALWAYS 50% longs and 50% shorts - does any uptick rule make any sense here? 3. many futures markets (futures on commodities) like corn, oil etc. simply cannot drop like stocks because there is real value underneath and not something virtual possible to cheat (corn do not care of Arthur Andersens fake audit reports or shareholders interests)

Nick1984, every system is 100% reactionary - you always react to something, otherwise it is random. Not all automated systems are price-based. Reuters (an I expect other institutional data providers) already feed their clients with fundamental data in an "algorithm-friendly" form. So automated systems can process reports generated by FED and other agencies. Goldman-Sachs is throwing out 60+ traders and replacing them by automated systems. What else is necesary to say? Personally, I am both automated system trader and discretionary. Both, if done right and after spending enormous amount of effort can be profitable. Single whatever great automated system is always less profitable than good discretionary trader due to timing (and I do not accept the graph posted here because the guy was fooling himself by buying at bid, selling at ask, if not mentioning slippage). On the other side, you can auto-trade several systems at one and fully utilize kelly ratio which discretionary trader cannot. In the end you end up with similar results. No way is easier or better than the other, it is about what suits you more. Nelo