ticks

I trade as if the markets are cyclical -- the price is hard to predict but we do see movement either up down or sideways. So therefore I do not try and pick a direction but instead chose a strategy that allows me to have]both sides of the market. So to accomplish this I use different strategies depending on choice of the underlying. For example using a future contract long on the ES and buying 2 ES puts to have a close to equal market exposure which may be measured with the delta on the options and the delta of the future being close to zero delta. Now with that position the market is eventually going to give me a profit on one side -- either the puts benefit from a move down in price of the future or the long future will give me a profit on a price move up.I can monitor this with the change in delta and when the delta changes by 8 or 10 I capture that profit by adjusting the trade back to the original deltas. On the ES this provides a profit of say $200 and I then wait for the market to move however it wishes until the delta again changes to offer another profit opportunity. Another strategy which I use will be a pairs trade -- such as trading 2 NQ contracts short against 1 ES contract short. The ratio can be 2 to 1 or 5 NQ to 2 ES futures. So again the strategy is non-directional and is based on the belief that markets are cyclical. The ratios are based on the point values: 20.00 a point on the NQ and 50,00 a point on the ES. So 5 NQ's equal $100 and 2 ES contracts equal $100. On the 2 to 1 ratio it is close enough as then it is $40 vs. $80. I have a mechanical system to pick which contract I will chose short and which one long -- but it really doesn't matter -- again to the fact that the NQ and ES normally trade in lockstep so when there is divergence (one stronger than the other) there will be a reversion to the mean. In all my trades I need no stops and both of these as examples illustrate the fact that duration trumps direction. These trades give me "time to be right" and will not shake me out of a winning trade with a stop being hit. Perhaps this very confusing to those who hold to the belief that the proper way to trade is to pick a direction and use a stop. I can demonstrate the profitability of this strategy of trading easily by showing actual live examples but that will necessitate some way of posting live trades. Meanwhile just try it in a paper account and you will see it is hard to lose money. Another advantage to these trades is the fact that you receive about 85% margin relief from the clearing firm. This proves that the trades carry much less risk as the margin is to protect the broker from loss. I hope this illustrates the point in a way that makes it somewhat clear. There are rules that make the trades very mechanical and when followed it generally produces consistent profits. The more volatile the markets you trade the more opportunity for profit. So CL (crude oil futures) works well. The reason, of course, is the more swings (since you are holding both sides long and short) the more opportunities to take profits and readjust your trade deltas. Now you can easily see that you have profit on one side of the trade and a loss on the other side of the trade and therefore how can that produce profits. The answer is in the cyclical nature of the markets -- you take profits mechanically when the market gives you the profit and you are left with an "unrealized loss" on the opposite side of the trade. Then the market eventually swings the other way and the loss on that side becomes a profit and you "rinse and repeat". I doubt that many will grasp this from this post but hopefully at least it will shed some light on the subject.

The "arguement" that the market is either a "random walk" or "predictable" goes on almost forever with knowledgeable proponents on both sides. I have traded for a long time -- always trying to predict market direction and cycles using technical indicators and charting techniques. The old quest for the "holy grail". The more experienced, and fortunately the more consistently profitable I have become, the more I find myself in the Random Walk camp. So if no-one can in fact predict the markets with consistency then why should we not turn to strategy to "trump" direction. Strategy will take out the need for directional predictions. It also allows for trading without the need of stops for exits. Stops are really "evil" as the stops take us out of trades prematurely either with a smaller win or sometimes a bigger loss if chosen incorrectly. Strategy selection allows for mechanical trading without the need to be right on market direction. By now you are saying "all well and good" but is what i have written correct? Is it probable? Can it be demonstrated and shown to be correct? Yes. Consider the fact that there are hundreds and even thousands of charting tools and indicators -- often presented by trading "gurus". Why is then is it that most traders who employ the use of indicators lose in the long run? Who do you know that can cosistently predict market direction better than a 50/50 choice? Strategy trumps Direction. The markets can go up down or sideways. No-one knows for sure. Strategy permits making money even if you are wrong on your direction prediction. This thread was well started as it may save traders years of frustration and thousands of dollars pursuing statistically wrong approaches. I hope that traders will finally come to the understanding that what they are doing results in trading against the odds of winning and change their thinking to what really makes statistical sense. Sorry if you believe that I am preaching. I just offer this as a result of being in the trading trenches for years -- mostly at a loss -- until I was guided to strategic trading. BTW please don't think I am trying to sell any system or that I have "an axe to grind" which will line my pockets with your gold.

Thanks for this thread JPerl. I am unable to play the Flash presentation -- are others experiencing problems or is it my computer? Thanks for a reply.

Just a heads up -- This is "pirate software" not authorized by CBOT (license holder/owner of MP). This means that the developer, who is a "one man shop" working out of Isreal, is taking a chance that he will not be "shut down" by the CBOT. The CBOT requires a licensing fee for each user. So caution flag is out --before paying someone in Isreal for software that is risking being shut down.

For some unknown reason I was unable to open the video. Link would not connect. I will try again later. Thanks TinGull for the video hope to see it soon.