steve46

Thanks for your kind words Josh Characterizing the Globex The S&P futures "overnight" market commences at 1330 hours Pacific Standard Time, continuing until the next day when the futures open at 0830 hours (or 6:30am PST) the next day. From that point on the "Globex" or "overnight" market consists of a series of openings and closings of financial markets worldwide. For the purposes of this small article, we will consider only the open and close of the Asian (Japan, Singapore and Hong Kong), and European Markets (primarily the German DAX and UK). Knowing that this market differs substantially from RTH sessions, we look for a way to characterize it so that we can 1. Find a way to trade it that provides us high probabiity entries without having to monitor continously throughout the night. 2. Manages risk effectively while minimizing exposure to systematic risk Based on experience we know that participation, and thus volume, liquidity and volatility are likely to be limited except just prior to, at or during, the open of each regional market (as listed in our initial comment). Our preparation consists of the following 1. Review of important (high impact) economic reports for each regional market using Forex Factory, Briefing.com or equal source of information 2. Review of significant economic news for each regional market using any of several news publications including Financial Times or Bloomberg 3. Monitoring of at least one televised source of real time news covering the open of each regional market (again we prefer Bloomberg) To characterize the markets, we look to recent events to direct our efforts. As of this date (July 12 2012) we know that the Asian Markets are minimized as shown by review of the S&P feed during those "opens" at or near 3pm PST and 5pm PST...however the DAX and London show significantly increased volatility and as a result the S&P "Globex" perks up at the open of each of those markets displaying tradable, repetitive patterns.

Yeah well I have a couple of observations of my own regarding a trader's "self-development" I believe that past a certain point in life it becomes impractical, and most certainy unlikely, that a person will make the very significant changes required to become reasonably good at this business......sports analogies are near and dear to me, probably because I have some life experience is that arena.....just to pick one, it is well known that if you can't learn to hit a major league curve ball, unless you can throw one (unless you are a pitcher) you aren't going to make it in that sport...it matters not whether you "understand" what you are looking for, how the curve ball is thrown, etc.....you either can or cannot hit that pitch.... there is no middle ground.... As a pursuit, I believe that this business (trading on a daily basis) is similar.....up to a point one can find, and receive education, mentoring, and technical expertise, but there is a critical element that is found in one's psyche (in some of us anyway) that cannot be taught or learned unless you have at least "a seed" of that intangible "something" within you to begin with.... Now to be realistic, we cannot all be Michael Jordan (basketball)...or Nolan Ryan (baseball) but we can maximize our own potential, whatever that is.....from my point of view the "real" question is......is that potential (the maximum that we might achieve)......enough. Its up to each person of course to make that decision. In my own classes after number of months of trading in a supervised environment I asked each student to go out on there own and try to make a reasonable living....I suggest to them that they should be able to do that within about 6 months. In my opinion, if a person cannot make significant progress within a reasonable amount of time, given sensible restraints in terms of capital.....they probably should look elsewhere for a vocation... Good luck

As usual a lot of commentary and very little substance Risk has to be understood in the context of YOUR systematic approach and YOUR particular edge....if you have a system that is right 45% of the time but produces a significant return (that overcomes your expenses) just simply common sense says you have to have a different risk management program than a person whose system is right 60 to 70 of the time but produces less return per trade.... Take the time to figure out what your system performance is over a period that includes at least 400 data points. Then work out your risk management....its really not that difficult Oh and good work "experts" with your advice......always appreciate the comedy act....

Actually we don't need you to be charming, but perhaps we could get you to say a word or two about where you come from and what your background is.....What did you do before this....? What do you plan to do here? Do you vend a product or service or both....? Honesty works just fine here however what we see recently are folks who show up and offer to provide something and what they end up doing is trolling for email addresses..Ironically the "first post" often takes a form very similar to yours........its a tough act to follow....Welcome to the forum.

To summarize for interested readers First, we assume that markets display repetitive patterns can be observed We approach the market by dividing it into time periods. We consider "the open" to be the first half hour, and we divide that half hour into 10 minute segments. The rest of the day we trade in half hour "chunks". We look for ways to characterize price action so that we can anticipate it based on confluence of time and price (we want to be able to "look for" pattern that occurs during a specific time period, and at or near a specific price or range of prices) We start by looking at the most recent market examples and work our way back (we prefer to obtain at least four (4) weeks of data on which to make our observations). Proper characterization should include analysis of entry points, profit targets, risk management, as well as context (reports, events, news, etc) When the analysis of the historical data is complete, one should try to obtain a week or two of "walk forward" data to provide the trader with adequate confidence to put money at risk.

Wasn't planning on posting this example but it presented itself so I will go ahead and show it This is a part of characterizing late day (afternoon) action. I simply call it an afternoon reversal. Lately the S&P market has been presenting this behavior and if you see it, and can organize your system so that you anticipate it, then you can trade it. The pattern lately has been for the markets to respond to Euro news (as well as domestic news) by moving south. In the afternoon, institutions and speculators come in to buy the "marked down" market (at a discount). This reversal action tends to happen on the half hour. We characterize it using the following protocol 1. We know that a down market or market that has trended down through the morning may reverse in the afternoon 2. We know that this behavior can occur on the hour or half hour from 10 am PST to close 3. We know that the behavior is likely to happen at or near one of our supply/demand nodes and that the signal is repetitive (one model of this setup calls for a relatively wide range bar or candle, followed by a reversal candle, then two "tests" of that local low)....favorable entry is possible at that point. This is another example of using principles of "characterization" to aid in developing a profitable approach to trading.

well its one way of looking at things....unfortunately it not a productive way of seeing it but thats academia for you Those who do this for a living have to deliver a result.....they look at real world action based on human habits....particularly the habits of people who put capital to work in the markets.... "Informed" participants (the pc term for smart money) will tend to pre-position, get some breathing room and manage the position into the release. The "drift" is the natural historical tendency of markets (and those who want to make a buck). Its not only prior to FOMC that this happens....in fact I was taught to pre-position for the RTH session during the previous evening from midnight to about 4am PST. Works very well and I do it to this day (I was short from 4am this morning). there are a number of different ways to make money in this business, to act in ways that aren't immediately obvious to the crowd has always paid off for me...

Here are a few ideas for those interested in learning to characterize markets From my point of view this technique is the cornerstone of "real" analysis. If you learn to do it skillfully, what you obtain are patterns and tendencies that may provide the basis for a profitable systematic approach to trading. The Open How does your target market open.....think of the characterization process as a blank canvass. You can add structure as you wish, but simply remember that whatever you "add" has to provide value of some sort.... For my purposes I start with the concepts of "time & price" and "confluence". For the S&P futures the RTH market opens at 6:30am pacific standard time closing at 1:15pm. I classify the open as the first half hour, and divide that time period into 10 minute pieces. During the first 10 minutes, brokerages process retail orders that come in overnight and during the pre-market. In the industry we call this "shearing the sheep", because these initial orders usually represent the opinion of uninformed participants (also called "noise traders") Because the actions of this segment of the population includes a significant emotional component, we often see what Market Profile adherents call a "test/drive" protocol, where price moves to test a nearby ledge or area of previous supply or demand. This initial test/drive process can best be seen using a short time frame chart. Depending on the time frame you choose, you can either see the "granularity" of price movement (with 1-3 minute bars or candles) or you can go out to 10 minute segments and see the broader strokes (just the reversal points). Homework For those interested, go to your chart package and review the opening half hour for each day of the previous week. Use a short time frame bar or candle (from 1-3 minutes)....look for the following 1. Look for price to open and then test a nearby ledge....(a ledge is a series of bars/candles terminating at the same price) also known as supply or demand, support or resistance. 2. Look for confluence....("confluence" is the convergence of two or more data types) for example.....if we concentrate on the confluence of time & price....look for price to open, test up or down to a nearby ledge, then reverse at a specific time...i.e. 6:40am (remember "10 minute segments"?) 3. For those interested in Market Profile, look for price to "test/drive" up or down to a nearby previous value area high or low...(I also use "time based pivots", but to each his own). The object of this homework lesson is to get folks to begin looking for patterns of behavior that repeat. At first, you want to simply confirm that these patterns exist (prove it to your self first) then you dig deeper and try to find the nuances 1. how does the market open on days when we have a report out PRIOR to the open (at say 5:30am) and how does it open when the report is scheduled for release after the open (at say 7am PST). What you will learn is that the markets have different ways of acting on the open depending on whether we have a report early or later (after the open)....and the open is different when participants have some expectation of the likely result As an example, when we have an economic report due out AFTER the open at 7am PST and the result is widely anticipated to be positive....typically you will see the market open and stall, moving horizontally until about 6:45am.....the reason for this is simple....it is a "game of chicken" as participants delay looking for others to signal their bias....they wait for others to show their hand by putting on size....in theory, "informed" participants are likely to act in front of the release, and others follow behind like a school of fish. This can be seen by monitoring the tape (time & sales) and/or by watching the NYSE tick, or by simply watching price as time moves toward that 6:45 "line in the sand". Strategies There are several strategies that a trader can implement depending on risk tolerance and skill level. 1. One can monitor and simply "go with the flow" entering at or after the 6:45 time line, depending on their ability to decode the price action. 2. One can wait for the release and find entry at the first retrace up or down 3. Or if one is "informed" (has a strong viewpoint, presumably accurate) one can position themselves in front of the release, and having obtained "breathing room" simply wait and manage the position. Couple of words of advice...for the most part members here will tend to be newbies and not have enough experience to comment....I will post charts to illustrate ideas and concepts but for now take the time to "think" before you post. Thanks and good luck in the markets.

In light of recent developments at Peregrine I have to suggest that people take a long look at forex and how its structured.....I never did get the attraction (I realize its cheaper to trade it but look at what you get "with the package") with regard to learning how....the same impediments exist for forex as for any market...you still have to develop an edge (as others have pointed out).....since "guarantees" of performance are not permitted, what we see is the other alternative as vendors try to make trading appear simple and easy......the most interesting development is what I call "aggregating bars"...for this technique the vendor goes and finds a programmer and they "invent" a new way of displaying data where each bar is colored (and/or shaped) differently so that trending behavior is seen (in theory) earlier (and more accurately?) ah.....well that technique has been around for quite a while and as with all things it looks good in theory but in practice...it simply doesn't provide much of an advantage. I think what I wil do is to provide some new info with regard to characterization of markets. With all these new vendors coming in to tell us the "top 10 reasons why traders fail" I think someone should provide some substance for a change.......

This latest problem is the "last straw" for me as well. I "used to" leave a significant amount of capital in my account, but now it seems that this is simply not wise given the news...so what I am going to do is to remove all but the bare minimum for my business and sweep profits every Friday (used to just leave it alone).... I think the idea of using multiple brokers is probably a good one however, for my purposes what I have decided to do is to let my accountant do his own eval of the balance sheet and fiscal condition....personally I figure if the owner of a business is going to commit fraud, or embezzle funds, there probably isn't much we can do about it except to limit losses by keeping the account small and keeping vigilant (being "nimble").... For those interested I seem to remember that Vanguard offers brokerage services....don't know if they have direct access, but I am sure they have primary access to capital markets (best to check out their website if you are a swing or long term trader). My take on this is that my money is safer (if there is such a thing) in a bigger firm where no one single entity (owner or relative of an owner) can "cook the books". Other alternatives include Goldman (for those who can meet the minimums) and the bigger banks (don't know that they offer brokerage services, but I am going to check it out now)..in those cases if there were fraud, presumably the firm would have sufficient capital to indemnify losses and they would be motivated to do rather than see their rep damaged. Good luck

One of the reasons so many new traders fail is that they see so many wannabe vendors spouting useless crap....when you are done with the marketing intro, I look forward to reading something useful......something we haven't heard before.... Thanks.

I'll offer this comment and then I'm done. After all I no longer do this (teach) for a living The starting point is learning to characterize the way your target market behaves from start to finish....on a typical day, how does the market open....for example does the market open and move one way for the first few minutes, then reverse and trend? how does the market act on days when economic reports are released, on days when "bellweather" companies present earnings, or on days when news about the European crisis hit the wires? How does it act during mid-day....what does the last hour look like? This is simply about your ability to observe and make notes about the market you want to trade...to the extent that you learn to observe and come away with useful info, you may find something that no one else sees....something that forms the basis for a profitable trading system. Good luck

Try paying attention to the context joseph (it will help you to find your own success) Those who can....do.....that is what I am doing....I no longer teach (therefore I have nothing to sell).....and even when I did I traded my own account during class (in contrast to felton who traded a sim)....also I charged my students $200 a month....not "thousands"....in my opinion no vendor should charge "thousands" to learn how to trade.... I speak for myself now....from my point of view my financial records are none of your business....my ability to trade IS however.... and for my students I displayed that ability in real time over a period of a week so that they could see (before paying) for themselves. I taught two classes....in the first I had a problem with my data feed and we had to stop for period of time...until it could be fixed...for the second...we had no problems and the class went smoothly...at the end of my class students were asked to stop and go out on their own to prove to themselves that they could make it in this business..for better or worse that is how I chose to do it.....its history now...and I notice that none of them have posted comments to the contrary.... Finally my comments are meant to encourage folks to become their own teacher....again pay attention please....if you do this yourself you pay nothing except for your time....and if you choose that road....I suggest that you (all of you) take the time to properly research your ideas and gather enough data (I suggest a mimimum of 100 and preferrably 400 data points) to justify putting money at risk... Best of luck to everyone

I think there are a couple of interesting points that can be taken away from a thread like this one First, it seems obvious that in an economy like this one most small players have already lost most of their discretionary money....likewise we know that todays markets a dominated by institutional players. This tells us that on a daily basis most of you that still have accounts are taking a beating. The comments about "watching and waiting" are important.....the ability to observe and develop information without being at risk is critical in this environment. Every time you pull the trigger it costs money whether you win or not.....and what many do not seem to understand is that you need money to make money....so it is very important to keep your powder dry until you have a very good strategy....one that allows you to make a minimum profit on each trade and to have a fairly high "hit rate" (accuracy)....for those of you with small accounts (less than $10,000) this allows you a chance to make some money and actually build up your base, instead of simply bleeding it dry (fast or slow) paying brokerage fees. I hope the most recent thread on "felton trading" taught people some important lessons. In those threads we learned that folks in the so called educational profession are feeling the effects of this economy just like every one else.....with so few people having discretionary money, vendors are having to go out and search for students. Also you are seeing that many of these vendors simply do not have strategies that work well.....one cannot know whether that is because they 1. Never had an edge to begin with, or 2. Are simply too difficult or complex for students to learn. From my point of view it doesn't matter...the net result is the student loses. A final comment about obtaining "proof"...I realize that is it fashionable to request financial records from vendors....hey...have at it if you must but from my point of view it is much better to do your own investigation. Not only can you obtain the data (your ultimate proof) but the advantage you get from doing this work yourself is that you have up to date evidence that a strategy works (or does not) and if you find something worth doing, the work you did to "prove it" provides you the internal confidence that helps you to "pull the trigger" confidently when you are trading it yourself....In my last class I required students to do this before trading with real money...they didn't like it, until after the exercise was over, then when it came time to put their own money at risk, they all "got it".....during the exercise of accumulating the data, they saw for themselves that trading produces runs of winners and losers (no way around that) during the process they see (they saw for themselves) how many consecutive wins and losses they could expect. I had them do a mandatory preliminary test of 100 data points, and for those willing to take my recommendation, (for my final class) I asked them to accumulate 400 data points using several different historical time periods (covering several different market conditions). The final "proof of the pudding" came at the end of the class, when I asked them to stop and go out on their own....those who had done the work are still trading and making money....those who did not aren't doing so well...(I only trained eight students over two classes). Especially for those working on their own, I suggest you take the time to do this work....it will pay you back many times over.... Good luck

Since I am "here" only rarely these day I think I can answer some questions First, yes I have several successful strategies. Second, no I don't share them Third I have taught a few (very few) students how to trade. I did it because I wanted to help. Teaching is work...it is difficult to do and with my experience behind me I now have respect for those who do that work...I no longer teach and a couple of comments for the original poster Websites like this one attract all kinds of people. What they have in common is the interest in learning to make money. Some of them are "my kind of folks" (whatever that means) some are not....I try to help those who seem like they are trying earnestly to learn the business. Others I ignore or try to direct to places where they might find help...Some (who in my opinion ) are infantile persons, get a verbal whipping and they don't like it....thats just too bad...its part of life...so no apologies. There are simple ideas that work..generally they are "right in front of you" meaning that they are obvious but for reasons unknown, the general populace simply doesn't have the skill or the intelligence to find them. Again thats life....there will always be winners and losers. The best advice I can give is to learn to observe patiently and try to see what people are doing in the markets...learn the basics and go slowly...learn to test your ideas and to manage risk and eventually some of you will make it..... If you find a good teacher consider yourself very lucky as that can speed up the process significantly.....if not try to become your own teacher.... Good luck

Hmmm, so lets see here, you've just suggested that your "business model" is justified because you have employees that need to be paid? So its okay to upsell folks from the get go and its okay to market software that makes your students dependent on YOU to trade your system and apparently this "business model" is profitable enough that you don't need to trade (except in your most recent post where you recant that comment....now you DO trade at specfic times of the day)..... I think the rest of you can connect the dots......

Interesting with respect to the question about finding a method or room that is profitable, the answer is not going to be welcomed...first it is not "the method" or even "the room" that is going to make a person profitable....unfortunately for most of you, it is a number of other characteristics, most of which people aren't " born with, but need to learn to incorporate in their personality....among them are discipline, focus, mature experience and judgement. Also one needs to have internalized a sense of adult self esteem. By "adult self esteem" we mean a sense of what is real and the ability to subordinate immediate personal "wants" while working on a future goal. If one possess those qualities, there are a number of systematic approaches that work pretty well. If we are talking about trading the S&P Futures for example, currently most skilled participants are using a mix of both trend following (longer time frame) and momentum based (shorter time frame) systems with good result. with respect to a systematic approach or "room" I can only relate to my own system (one that was published here quite a while ago. In that approach I outlined how large institutions use time based goals to move money in and out of the markets. Last year for instance the longer time frame goal was 1363 (approximately)....participants knew this goal was in play fairly early in the year and we traded around that using both outright positions and options (for the longer term players). If you took this seriously you did both (trading around the open, high and close of each time period from daily, to weekly to monthly to quarterly). and of course markets move up AND down but I don;'t have the time (or inclination) to provide a comprehensive outline of my system here. Now some will suggest that in that thread, there wasn't enough detail on which to base a systematic approach, nevertheless, some folks took that info and ran with it, and had a decent year...I taught two small classes (8 students total) and like any approach where you have a diverse student body, some did well, some did poorly and for some it is a work in progress. Since all of them are either members or read my work here (and aren't posting complaints) it is assumed that (at the very least) they received value for their money (I charged them $200/mo...and this brings me to my final point. I think there are ways of screening for participants who are most likely to be successful in any endeavor...in future if I decide to teach again, the screening process will be weighted so that I can find folks who are most likely to benefit from my approach to teaching. Unfortunately everywhere I look, including Mr. Felton's "room"...if you have a checkbook, you're in...to me that signals that the business's profitabilty takes a higher priority than the student's success. I think that is fine, but not a value that I want to embrace.

Be careful......that could be construed as an "insult"... hmmmm lets see....I haven't "attacked" anyone in a few minutes....and I seem to have misplaced my list of pre-written death threats.... Well no time to look for them now, I have to get back to my "illegal activities"..

Personally Josh it seems to me that what matters is what the market does, not whether you understand, agree or disagree with it... For those interested, the top tier firms maintain 24 hour exposure to the market on a worldwide basis, using a team concept, where groups of 5 or more individual take turns monitoring and managing delta exposure.....as each market opens and closes, the teams handoff their obligation to the next group and they only execute as they are told to....by a person further up the chain of command who "sees" the bigger picture. One of the advantages of this strategy is that it prevents any one person from knowing what the firm is doing at any single point in time. Analysis of cumulative delta is essentially useless (as you can see from josh's comment). One thing you can do however is to use simple common sense....if the markets have established a yearly high of 1417.75, that means that someone has inventory parked up at that level.....if you look at where we are today....it makes sense to suggest that there are participants who may be motivated to lower their basis...there are two ways to accomplish this. 1. to buy at a lower cost when the market dips, and 2. to take profits when the market is marked up however briefly. Depending on how much of a committment each firm has at higher levels, you will see this strategy executed as long as firms think that the market is likely to move lower.

Its called an "equalization trade" and it happens because Asia has its own opinion of what is likely to happen in Europe now that Greece is threatening to renege on their proposed budget cuts....anticipating the possibility of more bad news to follow, "informed" participants got short after the close of business. The "tell" was the noon balloon during today's RTH....the half hour from 10:30am to 11am PST was all downhill. Generally, older participants (those likely to control significant capital) use that time frame to get a head start liquidating "parked positions". Today's early up move gave them a chance to get out at a reasonable discount to their basis.

Okay so one final comment just to try to provide some hope for people struggling....first, trying to help "struggling traders" is what I came here for 6 years ago....my small insignificant attempt to do something right....what ever happened I am willing to let the chips lay....no explanation needed Now as to the idea that you "can't learn unless you already know".....like so many riddles, it is both right and wrong....I think it is difficult if not impossible in this environment to find qualify education....Look at the what happened when "spookywill" showed up....although he has some skills, his ability to transmitt anything of educational value sucks....right from the beginning he provides dated material and when challenged he says ...this is a "legacy concept".....yeah that helps, especially while people are getting their asses kicked trying to trade it....more recently he suggested that the "odds" of a move occuring were "65%" and then no explanation until someone has to come back and ask again "how did you arrive at this number"...only then do we find out that THIS concept is actually pretty useful (relatively up to date)....but how did that happen....not because the guy had teaching skillls but because some of YOU folks decided to do the research.....The bottom line for me....and my suggestion to all of you is that you look carefully at what happened there....what you learned and what you have to "take away" was the result of your own work and initiative....not his, not mine...yours...and for my dime, that is still the best way to learn how to do this...that is to observe, to research, and then to synthesize information that is current for use in this (or whatever market you trade)....If you folks were to find just one concept like that per week I think in a short time, it would go a long way toward providing a viable tradable edge.... Good luck Steve

The prevailing thought is that when a profitable system is public, the participants find that their entries and exits become "crowded'...(it becomes more difficult to get filled and to put size on) As a result, if that system required limit orders for execution, participants might find that they needed to use market orders instead, and that would change the profile somewhat...also at the other end, on exit they might find that they had to lift the available bid earlier....again this would alter the system's profile... Finally as a systematic approach becomes more publicly known, there are those who would be waiting to suck in the retail traders and then take it the other way. The most common example can be seen in the S&P Futures contract. In that market, players like to wait for price to move to test swings high and low...what you may see is that the market will often "take out" that high or low by a few ticks or even a point or so, then reverse back the other way....professionals call this "shaking the tree".....it is also done with just about any conventional indicator in common use (MACD, Moving Averages, Market Profile Numbers, etc) Just a few examples to think about.

People who make money (a lot of it) are usually people with a high net worth (as they say in the banking industry), and usually they are people who guard their privacy....so those of you living under the delusion that a teacher who has money and makes money is going to show YOU his financial records, need to wake up...(or not).. Secondly, the idea that you (the student) will pay a teacher (who already has money) some small percentage of your "earnings" is comedy at its finest..... I taught (past tense) two groups of people...in each group some folks did well, and some did not, and I wish all of them the best of luck, and if any of them were to contact me, they would receive my best advice and help at no charge because I liked each of them as human beings....I couldn't care less about receiving some percentage of their earnings, that should go to their families....who generally speaking have had to put up with them losing money most of the time.... Try to remember this...a skilled professional earns much more per day than any of you make or will make in a week, or perhaps (I should say probably) even in a month...try to bring some semblance of realism into your view of the world...it will help in your trading (those of you with actual accounts)....

Your post #40......Gosu's post #57....either one.....thanks

The gentleman asked you a question. I am also interested in this subject... Could you show the calculation you used to arrive at that number? Thanks