green.green

Is 80 based off a hinge on the hourly? (Not depicted on your chart). From last Friday.

It's going well. I've gone through a ton of entries and amazingly it seems if you enter in the right spot 6 ticks seems to be about all you ever need. I still have a little more work to do but should be codifying everything over the weekend. I hope your dip in the pool is going well.

Someone sent me this video this morning and I think it is important. Allow Steve Vai to teach you how to trade:

I haven't done more on this as it's much harder to do in excel and i don't know what time frame to consider to define the trend. As for the plan - it's going well. I'm using DBP's template and going through a full calendar year of data which is taking some time but certainly is helping. Did you go live today?

The Importance of the Small Win: I was a psychology major in college - I've always been interested in psychology and both poker and trading have given me some direction in my continued education. I've said elsewhere that I believe creating a very specific morning routine before the trading day is important. This is all about the small win. The night before a game Michael Jordan would watch a tape that was prepared for him. It was clips of his opponent and their go to moves. A statistician had analyzed his opponent's tendencies and put together 10 or 20 short clips of that player making their go to move from that spot on the floor. Basically MJ did his homework. On game day Michael would eat a specific breakfast. He would chose a particular car, play a particular playlist and drive a particular route to the stadium. Upon arrival he would go through his routine to prepare himself. He would change into his uniform, always wearing his UNC shorts under his Bulls uniform, always putting on his wristband up to his elbow. A few minutes on a warmup bike, followed by a specific stretching routine, followed by a shooting routine where he shot a specific number of shots for each area of the floor, working from the layups out to the 3-point line. Then he put his warmups back on and put on headphones to listen to a specific playlist. This whole routine would take around 2 hours. When we think of athletes doing this kind of stuff we often call the "superstitious". What MJ and almost all successful professional athletes are actually illustrating is the power or the "small win". MJ's pattern was a habit. He had done each of these things so many times that there wasn't any need to think about them. Each step in the habit was a small win. Each small win leads to the next and on it's own seems insignificant. What each small win does is reinforce the idea of winning. MJ puts himself in the right mindset and each small win builds to the goal of playing his best that day. Some researchers were interested in figuring out why some dieters repeatedly failed to lose weight. They found a bunch of failed dieters and asked them to keep a food journal - to write down when and what each of them ate each day. There was no request to diet in the study at all - it was just meant to give the researchers some data. Something far more interesting occurred. Some of the failed dieters made using the food journal into a habit. Others were only recording what they ate from time to time. After six months of journal entries they found that the dieters who had made the journal into a habit had lost a significant amount of weight whereas the other group had remained the same. What caused this? First the journal acted as a tool for recognizing a pattern. The participants who used the journal regularly noticed (for example) that around 10 each day at work they would eat a doughnut. Just by making this observation they could adjust their behavior by switching out the doughnut for a healthier alternative. Once one small change was seen and recorded it gave these failed dieters a sense of accomplishment and a positive feedback loop was formed. They saw a pattern, they made a plan to change their behavior, the followed their plan and booked a small win and they recorded the results. This made them feel good about themselves for a change and many more small wins naturally followed. If you can come up with a method to track your small wins and a morning routine to create a winning frame of mind you greatly improve you chance for success. The end of this document is especially important for this: http://cdn3.traderslaboratory.com/forums/attachments/131/38017d1398254234-developing-plan-trading-journal-developing-planwst.pdf

I haven't done my homework for tomorrow yet but I wanted to post my chart from today. This chart can be compared with the one posted yesterday in this thread.

I've been doing some rough data analysis on night session versus day session. I've included the excel file if anyone is curious. There is raw data for the overnight session and day session going back to April 1st 2010. I didn't exclude holiday's but if someone wants that level of detail they are free to do so. So what is the point of all this? I wanted to see how often the overnight high or low is broken. It turns out that this occurs 96% of the time. Even more interesting is that when the high or low is broken 71% of the time the other extreme is not broken. I have over 1000 days as my sample set so this number is historically accurate. This got me interested in the distribution of ranges where neither end was broken. Surprisingly when this occurs it's most often with ranges of 20 points or less. I also did some distribution work on overnight and day ranges which just give a better sense of what sort or ranges normally occur. I made the excel file for myself so if you can't understand any part of it feel free to ask me - it's not pretty. NQmasterDATA.xlsx

Here is my chart for tomorrow. I won't be simming until I finish my flight plan and statistical analysis. I just want to see how well my homework provides areas to trade (or more importantly - areas not to trade) and continue to build the habit of doing proper homework.

I've been trying to relate boxes to AMT. It seems that boxes represent value. I imagine if you were to plot the volume distribution (or time) within a box you would often get a bell curve. So the mean of the box should be the place where buyers and sellers agreed on price the most. When price leaves the box you have the auction market searching for new value/advertising price. This is my starting point at least.

Here is a chart I started working on yesterday as a means for testing a setup. I've been looking specifically at boxes and how they interact with price. I'm getting better at identifying boxes and am starting to see their importance. All of the boxes and horizontal lines were drawn on this chart before the market opened. I didn't draw the down sloping channel until price broke below 3550. The interaction of horizontal and diagonal lines is certainly compelling. I did something with boxes several years ago in an attempt to explain support and resistance. However, nearly everyone focused on the boxes themselves rather than the support and resistance they implied, much less the trader behavior that created the boxes in the first place. So it never really went anywhere and became just another newbie gimmick. If you understand the behavior that these boxes represent, i.e., why the boxes take place, then they may be helpful. But if they're no more than a "feature", they are not likely to be of much value.

As I've been working on my "flight plan" I've been drawing from my reservoir of poker experience and I realize a lot of what I've learned from poker isn't well understood by retail traders. I'll try and summarize my thoughts in this post. I hope it helps my fellow SLAyers. I apologize for all of the upcoming poker analogies. The Goal - the reason for developing a "flight plan" is so that we can define and track our edge. By doing this over time we build an intuitive approach to trading and a trust in our plan and our abilities to execute our plan. Intuitive trading is not the same as doing what feels good. It is forming a habit so that we don't have to think about each trade as they develop. We see a DL break, a pullback and we set our entry and our stop without wasting mental energy. It's building "muscle memory". When Michael Jordan steps on a basketball court he isn't thinking, he is reacting. He has built habits and uses these habits to drive his actions of the court. When the game is over he watches tape of the game and analyzes what he did right and what he could improve on. When he finds some weakness in his game he goes to the gym and practices that element over and over until it is automatic. I think most of us understand this but we don't know how to "go to the gym", we sim endlessly and we look at historical charts but what are we practicing? Would Michael Jordan get to the skill level he has if he just played pickup basketball day after day? So where to begin? In poker the primary starting point is EV; expected value. Expected value is defined as (average win x win %) - (average loss x loss %). In poker the EV of any hand can be calculated but only if you keep statistics. If you have played 1000 hands of AK you can calculate your EV for that hand with reasonable certainty. If a hand has a positive EV then you are making money with that hand, if it has a -EV then you are losing money with that hand. You can maximize your overall EV by removing hands with -EV. A poker player also needs to consider variance. Let's say that I am looking at my results when I play the hand 65. Let's say my win percentage is very near 25% and my EV with this hand is 0.05 antes (the equivalent of ticks for poker). This hand is showing a positive EV over time but I may consider tossing it. The reason is because this hand is likely to greatly increasing my overall variance. The closer a particular hand's EV is to zero and the lower it's win percentage the more it will increase my variance (swings). Whether to play this sort of hand is up to the individual poker player. If he has enough money and the mental makeup to handle big swings in his account he may keep any positive EV hand in his overall strategy. (I've included a screenshot of the results on one of the best poker players in the world. Note his best and worst days as well as some of the swings he had to endure. This player does not turn down any +EV hand.) On last point about all this that is important. The lower the win rate of a hand in poker the larger a sample you need to accurately determine it's true EV. Don't be fooled by strong results with low win rates over small samples. So how does this work for traders? If you want to be a discretionary trader it starts with observation (http://www.traderslaboratory.com/forums/wyckoff-forum/15896-how-do.html#post176152). When you see something that you suspect might have an edge then the first step is to find at least 30 instances of this behavior. Let's use the hinge as an example. Find 30 times a hinge forms on your trading chart. Next comes trade execution and management. You need to define how you will enter on the hinge and how you will manage your trade once it is entered. This is a huge stumbling block for poker players. If a poker player has a setup (let's say he is dealt the hand AK) he might know he should play this hand, he might even know he should raise to maximize his EV but this is where most poker players stop and fail. They don't actually have a plan. They raise to 4 times the ante one time and 3 times the next. They don't know what to do if they are re-raised by another player (should they fold, call or re-re-raise?). They don't know what they are going to do if they completely miss the flop (bet or check?) or how best to maximize their EV when they hit a hand. They especially don't know when to fold. What ends up happening is they make a plan on the fly. (I'm going to bet the flop and fold to any resistance; I'm going to call one bet to see one more card). The disaster with this approach is there is nothing to measure. There is no metric to help the poker player. He isn't following a pre-defined plan so his results don't relate to or test a plan. Without the plan there is no way to improve, there is no way to maximize EV and there is plenty of fear. Even worse - they are often rewarded by winning a pot. They don't realize how much EV they are leaving on the table each time they are dealt AK. Trading is a little different than poker in one important way. With trading you are never forced to play a marginal hand. You can sit back and wait for a premium hand without any real drawback other than time lost (opportunity cost). In poker you will go broke from the ante if you forgo too many marginally + EV situations. In poker there are three main focuses for a strategy, maximize EV, minimize risk and maximizing emotional control. A poker player might forgo playing certain hands because sitting on the sidelines allows him to keep calm which in turn improves his overall play. How to balance these three considerations is a personal decision but one that should be based on your particular makeup. This will define the style of your trading. A note about money - in poker you exchange money for chips. You measure your results in relation to the size of the ante. You try to think in terms of ante not money. The EV of AA might be 2x the ante as an example. The same thing should be done in trading. Concern yourself with the EV of a setup and frame it in terms of ticks. Turn off you P & L if possible during the session. So you collect 30 (or more) instances of a hinge. You come up with a trade management strategy for trading the hinge; how you will enter, how you will move your stop, where you will take profits or scale out etc. You now can create a theoretical EV for this setup. Now you forward test or simulate this trade in real time. Now your statistics that you collect are meaningful and will lead to improvement. You can make adjustments to your entries and exits that maximize the EV of a hinge. All setups should be treated in this exact manner: observation leads to a hypothesis/setup leads to a rough determination of the edge leads to a management plan leads to quantifiable results and improvement. We now have a theoretical win percentage for our hinge setup and an average number of ticks this trade should yield. If we were computers this would be enough but we also need to consider errors that might arise. In poker there are five common errors. 1 - not playing a hand that you should - you are dealt JT but you are nervous or distracted or have been losing and you don't play the hand. 2 - playing a hand you shouldn't - you are bored or on a win streak or distracted and decide to play a marginal hand. 3 - playing a hand differently than you planned to - you don't hit a flop at all with AK. Your plan says you should fold but you decide to pay to see one more card. 4 - chasing - you have a straight draw but you overpay to see if you can make your hand. 5 - making a mechanical mistake - you want to raise to 4 times the ante but you put out more chips than you intended. The trading equivalents here should be obvious. Most of these mistakes also contain a psychological component. You are nervous or scared or greedy or euphoric and this causes you not to follow your own rules. If you track these mistakes they will either cause you to better follow your plan or modify your plan to better suit your personality. They will also show you explicitly how much you are losing by going off the map. Lastly, you will be able to identify situations where you plan is inadequate or where being aware of a particular context cue might greatly increase your win rate or EV. Without tracking mistakes you inadvertently taint the data you are collecting on your setups. Some of you may know that I enjoy lifting weights. There are many good reasons for this. In weight lifting you can set lofty goals. You can wake up today having never lifted weights in you life and decide you want to be able to squat 300 lbs. You go into the gym and you can only squat the bar (45 lbs) but you talk to some people who know more than you and you come up with a plan. You decide to do a certain number of reps and sets every other day and incrementally increase the load on the bar. You create a workout log where you track what you are doing each time you lift. You can see where you are getting stuck. Maybe you work up to squatting 150 lbs but you stop progressing. You modify some aspect of your lifting plan. You eat more, you sleep more, you increase your volume etc. Pretty soon you are squatting 200 lbs. You make these seemingly tiny incremental changes and over time you can reach your goal and more. The reason I bring this up is because none of this improvement is possible without keeping records. You can't tell where you are stuck. You can't make sensible increases in weight. You don't create any sort of positive feedback for your efforts. Poker (or trading) without records is like going into the gym each day, putting 300 lbs on the bar and trying to squat it. You are going to fail and build a negative image of yourself and your abilities. You remove all of the positive feedback and instead frame your efforts around failure. When I finish my flight plan I'll be happy to share it with anyone who is interested. Like anything in life it will be up to you to make it your own and to use it. I won't be simming until this work is done.

My point was that I was wrong that it was against the rules. As for my UL - how is it drawn wrong? I initially had chosen the highest high between the two lows but when price doubled the range I thought we can move the UL. If the point is to track supply and demand doesn't my channel do this? EDIT - sorry my reading comprehension seems poor today. Sometimes I post and then comprehend. No reply required.

I'm in the process of developing a "flight plan" - basically a morning checklist where I note all that needs to be noted before the market opens. Once an area of interest is reached it's just SLA which I feel comfortable with and don't need further testing with. I'd like to sim through 50 or so pre-market days, fill out my flight plan and then run the playback around areas I have predefined. I also want to do some statistical analysis around ON highs and lows which can easily be done in excel but will take a little time. I will also analyze the results off these levels and try to figure out what I'm missing so that my game plan each morning is solid. Basically I don't have the right habits in place pre-market. I need a way to force the right behavior and I think some sort of checklist followed by honest post-market evaluation. I don't want to have to do any thinking once the opening bell sounds.

Terrible winrate Silence is a lot sweeter than listening to boo birds. I don't miss ET. Are we going to Big Mike's next? EDIT - I just got some scammy looking e-mail from ET about HFT and the easy money to be made. Yuck.

I shouldn't complain but I was disappointed that I missed the reversal. By the time I exited my short it was moving fast and the first decent pullback was at 62 and didn't look appealing to me. I almost took 51.50 but it moved through while I thought about it.