THE DATA HAS NO AGENDA, PART IV

                                     I Can Afford Catnip Now!!

There are some very important key points I want to go over before I start with the different scenarios. I explained in an earlier post what the definition of the “low value & high value for the week are and how they are calculated respectively.

There are 3 very important points I want to stress.

1) The statistics generated by the “low value” is what I use for determining our hedge positions and the statistics generated by the “high value” is what I use for determining profit potential. It is important you understand this, and after I present the key scenarios, I think you will clearly see why this is so important.

2) I also want to stress the importance of following the red and aqua exhaustion lines, as well as the yellow and plum line buy/sell signals on the 5M candlestick chart once we start to trade when the horizontal opening line threshold is breached. It’s really pretty simple; no matter what you think, the market isn’t going to rally higher unless the plum line is over the yellow line, and similarly the market isn’t going to break down lower unless the plum line is under the yellow line.

When exhaustion lines are hit or breached, you must either hedge up or liquidate your position. Yea, sometimes markets keep going, but more often than not it’s very near the end of the line for the move, at least for a little while.

[Note: The mq4 file for crude oil is now listed in the File Download Links under "VBB Crude Oil mq4". Download for free, or if you have any trouble contact me at vegasalgo@yahoo.com and I will send it to you ASAP.]

3) You have 2 options when it comes to hedging; either do it or don’t. I like the idea because it forces me to act when market conditions warrant instead of sitting on the sidelines hoping for a rally or break to get back in the market. If you don’t want to hedge, then simply open new positions and then liquidate when appropriate.

All of this means of course 1) you have to follow the plum/yellow line signals once in a position, 2) you have to be aware of the exhaustion lines for liquidation or hedging up, and 3) you have to be aware that the +35 pips from the open down to -35 pips from the open is our “no mans land” for trading. Inside this zone we are either flat or hedged up.

When [not if] we get a reversal week, our new position becomes effective at that 35 pip threshold.

Our goal each week is simple: net out 200+ pips per week.

If you are more aggressive, then simply follow the signals to the end of trading for the week on Friday. Me? I like to live some – I’ll take the 200 pips and go enjoy life; whether it comes on any particular day I don’t care.

SCENARIO I:

Looking at the “low value” statistics [i.e. raw data], I know that approximately 20% of all the weeks in your trading career, the market will open on Monday and NOT go more than 35 pips from either the eventual high or low of the week. Therefore, in this easiest of scenarios, there won’t be any weekly reversal moves and it should be a relative straight shot to the high or low of the week. Whatever the side, I’ll be on it, and if I trade correctly [i.e. hedging properly] I’ll get the 200 pips.

Why am I so sure?

According to the data, 77% of the time the high value will be greater than 250 pips for the week. Now, these are odds I can embrace!!

SCENARIO II

I also know from the data that slightly over half the time [53%], the low value for the week will be greater than 100 pips. If I trade correctly, that means I’m going to make money on the low side value [before it turns] AND the high side value as well.

I’M GOING TO MAKE MONEY ON BOTH SIDES OF THIS VOLATILITY!!

Again I ask, what’s not to like about these kinds of odds? Seriously, somebody "enlighten" me and show me where you can get probabilities like this from any other market.

SCENARIO III

According to the data, a little over a quarter of the time [27%] the low value for the week will fall between 35 and 100 pips. Now, I will either a) make a little money on the low value side, b) lose a little money, or c) basically breakeven.

Who cares? I’ve still got a 77% probability scenario for 250+ pips on the high value side.

Oh wait a sec ……… I’m shooting for 200 pips not 250 pips. In that case I’ve got a 90% PLUS PROBABILITY PERCENTAGE [91.24%] WORKING IN MY FAVOR!!

Seriously folks, I’m not really into what floats your boat, but when it comes to trading markets and making this market your own personal ATM, I don’t know how it gets any better than this.

I’m going to give you 3 pieces of advice to take very seriously; 1) don’t be greedy and stupid with your trading [because a week is a long time], 2) set aside at least 10% of your winnings to grow your account [see “-vegas For Life” file for details if you haven’t already], and 3) as you win set aside a rainy WEEK fund for those “tail risk” weeks that eventually must come some day.

Next post, I’m going to show you how to make your losses very small relative to your winning positions. I used to have a saying when I was on the floor; “Lose hundreds, make tens of thousands”.

Have a great day everyone.

-vegas