Faith & Happiness “In The Moment”
When someone starts trading they inevitably make one very
important mistake; they concentrate all their energies on price.
A long time ago, in a galaxy far, far, ……… [wait a minute,
that was something else.] When I first hit the trading floor many blue moons
ago, with my shiny new badge and convinced I knew what I was doing [I didn’t],
I would ask other veteran traders before the open where they thought “price”
would go.
These were guys who had traded eggs and butter years before
I showed up and were reading and thinking about markets when I was in 1rst
grade hoping for recess. They would look at me and I could feel the contempt for me even being there.
“Hey rube, you want
some free candy”?
It was my mentor Bert [a few years earlier], who had taught
me the importance of volatility and the need to
spend almost all of your time studying it and the effects it has on the market
[s] you are trading.
Of course, since I was now a “member” of an important
commodity exchange, and the fact I was still in my 20’s and knew everything,
I thought all that stuff Bert taught me was BS. Wave your hands ….. Watch the
price …. Buy and sell ….. Presto bango …. Money.
I initially struggled on the floor, until I put my pride
aside and completely and fully embraced the principles of volatility
that Bert had entrusted to me.
All of the previous versions of my algorithms released on
the internet to the trading public [1 hour tunnel method to the present] have
sought to take advantage of volatility to some extent. Previous versions had
limitations that the market exploited and led to extended periods of time that
either made little money or led to small losses. This is unacceptable to me.
The “Long Term –vegas Big Bang Algorithm” [especially in WTI
Crude Oil] is the most powerful trading algorithm you will ever have
in your possession as a retail trader. I challenge you to find anything even
remotely close to the probabilities of success the algo provides. The fact that
it’s FREE VERSUS the crap you can buy for $$thousands$$ should have you studying “The Data Has
No Agenda” series in earnest after you read, reread, and study the “-vegas For
Life” file.
The logic behind the long term algo is inescapable; either a
market has average, little, or zero volatility for the week [0] OR
a market has higher than average volatility for the week [1]. With these two
outcomes and no other probabilistic events possible [i.e, a 0 or a 1 is the
only outcome possible], we seek out any market that falls into the “1”
category.
If you believe any market, or group of markets, is going
back pre-1972 [a 0 event] then fade every algorithm signal for profit.
Good luck with this scenario because not only is it unlikely, but I don’t think
it is even possible given global trade.
So, what prevents the long term algo from being the “Holy
Grail” of trading?
Easy; how you put your hedges “on and off” and the behavior
of the plum/yellow line cross “overs” and “unders” when you are unhedged. If
the volatility is there during the week it is impossible for the market to rise
in price UNLESS the plum line is over the yellow line and it
is impossible for the market to go lower in price UNLESS the plum line is under
the yellow line.
This is the reason why I recommend taking hedges [when the
plum/yellow lines cross] at or near the week’s high or low, and
keeping them on UNTIL price again threatens to EXPAND THE HIGH OR LOW FOR THE
WEEK [where incidentally your hedge price is]. When we take them
off, the market is moving towards the high probability scenario we know will
happen.
I am intentionally skipping all the other action [with the
plum/yellow line cross] because a) I don’t want to get caught in either daily
or weekly reversals, which by the way have a high probability and b) I
want to place my FAITH [read my money] on expanding volatility probabilities
THAT I KNOW EXIST FOR ANY WEEK!
Implement this logic with multiple lot winners and 1 lot
losers [initially at or near the week’s high or low] and you almost have to
want to lose to not make money. Your “tail risk” is a week with absolutely no
movement and/or a week that goes back and forth between the week’s high and low
making new high’s/low’s by a few pips before reversing.
This “tail risk” is real, and will eventually take place
some weeks into the future, and is the reason I strongly recommend
using part of your profits to establish a “rainy week fund”. If your goal is to
make $2,000 per week [for example], over time save up 2-3 times your weekly
goal and put it away for those “tail risk” weeks so that you can easily pay
your bills and live life like nothing happened. Then it’s back to business as
usual.
Trust me, when you start making money, everybody in your
life will be looking at you like you are an ATM card. Nobody wants to hear
there was no volatility this week – they want to see the moola.
Success for you will ultimately depend on your faith.
Live and trade in the moment; forget last week [it’s over and doesn’t
matter anymore]; forget next week [it’s not here yet and has no bearing on
right now]; concentrate on what you need to do now or today. If
you need to hedge, then hedge; if you need to add to your position, then add to
your position. Concentrate your energies on what needs to be done based on the
algorithm.
As for me, I’m putting my money [faith] where my mouth is,
and I’m betting the world of trading isn’t going back to the 1950’s.
Have a great day everyone.
-vegas
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