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  OR a market has higher than average volatility for the week . 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.