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
