Last week I wrote about the Bull Volatile regime. As I always like to remind people the way that I categorize the markets is using a LAGGING indicator, the SQN (System Quality Number). The SQN is similar to the way a calendar works, it won’t tell you the temperature exactly every single day, but you have a general idea of if it will be cold, hot, rain, snow, dry, long or short hours of sunlight.
That is if you are in Buffalo, New York in January, you are most likely to have cold, perhaps snow and more importantly you’ll know the tools you need to have handy for that month. Flip flops and a tank top are not to be considered, where as you wouldn’t even think of not grabbing your coat, wearing a sweater and likely your boots and gloves.
The SQN is the same, it helps traders by giving you the general characteristics of the market regimes.
There are two parts to it, first the trend, Bullish, Bearish or Neutral.
The FVBO has been doing quite well against some US Dollar FX pairs this past week, I pointed them out on Twitter. Let's have a look at USDJPY
Earlier in the week I was talking about the VBO setup, being the first breakout of the channel. I have totally cut out this strategy from my main trading and have improved to the new VBO 2.0 (vbo +, or whatever we decide to name it!).
The new VBO would not take that first breakout and instead wait for the FVBO, which we saw play out nicely on Monday and Tuesday, hitting our profit target with little pause. Where VBO 2.0 comes in would be a pause and a reversal higher...we did not get that.
Additionally the Bear Quiet/Neutral regime that USDJPY currently is in, doesn't work very well with VBO2 but it is incredibly powerful trading the FVBO.
If you are utterly confused by now, sorry. I am putting together the full VBO2 and FVBO strategy videos and some backtests. Stay tuned there.
Next we had the USDCHF which is...
The trading team in the "Lab" have been doing a lot of work on different ways to categorize market regimes, and the many different characteristics of each regime.
Of course if you've been seeing my emails and following our work at Pollinate you know that we put a lot of importance in the value of categorizing market regimes and using the SQN indicator to help us do that.
Another even easier method to categorize the regime is to use the ATR indicator.
ATR = Average True Range basically smooths out a moving average of the length, which out of the box is 14 bars.
So the way we use it is if the ATR is declining then the volatility is declining.
If the ATR is rising, then the volatility is increasing.
Let me show you what I mean on the Nasdaq Futures daily chart
This is one we've been talking about for a couple of months.
You'll notice that the SQN indicator signals a sideway/neutral regime all while the price has been rising...
I just put out a Tweet that I wanted to share with you all, because I didn't realize that I was going to turn it into a thread, until I did, and wanted to make sure you all got to see it to.
Here's the link to the Tweet, would love a like, retweet and share it with any other traders you know who needs to hear this!
And if not, no worries, here's the Tweet because I love you all!
In yesterdays live session in the trading lab we covered a number of topics But one of the best one was that the magic isn't in the indicator it is in what the indicator is telling us about the characteristics of that market
There are basically 2 types of markets Trending and mean reverting A market is either trending up/down or reverting back to the median (sideways)
Markets fail to breakout and trend 80% of the time Or breakouts that follow through and become trends only happen about 20% of the time But when they do they can...
It has been a busy week (and weekend) with the cryptocurrency markets taking a lot of our focus. In fact this week our busiest channel in the Lab is the Crypto channel, by far.
I won't make this email all about crypto but I want showcase some of the trades we took this past week.
(I go a lot deeper on market regimes down below, stay with me!)
To be fair, it was pretty easy to make good money in the crypto space last week. But there were a number of members in the lab who didn't know how to access the markets, didn't understand security, didn't know what assets to trade and generally would've been lost without a network of fellow traders to lean on.
You'll notice that you don't see any SQN indicator or ATR indicators on these charts, you might say "But Chris, you are the regime guy, how do you trade without the regimes?"
It's very comforting to rely on indicators to do your dirty work, and they do a great job on the whole. But if...
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