First of all, I love seeing you all taking advantage of this market chaos and social distancing and the 50% discount off the Backtesting Mastery course. I believe without a shadow of a doubt that the Backtesting Mastery course is the best course for any trader, new or experienced, to get to the level of consistent profitability. It's a simple methodology that not many people understand how to implement.
The questions I'm already getting from traders is fantastic! Proud of you all!
On to the real business of figuring this market out.
Yesterday I was talking to a trader who was asking me if I thought the FBO setup on the daily ES chart was a valid trade. He correctly noted that it was an FBO and not a FVBO, the distinction is important.
Using 1% risk (which is way too high to be using in this market in my opinion) you would need to have a $200k USD account to purchase one E-MICRO, not the E-MINI. You would need a $2 million dollar account to do it with an E-mini....
One of my core concepts about trading is stacking edges. If you don't know what an edge is in trading then we REALLY need to talk!
An edge is a quantifiable/statistical advantage with a certain asset class, a trading strategy or you yourself, as in you can focus incredibly well for example.
When you can stack multiple and complimentary edges together, you can come up with some really powerful trading systems.
One of the most important tools in my tool kit, is categorizing the market regime. If you've read any of my emails lately then you are well aware of what I'm referring to.
Categorizing the market regime gives you valuable information about how the market is trading and you can then apply the appropriate trading strategy to the market instead of trying to use what worked 2 times last week (out of 10) or for the past few years.
This market is completely different than that market, and it warrants a completely different strategy.
I hope you have been benefiting from these posts.
I realize that for many traders, they've never experienced a highly volatile bear market like this. Well no one has experienced it like this, just like any other bear market, this one is different.
However there are characteristics of all bear markets that are the same. That means that there are systems to trade and generate income during these markets, just like there are ways in roaring bull markets.
Ironically my trading has grinding nearly to a halt during this period.
For most traders, who still have their accounts and didn't completely blow up already, the volatility is very enticing.
These massive intraday swings are something we haven't seen before, and for traders who don't understand position sizing, they see 5% even 10% intraday moves, not realizing that they could make big money with 0.5% or 1% if they had the appropriate strategy and more importantly sized positions correctly.
Do you know how your...
In yesterday's email we talked about the price action on S&P500 Emini daily chart and contextualized it by the market regime and the likely scenarios.
The Double Top setup in a Bear Quiet market regime is a higher probability setup than a double bottom in a Bear Quiet market regime and Bear Volatile regime for that matter.
The risk range was the best we've seen in weeks and it was a natural place to pull back some, which it did.
What's great about this trade is that tight risk range allowed for very nice position sizing. Once of the few setups in a while where that was the case, making it quick and easy. Not exactly a common occurrence since this bear vol regime kicked off.
Now this is where it gets annoying.
Even though it was the smallest risk range trade on that chart in over a month, using our 1% risk model, you could've traded 1 ES Emini contract per every $500,000 in your account.
Or you could've traded the E-Micro S&P 500 contract and...
What a day huh? Today's market action is characteristic of the transition between Bear Volatile and Bear Quiet regimes. It gets tricky in here as optimism starts to kick in as we rally from the depths of hell back to where we are now.
Bears are nervous and are covering their shorts or waiting to cover their shorts, bulls who got punched in the throat last month and sold at the first bounce are starting to wonder if they did the right thing and start buying. This is what fuels bear market rallies, the most violent of all rallies.
As you know we aren't here to call bottoms or tops, we let the market regimes guid us. What works in a Bull Quiet regime doesn't work in a lot of other regimes and what worked in Bear Volatile doesn't work as well in a Bear Quiet and vice versa.
As part of the mentorship program I am running currently, AKA the Trading Thunderdome, we are doing extensive work on finding characteristics of the different market regimes and...
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...
While working with the guys at Macro Ops we borrowed an idea from Tim Ferris and his 5 bullet Friday's email format. The reason is because it is a great way to always be on the lookout for amazing things to share with people. I bet you can guess where this is going now.
So let me start the FIRST of these types of emails with what I want you to have/do in order to be a better trader. These are like table stakes, buy/read/do these things.
Also if you leave me forever and buy absolutely everything offered by these people and never even wave hi to me in the all, I don't mind in the least. These links/recommendations are the best in the game and I won't be sad at all knowing that you are moving in the right direction with your trading and life.
These products might cost money and these may be affiliate links.
This is one of the best books about trading in the business. Dr. Van Tharp is one of the...
If you've been with me for a while you've seen me showcase some of Grant's work. Grant is a team mate in the Trading Thunderdome and continues to generate great research and insights. He started writing a monthly letter summarizing his thoughts and keeping his investors updated along the way.
You will recognize the heavy focus on market regimes in his writings but you will also notice that he has taken the work he did in the Systems Mastery Course and ran off in his own direction with it.
THAT IS EXACTLY HOW IT SHOULD BE DONE!
If you did the Systems Mastery Course you should have a lot of your own ideas and now have a framework for how to turn that into a trading business.
In other news, the new direction that we will be taking the Thunderdome idea will go live this week. Currently the things we are looking to offer are:
If you aren't a part of the Pollinate Trading Lab you are missing out! We have a great bunch of traders in there now sharing backtests, setups, knowledge, code (for those of you who are interested in using AI and algo's), we even have a shared Google Drive of all our resources available for members.
This is not a signal service, don't join if you want someone to tell you to buy $F stock at X price or short $FB or whatever.
Rather if you want to have access to a bunch of real traders who are talking about the various setups they are seeing and what they are looking at doing in the markets that day, this is the place to be. We have traders from hedge funds, prop traders, family office traders and professional traders who have been trading for years (decades).
You don't need to have completed a...
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...
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