Systems Trading vs Price Action - How To Get Lucky

I got a lot of emails and DM's from traders asking me my thoughts on where the market is going to go from here, what's my price target?

The truth is, I don't look at markets that way. When I got long $NQ Futures back at around the beginning of April, I wasn't planning to be on the doorstep of 10,000 NQ by summer.

And to be clear, this is not a victory lap of me catching the bottom and piling in long from the very bottom and buying a Lamborghini. Nor was this a VBO or FVBO trade, this was me applying my knowledge of price action and how it (price) behaves in different market regimes. 

Me getting long on April 5th was not expected to be a 2000+ point winner, with multiple adds to my positions. I had no special perspective on where I thought the market was going to go and I certainly didn't expect to be putting in new highs with all that is happening in the world.

All that is happening in the world and what we were dealing with on April 5th had nothing to do with my decision to get long. The news had 0% to do with any of my decision, the recency bias of what just happened in March, had 0% to do with my decision to get long. 

And this comes back to how I do all my trading, let me walk you through what my decision making process was at the time and how it adapted as we went higher. 

At the end of March there were a couple of things on my mind, first was the Bull Volatile market regime that we had just RAPIDLY departed from a month ago. 

A Bull Volatile market regime is REQUIRED for a major market top, among other things. So that signaled a lot of credibility to the fact that the April bottom formation might just be a tradable counter trend bounce before we head lower. To be clear, I wasn't a perma-bull when I put this trade on, but I do know the market is built, by design, to go higher in price over time. 

Next I annotated the complex double bottom pattern that I did not trade. I missed the bottom, yes I suck and you should tell everyone you know that I suck!

Actually even though there was a tradable setup the risk parameters were too high for me to trade even 1 contract. So had I even wanted to buy, my risk management wouldn't have allowed it. 

None the less, at this point I was queued up to look for reasons and ways to get long. 

Next we get a shooting star type of candle and a double top variant there, this is THE BEST looking sell setup I could imagine. It's a gift, this is every excuse to go short, in the world, this is the easiest top tick for the next leg down in the worst bear market in history that everyone is calling for...and it fails. 

Well to be clear, it worked for 2R, which is really good for traders who understand risk management and mean reversion strategies, but not what every.single.market.pundit was calling for. 

When the market turned up from there instead of going limit down and printed a bull bar this is when my slow moving mind realized that bulls have regained control. 

I could've taken Jerry Powell at his word and just bought when the fed stepped in but, as mentioned, I don't pay attention to the news and things like that. 

But I saw my opportunity to get long. 

Using the techniques in the Consistently Profitable Trader course I let the market pull me in long and using my position sizing techniques from the Systems Mastery course I had much better risk management and could size the position appropriately. 

Once the price action confirms the market regime we are in, we can apply the correct strategies to take advantage of the environment. 

For me, I was more than happy to continue to add to my long position, almost lazily, as each of the most obvious market top short setups, FAILED.

It's rare that I do step away from my FVBO/VBO strategy and take a more discretionary trade but when I do this is the sort of outcome I'm after. 

I don't know when this trade will end, but I'm holding long and will continue to add when the setups present them self. 

Be sure to sign up for the FREE email to get more timely updates and join us in the Trading Lab to trade right along with a bunch of professional traders at hedge funds, prop traders, family offices from all over the world

Everything you need to bring your trading to the next level.

If you are interested in this stuff, Have a look at what we have to offer. 

And think about joining us in the Lab, we work on these projects every day together

Subscribe to our newsletter

We look at markets differently at Pollinate.  Our main focus is on identifying market regimes, discovering the characteristics of those regimes, and matching strategies to exploit these regimes. Sign up and find out how we do it. 

Subscribe

Join the Lab! 

The lab is a private slack group where professional traders, proprietary traders, traders at hedge funds and portfolio managers collaborate 24/7 covering our unique views on markets.

Join the Lab

Master consistency and systems trading with our courses

We will help you build a profitable trading system that will consistently earn for you day after day.

 

Enroll

Sign up for the free newsletter

I will send you proprietary research, strategies and insights that you won't find anywhere else, exclusive only to email subscribers.