Retail Trading for a Living Milestone - "Feed my ego"/Thought sharing

[minwa]

Thanks minwa. Do you scale into or out of positions?

One position in, scale out. Scaling will depend on my expectations and where we are via the intermediate time frame price cycle and if I need to sleep. Don't prefer to use automatic trailing stops, but have to resort to it if I have to sleep.

 

[Gringotts Bank]

One position in, scale out. Scaling will depend on my expectations and where we are via the intermediate time frame price cycle and if I need to sleep. Don't prefer to use automatic trailing stops, but have to resort to it if I have to sleep.

ok, thanks again.

A 6 figure month. Still getting over that. :knightrid

 

[DeepState]

Thanks, that's much put simpler for me to understand and respond.

...

Hopefully that clears some things up.

Thanks again.

I do not think you were arb. You could not be with what you have to hand. Others would trade well inside anything you could reach and faster than the thought could come to your head and your order would need to route from Melbourne to CME.

I was arguing that liquidity imbalance in the ES (for a given level of SPX) could not be a source of sustainable profit due to the enormous amount of liquidity available in the contract itself and other relatives, vs the SPX. The spreads are tight and the volume going through is so deep that market impact through the top of market volume is largely irrelevant excepting options expiration dates in certain circumstances.

You go on to argue that the source of imbalance is the underlying stocks themselves...ie the stocks are manipulated and, thus, the ES is manipulated.

Let's consider this. The SPX consists of truly huge companies at weights that are very even. The tenth largest is Wells Fargo, with a 1.25% weight. Let's say DeepState Investments waltzes in and utterly smashes this stock by 10%. This would attract regulatory concerns and invite concerns about the solvency of Wells Fargo by market participants wondering what they have missed. Truly epic. The impact on the ES is 0.1%. Nothing.

If big houses are smashing stocks all day long, it happens in two directions. They don't hold an agreement to move in the same direction on the same minute. They trade all over the place, all through the day. They don't smash stocks by 10% unless by accident.

In other words, it could be argued that hitters come in an utterly smash stocks, but the chances of this happening in enough magnitude to hit an entire index is mostly theoretical and certainly not sufficient to generate two trades a day worth a 0.5% move with perfect foresight each day.

Further, this type of trading can happen in less liquid stocks where a trader may develop a sense of inventory on the street. It can also happen in more liquid situations around things like closing in to option expiration where there is pressure on hedging for strikes which can be seen in the market or otherwise fished out from the dealers. This is infrequent. More pertinent, like ES and SPY and SPX are all capable of arb, so is Wells Fargo and a portfolio of stocks that usually trade like it. Algo looks for this type of thing and restores balance, resisting efforts to smash a stock for no news. Algo makes up more than 50% of trade an a sizeable chunk of disclosed screen volume. Algo overwhelms my retired uncle and all his friend's accounts by some margin and some more.

Although stops are a feature, so are undisclosed limits. Goldman would not hold Wells Fargo at 10% below where it should trade for even an hour. It would consume an enormous amount of any reasonable volume it would seek to buy in the first place...which it would have to buy back. It could do it for a few minutes and hope that the sale volume behind it develops strongly enough for it to soak up more than it sold before the price reverted. In any case, the 'manipulation' does not last long.

So, even if manipulations occur at the stock level, even epic single stock moves have virtually no impact on the market...and hence ES. These moves are unlikely to be coordinated enough to meaningfully manipulate an entire index at any time. Quite certainly not enough to produce a, say, 0.5% shake out move twice a day.

Which leaves me with your outcomes being in the WTF basket.


Try to estimate what volume of trade would be required to have faked out the SP500 market for the morning session into the most liquid part of its trading day. That's a definition of epic.

 

[Gringotts Bank]

Try to estimate what volume of trade would be required to have faked out the SP500 market for the morning session into the most liquid part of its trading day. That's a definition of epic.

ES is probably not manipulated, but mean reversion off certain levels is a reasonable approach to trading.

You say you can't find any profitable reversion tendency in the ES in 1/5/10/30/60 min time frames. When I last tested SPY, I couldn't either, but minwa is using filters to get his high win rate (like time of day and the behaviour of other correlated instruments). He's also scaling out of positions. All of these added things can affect profitability enormously.

 

[minwa]

Ah yes, I see what you're conveying. I used GS buying Apple example because it would be easier to understand. It is my belief that the same manipulation occurs across the whole board, equities as a whole as all liquid markets are intercorrelated as funds flow from one to another - hence why I believe watching the yields provides clues to following them.

1-2 trades average on the days I trade, not each trading day. My broker analyst shows 20 trading periods I was in, in actual it's less because some positions are held overnight and days will still be counted when no new trades were entered so it will be a few days less. I really can't remember top of my head, I'm in the charts almost every single day, I make trades in FX on MT4 also.



Lots of potential opportunities, more if you use the true open, CME pits.

You do offer a compelling argument on that manipulation is not possible based on maths. I really have no theory besides I was taught that it does happen on a repeating basis. Technical side of me won over and adopted it.

 

[CanOz]

Hi Minwa, great thread mate.

Have you noticed the globex (overnight) low to be a relevant reference in these plays?

 

[DeepState]

It is my belief that the same manipulation occurs across the whole board, equities as a whole as all liquid markets are intercorrelated as funds flow from one to another - hence why I believe watching the yields provides clues to following them.

You do offer a compelling argument on that manipulation is not possible based on maths. I really have no theory besides I was taught that it does happen on a repeating basis. Technical side of me won over and adopted it.

Sustained manipulation across the entire equity markets in aggregate is not a viable explanation or postulate. That you acknowledge correlation and flow across these markets argues further against it than my prior focus only on the SP500.

Manipulation of the type you discuss exists at the stock level. It exists in FX for short periods. To argue this on the market aggregate for such sustained periods goes so many levels beyond whatever was required to manipulate LIBOR, Gold Fixes and FX that it truly would require a man in a volcano to coordinate. The problem with that explanation is we all saw that Ernst Stavro Blofeld was arrested by MI5 in the last Bond movie.

You are fully in the WTF basket. Awesome.

ES is probably not manipulated, but mean reversion off certain levels is a reasonable approach to trading.

You say you can't find any profitable reversion tendency in the ES in 1/5/10/30/60 min time frames. When I last tested SPY, I couldn't either, but minwa is using filters to get his high win rate (like time of day and the behaviour of other correlated instruments). He's also scaling out of positions. All of these added things can affect profitability enormously.

If the moves are essentially random, randomly trading them in any way will just skew random results to change hit rate and R:R in a way where the outcome is still zero. To generate results like has happened over months requires filters or identification of 'certain levels' from the noise of day to day, prima facie, random movement and money management methods with such insight that Minwa might well make fortune telling obsolete. He is closer to making that fortune....which is kind of what is happening.


As SKC says, I hope that he has found something. However, whatever it is does not sit well with what he thinks might be driving it (market manipulation). Whilst someone can take a view of "who cares, it works", I think that is not a good foundation from which to build and refine a process.

Still, of the choice between being lucky and skilled were offered, I'd take lucky all day long.

Thanks Minwa, this has been fun.

 

[Gringotts Bank]

If the moves are essentially random, randomly trading them in any way will just skew random results to change hit rate and R:R in a way where the outcome is still zero. To generate results like has happened over months requires filters or identification of 'certain levels' from the noise of day to day, prima facie, random movement and money management methods with such insight that Minwa might well make fortune telling obsolete.

You've taken what I just said, re-arranged the words and shot it back at me as your own stuff!

 

[DeepState]

You've taken what I just said, re-arranged the words and shot it back at me as your own stuff!

You indicated that his various methods look into the apparently random data and manage to do some magic with it. Like finding mean reversion at 'certain levels' in a series where mean reversion does not overtly exist under conditions where 'filters' indicate a higher likelihood of producing it. This, with other magic in terms of scaling or risk management certainly can produce very different outcomes to noise where genuine forecasting power exists. In Minwa's case, very favourable.

My extension to your words is to highlight that the outcomes are so far beyond what is usually manageable in forecasting (obsolete fortune telling) that it might be more accurate to describe it as him making the outcome itself (making that fortune [happen].) That last bit is my own.

 

[Gringotts Bank]

You indicated that his various methods look into the apparently random data and manage to do some magic with it. Like finding mean reversion at 'certain levels' in a series where mean reversion does not overtly exist under conditions where 'filters' indicate a higher likelihood of producing it. This, with other magic in terms of scaling or risk management certainly can produce very different outcomes to noise where genuine forecasting power exists. In Minwa's case, very favourable.

My extension to your words is to highlight that the outcomes are so far beyond what is usually manageable in forecasting (obsolete fortune telling) that it might be more accurate to describe it as him making the outcome itself (making that fortune [happen].) That last bit is my own.

Fair enough. One might just as well buy the MACD/stochastic/MA crossover and be just as profitable, so long as the time of day or other filters are setting up properly.

I certainly can't replicate anything like his results using 1min SPY data.

 

[Gringotts Bank]

min, have you run the system on backtesting software?

 

[Modest]

Mr minwa, do you look at any type of volume be it Market Delta, Vol Profile or ordinary Vol Histogram?

 

[minwa]

Hi Minwa, great thread mate.

Have you noticed the globex (overnight) low to be a relevant reference in these plays?

Not particularly, sometimes they are taken out sometimes not, the best lows to be taken out are where price have spent time consolidating for long periods, double bottoms & similar patterns.

min, have you run the system on backtesting software?

Not mechanical so not suitable for a coded backtest. As for a manual backtest I don't see much merit, a fair bit of it lies on the intermediate time frame premise which can't be fairly presented in a manual backtest, as it's 3-dimensional not just ES, I look at other markets to get a feel for the macro. Also knowing what happened in the past doesn't help with the discretionary side of it.

Mr minwa, do you look at any type of volume be it Market Delta, Vol Profile or ordinary Vol Histogram?

No I don't watch volume at all.

 

[Gringotts Bank]

Not mechanical so not suitable for a coded backtest. As for a manual backtest I don't see much merit, a fair bit of it lies on the intermediate time frame premise which can't be fairly presented in a manual backtest, as it's 3-dimensional not just ES, I look at other markets to get a feel for the macro. Also knowing what happened in the past doesn't help with the discretionary side of it.

Would be interesting to see how much of your performance is due to good intuition + good money psychology versus good system.

Actually there's a way to test this very question for someone trading a combined mechanical/discretionary approach: If there's a big difference between paper trading and real trading profits, the differential is caused by poor trading psychology. If there's not, then either you have a brilliant system, or brilliant psychology, or both. Can you tell us what difference there as, if any?

Thanks again.

 

[minwa]

Would be interesting to see how much of your performance is due to good intuition + good money psychology versus good system.

Actually there's a way to test this very question for someone trading a combined mechanical/discretionary approach: If there's a big difference between paper trading and real trading profits, the differential is caused by poor trading psychology. If there's not, then either you have a brilliant system, or brilliant psychology, or both. Can you tell us what difference there as, if any?

Thanks again.

My demo trading was years ago, and over time I have made changes to the methodology so kind of hard to compare now. From top of my head I do remember when I went real money from profitable demoing I was only around break even, little profit little loss there for a few weeks at least. I'd say the system is brilliant, although I haven't traded through a prolonged bear market like 07/08 so there's still that to come.

 

[VSntchr]

I'd say the system is brilliant, although I haven't traded through a prolonged bear market like 07/08 so there's still that to come.

Yep. In the same boat as you with that regard.
Although, market conditions have certainly not remained the same over the past 3 years, so if you've adapted well over those changes then that is some comfort.

 

[Gringotts Bank]

My demo trading was years ago, and over time I have made changes to the methodology so kind of hard to compare now. From top of my head I do remember when I went real money from profitable demoing I was only around break even, little profit little loss there for a few weeks at least. I'd say the system is brilliant, although I haven't traded through a prolonged bear market like 07/08 so there's still that to come.

Great, I accept you probably have a excellent system. How would you descibe your attitude to money? For example, how does it feel when you make a losing trade?

 

[Wysiwyg]

I'd say the system is brilliant, although I haven't traded through a prolonged bear market like 07/08 so there's still that to come.

It seems to me you are in the zone of confidence and belief that athletes get into when they are winning with what to the majority appears ease. You are where all traders want to be but will never get to because they have mental and real baggage, Many people will never make it and most of all will never make it as well as you have. It can only be that way or you would not be.

 

[castelldefels007]

I love it how you feel to be on a high with your trading. – I had in my trading live a few time where I felt like bragging. Every time I did my equity curve went down. Enjoy as long as it lasts.

 

[minwa]

Great, I accept you probably have a excellent system. How would you descibe your attitude to money? For example, how does it feel when you make a losing trade?

I still feel annoyed at controlled losses, angry if loss is "uncontrolled" like, a human error in placing orders which results in larger loss than anticipated. I do not think I will ever reach the stage of "not caring" at all of losses of my money. I personally do not believe that is possible, at least not for me, if I don't disregard the desire for material things - if that happens I wouldn't be trading anyway.

Whenever I am in losing streak, I compare it to my days of options selling losses, and these losses feel like nothing. A blessing in disguise were those large losses, how they now enable me to feel much better about small losses. I would joke about it to my trader friend, things like "time to line up at centrelink tommorrow.."