Before I review I gotta get some stuff off my chest. I dont think I have ever experienced this much lack of confidence in myself ever since I started trading. When you take 50 trades in 2 weeks and you lose on 85% of them, its insane how much of a toll that takes on your ability to make clear decisions. I feel as though in this moment in time, trading is impossible. When I feel like that there is only 1 thing that I can do, continue the course, be okay with lackluster results, continue to review, trade my strategies. Something I have been looking up over the weekend was the idea that sometimes our strategies are very bad for the market conditions and when they are it is our job as traders to lose the absolute minimum possible. When our strategies are good we must win the absolute maximum possible. It is something that only a very highly experienced trader can do but I think that is one of my biggest weaknesses, I am unable to identify when my strategy is good and when it is bad. Last week I traded so much and lost over $300 just because I was fighting a market who did not want to be touched. This week I adjusted slightly to adhere to the unforseen varibiables that exist and so far it seems like this small tweak could help me a lot. Something else on my mind is the whole apex account shit. I am spending 100$/month to have that funded account yet I am trading and losing more money than I would if I was using my own money. I knew that doing linear sizing meant that I would have to be willing to lose a lot more money and with apex that is the only benefit. The problem is that I have already had the account for 2 months and I have spend $200 to have that account and I have lost over $500 in the account so far. I am stuck, should I size up more so that when I win in apex I actually have a chance at getting a withdrawal? or should I stay small size and pretty much chalk up the 100$ a month going to education? hard to know. If I lose the $1500 because I size up then I have to either pay $80 to get the account back or I just have to go back to trading with my own money. Its so hard to know the right decision. Perhaps I should use about 2x the size I use now but change nothing..........but I have tried that so many times and it never ends well. I think adding into true continuation moves is really the only thing I can do and if I do that correctly I should be able to have at least a $1k month. The only thing I need to focus on is how do I lose the minimum when my strategy is bad. Firstly, lets define what makes my strategy good or bad.
a. Clear structure must be shown. That comes in the form of linear regression channels. These channels show me the overall direction of the last 5 days of trend. When we are in a downtrending channel, I only short at the top of the channel, when we are in an uptrending channel I only long at the bottom of the channel. That is how it MUST be done. There are no exceptions to that whatsoever. Only short in downtrending channels, only long in uptrending channels.
b. Ontop of these channels we have lower highs/lower lows, and higher highs/higher lows. When these also align its adding to EV
c. If we are in downtrend, below PDL and PDC is great, vice versa for longs.
d. Below/above moving averages
e. Anchored vwap from turning points in the regression channels
a. ADD- This indicator has been TRASH the last 2 weeks because the entire move on SPY has been attributed to only the top 5% of weight. When only top 5% is moving the entire market, ADD is useless. In a good high +EV scenario, ADD will be moving in the same direction as the structure
b. Weight Index- I made this up but its just a combo chart of AAPL, NVDA, TSLA, MSFT, GOOG, AMZN, NFLX. These tickers combined show great sentiment in terms of the overall market and where the SPY should go next. This has been much more helpful than the ADD in recent days. When its aligned with structure, again, way better +EV
c. VOLD- Vold can actually see more than the ADD sees in terms of overall market sentiment because the volume from Weight index will show up on the VOLD much faster than it will show up on ADD.
d. TICK- yeah above 0 below 0 whatever, helps a little
THAT IS IT. Nothing else is a variable. When these varibles are added together and align then EV can be calculated. Lets look at todays example. We had firstly, an ORH, a Trend Reversal, and a Trend Continuation. We will go over all of them at same time.
- Uptrending channel on 4h but we had a nice blowoff top so reversion to mean is likely so long as the 30m chart is in a downtrending channel.
- 30m is in downtrending channel as well as below the anchored vwap to the peak of the move. Most of this move is damn ugly, its very tricky to catch shorts when the market is driven by the top 5% of weight rather than the actual overall market itself.
- Another descending channel on 2m where we hit the premarket high and fakeout the "lower high" before reclaiming the channel and failing massively back inside of the channel hitting the mean reversion spot.
Okay so we have the structure laid out but what is the trade to take? We are extended and hit topend of channel on 4h so since the 30m is in downtrending channel we are allowed to go short BUT the 2m chart intraday was very very strong at open, why would we short an uptrend? because that uptrend is miniscule in relation to the broader 30m downtrend. Where do we get short? once we see a failure to breakout of the descending channel. Are the internals confirming this thesis? If they do then we MUST use more size. It is a fundamental error to trade a setup with D size when it is an A. You end up not making money in the long run if you do this style of trading when doing mean reversion. You must size into the good trades and keep small size on the losers.
- Massive uptrend on ADD until the top of the channel when we somewhat moved lower but its still just a consolidation at the highs. To see this really roll over id want to see it take out at least 70% of the initial intraday uptrending move. It did not do that
Weighted ADD (O)
- These were in a clear massive downtrend once they broke above the opening range high. Right at 10 you can see people wanted that ORB but instead it did the ORH and ripped back down through vwap and never looked back. This is a stark contrast to the above example that only has a simple list of the stocks in the NYSE. The weight of these top 5 companies can pull the entire market with them, for that reason this indicator is going to be a very important one moving forward. If this indicator is going in your direction but the ADD is not, then you can pretty much chalk up the day to a rotational. When ADD is consolidating but weight is dropping then funds and big money are simply taking money out of big 5 and into the overall market. In rotational days the trend is much worse in terms of true followthrough. This example was moving down though adn I was looking for a short so this did help in my analysis and definitely gave me +EV.
- VOLD was extremely strong at the open and it started to go back down but it never broke and held its LOD so its still technically in an uptrend. If SPY is in a downtrend and VOLD is in an uptrend that is NOT GOOD.
- TICK was also quite bullish, yes it was downtrending when SPY finally turned over but then right back above 0 and making strong values. This is yet another indicator of rotation rather than trend.
So what in total do we have working for us in Structure:
1. Downtrending structure on 30m as well as 2m
2. Failed lower high on 30m
What do we have working against us in structure:
1. 4h is still in huge uptrend
2. Holding above PDL
3. Initial spike at open was extremely bullish and aggressive/tricky to think short after a move like that
4. immediately broke above PDC at open and held
Structure score is at best a B. We are contradicting the overarching 4h trend, but we are in confluence with 2m and 30m being both downtrending. That is enough of a reason to at least take a trade albeit a small size one.
What is working for us in terms of internals?
1. Weight is moving down and trending lower
What is working against us?
1. ADD massive uptrend then consolidation
2. TICK bullish leaning
3. VOLD bullish leaning
If the structure is a B and the internals are a C then what is the score of the overall trade?
This is where things get tricky, it depends on the style of the trade.
If you are doing trend continuation ONLY, then this is pretty much the nightmare scenario. Potential target on these trades is anywhere from 2-5 points and the chances of continuation when we have internals conflicting eachother is VERY LOW. If you are doing mean reversion or "Trend reversal" then this is pretty good scenario. Not great though. If the ADD and Weight were together then this would be incredible but again when they are conflicting eachother then we are seeing rotation occur rather than a true trend. Yes for mean reversion you must get in at a sketchy price but you also must add into the trade for it to outweigh the 30% win rate. If the followthrough is ugly and sketchy then its nearly impossible to add into the trade which in turn makes the EV very very low and almost not worth the headache. Yes you will still make money but in the longrun it will be nothing in comparison to a trade where mean reversion works well and you can add into it.
- This was a pure trend contination on 30m, trend reversal on 2m. We have a lower high on 30m with descending channel and we hit topend of that channel, Then we fail big with a retest of the highs for a fakeout then we breakdown and have that final big flushthrough. This was the trade I took today but instead of getting in early and adding, I only took my starter at the second red arrow and then covered for a 10 point trade. I was unable to add into that trade though which was a fatal flaw, if I cant add into the reversal/reversion style then the win rate will inevitably make me lose money overall on that strategy.
- This was a much better and easier trade to take but since it was a continuation trade there was not really a chance to add into it. Albeit, this trade shouldve been with 2 contracts and scalping 3-5 points. That is how you trade a continuation when the internals are conflicting like they were today. In rotation we scalp with size and we try our best to catch reversals but they will be extremely difficult to attain.
What did I learn today?
- When the ADD and Weight are inverse, rotation is occuring so followthrough is sketchy and pullups/pullbacks can be extremely violent and hard to catch.
- If I am doing a mean reversion trade I need to add into it always and the best way to add into a mean reversion is to wait for previous support to become resistance, if that doesnt happen before you have a 10-15 point trade then just take the profits and wait to see if it happens later on in the day. Dont scalp the move like an idiot and then stop out at the perfect high because you are down 3 points. That scalp I took had zero basis in reality whatsoever. I shouldve waited for the pullup to previous support before even thinking about that trade.
- When doing reversal you use 1 starter, when doing continuation you use 2 and never add. Reversal entries dont have to be perfect because you can add when confirmed right but continuation entries must be close to perfect if you want to really get the move.
- There are only 1-2 good opportunities of the day and the rest are bait for traders who will never be profitable so long as they continue to trade it. That first reversal drop was the biggest opportunity of the day int erms of gains but it was also the most uncertain since VOLD ADD TICK were all bullish as well as sectors. The 2nd leg was much easier and a lot cleaner but the pullup was so violent that it made me nervous and I executed very poorly. I think the 2nd leg was probably the better trade in terms of confirmation and potential reward but they are 2 different style that need to be respected as separate styles. I can get my starter and add into the first trade with confidence and I can enter more cautiously with bigger size on the continuation trade.