iBankCoin
I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
3,701 Blog Posts

Organized, Like Crime

I really like the feel I had trading the /ES_F today.  I’ve currently pigeonholed my discretionary trading to conform to the BOSSRAM ALPHA cycle.  This prevents me rushing.  It allows me to measure where we are in the cycle after some broad redundantly calls my phone so she can hear herself talk and position (or hand sit) accordingly.

You see, plates, I juggle so many.

One of my favorite trades in the market requires full attention because it can fly in your face quickly.  I didn’t want to stop trading the chart picture simply because my day job doesn’t afford me focus so I automated it.  This was the birth of ELROI.

Elroi doesn’t trade the picture as profitably as me.  But what he lacks in profitability Elroi makes up in consistency.  Elroi bagged 3.75 handles in profit today on trades that were too racy for me.  I on the other hand, wielding Bossram, made $25 or 0.50 handles.

But it was fun to watch Elroi go to work while I waited for the market to come into the Bossram wheelhouse.  This week I reset my account to $10k: five for me, five for Elroi, and I pulled the rest out to buy cat food.

You see, trading the /ES since April has been by and large a circle jerk and a dangerous one at that.  It came down to losing focus.  I’ve…courourrrected the problem and put several policies and procedures in place to ensure the new habits stick.  My future’s trading operation is looking more like a Fortune 500 company every week.  Goodness, companies like AMZN, GOOG, and SBUX aren’t on these lists by luck.

Learn from their cultures.

Now it’s exciting and I’m happy to fire up my futures every morning.  It’s me verses Elroi.  So far he’s winning.

ON TO STOCKS:

I sold AMBA entirely today.  I told you very clearly I was taking this cheap trick for 10 percent and then taking my business elsewhere.  AMBA fucked me once, I fucked AMBA once.  Perhaps after earnings we can make love, or something.  I earned about 8 percent on the trade.  It was a 12 percent position.

I took profits in Ford(s) because I was watching the /ES_F weaken.  It’s nothing personal.  I still have a 5% position.

My top performers were END and YGE.

RVLT continues to ‘suck goat’ instead of retrofitting Manhattan with LEDs.  Get to work you zoophiles.

I bumped my cash up above 25 percent and was up 1.75 percent on the day.  I needed it.  One thing is certain.  When RVLT stops going down…I’m forecasting champagne showers.

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Pay Attention to the Winners

…not the losers in Washington DC.  The market sold off after hearing something from congress.  That’s as far as my analysis goes on news flow because it’s far from my forte…instead I suggest you turn your attention to Zillow.

Even with the jolt in interest rates today, $Z is strong and flirting with $100.00 like it knows what it’s doing.  You know what happens next, don’t you?  Zillow goes to $125, getting the phone number of the woman you’ve only mustered the courage to talk to all night.

Zillow is the winner.  You can be too.

As of this writing, I have no position in Zillow.  I do however have a long position in TRLA, Zillow’s not so cute but still fine cousin.

NOTE: Be sure to register on iBankCoin to comment.  It’s free, it keeps the miscreants at bay, and we love to hear your thoughts.

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Quiet Overnight: Gap Still Intact

The big gap higher over the long weekend is still mostly intact on the S&P 500 as we approach the cash open.  Early this morning a bit of selling entered the market and took us off the overnight highs by a few handles but the market has mostly digested the move, holding above the 08/29 VPOC at 1642.75.

Last Thursday (08/29) featured a poor high which can be seen on the RTH market profile as several TPOs stacked at the top without a single print TPO.  These types of highs are often resolved sooner rather than later and it was an excellent clue we may see some relief strength in the index.

The question today is which of the three scenarios drawn out below come into play today.  The important level to keep in mind for scenario 1 to occur is the aforementioned 1642.75 VPOC.  Should price sustain trade below this level for more than an hour it could signal acceptance of the lower value which often results in rotation back through the value.  That would print either a scenario 2 or 3.

I’ve noted some levels of resistance the market needs to clear in order to print scenario 1.  Most important however is recapturing the zone covering the overnight high at 1649 and 1648.25 which would put the market back into the 08/22 value zone from two weeks back.  The market accepting trade (sustaining trade for more than an hour) within this value area opens the door to a larger upward move, perhaps even triggering a short squeeze to 1674.50.  That would be the bulls crowning achievement if they’re able to accomplish it this week.

I’ve noted these price levels and the three scenarios on the following market profile charts:

ES_MarketProfile_09032013

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Using Labor Day to Prepare for Labor

There is something divine about the three day weekend.  The majority of the past 48 hours were spent restoring order to la casa.

I like simplicity.

Bossram alpha is so fantastically simple, yet built upon preconceived and developed complexities, that its robust nature gets me plum excited.  I trade my worst when I feel rushed.  I feel rushed when the market accelerates or an interruption causes confusion.  Bossram is a cycle ready to trade trend pullbacks, backed by hard data, with predefined entries and exits.  A quick stroll through the decision tree tells you exactly how to behave, with 100% mechanical entries, 100% mechanical profit targets, and 90% mechanical stop losses.

In back testing however, the stop losses are entirely mechanical too.

Once the system grows to three contracts, the profit taking process will become 66% mechanical as the third unit will be traded with discretion.  Achieving three contracts is the goal of Bossram.  At that point, I’ll have an opportunity to flex my discretionary muscles and begin my quest to compete with the best traders in the world, fully financed by the Bossram bread-and-butter operation.

Do you see how exciting this all is?

I’ve walked forward over the past two weeks with Bossram, but the cycling nature of Bossram is beyond my coding abilities so the data was compiled old school.  Well not quite old school; old school traders used to print out charts on reams paper and compile the data into stupid paper journals.  Then I suppose they used their abacus to calculate win rates and such.  Silly traders.  I surfed across the charts on my 24-inch Samsung and inputted the trades to excel on my other 24 inch Sammy.

All testing was done on RTH data only of course, as I will only trade discretionary during regular trading hours.  Here are the best data bits:

Total Trades: 34 (3.4 trades per day)

Gross Profit: $2,687.50

Gross Loss: ($1900.00)

Net Profit:  $787.50 (not including commission)

Win rate: 82%

Largest Winning Trade: $150.00

Largest Losing Trade: ($450.00)

Max Drawdown: ($825.00)

Some notes on the performance:

As you can see Bossram went through a bit of a rough patch.  It occurred over the course of Wednesday and Thursday, two days featuring violent, news driven chop.  Believe me, I’ve psycho analyzed the price action from this period to gain insight into Bossram’s weakness.  The kryptonite to this system is visible, at least in hindsight.  But the cycle was still profitable, and I would hate to muck up the concept with discretion, so I’m resisting the temptation to begin filtering out entries.  And the walk forward data looks like an accurate cut out from the multi month back test.

Now begins the very ceremonial process of rolling the concept into a live trading environment.  Before any live trading takes place on a new idea I first take the opportunity to remove any clutter from my life.  I bring the budgets up to date, set logical goals, clean my office like an OCD, and archive paperwork.  Finally a large thicket of sage used to smudge my home and self carrying away any negative energies lingering on the premises.

Now everything is in place to take the idea live.  The live environment is the exact same as the walk forward and strikingly similar to the back test only now I have to overcome any psychological effects associated with making and losing money.

That’s how you take an idea live.  The process is as fun as the outcome.

Finally, the system increases contract size based upon the max drawdown.  I keep this step simple too.  I use a 3x multiple of the max drawdown plus the intraday margin requirement of the instrument (in this case the e-mini S&P future contract) to determine the amount of capital needed per contract to finance the idea.  The following equation renders the amount of capital needed to increase contract size:

($825.00 x 3) + $500 = $2425

For simplicity sake, for every $2500.00 increase in capital earned by the system, contract size will be increased.  Once three contracts is achieved the plan will be reassessed.  According to the data from the back test, Bossram alpha should increase its size to two contracts in 7.25 weeks.

Hello October 21st.

Fortunately it takes half as long to earn the second $2500.00 lot.  Let’s call it 4 more weeks.  Therefore, Bossram Alpha will achieve the three contract goal near November 21st.

There you have it.  I’ve conservatively built a way to earn $40,000/year.

Bread and butter.

So it is written, so it shall be.

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Looking at The Auction Since The 08/15 Selloff

This morning I zoomed out to a larger timeframe and took a look at the S&P volume micro composite.  The following volume profile is built on all the trading activity since the 08/15 breakdown.  In essence, this is the long-term auction taking place since the market sold off.

We can draw some interesting observations from this chart.  The first reference point that jumps out to me is 1655.  The volume point of control, the price where more volume was done than anywhere else from 08/15 – present, is much higher than where we’re currently trading.  Even though we haven’t traded at this level since Monday, value has failed to migrate lower.  This is interesting because price and value always converge, either by value migrating with price or price reverting to value.

If you look at some of the other high volume nodes on the chart, you’ll see price retracing several times to the level.  High volume zones tend to slow price as both buyers and sellers perceive the zone as fair, and they auction the level with volume.

Next I see the low volume nodes.  To me, these are the areas of highest opportunity.  This is where price moves the fastest.  I’ve noted three on the chart: 1649.75, 1641.75, and 1635.25.  The not so great news for bulls is we’re trading below all three levels.  1635.25 held up well until we had the war news from John Kerry.  Since then, the price was rejected once.  Therefore, we want to closely observe this level when the markets open back up briefly Sunday then again Monday evening.

The final observation I make is the negative delta we’re seeing down here.  This is shown as the coloration on the volume profile bars.  This tells us more orders are taking place at the bid, sellers initiating the trade, then orders at the offer.  They are net sellers, but there’s significant absorption taking place.  Imagine a sponge sopping up all the orders without much directional movement.

Feel free to share your thoughts on the following volume profile chart in the comments below:

ES_MarketProfile_08312013

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Necessary Aggression Initiated

I started feeling I was getting a bit soft after reading my latest post.  I realized the USA is still the home of Jack Daniels and the Bible belt.

I’m not going to cower during Labor Day weekend.

No

I will stand, like a man, like an American, and improvise if need be.

I took a look at my portfolio and said which one of these stocks is the greatest abomination.  RVLT was the clear choice, the flaming dung heap it is.  So I bought more.

Meanwhile, I’ll be in the hanger this weekend tinkering with my drone strike algorithms, ensuring they’re ready to do battle when the globex session opens up at 1800 EST Sunday afternoon.

Because the monies, they never sleep. Niether do my robots.

Have a great holiday weekend everyone and remember…ignorance is bliss.  Turn off the news flow and make people tell you what’s happening.  It makes for more intriguing conversation anyhow.

http://youtu.be/n7DDTd_ZZIk

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Added to $RVLT Long

I bought more RVLT shares. Not many, but more.

Note: My net position is -30% and this is a long term position. And if you buy RVLT becasue of this post, you may lose money.

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Perturbed

I cannot say with any certainty if it made sense to eat twenty four dollars’ worth of grilled cheeses, but I can tell you that meal was the only thing that excited me today.  Normally, in this country, I should be excited that a three day weekend approaches.  As a matter of fact, during our last three day weekend, I ran an exciting back test on the /ES that has been profitable.

I expect this weekend’s research to further my quest to dominate the S&P 500.

But I don’t look to the weekend with glee.  Instead I have been plagued by nightmares of global conflict.  As much as I enjoy speculating during the turmoil, my vibe took a negative turn today.  It rolled over, if you will.

Generation X and Y have mostly escaped war.  There have been conflicts. Good people have been sent in to foreign countries to bring the fight to the villains, but no full fledged war has occurred.  And I’m happy to live in boring times.  Perhaps I’m getting older and becoming more aware of global brutality, and perhaps I should just tell my subconscious to eat a donut and STFU.  But I really don’t like this situation…this situation in Syria.

I had a dream a few weeks back that an unknown villain nuked the entire taiga, destroying the atmosphere and ending the world.  That’s the kind of vibe I’m feeling.

I’m also getting bled out every day by RVLT, WTF is going on over there?  This crap still doesn’t look buyable.  It’s almost surreal how poorly this stock is behaving.

The LVN I noted this morning at 1641.75 never came into play today.  Instead it’s been a risk averse tape, but mostly the action has a smack of indecision and chop.

I raised a bit more cash, taking anther scale in AMBA for a win and closing ENPH for a loss.  ENPH is entirely without trend here, IMO.  I was playing for quick strength to trigger a short squeeze.  It never materialized and I was too slow with my exit.  Then I bottom ticked the sale today without even queuing up the chart.  This too was quite perturbing.

My futures workstation completely broke today, froze, and needed a hard restart.  Brutal.  You know…the restart where you hold the power button for like 10 seconds until POOF, and then an eerie silence falls over the room.  Then you count to ten as slowly as possible, giving the machine the official ‘ten seconds to settle’ before turning it back on.  It worked, and my tools are 90 percent operational going into the close.  My volume-at-price delta is still broken.  Either that or every order today has been executed at the bid (I hope not).

My book is a sea of red except for YGE and FB and all I really want is peace.  I don’t foresee much more action on my behalf into the weekend.

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The Curious Low Volume Node

The overnight session printed large chop, nearly nine handles wide.  A wave of buy flow swept though the market around midnight EST pressing the market above yesterday’s high briefly before the move was faded back to the midpoint.  The overall action is indecisive but slightly favoring the bulls.

A key price level to keep in your mind as we approach the weekend is 1641.75.  The level behaved as support several times since 8/21 before giving way and becoming resistance.  On yesterday’s tape the level formed a low volume node which clues us in that the level is perceived in a unique manner by the market.  The sellers consider it a wholesale entry point aka it’s where the pros are at work.  If price can be sustained above this level during today’s session, it may force short covering into the weekend and change the overall perception of value in the marketplace.

At this point we could explore higher, searching for value in the large gap above.

Conversely, if price cannot sustain trade above 1641.75, we may rotate back through the last three day’s of value to make sure the buyers are confident enough to react to the discounted prices.

If not, a retest of the swing low is on the docket.

I’ve highlighted this price level and a few scenarios on the following market profile charts:

ES_MarketProfile_08302013

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15 Longs, 0 Shorts, 15 Percent Cash

I shuffled the deck up a bit today, closing out MHR after a fantastic run and scaling off some bread in USO, AMBA, and YELP.  Then I bought some TRLA even though deep down I wanted to chase Zillow.  I think the concept behind both companies is ostensibly the same although a realtor who has worked with both firms may possess differentiating information.

I used both when home hunting and found their services to be indispensable, even with the help of a realtor.  I could find listings and say, “Hey, guy, why didn’t this gem populate my daily emails?”  I liked keeping him on his toes but mostly I wanted to find the right house which was painful in my price range.

I lightened up on the whole oil shebang because of how many false breakouts I’ve seen across the markets these past few months.  The crude oil breakout looks so picture perfect, I don’t like it.  Then everybody started getting soft about playing missile vollyball and everything started to unwind.  Note: my profit taking occurred before the unwind.

Let me take a brief tangent at this moment and discuss bragging and the swag that goes along with it.  First off, I’m a very humble person in real life.  I don’t drive flashy cars or wear over-the-top fashion because I don’t like the attention it brings.  Last time I dressed too nice, my gym locker was broken into and picked clean.  I never dressed nice again.

When losing trades roll through, sometimes four of five at a time, I analyze them, painstakingly, live to the people of the internet.  As honest as this all seems, I do it for myself and to learn from my ways.  I read posts in the days leading up to the losses and peer into my mentality.  It’s a useful tool, a journal, for finding behavioral patterns.

So if I’m going to self-deprecate all over the internet and loath losers because I hate them oh so much, excuse you, I’m going to take a victory laps too.  You should try it.  It is fun.

Now let me ‘splaine’ something to you.  I nailed the oil trade and I will continue to do so.  This weekend I’ll be eating a meal fit for a king because, if there’s one area in life I never cheap out on, it’s eating.  Then I’m going to bring no less than two fast women along in my subcompact auto to sample the finest offerings our local scene provides.  Trust me, we all gone eat honey.  When they ask what we’re celebrating I’ll simply point upward and say, “Mother Russia” in a thick accent and then slam my fist onto the nearest table to summon the serving wench.  Then it’s ‘eyeball Paul’ time.

“Babe, I had to nail the oil trade to finance the drubbing I’m taking in this RVLT investment.”

Investing, my friends, is hard when your first investment vehicle is a three dollar stock that was a penny stock in January.  But I can tell you this, if their management team executes by collecting ALL THE LOW HANGING FRUIT spread across our country, a bumper crop if you will, they will make hundreds of millions of dollars.  The hardest part of this investment isn’t going to be holding through a drawdown, it’s going to be sitting on my hands when it goes green.  That’s where the money is made.

Or the whole shit house goes up in flames.  Hey, it happens.

If you’re young, time is on your hands.  We have many more years to earn any lost money back.  Why not invest into a high spec stock?  What else will you do with your money?  Lease the same BMW as your douche bag friends?

Finally, I didn’t even fire up my futures platform until 3pm today.  ELROI was dormant today and BOSSRAM took one winning trade in beta testing.  I have 600+ unread emails, five overbearing fruit trees, and one broken database to tend to aka why I abhor vacations.  I likely won’t be trading futures live until next Tuesday.

I missed you guys and I’m glad to be back in the saddle.

Until tomorrow or perhaps this evening,

Raul

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