I am pleased to announce that we are now grid trading with micro futures. I have been testing the M6A (Aussie Dollar), M6B (British Pound) and the M6E (Euro Dollar) with much success.
I am able to grid trade these markets because of the low margins. In fact, I am incorporating a bit of Martingale technique into my trade model. This is important because it get's you out of the market much quicker. You will need this because futures contracts have an expiration every 30 days.
After one week of trading in all three markets, my longest hold was less than 48 hours, as you can see by the screenshots below. My average turnover time is somewhere around 2 hours.
All trades you see below are winners. I do not use stops. This is grid trading. Scale in, cover then reverse and start the process all over again.
Accumulate, Cover, Reverse
The most contracts bought at one time in this trial run was 20. With margins at $50 that equals just $1000 risk. The really cool thing is that this was during a big fed news week. This gives you a good indication that you can handle wide ranges (news day).
Knowing this bit of information now allows you to trade, pardon my french...balls to the wall, 24/7/365.
M6A (Aussie Micro)
M6B (British Pound Micro)
M6E (Euro Dollar Micro)
NinjaTrader has a great feature built into the software called Market Replay and you can use it to learn and test different volatility levels.
These are my Grid Levels:
$1,000.00 - $2,000 account = $0.01 (Lot Size) = ($10) add 1 lot, keep adding until market rolls over and your position turns positive.
$5,000.00 - $10,000 account = $0.10 (Lot Size) = ($100) add 1 lot, keep adding until market rolls over and your position turns positive.
$10,000.00 - $20,000 account = $1.00 (Lot Size) = ($1,000) add 1 lot, keep adding until market rolls over and your position turns positive.
So, for example:
You open a trade long the AUD/USD and the market quickly moves against your position. You are now negative ($100.00) on this position. You add to your position one .1 lot. The market continues downward and you are now negative ($200). You add another making your position 3 long @ ($200). You continue this until the market rolls over and your position turns positive.
($100) = 2 lots
($200) = 3 lots
($300) = 4 lots
($400) = 5 lots
($500) = 6 lots
Continue this pattern until your position turns positive.
As you can see from the image above there are four charts open in market replay each containing an FX pair.
I use an ATM bracket with stop @ 20000 (A ridiculous number because I do not use stops in my trading) and a target of 200 pips (targets will vary with testing) Warning: testing different target levels with market replay can be very addicting.
I also have reverse at target checked so as soon as a position closes, one is opened one in the opposite direction and the "Accumulation" process starts all over again.
Think of it as a martingale strategy but without doubling down. I simply add to my position with the macro understanding that the market will come back to equilibrium.
Test this in Ninja Traders Market Replay.
You can also use myfxbook.com to get an idea of a markets volatility range. Some markets swing really dramatic so you want to stay away from those unless you have a big account and like plenty of action.
Disclaimer: My trade model can use a large drawdown % because I do not use stops. This is why it is critical for me to understand a markets range, and to not overleverage. This is what I do...I watch volatility levels. I do not give a rats ass about an elongated candle showing momentum, a moving average crossover or any other scenario you can dream up. I stay in the markets 24/7. I am always building a position through accumulation.
I never have to break a sweat trying to figure out market direction. That crap will ware you down over a ten year span and not even necessary. I do know a guy that likes to pick direction daily but it is not for me. I just let the market wiggle around and pay me in the process. The key for me is understanding a markets range and to not overleverage in that market.
Ninja Traders Market Replay is the perfect tool for checking and testing a markets range.
Hope you got something out of this. Leave a comment below or sign up with our Live Trading Room to see the action five days a week.
Great trading everyone,
Here is an Iron Condor trade 38 days out from expiration with an 85% chance of expiring worthless.
Credit $1.10 X 5 Lots
Total $550 - commissions
Call Side = 83.12% chance of expiring worthless.
Put Side = 92.80% chance of expiring worthless.
Expires in 38 Days
Credit: $1.10 x 5 = $550.00
Below is the Option Chain screen shot. This is showing you the Delta of the underlying.
You are looking for something close to .10 on the Call side and -.10 on the Put side.
Check back in 38 days to see how this trade turned out.
Remember...trading is a marathon, not a sprint. You only need 50% or better annual returns to be an elite trader.
Try not to get caught up in daily or even weekly profits when starting out. Look for high probability setups way out of the money like the one illustrated above. These are super easy to manage with a high winning ratio. This "winning" ratio will keep you in the game and consistent with your trade model. A lower probability set up tends to fall to the wayside because the trader will simply get tired of seeing the loss in his or her account.
Share and comment if you like the post :)
If you are looking to diversify your portfolio I suggest you try the Iron Condor set up in the Russell 2000 (RUT). This setup will produce 40% or better annual gains and can be managed with little time and effort.
Below is a screenshot of the Russell 2000 Index options page, on the Thinkorswim platform.
Notice the two orange squares. The green and red boxes inside are my debit spread position on each side creating an Iron Condor. What you want to look at here is the DELTA. Outlined green in the image below.
This trade is about to expire so the delta is worthless @ .01 on both sides.
When you search for this trade you are looking for a DELTA of .08 - .11.
When you find this trade you then analyze it in using the Analyzer tab on the Thinkorswim platform as seen in the image below. This image shows the Call side @ 99.81% chance of expiring worthless (it expires tomorrow). When you analyze a set up you are looking for an 85% chance or better of the option expiring worthless. You do this on both sides, evident in the two images.
CALL side above
PUT side below
I will post my next Iron Condor trade next week. I will highlight everything just like the above images so you will be able to see what to look for at the initial stage of the setup.
I highly recommend you learn in simulation for six months minimum.
Great trading everyone.
If you are getting stopped out all the time then remove your stop and cover the swing.
What do I mean by cover the swing? Just what it implies. You should remove your stop and "ADD" to your position instead of stopping out. This is called building a position.
NO STOPS! Quit paying your broker and start paying yourself.
Just try it in a demo account for six months. You owe it to yourself. Before you give up completely you must try this.
My last warning about using stops...I have watched them ruin traders, make them cry and quit...and that is a fact. Hell, they just about made me cry several times back in the day.
Below is a screenshot of a 20 year Monthly chart of the USD/JPY. I am long 1,000 units or 1 micro lot. One micro lot = 1,000 units = $0.01 US dollar. This is in a LIVE ACCOUNT.
The red bubble represents my target and the green bubble represents my second entry long. Remember, this is a monthly chart. Let that sink in a bit then ask yourself one question from here. Which bubble does the market hit first? The red bubble sitting on top of price or the green bubble way down at the "5 YEAR LOW"?
If you guessed the red bubble you would be right about 96.7% of the time...cha ching!
Getting the message yet? Where is my stop?...let's go further.
The only place the market can go, if it does not go up and hit my target, is straight down to the green bubble...what do we do then?...panic and stop ourselves out?
That is one option that most traders seem to take but I say absolutely NOT...
Hmmm...what if...we try a "Different" approach?
Remove our stop and add to our position at each one of the grey squares (in the above chart).
Now we are covering the entire swing of a 20 year market low with only $1,000 plus margin which is10 lots x40 = $400 for a total of $1,400 to cover the entire swing and hold on to this baby until she turns back around and goes up.
Awesome...let's just see what happens.
I can't show you on this trade because I just entered it last week but if you go here you can see my Account Summary Report from Thinkorswim for 2017 and updated 2018.
I used the same trade model explained above to produce the gains you see in my portfolio.
I hope this helps or inspires some traders to think outside of the box a bit...especially if those pesky stops are killing your bottom line, or even worse your spirit.
Don't let those stops get in the way of your financial goals. I promise you you do not need them.
Fire up that demo account and get to work...I will see you at the end of the year...right here with my Annual Account Summary Report in hand. :)
Great Trading everyone,
When you look at trading from a macro stance, you will quickly see that the power of consistent trading, coupled with compounding returns will have an enormous impact on your Annual Performance Report.
I am excluding taxes from this equation as this is meant to inspire some trader minds. We can discuss real tax cost and cuts (Trading in your IRA Account) in another post.
Let's jump right in.
If you can produce a 50% return in a years time and do this for ten years in a row, then you are in an elite category. Let me explain if I may.
Before I begin I should side note that if you can put up these numbers for ten years then you can probably get a job at any financial firm you chose. But that is another post altogether.
Let's say you start your first year with just $1,000. I know that is a very little amount and that is the point. This will show the enormous power of consistent trading along with a compounding trade account. In 5 years that $1K account with a 50% ROI is now $7K and in ten years it is $57K.
That's right...1K into 57K in just 10 years. Let's break it down.
I hope this inspires you to think longer term when analyzing your trading results. This can help you to think outside the box in terms of different positions and strategies. It does not need to be all about an Hourly chart. Back up a bit from those micro views. Slow down your process.
Please comment below or share if you like.
Great Trading Everyone :)
Four Hour Chart
The Four Hour chart is giving us a great macro view at the moment. We can clearly see price rotation and balance with Value area high at 71.47 and value area low at 70.60.
We are currently trading at the low end of value @70.79 with expectancy to rotate back up to the high end of value.
Note: Because markets do not go straight up and down expectancy is to see rotations (Accumulation) before price rises (or falls) again. This can mean one to three days of a rotating market on average.
Note 2: We had a heavy sell off Friday afternoon. Afternoon rallies and selloff's are usually indication of further price action in the same direction so we could see selling all the way down to 69.44, then 68.50.
My Expectancy on the day: Rotational market (Accumulation) with maybe a new low from Friday put in.
We are still imbalanced higher with no 100% pullbacks for creating a daily rotation. This is strong bullish activity so I caution shorts. If we continue to accept prices here then expectancy is to see highern pricing with first target at 71.50, 71.87, 72.70.
One Hour Chart
We have 100% rotation on the 1H (Hourly) chart. We can now look to trade VAL and VAH of the balanced area. We are at the top of value currently trading @70.87 with expectancy to rotate down to value area low @68.53. I will look for short opportunities to take the market down to VAL. If we struggle to see lower pricing then I will reverse early as we are in an imbalanced market on the Daily to the upside. Caution is to the down side but expectancy is still in place.
We are still imbalanced with no 100% pullback. We are now trading above value @ 70.05. If we continue to accept prices here then expectancy is to see higher pricing. First upside target is 70.84, 71.92, 72.70, 73.50.
If we can not hold here then expectancy is to see lower pricing with first downside target at VPOC 68.20, LVN 66.80 LVN 64.50.
One Hour Chart
We have completed a new 100% rotation on the day creating a value area at 70.52 - 69.69. We are currently trading inside value @ 70.05 If we hold here then expectancy is to see higher pricing with first upside target at VAH 70.53, then yesterday's High @ 70.94 then the break to 72.
If we can not hold here then expectancy is to see lower pricing with first downside target at 69.50, 69.11 then 68.50.
We are still holding the range on the daily trading just below value area high of 68.82. If we hold here then expectancy is to rotate back down to VAL @67.36. If we break and hold above 68.80 then higher pricing is expected. First upside target is 69.65 then a big slide to 74.
Nice auction process happening in the hourly chart. I was able to trade the long up now I am reversing position for the ride back down. This is an aggressive trade I understand because of the strong upward momentum. I will look to cut short and reverse again if the shorts do not pile in for the move down. Stay tuned for the results.
Great Trading Everyone,