(binned per thread starter’s request) CookieMonsta's Journey Into

Now I get it, 1 missing parameter in all options pricing model, they not adjusting for commissions Vs volatility factor, so for long straddles, you have gamma Vs theta Vs volatility and also commissions Vs volatility factor.

If say you bought an options whose value is 0.95 dollar and it's theoretical true value is $1 you gotta adjust for it in terms of pips for commissions too, at least for retail side, that's part of what bleeds most traders silently.

Implication, for retail, long straddles are inherently better as it minimises adjustment cost for them mainly because, the adjustment for long straddles can come from spot mostly, which is alot cheaper than having to use options to adjust on top of the initial risk outlay.

However if you are trading in an exchange or in general lower bid ask spreads Vs spot or in a professional capacity then things are different when you can negotiate commission costs.

The significance of stop hunting for options, stop clusters are a bunch of area in which price is highly likely to touch, at some point in time, because everyone is attracted to those orders in order to use those orders for their purpose, options strategies can be legged in for advantages to grab edges.

Interesting idea, gonna check it's relevance on Monday when the markets are open.

Check gamma curve Vs premium Vs theta.

Interesting, with the way hft are pushing price perhaps there is an exploitation?

Interesting I just had a new idea to test out, basically to test out market term structure and legging. It may be able to reduce premium cost, and is still open to crash giving me huge sums of money, grey swans from nassim taleb's.

Man sooooo many ideas.

Fti is right, check the shifts the key is in the shifts. And this strategy you can't find in any textbooks, it's a custom strategy of my own.

This has something to do with structure exploitation, with regard to how price moves.

But I think this is very easy and simple compared to what fti is refering to.

Hmm perhaps it has properties of being an inexpensive way to find out volatility has contracted after the fact.

Notice gamma, it's a bellcurve, it coincided with probability and standard deviation moves.

Hi cookie,

Now I got a clearer view on how it works, the advantage of 3 legged animal compare to cut and flip is that because the positions in loss are not closed, after the locking position is implemented, and price reverse again, it can sort of reduce the loss, instead of getting killed both way, if one can time the unlocking moment correctly.

After reviewing my trade, I also found out some mistakes I made.
First although gu seems strong given the daily fib level, I shouldn't enter in this pair, as from other 7k besides eu, most are in favor of USD strength, which means long GU is actually not a good pick, as both usd and gbp leg do not go in opposite direction, and usd strength might kick in anytime, so essestially I failed to buy the strongest and sell the weakest currency, a better pick should be GBP/nzd, gbp/aud, this way I do not expose myself to usd strength, even if gbp strength fail, the other leg weakness might also help me on this position.

Secondly, let say I flip and flow with gu weakness, when can I time my entry better? from my observation sometimes cross chart support and resistance do work, eventhough majors determine cross movement, but sometimes, major move in a way to form neat s/r in cross pair, I suspect this is because MM know there are also ppl trading cross chart, by making nice s/R , he is able to maximise his profit by generate the maximum flow.

Besides, Fti once mentioned that when currencies tear, it could be genuine move, or just profit/loss screwing on cross chart, this reinforce my view that cross chart are not just entirely determine by flow from majors, it can has it own flow based on its own pattern.

So i would look at all gbp cross and usd pair, and sell only when most gbp cross reach resistance and usd major reach support, this way I have the higher chance that price will go to my way compared to when I just monitor the pair I trade.

Perharps I could further improve my terrain reading skill by incorporating cross and major reading.

Btw, it is nice reading your insights

Regards

Hi goldenfinger,

Exactly.

Also, notice that Catalonia and brexit has been spooking the markets, so there is cause for eurgbp to have strong flows too. As you mentioned fundamentals which may cause the eurgbp cross to tear.

Nobody said you can't sell premium, just that when you sell naked premium, when the markets crash, ability to delta neutralise is near 0 till it's a given you would lose your money.

So the kicker is really that, the conditional probability when a crisis occur, you are naked premium sold, and you are not cash covered, you could lose your entire account.

That's why usually I don't touch naked premium shorts, I try do covered positions if I'm short premium.

Doesn't mean you can't sell premium, you just have to be risk adjusted and be smart about how you do it.

Oh yea, and beware the long tail.

Have you guys wondered, why is the options not working with volatility and why do they choose IMPLIED volatility, key word here.

Once you understand why, you understand the model weakness. And you figure how to exploit that.

notice that they are using implied volatility skews to adjust for events, which implies, what we are really doing is this, we look at what mm or market is quoting, and we figure if its cheaper or more expensive then we decide on a strategy to capitalize on it, which means, there is still discretion involved.

hmm, maybe the idea above doesn't seem too good, the premiums are not degrading fast enough

hmm spread too wide they eat into too much of the profits.

hmm, seems like currently, the most viable one really is using either the long straddle and delta neutralize it or using the taf mo against a put or a call, using 1 day options, but of course you will have to be able to scalp up 20 pips or so, to break even, because for 1 day options, you b6uy say 0.05lots at usd $15-ish that is 30pips, and if you decide to sell, it probably is going to be worth usd $6-ish ATM, which is that there is a 20pips spread on you, which is as good as saying, you locked in 20pip loss the moment you put this strategy on. but if it comes in the money huge, you will end up making alot.

however, this is factoring in the fact that you have a maximum of 30pips risk on the premium if you decide not to sell the option away.

hmm, i have been considering, what if i using taf mo against a put or call then near expiration, i try to box it to salvage value? essentially, it means i can never suffer from overloss even in rescues against major term trend changes, which sort of really was the main problem i have when using the taf mo, the major term trend change always gets me.

1 way to trade the long straddle while keeping the inline with the greeks is the off by 1 delta, say long straddle, delta of 0.23, not that deep in the money.

instead of going 0.23 you can go 0.24 or 0.25, and time the swings. then the 0.25 you can split it and keep fading it as the market moves upwards or downwards. say, 0.25 = 25 troops, and use fibo to execute the troops in trenches, that way you sort of can exploit the delta numbers and leave it some leeway for further pushes.

The optimality of hedging is the number of swings the market makes? Just my intuition.

there are actually ways to play fomc or high risk events, 1 strategy i thought of, is leveraging taf mo, say you use 1 1 2, and traded up 30pips profits, on each position, so its say 120 pips profits at 1x, then you take 3 out, and buy a put supposing you are long, or if you feel like you want to trade volatility, you can buy 2x puts, and let fomc do its thing, using foreign cap, and position advantage to leg into options, and then let high risk events generate the required volatility to carry the volatility bet.

also i have been noticing this, it seems like flow are getting further and further out in timeframe, and smaller and smaller at the same time with respect to hfts becoming more prevalent.

what i mean is this, the timeframes for nice trends seem to be hourly and h4 and above, so the flows seem fairly nice, 5mins looks choppy, taking signal from it is lousy, but once you hit 1min, flow seems to come back again.

reasons i can think of are these. hft are inherently brainless, so they do not price in markets effectively, what old school dealers do very well, guys like fti, they literally are the custodians of the markets and keep the markets inline, their job is keeping volatility in check by providing temporary store for orders and match make orders. thats what locals are there for, not all are nasty people trying to grab your money, they match make orders and facilitate trade and allow for corporations to be able to hedge their risk and perform their functions properly, and provide a service to the community. because of this, their trades(hft) are uninformed trades, and have no informational advantages on 5min charts, except orderflow(they see it but by then, its too late for you), but some of the videos of people pointing to hft i have seen, its just odd, hft trade 20times and lose 18times and profit 2 times, and they still make money, basically a probabilistic model, pretty brainless if you ask me, whats wrong is not their risk reward ratio, whats wrong is their trades are making the market place less efficient, as they are out so fast, using 1mins charts might allow you to sense their moves. but they don't stay long, implying that, hft's impact is only on the short term unless something like a breaking news sync all the hfts all together and cause a flash crash. but as for the hourly, since hfts are not in for so long, replacing old school dealers, the market becomes more inefficient, which implies it takes longer to price in the markets as for real fundamentals or at least the current trend, and because of this, accumulation and distribution segments may end up taking longer, and the average hold for a good trade will end up being longer, but the swings are more or less quite evident.

so, all in all its good for retail traders, just that you gotta work around the hft rather than directly compete with them.

if you think about it, the taf's teaching of the art of war, is saying that, playing profiling is important, if you understand hft's impact on the markets, once they hit critical mass, they will impact terrain, and understanding how they act, will give us the keys to either win them or work around them.

if you read the taf thread, you see fti referencing someone called jacson, if i remember the name correctly, saying log 2 15 or something, to clear noise.
i believe this might have something to do with this, intepretation of price action and understanding that the terrain is just too messy or noisy.

1 way, is visual inspection as you switch timeframes to see where flows are.

in intepreting price action, its much more nuanced than what many course put out there, mainly its about what you think price action is trying to tell you, and also recognizing when price is just noise, and you can't call a direction. there is nothing wrong with being unable to call direction because market is just noisy.
your just calling what you see and that is a very valuable skillset.

Hi CookieMonsta

quote.... if you read the taf thread, you see fti referencing someone called jacson, if i remember the name correctly, saying log 2 15 or something, to clear noise.
i believe this might have something to do with this, intepretation of price action and understanding that the terrain is just too messy or noisy..... end quote.

i have brought this up a few times and explained that is why i trade mainly in M15/H4 for my live stuff.... this year i have found it to be particularly bad for this.

here is the post...

https://www.forexfactory.com/showthread.php?p=6627929#post6627929

regards

Phil

Hi Phil, indeed, that is the post I am referring to.

But first, just to clarify do you mean it's bad to trade M15/h4 or bad to trade M5/h1 for this year?

Just my interpretation, which is you are saying, M15/H4 flows are better. Yes, completely agree with. What I with the cross currents, the lower tf is getting choppy, so shifting to higher tf is preferred.

What I think about ego in trading is, it's a little more nuanced than what many think.

You cannot have too much ego, that, you become overconfident and think the market must go your way.

But you also cannot be completely egoless that, just alittle and the market shakes you out, as you need to have some confidence to sustain your position, and mainly the confidence must come from, technical skill.

In truth, ego is not binary, it's not it's there or it's not, it's a range maybe from 0 to 100, being at 50 is the best position.

That's what it means to be confident yet humble.

What I guess I mean to say is, balance is important.

That's basically the mindset to the mo. Correct, to attack, salvagable to rescue, unsalvageable to cut.

I mean if you think about it, people have been saying you cannot have an ego when you trade, really? What do they really mean? If you think critically then it's balance that is the answer, not no ego and not all ego.

Hello CookieMonsta,

It's great to follow you persistent in your Journey and I believe that the sort of brainstorming you expose here is indeed helpful.
As regards the Ego point in trading, I would make a comparison (in effect not any new and it has either been displayed by FTI) that may seem clumsy or irrelevant. However, here it is: what may "Ego" do if you are in real shooting, you target and trigger to an enemy in fight. If you're affected by your "Ego", then it's you who is targetted and shot down. Is it well trained to reflex what you are doing, soundly targeted and calmly triggered? Thus, no "Ego". That trigger applies to both Entry and Stop so that to win and stay alive.
By the way, one really coward "trader" by escaping any fight (no Entry triggers) may brilliantly outperfom the notorious 95% losers. Or, an "Ego" driven Demo trader would make his/her Demo extreme profits. There are many things (well known on FF) to ponder on again and again (analyze and so on). Or, just start Live AoW trading one day?

Have a nice week-end, my friend!

Best regards, Exnav

Hi exnav,

Well, huge ego kills by allowing your enemy many opportunity to kill you. Your enemy is always out to get you and you are always out to get them, that's the nature of the battlefield.

So with huge ego, you allowed yourself to be killed yourself.

Without ego, and with cowardice, it leads to easy capture. (Covered in AoW)

With recklessness and conceit, it leads to easy goading and manipulation on the ego and then easy capture.(Covered in AoW)

Cowardice is when it's time to act, and the person can't act?

There are many things to ponder, but something's are best learnt the hard way coz then they really stick.

Many points I want to bring across but don't know how, so I guess I leave them for next time.

Hi CookieMonsta

Not saying it is good or bad to trade either my friend (each to their own), it is just for me and my way/style of trading I find too much noise in trading H1/M5 nowadays, even M15 has become a bit noisy this year, I am ATM using D1/H4/M30 due to this but hope to go back to M15 when (if) the market picks up again, the only other option in the time frames I see is trading M1 and taking far less pips in every trade but the amount of trades/pips should work out the same roughly as you exploit the move earlier in most cases, the only thing with M1 is it is much harder to trade more than a couple of pairs at a time due to the amount of data we must process with a new bar every minute. guess it is just the new way we have to adjust to keep up with the times and new machines ect that now trade the markets or look at other things maybe that are more liquid/volatile to trade but then the risks are higher in doing that unless you think of another strategy to deal with it.

Regards

Phil.

Hello CookieMonsta,

Thank you for your question. Even if that was not or just a rhetoric, I will specify my meaning of the cowardice in the previous post. It implies an outcome.
E.g., one may watch price movement and analyze it but he/she never engages due to many reasons so the result will certainly be better than for 95% of active traders, i.e. = 0 [BE]. Therefore, we might name these guys as analyst, coward, or in effect they are just more prudent being"traders"merely in their analytical or cautious, rational imagination. Although, their satisfaction is in the result ouperforming the 95% game losers. We hence may derive that in PL, financial, money terms these watchful guys are preserving their CAP, bank accounts much better than the live traders' absolute majority.

Therefore, it's up to each Live trader to judge what and how he/she is doing with Fx. I don't mean those winning TS, holy grail, traders mindset etc. searches and endeavours. Simply let's not forget that retailers Fx market is to take money from retailers. Not otherwise. And those who are able to the contrary are presumably less than 5% exception.

Then, we are coming to the point of being humble. Here, one can deduce that inspired to be exceptional might well be contradictory to the "humble" term.

For 95% live traders, do we call ourselves losers? Or are we yet and already exceptional or believe to become such?

Frankly, at the moment I'm admitting to frame myself within the big losers family and humble not to aim the "exceptional" as the above indicated 5%. My focus and interest is on live trading process, its mastering. Focus on every target is with a sole objective: stay alive. Then what might derive from the point: that you are able to fight aftermath of every single engagement, battle? And will there be any P/L reflection? ... Eventually, I will only consider being the "loser" when I lose the interest in live trading.

Most importantly, I'm convinced that live trading is a genuine performance related to a specific individuality. Ultimately, it's so peculiar that another personality can never make exactly the same (TF, volatility, method, system, mindset, etc.). Consequently, there is no way to "decipher" 100% of "exceptional". Because everyone is exceptional, with his/ her own genuine Ego.

I'm sorry if the above "specification" looks too long or a sort of philosophy (Sunday's a good window for reflection). Likely, it's an attitude I can see it right now.

Best regards, Exnav

Hi Phil, agreed,

I'm also making some minor changes, for example, using h1 with h4 and daily, but only picking small trades and keeping skew small, say 1 1 1, just to trade further out in timeframe. 15m is only for timing pullbacks. So pulse is purely taken from h1 and above.

Also, I'm kind of I'm agreement with you that, going out in timeframe is probably better and side step the hft altogether. Well they are not necessarily a problem if we don't have to content with them yea? We can always target bigger swings, just that the mm needs to be readjusted. And probably some kind of risk control needs to be used.

I have another mo, which sort of works, which you might want to check out, it's not going to be entirely inline with fti's teachings, but it's one of the mo which I find works pretty well if used properly.
It's heavily modified from gann's mo and added abit with fti's mo, added with linear mm.
Basically, you look at price chart on the higher tf, h1 and above, spot for accumulation or distribution phases, like in gann and wyckoff. Then put in scout, then if price drops, or rises against you in a limited volatility range, but not enough to signify trend change, you rescue with 1x more, then leave it, if it still pushes against you, cut it, other wise, if it goes your way and allows for a nice attack, you can go linear for 1 to 2 more attacks of 1x.

So the mm to decide scout size is as follows, using the current volatility value, as determined by gut feel and visual inspection ( this part is taken from taf, the pulse read), determine that for 1% risk to book, with volatility of X how much scout size can I buy, let's say 0.1 lot, then I factor in 1x rescue at 50% of the volatility range, so that's 0.15, so my maximum exposure anytime is 1.5% of book, but since we are invoking 2 criteria here, is that , we do not let risk get out of hand, meaning we must compensate limited risk with ability to pulse market extremely well, and ability to time markets, so let's say market hourly swing is say 100 pips, now the hourly small group of stick 25 pips, we buy 0.1 now, it drops 12pips, seem like pullback, we add more, 0.1 then if it goes up 100 pips upwards, we get alot more than we can lose, the key factor here is, on top of handling risk, we also handle volatility state transitions. That is, we set a bound on which if volatility exceeds that amount, we guestimate that risk to book is fairly high, so we do not rescue and just take loss. Otherwise if price increase in volatility, but in our way, we can press the attack by adding 1 or 2 more. And because of its bounded nature, it can handle higher timeframes with less strict baby sitting requirements which fit my current constraints really well.

So terrains it can handle, range bound and trend based, it will cut out of counter trends when it is detected.

I use it now mainly with stops since I can't look after my trades as closely with work commitments going on, I need an alternative way to manage the risk side.

But the price I pay for being able to trade in my constraint, is more rigidity.