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

yeh funny day h1 wave you mention shows what m5 is doing.

chart shows how I saw eurusd today.

A bounce off support could only do either bounce and run long OR bounce and back into a consolidation - lucky it sprung twice.

Alex

Yep, hmm, on M5 it seems to be a up trend until new york am. Then when New York open shorts came in and on hourly.

it was a deep pullback on wave 5, on the hourly before New York came in.

yeh then our power went out in village for several hours and had trouble getting broadband fixed this morning - what fun.

Missed some trading too due to health issues - but it is December so be a bit funny


Alex

Take care on the health issues.

Yeh, market jittery alright, eur and gbp tearing all day long. Also with fomc tomorrow

It just occurred to me, what if the butterfly's weighting is done by ATR ratios?

Options dynamic modelling, per move per leg, 10pips, interesting, with this I could more accurately replicate end state results with respect to spreads paid. Which is mostly where most strategies in options lose money, except for naked shorts.

Because round trip is 20, 1 spread is 20 too since we hit bids and take offer.

Seems true component is price + spreads per leg.
Implication is, each time you do adjustments to try converge to box you approach zero, and then from zero to negative if too many moves are made.


Which means that if we attempt to converge a position into a box somehow, the number of moves we are required to make, will cause the box to inherently invert on us after X number of moves per leg, so we can technically calculate the move prior to making them factoring in shifts in price, volatility and time.

Hi CookieMonsta

Fti mentioned ATR a few times, not sure I really understand how he meant it could be manipulated along with the money management… but as I said I will be touching on this again along with my own findings after I am finished with the current demo trade I am involved with.

Will be interesting (as always) to see your own findings..

good luck (where preparation meets opportunity)……

Regards

Phil.

Hello Phil,

As regards ATR and MM (rescue/ attack adding and price move range extremes), I would so elementary take into consideration a possible price range (?XD) after accumulation, distribution phase (1XD) no matter how many days the stage lasted. So in normal conditions, a momentum made the price beyond 1XD at probably 1X, 2X, 3X (close to extreme moves). Then, essentially, we might expect a second day move to get approximately the same range (e.g., Y=2X or Y=3X). The above is my virgin level school math. Of course, we would reckon in other market ingredients (fundamentals, higher TF S/D, S/R zones, BRN, trade sessions - timing, end week, month, year, etc.) Actually, we should have an idea on daily and sessions SD (Standard Deviation). FTI mentioned 3SD not so unusual.

As a fresh instance please look at "Y" for 3 last days USD/ CAD and GBP/ USD ranges. I did practise those live.

The above is indeed my elementary degree understanding. Perhaps, I might not have conveyed it well or got your ATR/MM point, and eventually missed the mark. I'm very keen to see your observations as well as CookieMonsta's findings. However, for me, the simpler the better I do.

Best regards, Exnav

Hi phil13 and exnav.

What exnav stated is essentially fairly accurate except that the volatility estimate is to be recalculated during live battle and trimmed to form and volatility shifts. Essentially lower timeframe forms clues us to volatility shifts on higher timeframes.

For example a symmetric triangle on h1 is a volatility contraction on D1.

Also what exnav stated is for 1 single pair, now extrapolate it for the 3 legged animal and see how the tearing of the cross goes when they tear, then suppose you are in a rescue scenario, say 5 units in eurusd and gbpusd is your choice for rotation. Say for example eurusd is has 1 leg down with 50 pips but gbpusd enjoyed better support and went down 30 pips, because of this, a rescue needed would be around 1.6x shorts on gbpusd to eurusd, because from a relative volatility standpoint, you are implementing a less effective lock to rescue a volatile pair. But depending on situation you may not have a choice of you do not want to expose book to current impulse.

Also additionally notice that the residual volatility for small changes, is being displayed on the cross, which is why the 3 legged animal's no arbitrage rules by market maker works.

Example, for small shift say 10pips on eurusd, and 6 pips on gbpusd, on eurgbp you would see 4 pip shift if eurusd and gbpusd in same direction, if cross is tearing you would see around 15-20 pips. Direction in this case matters.
Essentially you take the 2 trendy legs and minus each other you should get the 3rd legs volatility. However this works for small price shifts only, big ones does not work because price quotes for cross is a division and not subtraction.

However, usually if you can protect for small price shifts, you are usually just 1 step away from protecting against large ones, because once you do for the small ones, you have implemented a lock, all you need is go with the one which works and convert rescue into attack.

1 case study I can give you on ineffective rescue using 3 legged animal is say eurusd long 1x and you are down 50pips, gbpusd leg is down 30pips, you short it and you are up 30pips, the remaining pips is actually in eurgbp, with 20pips residual volatility, in this case, you can end up seeing eurusd down, gbpusd down, but eurgbp down too. And that's mainly because eurusd is the main tearing pair. Eurgbp tells which side is stronger, either EUR or GBP, so result of eurusd Vs gbpusd helps tell about eurgbp.

So using this understanding you can derive 2 counter tactics, 1 fti mentioned, using cross to pitch and yaw from eurusd to gbpusd, or the like, or cross out to favourable terrain volatility, or use the volatility of leg runs to implement locks to protect book till market conditions allow for rescue.

Anyway just to show case the tearing, what's 1.00 +0.001 /1.00 - 0.001, Vs what's the difference between 1.00 + 0.1 / 1.00 - 0.1?

First one is alot closer to 1 another is much further, the drift multiply by volume causes drift in the locks ratio.

Implication is that the shift of relative volatility ratio is non linear, hence hedge ratio may need to be readjusted with time and volatility Vs position size and pair and direction.

So all this should be implemented using the feel for price action and form.

So with this it is sort of a 2 legged version of the butterfly, IF I got the butterfly correctly that is.

Hope you guys find this helpful.

First calculate all 3 pairs volatility, then rank them according to according to volatility in descending order.
Always remember with the 3 legged animal, relationships go on sync and out of sync, best way is use 2 strong legs to calculate the 3rd leg if you are on the 3rd leg you may be in range bound situation, if you spread from 3rd leg and 1st leg, that's is where Fti's answer to 2 legged animal comes in, the legging is done wrong, and the tearing kills, unless rectified properly.

My insight into the 3 legged animal is the relationship or pair choosing is the key factor in effective rescue.

Finally is integrating mm and mo into it.

Well the above arises from the need to innovate for small accounts. Because Fti's mo is big boys mo, requires alot of money to implement strong rescues, otherwise book can get into trouble really fast, which is bigger books can withstand more volatility, smaller books cannot, also if you trade too small you ain't gonna make it worth while and simply can't live off of it, hence the 3 legged animal is an alternative to stop the bleeding dead in the tracks so effective portfolio drawdown does not get out of hand for effective salvaging. All mm can do is help with the odds, so for smaller books it's harder to trade, so more strategic alternatives are needed. So basically for smaller books, it's either other alternative for handling the volatility or stay very nimble, optimise for attack instead of rescue so option to abandon bad positions can be done without much damage to book.

Hello CookieMonsta,

Thank you for your comprehensive feedback and, yes, I admire your sound approach.

Here is your very accurate and relevant reminder on the CAP as one of 3 Pillars by FTI.

I would just share that lately I'm more on stand-by (in normal volatility conditions) before deciding on our respective adding (to Rescue or Attack). Actually it's the volatility that challenge my scouts destiny (time, price range and speed). That's, I would rather be an observer on a small account if the flow is undecisive and hesitantly opposite, I will care of every single bullet in my cartridge-clip. And it may require more patience then. E.g., I would keep the scouts deployed and reporting (bleeding as well) during 1 - 1,5 hours for my 2-3 hours eventual engagement. Thus, I would also withdraw them at BE+ because of that irresolute fluctuation, and there's an other day ahead. Or, square out and trigger another animated pair. Hopefully, it would be enough volatile.
It was OK during the last week, however, we may expect this sort of market structure manipulation right on the Year Eve, i.e., already now.

Stay careful and green!

Best regards, Exnav

Hi exnav,

indeed, that i have come to realized that the crux of the 3 pillars by FTI, is that these 3 pillars must work together, 1 cannot work without the other, otherwise other kinds of support will be required to help out this mo.

well, christmas to new year is always thin so its usually ripe for stop gunning for.

as for now i am currently figuring on how to handle death battle situations as well as sudden volatility gaps against position. essentially, the critical breaking points of the mo. if i make more headway into it, i will write it down here.

thin markets are good for training reading into sub-optimal flow, where things may go from 0-100 in a very short span of time. good to test oneself against such situations. in order to be prepared for all kinds of situations.

Hmm, perhaps a 25pip band to start using the 3 legged animal? Ghe question is, for my own trading book, at what point does rescuing a position become ineffective because my tenure in the markets vs volatility and position size becomes not good for my mo

I see, i believe i have made more head way into options trading by understsnding the book by sheldon natenberg. Seems like while the price is fluctuating, the synthetics to readjust the position can have more theoretical edge to protect book while and the theoretical edge comes from dancing implied volatility.

actually, there is an mo, which functions as a trapping mechanism, and has dual functions, i wonder if this could actually handle tsunami situations.

basically, i buy out of the money puts at say 100pips down from current price, and 100pips up i sell calls, then further 100pips up i buy another call to tailrisk hedge it, then i use spot to dance the taf mo. as for the ratios i need to see how they work, then see if i can lay the position for zero cost.

mainly because rescues into very very long term time frames like maybe daily charts will end up breaking my volatility tolerance band and also have my capital trapped, essentially this can be level 4 rescue.

rather than increase skew, i develop other tactics when breaching level 4, then level 4 will be 3x rescue troopers with scout+1+2+3 regrouped, together with the options positions.

essentially, this may solve the death battle scenario problem, plus the tsunami situation with 1 blow.

the main problem with the tsunami and the death battle is that 1 volatility is an huge huge issue, while market is pushing against you, you are exposing more risk each time, especially when caught in extreme sudden term trend reversals, these days it can come without warning, especially when hft already have gained critical mass, and with the situation happening like the pound flash crash. so essentially, if we can lock the volatility in a band which we have to deal with, we can essentially hold on to the position for along longer than simply only using spot.

i remember fti once mentioned to me my options trading model with only puts is not cost effective because i only buy premium, did he mean this? that the puts with calls to develop the spot into a collar is alot more cost effective, also fti once mentioned zero cost hedging. all these would essentially triangulate to these scenarios.

how curious, i think i made more head way into this.

i guess collar is 1 method, next will be investigating into all the various zero cost hedging forms and their integration into the taf mo, and then when mission is achieved, how to deactivate the position.

the theoretical idea here is that, you engineer the basic forms, and leave 1 shifting part to be implemented with spot using the taf mo.

take for example zero cost collar, instead of buying atm call and selling otm call, you buy otm puts and sell otm calls, then you go long spot as a way to dollar cost average it.

oh yea, this does solve the tsunami problem, it also further limits the damage by the death battle scenarios.

the thinking process is that, i don't necessarily have to profit from the options, i can use them for their intended purpose for retail, which is to protect position, and primarily profit from spot trading. primarily because pure options trading all the profits and edge is being eaten up buy spreads, so it is not feasible to profit primarily from options unless its long options and delta neutralize, otherwise using a collar which incurs a 10-20pip cost on initial outlay, with ability to use spot, which is low cost to adjust is alot of a better move.

so for retail, doing adjustments, priority given will be spot then options.

Hmm, suppose we are at level scout, 1 and 2, level 3 is our limit, once hit and still fail, we cut and accept the loss.

Spiral within spiral, implementation of level 3, split level 3 into 3 parts and enter as price turns, and if we are only able to rescue level 2 we just take level 2 and 3 out. This will alleviate it to not be a death battle scenario.

From that point onwards, it's implementing rescue but on higher tf using level 2 and slowly bringing troopers out.

Why spiral within spiral? Because within the local area you have a chance to rescue small parts of level 3 out if scenario is not good still.

I guess the main problem with the death battle scenario is really because not enough troopers to carry on the battle.

Hi CookieMonsta and Exnav

Sorry for the late reply but been busy with some other things the last few days and will be until the new year now.

Thanks for your replies.

Have a good Christmas and happy new year my friends.

Regards

Phil.

hi phil,

merry christmas to you too

12 sma, can be used to assess market condition, if you are trend trader, and you see price action spaghetti crossing all around the 12 sma, in which the 12 sma, is benchmarking where price is on average for the 12 periods before, we are actually checking to see if price is choppy or not, you actually just want to keep that chart on the side.

what led to this thought? well i was wondering why gann was able to do afew things.

1) his accuracy rate is very high, especially so for a trend swing trader.
2) his risk reward ratio is also very high, especially since he is a trend trader primarily.
3) how does he weed out the choppy areas?

it made me wonder, his gann angles, performs a similar function to sma in general telling us the slow and gradient and tearing from the average price.

actually, if you see gann's angle, done properly, what do you think it is? its actually a linear regression line, except gann was alive 100 years plus ago and he already has been using concepts like these.

i guess for 3) he is using some angle method, sma method to assess for trendiness, so as to avoid the chop. i also noticed that in the book truth of the stock tape, gann usings very high time frames, like daily, weekly and yearly. so hmm. interesting.

also another thing is, because gann is trading trends, it takes a fairly sizable amount of time to properly let the trend develop, whereas for choppy markets, it keeps chopping and is more difficult and needs very careful management. i guess that is why trend trading is usually slower paced, and with respect to volatility and accuracy rate, perhaps gann's mo has something very strong there.

the key is the chop, theoretically once you figure out how to handle the chops, to a certain degree, it can be very profitable, so im guessing, actually gann has done it, its just reverse engineering it.

i think the 12sma may contain similar usage when married with the feel the pulse of market, that is, its discretionary, not the black box method. as the SMA is simply a tool for the trader to use.

the critical moments is when price is entering the choppy period, that part is usually most difficult to identify because you can't predict the markets.

Hi CookieMonsta

12sma if used with the pulsing/legs of dow theory is very telling of the current market conditions and the next suspected move, I have covered this in my live trading in my journal, basically if prices returns to the second what I call MPS line then I would suspect consolidation/change in the direction.

Regards

Phil.

added...

post 645. and others in the live trading itself.

Hi, phil,

i see, good to know you are using this too.

on my first read of your journal, i had thought this was to do with form reads, and did not know you extended it to the 12 sma too.