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

Guess this orange box has alot of support after the news, nobody wanted exposure before advance GDP announcement, so after that was the time to enter or of extremely short, to exit. So lots of buys there.

out of curiosity, i was wondering, how do you protect against a flash crash?

the answer was interesting, consider a market maker, and consider us, the retail trader, since as retail trader, we expect there to be a price quoted by a market maker. so for the market maker, they are quoting price, so if they see competitors decide to step away, they may step away too.

what does this mean? this not just means the bid ask spread will widen, and not just mean you will have to manage extreme volatility, it also means a disappearing of liquidity, so price shades away at an instant. implying that your ability to hedge or protect against positions is reduced, hence slippage.

so whats the catch here? the catch is, to work far the ends long strangles, hopefully for a relatively cheap price and make it work for you.

so here is a bellcurve, probably once you hit pass 2 std dev, liquidity will begin to suffer because everyone is confused, so once you hit 2std dev, you have to check for conditional probability, if once price hits 2std dev, how likely is it to hit 3, 4, 5 and so on std dev.

towards the middle is normal probability, we actually have alot of information about normal occurences, since they are abundant. but towards the tail end, because the occurrences towards that are so little, mathematicians have to make alot of assumptions (which probably will not hold, see LTCM). so if thats the case, being long the tail ends makes you rich when the crisis occur, but since the probability is so small, its as good as buying lottery.

so the key is to do both, first you have a standard strategy which can make money consistently in the middle.
then you have long strangles towards the tail ends which has 2 functions, 1) insurance against tail risk 2) if exposed to long strangle but if you have no spot position, you have a chance you make alot if the market flash crashes.

so the best way to do it, is to figure how far to buy and how much time to buy, such that, you may only give away 25% of your average gains, after losses.

additionally, you could also be buying nearer term butterflies and managing it. then basically you have a strategy similar to anthony saliba, in the market wizards. scalping to pay the bills, butterflies towards the near terms to pay for the long strangles, and when the crisis happens, great, you made it rich.

Hello CookieMonsta,

I'm thankful for your posts and pleased to see how you have been evolving.
Meanwhile, to me, I keep in mind the fti's words: "Please do not believe in hocus pocus, locking and hedges. That does not exist in reality, FIFO,... locks and hedges, exist in crosses, and synthetics and these are for experienced players".
Therefore, I split the phrase in bold into: players - yes, agree; experienced - I never know since:

"If you had studied, analysed and practise, I am sure there is little here that you need refresh, except your mind and its development from time to time. Remember you are as good as your last trade".

Another point of my concern is here: "you no have to be correct in every decision. Just means you need read the flow and you have all the ammos splash them at every altitude they take you to. Cautious means you no run out of air space maneuver if needed".

Basics for my mindset: watch sizes, adjust to terrain nimbly, effect maneuvers properly.

Best regards,
Exnav

hi exnav,

yep, if there is anything else to take away from, its that, managing ammo and air space is key, and you will find all i presented was precisely meant to enhance my ability to manage ammo and air space. effectively its an alternative take on how to manage ammo and air space, but the core idea is still the same managing of ammo and air space for maneuvering.

also to note, part of the key is to manage and attempt to keep position exposure within 2-3x daily profits. this is what i have observed, usually if i go pass to 4 or 5x daily profits my size to recover it has to get larger, and that itself increases the risk of ruin even further. once you get pass 5x, it becomes very difficult to recover effectively. and you will see that sometimes if your rescue gets very very extended and position size is large you will reach that 5x very very fast. so the main issue i realized is that, few people have checked out what is at the tail end of 3x daily profit, essentially, what happens if you loss gets larger than your profits enough for it to make it difficult to recover the account effectively. and this is my answer to that.

well, i mean you can say you are willing to stop at 2-3x, but out of curiosity, i decided to investigate the tail and to see whats there.

Hello CookieMonsta,

Thank you. I think that you have found your edge.

To me, I should ponder on this by fti: "Instead you must have the mindset to do whatever it takes to WIN".
That is building an ant's account in a consistent way.

Best regards,
Exnav

exactly, and sometimes whatever it takes to win may mean different things to different traders. there is no 1 right answer.

same broker but, cross have stop hunting but not major pairs. Note, these are bid quotes being plotted.

So the 3 legged animal, has these kinds of effects. So please note, it's the brokers quote since you are trading their markets, so sometimes it's better to have your own tricks up your sleeves as well.

Hello CookieMonsta,

The interesting fact you are showing regarding GBP GPY spike down below 140.00. That pair didn't cross 143.60 on my charts.

Since you are closely observing GBP USD and GBP GPY and we are having London news in some 5 hours, what is your take on those pairs right after the news and BOE announcement? Of course, we are not predicting and they can make wonders. To move cable to some 1.2900 before the news or make a new high.
E.g., I can see some space for GBP GPY to spike up to 146.00 or down to 144.90. The only I must confess that I'm not smart enough to read the current PA flow on these pairs.
Thank you for your time.

Best regards,
Exnav

Hi exnav,

What you indicated is also another additional information. That there are bump quotes, which is the information I'm trying to highlight.

on your charts did not have the spike but on mine there exist a spike like that meant someone up to funny business on my broker.


Also what I want to highlight is, crosses are supposed to be quoted from majors like gbpusd and usdjpy will produce gbpjpy, but the fact that gbpjpy shifted so much while gbpusd and usdjpy didn't move much and also your info that gbpjpy did not move much on your end would mean that, it was a bump quote.

Well as for the current price action, I think we are in-between 2 big announcements, fomc last night and boe stuff later, markets probably spiking and any analysis is probably going to be rendered pointless after boe news since it's going to be repriced after the news, so there really is nothing to analyse before the boe news is out, if you are trading, it would be to attempt at fast hit maneuvers.

Btw, the one to look out for is eurgbp, since it is most affected by Brexit fundamentals and also.

Hello CookieMonsta,

Thank you fro your kind feedback. I remember also Phil indicated some 5000 pips spikes with his brokers that were not recorded anywhere else. I appreciate your reminder and will wait for after-the-news.

Best regards,
Exnav

Hi exnav, no probs, btw, not just do you have to take care of news as well, seems like they may pull these sort of things after New York close and before Tokyo opens, during that is Wellington open, and spreads are wider than it was years ago and liquidity is bad, so these kinds of moves can happen during these kind of hours too.

Hopefully this is the top

Locked some in, left some to ride.

Took it all out since it's a friday

hmm seems like bitmex can be a viable alternative for making money on crypto.
well currently this is more of an account i was playing around with to experience what its like to quote price and layer bid ask spreads.
but man, it totally blew my mind.

first a primer, i mainly manage positions on the 5mins chart, but i use the level 2 to get a feel for price action and how the pressure is flowing, but instead of looking for momentum, i look for possible chops to do fast hit fast run trades, e.g. if i currently market has possible turning point, i can layer a bid and ask around the best bid and best ask factoring in the volume to try see if i can fill both sides as soon as possible, using the surrounding bar range as a guestimate of the volatility and liquidity and where good fills may come in.

today, i tried a different style of trading in bitmex, compared to what i usually traded, mainly because its the exact opposite of what i usually do in the forex markets, as it would churn away my profits in the forex markets. i usually try to catch swings to profit from price differences.
so instead of playing for waves and getting money mainly from rebate profits. now what i did was try execute trades which do round trips really fast like maybe even afew seconds, the spread may be like 0.15 for ETHUSD, where i try to work the queue and trade intra-stick, and it was quite fun, i kept filling really fast for both while managing inventory levels to try keep it managable, since i didn't need for price to move alot in my favour to make money, if price didn't want to move, i can just keep quoting the best bid and ask and just net the difference and make from the fees, while keeping size at a target level. so it does take some skill to try work the order book, like reading the terrain, or capitulation or the market going on trend runs and you mainly want to keep quoting in direction market is going in. and in a sense, because it is so different from retail forex where you already pay commissions to make a trade plus spreads, you have to get direction right, so in a sense, the most unfavourable terrain for retail forex traders, now becomes your best friend in such exchanges which give you rebate instead. and originally, small tight ranges which causes traders to rescue in efficiently because you keep paying spread edge away, now, since you are the one being given the spread edge and rebate edge, it pays to keep doing loads of round trips.

so in a case where market run against me, i revert back to my old strategy where i manage position by averaging into the wave turning point, except i can keep churning price when it is at a possible turning point till it fully reverse or retrace pass my rescue. say if im long 100 and price push against me, i can go lone 160, and an extra 100 to just play for rebates and lighten the amount needed to recover.

well if you see the returns from the balance screenshot, seems this advantage is larger than i originally thought, so maybe its my rigid mind prior to having this lightbulb moment which limits my profitability here.

well great lesson learnt from these 3 days. seems like i have another viable alternative to profit from the markets.

also, another thing is, rather than just having credentials, sometimes it can get hard to enter the trading industry, they pretty much have the entire creme of the crop from whichever university they want which they can choose from. whats better than hiring the best graduate, well it would be someone who is already doing trades. well, i won't say it guarantees you a job, but it does open doors, just that some doors require different kinds of blotter and different styles. so, for example, if you stated that you studied sheldon natenburg's book on options and can describe details of how you would use it and the crux behind it in your cover letter, you probably will get your resume into the hands of hiring managers looking for potential candidates to join their trader program, since thats what they explicitly state on their webpage what they recommend as reading materials (mako trading group does state that this is a good read as well, so if you do intend to apply for their program, if you did already study the book, you will increase your chance of getting a potential interview with them, unless of course they decide to change their recommended reading list further down the road). so yea, these aren't done just for money, or profitability, sometimes it helps you open doors.

well just thought id follow up with the level 2 dom

usually reading this gives you an idea if whose in control and where the buyers and sellers start stepping in and the dom will keep changing and you are managing your position as it manifests. and you can figure out how to work the queue at each price level.

but 1 thing to note, if you do see the dom, you will keep seeing bids and ask keep refreshing and kept being pulled away and added and pulled away and added, usually those are bots doing hft and they keep refreshing their orders, and they will pull orders away which can make that side really thin, so learning to read these can actually help you make slightly wider spreads than the bid and ask since they may keep pulling orders and step away allowing price to whipsaw both sides which can lead to fast snap trades, which fill both your bid and ask within afew seconds of each other if both sides algo pulls their orders fast enough that price just whips up and down, and you get profits just like that.

well kind of like this.
well this is a 1 off example, usually if you try this style, you can end up with maybe 5-10 trades within 1 hour at least, as all your doing is staying close to market and quoting around it and working the order book and queue and managing position.

well, all the basic grounding in TA also works, since im pulsing the market for feel but having a level 2 helps and being in and out fast works pretty well too.

also key point to note, sometimes a side is very thin because that side is the side the market intends to push into, so sometimes just because its thin you may not want to just hop in and layer your orders in since filling it there is easy, but it may be a bad position to begin with. somtimes its a congestion and is good for both sided plays. but as a rule of thumb, checking which side is strong and staying with the stronger side is always better.

alright thats all for today.

hmm, today, it felt like there may be follow through from yesterday's move, so i made a 1 sided market and kept my size low while working for more round trips.

so i try to follow the 5min current swing direction and try to shift in and out fast. and these are the order history and fills.

also, there are some tricks i did use to see how strong which side is, like, i put the spread slightly away from the best bid best ask, especially if there is a wall there, to side which side steps away first, and sometimes they back and fill and gives you a good chance to do fast trades. unless there is a huge directional bias, which i will instead make only 1 sided limits and then place the other side to exit my position.

so for all these trades, no stops has been used, as there is an actual penalty for it, which is makers which add liquidity get 0.025% while takes pay out 0.075%.
so because of the fee structure there is a huge incentive to use execution strategies which add liquidity, and if it gets out of hand just exit on market (well you pay the fees, but at least your out).

also sometimes if i hit half of my size limits, i will just try to do scratch trades, effectively they are trades which are break even or maybe abit off, which are compensated by the round trip rebate, and net its still profitable, but its meant to reduce size when i become uncomfortable with the position's exposure from size. there are 2 key goals for this, which is to reduce position size exposure as well as allow me to stay near the market by reducing size and be able to average again later if in favour again. so it helps me reset my book to smaller size. well the key goal is to churn the markets for round trips and small scalps while keeping size well within limits so you don't get blown away by a fairly huge sized move.

Hmm, seems like wanting to get my own journal deleted is a huge task, anyone or any mod knows if there is any way I can remove this journal?

If you guys have any ideas plus tell me. Thanks in advance.

Lol, today I had an epiphany.

Since I can't delete this journal, might as well continue.

I kept wondering why people think I will splash with my current strategy, I used it for so long and have never splashed.

Now I know why.

How I control my risk, firstly for example, for argument's sake my networth is 100k.

I only take 5k as my trading account. Then from there, I sub divide my trading account into wallet(60%), shock buffer(30%) and actual trading active account(10%)
And on top of it, the actual trading account has 20% drawdown max or 3x daily gain max drawdown. And locking is implemented before 1.5x or as and when suits.

Also, if I have extra foreign cap, I have to option of moving extra capital away from the active trading account to my wallet and instead create a fixed value and reduce it to less than 10%.

Plus on top of that, I can take a trenched threshold such that my risk level will increase or decrease as my entire account value is increased or decreased by a 5% step, like the Richard Dennis turtles manual, a 10% loss will see buying power reduction. Effectively creating a risk spiral correlated to recent performance. Then if I feel like I have reached some form of level of max loss value I don't feel like exceeding even if my account gets larger, I can stop there and just use that value to manage risk rather than percentage size.

Effective risk if no foreign cap is 2% of trading capital before mandatory cut loss, or maybe even a fixed value lesser than 2% if I have extra foreign caps but am not willing to increase max risk taken. Which is 0.2% of my account or lesser.

What kind of splash is this?

Then I understood. They are putting their entire account at risk and they think I do the same. No wonder they will blow up.

Me, if I blow up it's still only 10% of trading account. I mandate it on myself, how to turn into rogue trader if I have these kind of risk overlay.

These are risk management rules I set for myself. Then locking let's me manage across many volatility levels. It further brings my risk of ruin down without increasing exposure risk. And they say this is not essential.

How to splash this way? Only way I will splash is if I disregard my risk management rule and decide to trade with no brains.

But then again if I trade with no brains, no matter what strategy I use I will blow up, only a matter of time.

Maybe that's why I can never understand why people can splash. Never really understood the all-in mindset. Me, pass a certain level I physically feel uncomfortable, where I cut loss or lock in. I can control it effectively, means situation not that bad, is when you lose control, then you begin to become rogue. Even better if right from the start when it's small I already stopped it dead in the tracks from even becoming problem.

And I have see many times, is people who lose control are the ones who go rogue. Don't blame the strategy, blame yourself, and IMPROVE yourself, don't hide behind others or other circumstances for your own failings, fact is you are given freedom and you can control yourself, you still don't use it means is your fault.

Me, I look to improve myself because I see where I am not good at, and market show me where I fail to let me improve. All I did was listen to market on how to improve.

Initially I used to run into issues where I always go beyond 3x daily loss and I realized is because I can't withstand volatility well and keep blowing my max risk value.

Once I corrected for it by listening to the market, I improved my skill and stopped losing much money at least when I do lose money, it doesn't even hurt as it's all within control. And the maximum drawdown, it's all controlled.

And some people want to come tell me I got huge ego don't want to listen to them.

And guess what? On top of that, I still have additional money stashed away as my silver bullet system in case something happen to me or I lose my job or what and need to restart everything from scratch.

And guess what? This is only 1 portion of my risk model. The scout starting size is tuned to expected volatility exposure WITH the 3x daily profit as max loss. Plus locking at 1.5x or less as I see fit or if size hits trigger point and focus must shift to attempting to reduce loss or size to half. And if I can effectively create an oscillating level to skew up and down on levels and not break above threshold values into danger zone, what major risk is there? It's the ones who cannot learn discipline and control who will blow up.

Hmm, to be honest everything I do is geared to REDUCING chance to blow out and if possible to reign in my risk exposure to a target max value. As I already am making money, now, I am focusing on retaining it as indicated by market what my weakness is, I keep trading up foreign caps but cannot retain it initially, surely it means I must work on retaining it and not trying to make more? Profits always take care of themselves, losses rarely do.(the market wizards)

Really makes me wonder what kind of risk those people are actually taking in the first place and what kind of mindset are they adopting in the first place. But never mind, I just need follow the golden rule to control these loss scenarios and make it more difficult to lose money only, the profits will come as the market wants to give to me.

Really odd people, market told me I must work on reigning my risk level in, they tell me work on getting more profits, doesn't even fix my issue and when I find out how to fix my issue, they tell me I fixing it wrong, doesn't matter, I only need markets feedback.

And the hard evidence? I keep making to +20% account only to lose back to break even, then the same cycle repeats. Surely this indicates there is something wrong in how I'm not retaining my profits?

But doesn't matter, I just need follow my own rules above only.