“Focus on the process”. You hear this all the time…. but what does it really mean?

“Essay From Confessions Of A Market Maker co-host AllxDayxRayx”

The Process

“Focus on the process”. You hear this all the time…. but what does it mean? It’s arguably the most important piece of advice in trading and other statistical edge activities. But for the newcomer or the novice, I believe the majority don’t understand the depth of this simple statement. It’s precisely the process a trader must strictly focus on and not the results. In this article I’ll attempt to succinctly put what it means to me and touch on the various elements that make up the “process”. Note that this may be a bit subjective and personal. It’s hard to exactly pin down everything that encompasses the “process”, but I did my best to capture the essence. I broke it down into 3 pieces: love for the craft, Self-review/Strategy, and mental game.

Love of the Craft

First and foremost, the “process” begins with love. Do you love trading? And no, I’m not asking if you love making money. If you’re in trading because you want to make money, stop. The money is a byproduct; the money is how we keep score. At the same time, I’m not saying NOT to be in it for the money either; a paradox if you will. You should be a trader if you LOVE the game- if you have a borderline obsession with trading. Having the visceral love for an activity serves a two-fold purpose in my mind. You’re competing in a game where there are people obsessed with using every waking hour of the day to optimize their trading; this is who you’re competing with. Secondly, having a deep love for the game pushes you through the difficulties which inevitably arise. When failing to initially succeed, are you going to quit? You’re not because you’re fascinated by the market. When you hit a down streak, are you going to quit? You’re not because you love attempting to design strategies that fit current market conditions. The point being, you can’t quit because there’s something inherent that you love about the game. 

This was the realization I’ve stumbled upon myself in my early poker days. I clearly remember several moments throughout my poker career, down moments, where I said to myself maybe I’ve had enough. I’m trying so hard but perhaps I wasn’t where I wanted to be yet, or I was hitting certain setbacks. The next morning or a couple days later it was as if all my anxiety vanished, and I was reinvigorated to see which areas of my game I could improve upon. Simple put, I couldn’t give up if I wanted to; I loved everything about the game of poker and that includes the painful moments- the greatest teachers. I don’t think it’s dramatic to say my connection to the game is spiritual; taught me many lessons that I carry in life, but that’s another topic. I use this example from my early playing days to illustrate to the beginner or novice that trading isn’t going to be all glitz and glamor and potentially quite painful. If you have a strong connection and love for the game, it’s what will keep in you the game. You’ll develop a respect for the game that it deserves, otherwise it’ll humble you. Quitting will not be an option because it’s who you are. Having a love for the game is to not be attached to the results. You trade because you love scrolling through charts looking for potential plays. You trade because you love the challenge. You DON’T trade for the results. You DONT trade because you want to get rich. Attaching yourself to a specific outcome leaves you vulnerable emotionally and that’s something we can’t afford in trading. The less I started focusing on results, the better they’ve become. Sure, having positive results brings a nice dopamine hit, but the real pleasure is in the journey and road traveled, not the destination. Work on your nonattachment. 

Self-Review & Strategy

I want to start out the section on self-review & strategy with a note on accountability. In trading and as in other gambling activities and perhaps life, it’s easy to blame external factors for our lack of success. Sometimes it may even be true. Worrying about the external factors is quite literally a waste of mental capital. We focus on what we could do better-if anything- and we move on. It’s never the markets fault! Ingrain that in your head. Blaming your results or lack thereof on the market is a loser’s mentality. You’re passing the blame off yourself. We’re the one whose executing; Its always on us. Part of the process is taking accountability for our execution. And it needs to be done strictly. I can’t emphasis this enough. We and we only are responsible for our PnL. You ever hear a professional sports player or coach blame the other team for their loss? -ok there may be some rare examples. But most of the time they put the blame on their shoulders and say they need to get better. Play like a champion!

Another thing worth noting is we’re in a game of probabilities. So you could actually be trading fine, but still lose. And vice versa of course. I believe this is one of the most important parts of the “process”. Your self-evaluation; your trade review. This is where you see if you have an edge or not. And this is another word that gets thrown around a lot that I believe a lot don’t truly understand it. An edge means you know for CERTAIN a strategy works- or as close to certain as you can get. Not that it’s worked for you a few times, not that its work for you once and you hit a home run. I’m talking about having a concrete sample size and history of a strategy working. When you know you have an edge you can shrug the losses off; you know the strategy will work in the long run. Knowing you have an edge helps temper emotions because you have confidence in the system. For new or novice traders this is part of the process that may take a while. It takes a while to know if you have an edge or not if your manually tracking your trades as its going to take a while to develop a decent sample size- why back testing is very valuable in my opinion. Starting off this can be frustrating and difficult work. Lets hope you love the game!

Simplify your trading. Trading doesn’t need to be complex. The best traders I’ve spoken too, their trading methodology and strategies are quite simple. When designing a system for yourself, make it understandable and clear to yourself. I think its hard for most- it was for myself- to believe that a simple strategy can reap money from the market. “Making money from the market is hard”, “95% of traders fail”. While these statements are true, a simple strategy that makes money lives in conjunction- my opinion is most people’s emotional interference is the issue. This principle appears to be universal, applying to nearly every subject. If your strategy is complex and hard to understand, is it actually good? Maybe, but it has been said that the greatest minds are able to take complex subjects and break it down in a digestible manner. I think the same can be applied to trading.

Mental Game 

Honing one’s inner confidence and listening to one’s inner voice I believe is a huge part of the process. It’s truly great to have a mentor, teacher or learn from various individuals and their resources provided, especially in the onset of your journey. Just as a child with his parents, you must leave the nest and form your own opinions. And these opinions can be molded by your teachers, but it’ll be personalized to your uniqueness. Knowledge of self- our strengths and weaknesses- is what will maximize your potential as a trader. This is a game within us. It’s not you vs. the traders on social media. It’s you vs. you, with you being the only person standing in your way. Modern society is a very noisy world. The one who can silence their mind and ignore the ever-growing distractions that are present will succeed. There are only a few things you need to focus on for your trading, yet there are millions of different indicators, charts and news headlines vying for your attention. The key is finding what is truly important to the strategies you’re executing. 

I think a lot of what I discussed in this article can fall under the umbrella of “mental game”; all these topics are intertwined really. Having an elite mindset is what all the top performers have. There are many resources devoted to this topic and the pure scope of its depth isn’t appropriate for this article. I will leave you with two resources that personally have had the most impact for myself: “Art of Learning” by Josh Waitzkin and the general study and practice of Zen Buddhism- with an emphasis on practice. We can do all the theorizing we want; we can read all the trading books in the world, you can never become truly elite without repetition.

Thanks to everyone for reading. Always feel free to reach out to Ray on twitter-AllxDayxRayx- or in our EquitiesETC/Microefutures Trading Room Community where he trades and hang our daily with members. Good luck

Consistent Profits with Day Trading Futures – Roy Williams

Are you a day trader trying to make consistent profits trading futures?
Haven’t learned that trading is a constant battle between the highs of making money and the lows of losing money, yet?

Well, you are not alone!

I’ve taken plenty of spankings in this business. I’ve found myself struggling to keep up with
profitability, which can be an incredibly stressful situation. My job as a trader is to achieve
consistent profits, and if the job is not making me money, well, it’s really not a job, right?
As a day trader, I know how hard it can be to maintain consistent profits. It’s a stressful situation
that many traders find themselves in, and sometimes it feels like you’re just spinning your
wheels. But let me say this: keep that grit! Don’t give up yet – with the right strategies and
tactics, you can become more consistent and increase your chances of success. In this blog
post, I’ll share some of my tips for achieving consistent profits.

Maximizing Success in Day Trading Futures Through
Screen Time and Risk Management

When it comes to day trading futures, consistency is key. That means having the right mindset
and understanding what works best for you as a trader. It also requires keeping track of your
trades, analyzing why certain ones worked or didn’t work, and learning from those experiences.
This will help you develop better strategies for future trades, which will ultimately increase your
chances of success.

Another important factor is risk management. When trading futures, it’s essential to use
stop-loss orders to control losses and limit your risk exposure when things don’t go your way:

● A stop-loss order is an important risk management tool that traders use to limit potential
losses when trading futures.
● It works by setting a threshold price at which your market order will be triggered, helping
you to stay in control of your positions even when the markets are volatile.
Setting realistic goals based on past performance will also help you maintain consistency in
your trading patterns by allowing you to adjust accordingly if needed. As long as you have a
good plan and stick with it, then chances are that the results will follow suit in time.

Now ask yourself, how much time do you spend in front of the screens?
How much screen time am I getting a day, a week, or a month?

Active participation is crucial for success in day trading futures. Being actively involved in the
markets means staying on top of news events that could affect prices or movements within them
as well as monitoring charts for any changes or trends that may emerge over time. Doing so
helps ensure that you are well-informed before making any decisions about trades so that they
are calculated rather than impulsive or reactive moves made without much thought behind
them.

In my experience, screen time is the most crucial of all strategies, because it’s what helps
develop your strategies into consistently profitable outcomes.

Achieving Success as a Day Trader: Strategies and
Commitment

Now it takes a lot to make money in this business.
Some of the strategies I discussed above are just entry-level understandings a day trader must
know. There are other skill sets involved. Consistently achieving success in day trading futures
takes dedication and commitment – but if done correctly, it can pay off greatly over time! Taking
the right steps such as having the right mindset, tracking your trades closely, managing risk
appropriately, setting realistic goals based on past performance data, and actively participating
in the markets (screen time) will all help lead to greater success as a day trader over time.
Remember, results take time to measure. Good luck!

From The Desk of Trade Beautiful – Bottom, Bottom, Bottoms!

$TWTR is making me feel like I am in a Lizzo video right now.

Let’s talk about Bottoms and whether or not we are in one.

Just as in real life no one likes a flat bottom. The rounder the bottom the better and it looks like the $SPX has not stepped foot in the gym in months.

First things first, unless someone hires me as a TA this is just for educational and informational purposes only.

Let me preface this by saying there is always a bull market somewhere. Energy and grain have been doing extremely well. A lesson for newer traders or maybe stubborn ones, it is ok to leave your beloved tech and growth stocks and move over to a new sector when they are not working. I give you permission.

In a sea obsessed with bottoms everyone is looking to “nail” the bottom. Let them at it. A broken clock can be right twice a day. Our job is to, especially if you want to stay in this career long term, figure out the truth by reading what is in front of us. The charts.

Today I am not going to speak on inflation, CPI, QE, Investors reevaluating based on P/E or anything to that nature. These are all lagging imho. All that matters to me is what the charts are telling me. I really don’t care why. My time is better spent elsewhere.

So what pattern were technicians looking at wayyy before CPI etc?

What’s that? Try again.

You Got it. Classic topping pattern Head & Shoulders.

Looking at the chart we can clearly see the H&S forming and the confirmation of the break was 4300.

3800 has been a massive talking point between experts, because it is the 38.2% retracement area. I adore measured moves. It is like ballet. Poetic justice if you will lol.

So taking into account the March 2020 lows we can see the 50% retracement would put us at 3500. This doesn’t mean we cannot bounce around.

Let’s take a quick look at the largest weighing company in the S&P $APPLE.

With 7% of the S&P , trading 26x its forward earnings and having just broken support conforming a double top formation I can safely say this adds to the case of the bottom is not in

Take a look at the measured move targets below on the break of $151.50.  Bullish case if reclaims this level and holds, as there will be a lot of trapped shorts expecting more downside.  

Remember, we let the charts tell us the story and we allow the patterns to work themselves out.  Every rally begins with an end to selling pressure and every selloff comes after bullish action, so it is important to not get tied into a bias.  

I really hope you have enjoyed this quick article!

Please feel free to reachout to me on Twitter https://twitter.com/tradebeautiful to chat stocks, trading, technical analysis, and to let me know if you would like more . Send me a message or tweet of what you would like me to cover next!

Til next time.

Trade safe. Trade Beautiful.

Les xoxo – @tradebeautiful (Twitter)

Beyond The Trades is sponsored by our good friends at Microefutures.com / EquitiesETC.com

Trading in Uncertain Market Conditions – from the Desk of vwaptrader1

Trading in uncertain market conditions – from the desk of vwaptrader1

The market has changed drastically.  We have to adapt our style of trading and manage risk and expectations.  To thrive in uncertainty follow these rules as a start and remember that risk management is the MOST important thing in these trying times.

1.  Time of day.  For new traders with limited skills in trading, the market open in RTH is not wise.  Let the market open and let the order flow establish itself.  This means letting the big traders do the work and take on the fast volatile new orders that come in off the open.  For more seasoned traders who have the skill and account size, size down so you don’t get whipsawed with SIZE.  New traders should trade Globex where the price action is slower and you can see moves coming and reacting.
2. Before trading watch the market. Figure out where inventory is.  Where longs or shorts are trapped.  Look at the structure and how the price action is.  Is the market moving fast or slow? Is the price jumping around or is it stable?  Where are the stops? How is price acting at the stops?  How many stops are sellouts taking out? Make notes of all this before you execute
3. When looking to buy dips remember we have SUPPLY in these markets now.  This means the market will take the lowest stop before stabilizing and making a move higher.  Short sellers KNOW there is supply and will not bid the market as aggressively as they did last year when there was no SUPPLY.
4. Make a plan for your out/ safety stop BEFORE you enter a trade so you are not caught off-guard.  
5. Let the size traders work at extremes when markets sell-off, remember there is more supply now, let those big-money accounts take the risk, then look to execute. Being patient is allowing those big-money accounts the time to do their business.  Getting in the way means getting unnecessarily stopped out.
6. Remember it takes TIME to clean up supply after a sell-off.  If a market has been over VWAP for 4 hours it is going to take longer than 5 minutes to clean it up when it breaks VWAP as not everyone who is trapped long over it will sell at the same time.  Allow time for the sellers to all realize they are trapped and head for the exits
7. Be aware of margin call selling when you are taking longs.  When markets cannot hold settlement we will have margin calls.  When other asset classes sell-off we get cascading margin calls as funds sell whatever they can to avoid sending money to their brokers.  What this means for you the retail trader is DON’T GET GREEDY on longs. Sell into strength!  If you are long and the market cannot take out the first upper stop above you get out and get paid.  Always trail stops when in profit in case of selling that will hit the market like a rogue wave.  Your stops are your lifevest, do not go into storms without one.
8. If you cannot figure out the trade, wait and watch the market will tell you what is going on.  Resist the urge to jump in and boredom trade or revenge trade.  If you have trouble doing this, reach out to one of the moderators in our room.  We are here to help.
9. Use Globex trading to put together information so you can build trades in RTH.  Be disciplined and always make sure you think risk before reward. The markets are not going to treat bad decisions and greed kindly.  Govern yourselves accordingly.
10. If you are having trouble with a market, size down and trade less.  The emotional wear and tear of losing money and blowing up accounts can be avoided by not pushing trades.  We have to be vigilant and smart now.  Anyone can make money in a bull market with no supply.  We have a two-sided market now so remember we have to be smarter, faster executing, and more patient to allow trades to develop.  Do not get upset if you miss a trade because you hesitated and chase it.  There will be thousands of trades for you.  
11. Admit you are wrong when you get it wrong and get out fast!  Do not let that “ oh it may turn” get in your head.  Be savage and cut losses quickly this preserves capital.  If you get stopped out 3 times take a break and review what you got wrong.
12. Stay flexible and learn to adapt to different market dynamics. We will see many in the upcoming weeks.

Reminder that @vwaptrader1 teaches and trades live at Microefutures.com / EquitiesETC.com Trading Room Community

Trading Essays – “The Middle of the Path” by AllxDayxRay

One of the hardest things for the human mind is too detach itself from the results of an outcome. Winning trade = a job well done; Bad trade = I did something wrong—not necessarily the case in either outcome. For the new trader, you’re going to experience the natural swing of emotion that occurs when learning a new endeavor. You’re going to have your “breakthroughs” and bouts of success—mostly temporary—and you’re going to experience mental blocks and the inevitable loss of money– hopefully mitigated by proper risk management. Throughout this mental and emotional rollercoaster, you must maintain a moderate temperament; not getting too high at your highs, nor too low at your lows. A good rule of thumb that was taught to me that helps me stay grounded: you’re never as good as you think you are—usually referring to when you’re on a hot streak—and never as bad as you may think you are: you’re going to fall somewhere in between. Cultivating this type of mindset is the pursuit of objectivity—a crucial skill at analyzing your participation in the market. 

Being a part of a trading community I’ve been able to see this concept in full display. You’ll have your traders who are on cloud 9, experiencing a winning streak of sorts. They start talking more definitively– an aura of pride in their speech. I’ve seen a trader boast how he makes more than certain prestigious professions– which was a blasphemous statement due to the sample size from what he was drawing from: it was laughably small. Because people can’t properly attribute the factor that luck plays into their success, they overrate their abilities, which as a risk taker, is one of the most dangerous places to be mentally. You also have the flip side of the coin, traders who berate themselves. This serves no purpose other than the twisted comfort you get from self-loathing. You’re going to fail a lot in this business. Ok, a trade idea didn’t work? Figure out where you went wrong, if you even went wrong in the first place—whether on the spot or aftermarket hours, as long as your heads clear—and move on! I’m ruthless with the thoughts that I let sit in my mind while trading. If it’s not serving your trading, there is no use for them. The feeling of winning money is elating and ego boosting, while losing money strikes at our insecurities. Take the middle path, the moderate approach, not succumbing to the extreme emotions that pull at us and serve as distractions from refining our process. 

I hate it when I hear people say you must have no emotions trading. That phrase right there shows you the persons lack of understanding. We can’t turn our emotions off. We’re participating in an activity that releases a copious amount of chemical reactions in our bodies– good luck stopping that. Rather, what people who spew that phrase are really looking to say is, don’t let your emotions dictate your actions or thinking. Again, that’s something that needs to be addressed away from market hours. I recently spoke with best-selling author and legendary hedge fund trader Turney Duff on the “Confessions of a Market Maker” podcast. He implied one of his edges as a trader came from his inability to feel the highs and lows of life or a trade: a medical condition he has. It’s a condition that I’m sure he’s struggled with in his greater life, but when it came to trading it served him well. Most of us are not in Turney’s position but this really struck home the impediment our emotions present.   

Being objective doesn’t come naturally to humans. Being moderate doesn’t come naturally for some: myself included. These are things that must be worked on away from the market. The market will reveal too you who you are and specifically your flaws; if you’re a passive person, it will manifest itself in your execution and tentativeness; if you’re a do first, think second type, it will manifest itself in huge losses, blown up accounts, and high susceptibility to FOMO; if you’re an emotional type, feeling the highs of your success’s—not to mention the pride that accompanies winning which is detrimental—and the gut wrenching pain of your losses will leave you with no emotional capital. These are generalizations and individuals are more nuanced, but I wanted to put an emphasis on how the market will reveal your demons. This endeavor can be mentally and emotionally trying but strive for the middle path and ignore the extremes; whether it be exuberance; self-loathing; pride; depression: focus with unwavering intent on the process. Focus on the results, and you have a trader with a faulty process; Focus on the process, and you have a trader who produces results. 

If you’d like to be apart of a pleasant and supportive trading community, trade along side Ray & 20 year market maker turned retail trader, @vwaptrader1 visit www.microefutures.com

Aggression Vs. Patience – The Uncomfortable Balance

In first typing up this article I attended on emphasizing the aggression I believe traders must apply to maximize their upside: especially for the people who aspire to become a professional trader. In doing so, I’d feel remiss if I didn’t counter that aggression – unchecked – can be determent to our trading and ultimately our bankroll. While I believe aggression is in the toolbox of a trader who’s trying to maximize his profit, he also has patience in his repertoire to match. I wanted to say this so you as the reader know I’m not advocating RECKLESS aggression. As for many things in life, trading is the great balance between action and non-action: although non-action is an action. From my experiences in trading and other games of similarity, an optimal approach – or the pursuit of it – will leave you with an uncomfortable feeling. If you want to be the best trader you can be, if you want to make the most money in trading that you can, the unsettling feeling must not deter you.  

I wanted to write about “aggression” because it seems to be minimally talked about in the retail trading community. The trading twitter community loves and retweets these passive trading euphemisms, “sit on your hands”, “you don’t have to trade everyday”, “protect your capital at all cost”. There is nothing wrong with these statements and I wholeheartedly agree. But I feel like the other side of this coin doesn’t get the shine it needs. Being patient and patient alone isn’t going to take you to the promise land. Now if you trade for a hobby or entertainment and are just interesting in protecting your downside, sure: your reasoning and “goals” for trading are going to determine your approach. I’m speaking to those who are looking to maximize their upside. I’m coming from the perspective of someone who is trying to do this for a living and who wants to make a good living. 

Aggression will often make you feel uncomfortable. Trading is a game of math. Prior to trading I’ve been in other areas where machine learning and analytics have been applied: obviously there applied to trading as well. Poker, football, and daily fantasy sports being the areas I’ve looked into “optimal” play as advised by models, software and analytics. You see it with games that computers are already stronger than humans in, chess and GO. There is one common theme that is seen throughout: an often uncomfortable or counterintuitive, aggressive strategy that humans haven’t stumbled upon themselves. 

Trade Ideas artificial intelligence Holly is fairly aggressive with the quantity of trades and her profit target; and wide with her stops. You often hear people preach the opposite: less trades, take profits along the way and tighter stops. She trades set ups I doubt many human eyes would find attractive. And She is better than the majority of traders: she’s profitable. On the recent episode of “Confessions of a Market Maker” podcast, we spoke with Senior trader at SMB Capital Ryan Hasson, who spoke to the aggressive approach and the challenging of themselves that their prop firm embraces. Mike Bellafiore, head of SMB Capital puts it well in his book “The Playbook”, “We must strike and strike without mercy when the market gives us our best setup”. 

With the introduction of solvers and AI into the poker sphere, we’ve come to understand that a un-exploitable strategy is one that’s often uncomfortably aggressive for a human player, and often not intuitive. With the introduction of analytics into pro sports, you’re seeing a lot of commonly accepted principles or strategies in each respected sport going by the wayside in favor of aggressive actions. Analytics has shown the value in basketball teams shooting more 3 pointers; in football being more aggressive on early downs throwing the ball against heavier boxes and choosing to go for it on 4th down in enemy territory at a higher clip. 

All this talk about aggression and the examples I’ve given lead me to this point; striving to be the best trader you can be while in the pursuit of maximizing your strategies and profit will often leave you uncomfortable. Being uncomfortable isn’t always a bad sign. As you size up after a run of consistency, you should feel uncomfortable. Trying a new back tested strategy for the first time, probably will be uncomfortable. Losing 5 trades in a row and then having a A+ set up appear: get over your uncomfortable feelings and pull the trigger. Implementing an aggressive approach will undoubtably bring some pain and losses, especially as you work out the kinks. If you want to challenge yourself and make the most that you can, you must resist the urge to “play it safe”. There is nothing wrong with playing it safe like I mentioned earlier in the article: it all depends on your goals. But as someone who wants to make a living doing this, you have to develop a killer instinct. The cliché metaphor to trading like a sniper; Wait, wait, wait, then finger jab. Patience with timely aggression.  

This approach to trading isn’t for everyone. I’m writing from my perspective, my approach and the correlations I see with strategies in other areas outside of trading which I believe are applicable. I’ll end this article with a quote from Jesse Livermoore;“They say you never go broke taking profits. No, you don’t. But neither do you grow rich taking a four-point profit in a bull market”.

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Trading Essays & Excerps is now sponsored by the Educational Trading Room Communities listed below  (note that AllxDayxRayx teaches and trades live in the below community)

EquitiesETC Trading Room       (for stocks, options & crypto trading)

Microefutures Trading Room   (for ES futures & Market Profile trading)

Excerpt Writings from JJ @Vwaptrader1

The function of wholesale and other time frames in the market and their impact on price action.
(How to swim next to the shark instead of into its mouth)

(Footprint chart provided by null_antechamber)

When a market is trading up and down in a narrow range this type of price action is known as “chop”. As traders, we are taught to avoid this type of price action and for good reason. By the end of this, you should have an understanding of how and why “chop” occurs and how to position yourself on the right side of the trade once the opportunity presents itself.

Let us see why this type of price action occurs and how observing it can help you trade with the size players who move price in the market.

While price is moving in this up and down fashion larger timeframe players are building a position. Using the tools that we have, we can see where the position is being built and how the structural location of this position can tell you the agenda of the size traders who are building it.

In the graphics below is the structure in question. Here is some background: before the regular trading hours (RTH) of July 17, 2020, the overnight inventory was long. At about 35 minutes into the RTH session, ES began its downwards correction as trapped longs sold out near the overnight low. At this point, price cannot break the overnight nor the previous day low. This is a huge indication that the sellers who took price down are not OTF size sellers, but rather trapped long players who are selling out or having their stops taken out.

Market Profile (TPO charts) shows what business is transpiring. Now we must investigate how those size traders deal with this selling and how they later profit from it.

As the initial wave of selling starts to slow down, momentum traders see this and jump in and buy. The wholesale side of the business knows this and in order not to buy the momentum traders stock back and cut into their profits, they move bids up and down resulting in chop. (Also keep in mind when a market goes to areas like the overnight low, some traders who follow price will short here and there will be others that sell from long positions down here too.)

This order flow and the way the wholesale handles it is the mechanics of this business. By creating this back and forth price action the wholesalers are able to absorb all this selling order flow, consequently resulting in what we retail traders call CHOP.

Now we will see how the wholesalers resell this position back into retail buying as the selling subsides and is “taken into wholesale inventory” This is how the wholesaler makes their money as they provide liquidity to retail traders.

The above is the market profile which shows selling has shot off down at 3196

Trading Essays & Excerps is now sponsored by the Educational Trading Room Communities listed below 

EquitiesETC Trading Room       (for stocks & options trading)

Microefutures Trading Room   (for ES futures & Market Profile trading)

Excerpts Writings from JJ @vwaptrader1

How the markets have become cleaner over time,  My confessions of Stealing order flow

Before the advent of online trading the markets were very opaque: very few people now know anything about order flow, back then even fewer did. Practically no one, including people who took companies public, knew how the mechanics of the market actually worked. For pirates of the over the counter and small-cap markets, it was heaven.

This gave rise to opportunity.  

If you had a company you took public and you were the financier you had a large position. In order to sell or dispose of that position, you need to create a market to sell it into.  This is where the Stock promoter came into play. He was hired by the inside shareholders to bring in buyers. He is given a position of say 5 million shares to use as he desires to create a market for the insiders, to say, sell 40-50 million shares.The promoter will start his campaign using all known methods of advertising to bring in buyers. When those buyers come in, their orders go to large market makers. If the large market makers do not know where to find a size seller they will move their bids up. We relied on the fact that 90% of promoters do not know how to trade or are too cheap to hire a specialist like me to manage the market. This is how we did it.

We identify deals with weak promoters and hunt their order flow. So if their stock is 1.00x 1.05 (bidxoffer) and a size buyer comes in, NITE the market maker would go bid 1.02. We would see that, call him and say “Oh we have an interest what you got?” “ I can pay the bid for 100k” he would reply. Sold!

We have just shorted 100,000 shares of a stock at 1.02. Now that bid drops and NITE goes back to say 98 cents. (under the best bid of $1).

Now for the fun part. 

We go and hit the bids HARD! You do this by hammering every bid on level 2(of course you tell your buddies to get out of the way first) then you slam it down. Once you break $1.00, you offer 200,000 shares at 98 cents and SHOW it, while you are hitting the bids. This scares the heck out of everyone, buyers scatter like pigeons, you take the stock down to close to 50 to 60 cents. You now call around looking for stock. “I can pay the bid for 150,000 shares”  The promoter will find out because you want him to. You have a market maker who is on neutral grounds call the promoters brokerage firm and show the bid; he will sell. He has too. He has gotten the stock for free and spent money to bring in buying. HE MUST SELL. You cover your short, a quick 50G booked and on to the next pillage!  All before lunch.

 JJ (@vwaptrader1) is the head educator and trader at highly popular Microefutures.com 

 

My Biggest Trading Weakness – and My Method in Combating it – – By AllxDayxRay

Ray D’Argenio

Me seemingly choosing two careers (trading & poker) that require keen mental dexterity would seem counter-intuitive to an overseer of my life. I’m a highly emotional being. Some blame it on my Italian heritage and upbringing; I’d think most would agree Italians on a whole are a passionate group. I’ve had people in my life turn to astrology to explain my nature: “Scorpios are inherently one of the most emotional signs”. Others of an old school variety would say I’m just a pussy, where they would get met with an unpleasant response because I’m anything but. The reasons for my sensitivity honestly don’t matter and for years I’ve wasted mental energy trying to determine why. I identified my hypersensitivity; how do I cultivate it into my gift instead of my curse?

The correlation to trading is straightforward. It’s well documented that a person in an emotional state is rarely using their reasoning and logical faculties. When you feel angry, discouraged, irritated, frustrated, sad, confused; it’s tough to be of a clear mind. On the converse, I’ve found when I’m over exuberant, overconfident and in general over stimulated, you get the same dampening effect.

While I’m considered a “newbie” in the trading game with just under a year of trading experience, I’m no amateur when it comes to wagering money. Starting off in poker I had success relatively right away. I mean that is what hooks a person right? Winning from the get-go, fast money. Open my laptop, fire up a few tables and watch the account balance grow. I put tremendous dedication in learning the theoretical and technical aspects of poker. What I was ill equipped for was the bad luck that accompanies money waging activities; and poker in my opinion (and the opinion of others I’ve spoken too who’ve venture in both arenas) is far more callous than trading. Poker really teaches you about probabilities in a visceral way. Still to this day its hard to wrap my head around losing as a 95% favorite in a poker hand; why does God hate me? Losing a hand being such a statistical favorite test your fortitude. You played the hand to perfection, got all your chips in the middle near 100% favorite, to then digging in your pocket for more cash befuddled at your misfortune. Losing a hand like this and letting it disrupt your mental equilibrium can and will have dire consequences. In poker we call this “tilt”. Now people’s tilt looks different from individual to individual, but more often than not it leads to pressing the action. You’re down money now and you’re going to do everything in your power to fight back tooth and nail. Lady luck the supreme seductress, played you and left you with the rage of a scorned lover. This is 100% applicable to trading right? Losing a trade on a surefire set up of yours can have the exact same effect. How about a string of 5 losses in a row? 10? The more they compound the bigger the explosion can be. Protection of the account is of the utmost importance.

You might not be inherently as emotional as myself, but you’re human none the less. These are issues we all deal with. So how do I go about combating “tilt”?

• Understand the Game You’re In
  

Often “tilt” stems from a lack of understanding. In a poker book that has stood the test of time, in my opinion, where many have failed to do so, author David Skalansky in “The Theory of Poker” said the #1 way to prevent tilt is to not only understand and perfect how to play the game, but understand the role luck plays into the equation. I am going to lose. Being 95% favorite is not 100%. I am not entitled to that pot. My mentor and podcast co-host JJ (vwaptrader1) echoes essentially the same premise. When you understand market mechanics, what drives markets to move, the underlying structure; you’re not going to tilt. There’s a big emphasis on trading psychology in our current environment and rightfully so. But you don’t have to fix your mommy and daddy issues to become a profitable trader. Having a deep understanding is not a cure all, but it’s a huge step in the right direction in curtailing rising emotions that can have disastrous effects on our bankrolls. 

• Set rules/parameters for losses
  

A well talked about subject so I won’t go too in depth. Personally though, I’ve been far too liberal in this area. I forget who coined the phrase “maximum pain threshold” as I’d love to give them credit for this idea. We all have a point to where additional losses do not add to the already excruciating pain we feel: we’re numb to any additional money lost. For an extreme example let’s say you lost 50% of your account on a given trading day. You might be beyond tilted at this point to where blowing up the whole account doesn’t add to the pain and frustration you currently feel. For poker players & traders this is a frightening place to be. This leads to account blow ups. This leads to days, weeks, and months of great execution going down the drain. Setting account stop losses prevents you from spewing money. You must be thorough with yourself and set parameters to prevent from breaching your threshold: 3 losses in a row, x% of your account lost, a fixed dollar amount lost. There are no right or wrong ways to go about it. The point is set parameters & rules to prevent yourself from going past your “maximum pain threshold”. 

• If you have drama or difficulties in your personal life, you may be and probably are prone to tilt
  

Being a professional poker player, I didn’t necessarily have the luxury to take time off when there was drama in my life (too frequent and much of my own doing). But I had to keep this in mind when I went to the tables. You are in a vulnerable state. Losses that normally do not affect me have the ability to make my blood boil. It can be difficulties in a relationship, the health of a love one, a child struggling in some facet of life. JJ has impeccable discipline when it comes to this. Having a heart condition there are days he is just not feeling it: a lack of energy, lack of clarity. He doesn’t trade. There are people though, that are great at blocking life out and showing up with complete focus. It serves as a distraction from the troubles of everyday life. I believe I fall into this category somewhat. But I cannot forget I’m human. I don’t think you can completely block life circumstances out; I’m not sure it’s possible. When I’m at turbulent periods in my life, I’m apt to shut a potential disastrous day down quicker than normal; I tighten my daily stop losses. Not trading in the first place is never a bad idea, but if you must, be hyperaware of your condition. 

The beautiful thing about trading and poker is that it has taught me principles about life. Being a highly emotional person susceptible to mood swings, these endeavors have taught me how to moderate my temperament and keep my wits about me. All we can do is focus on the process, refine it and push forward with unwavering determination. 

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If you want to learn how to use market profile, trade futures & or equites: Trade along side JJ & Ray at http://www.microefutures.com or http://www.equitiesETC.com

What I Learned from Hosting a Trading Podcast – AllxDayxRay

AllxDayxRay

I have had the pleasure and good fortune to have started my trading journey literally with the “Confessions of a Market Maker” podcast. I co-hosted a good 4 to 5 episodes before I even executed a SIM trade. Me and my co-host, JJ (vwaptrader1) started just over a year ago; June 10th 2019. We were both approached by a mutual party to embark on a podcast together at a time in my life when I was at a crossroads. I was at a crossroads for a while in my life. I was/am a professional poker player. Those familiar with the poker industry know the abundance of obstacles it takes to be successful in this current environment. Poker as a career has been increasingly getting tougher to make money. With the advent of sophisticated training tools, rampant cheating, and shady operators, poker has been on the downslope for some time. This is the difficulty a lot of poker players face. You have spent most of your adult life putting your blood, sweat and tears into a career that is slowly deteriorating; now what? What’s the next career move? I’m not sure how employers view “professional poker player” on a resume. Just trying to explain to people I meet in real life that I “gamble” for a living and seeing the peculiar and skeptical look on their face is a challenge in itself. My ex-girlfriends’ parents were not a fan of mine. This is the life I choose.

In June 2019, right before I’m headed out to Las Vegas for the 2019 World Series of Poker (which I went 0/5 in the tournaments I played), I started co-hosting “Confessions of a Market Maker” with one of the best story tellers I’ve encountered, JJ: “The Guerilla of Howe Street”. His unique, calm and poised personality mixed with stories of debauchery and excess during the height of penny stock hay days had me sold. We went into this venture with the idea of getting JJ’s story out and using me as a guinea pig; can JJ take someone with little to no market knowledge and turn him into a successful trader? The pod has then morphed into a guest formatted show with highly respected traders, psychologist, authors and even actors. A year into trading, while I’d be hesitant to say I’m a consistently profitable trader (key emphasis on consistent), I believe I’ve made positive strides on the path to my new career. Here’s what I’ve learned from talking with notable people in the trading industry:

• All guests have had an obsessive love and obsessive drive to be the best, yet most believe balance can be achieved or at least strived for

The beauty of hosting the podcast is that I get to talk to long-term successful traders one on one (well 2 on 1 but you get the point). I often draw from my own inquisitions as a developing trader which often overlap with the audience. I frequently ask a question along the lines of work/life balance. We all know hard work is required, but is an obsessive drive necessary? Is an obsessive drive healthy? I’d say almost all the guests we have interviewed have had been completely enthralled with trading: no surprise. Some have shrugged off this question with the attitude that extreme effort and time commitment is what is needed. Most though have admitted to spending a little too much time thinking about markets. In a hilarious story told by trading legend Damon Pavlatos, he recounts getting a globex machine installed in his house to capitalize on the overseas and overnight trading. This was in the 90’s so the installation men had to run large wires through his library: much to the dismay of his wife at the time. My co-host JJ pulled a Lazarus and came back from the dead! He had a heart attack and constantly reminds me to go have fun gallivanting around south Florida. Thanks to him I’m more cognizant of my stress levels on a day to day basis. We’re in a sport that will no doubt raise your cortisol levels. Damon’s now wife, profiled in the market wizard series, Linda Raschke talks about the importance of her health now due to raised cortisol levels. Bill Perkins, natural gas hedge fund Titan, high stakes poker player, movie producer, author and philosopher drives this point home. What’s the point of being successful if you’re a slave to your work? 

• The Struggles are Real 

I debated even typing this point out because of the rudimentary feel. No matter how basic though, I believe it’s worth repeating. Every single person we interview had to take the windy path. Tom Canfield, perhaps known for beating this topic home on twitter, discusses blowing through 25k and having to ask family for a loan. He is now one of the most respected retail traders in the community. One of JJ & I’s favorite people, Turney Duff, New York Times bestselling author and frequent advisor to “Billions”, bounced back after blowing up his career on wall street due to drug and alcohol addiction. He went on to recount his life on Wall Street, triumph & tragedy, in the “Buyside” which stands as one of my favorite autobiographies to this day. Though not a trader but portrays one on the screen, “Billions” actor Daniel K. Issac was still waiting on tables well into the 2nd season of “Billions” until he could fully sustain himself acting. JJ & Dani Hughes, CEO of Divine Capital, discuss the devasting effects 9/11 had on their careers and the tools they used to bounce back. Scott San Emeterio, CEO of the innovative Ballstreet Trading, had a front seat to the collapse of 2008. Entropy in life is a given. Keep your wits about you.

• Don’t Make The Big Mistake

I had the honor to read a draft of a soon to be released book by James Vogl, backgammon and poker professional who went on to manage 1.6 billion portfolio for a pre-eminent US marco hedge fund. He highlights this point in his book on risk/reward theory and on the podcast. Avoid the big mistake that will blow up the account. Your objective is to stay in the game. As long as you have chips, your still in the game. Then from there we can worry about maximizing the upside. I have to constantly keep this as a reminder to myself. I’ve incessantly worried about maximizing my profit: most likely from my poker background as squeezing every ounce of EV(expected value) is of the utmost importance to your bottom line. Ignoring the potential for a possible fatal mistake while your throwing haymakers could result in a KO for your bankroll. Troy Prince, whose leading a noble effort in bringing Wall Street opportunities to the underrepresented urban community with his non-profit Wall Street bound, hit home the simple fact that you just have to win more on your winning trades than lose on your losing trades. Once again, a rudimentary point, but one that’s not put into practice by many traders. Cut losers quickly. 

• Get Familiar with Technology 

This is the 21st century. The “good old days” are over. It’s funny to me that I hear the same traders preaching adaptability to markets, yet resist the changing environment, whine about the FED, Elon Musk or any other external factors out of their control. Former US interest rates market maker, quantitative researcher & systematic trader Chris Cain, talked about how finance professionals now a days harness the power of python to build trading models. CEO of Trade Ideas Dan Mirkin talked about his days in the mid to late 90’s exploiting the small orders execution system, and the power of data mining and having back tested proven strategies. Auto-trader and Trade Ideas consultant, Michael Nauss, gives insight to how a statistical driven trader thinks and goes about his work. You don’t have to be a quant to succeed in the market today, but getting familiar with what your up against appears to be optimal. 

I apologize to the other guests who I haven’t mentioned thus far. Peter Reznicek and his surprising sex appeal amongst women traders. Steven Goldstein and the great work he’s doing with Alphamind and his enlightening podcast. Harmel Rayat, JJ’s mentor: A genuine, moral, ethical human being. Gregory Zuckerman, who I’m sure is not going to read this, was a little pretentious for my taste, but wrote an excellent book in “The Man Who Solved the Market”. The ever popular and eccentric Julia Cordova, whose free trading advice and material has helped countless retail traders. Tracy Shuchart and her informative geopolitical awareness and down to earth personality. Kelly Aucoin, actor who plays Dollar Bill on “Billions”, couldn’t have been more gracious. Walter Deemer, 52-year career as a market analyst, was a complete joy with his corky humor and nuggets of wisdom. Paul Asmar, a New Yorker through and through, took us down a trip through memory lane being on the floor of the NYSE for 25 years and discussing the traits and tools that make him a successful trader to this day. Dr. Brett Steenbarger, aka “the 3min lover”, dropping wisdom as always. Kunal Desai, whose natural abundance of energy I relate too, is witty, intelligent in many arenas, and just a flat-out fun guy.  

If you haven’t listened to the podcast, get on it. Rate and review it for us on apple podcasts and like. I’m absolutely glad I got dragged into this venture and we don’t plan on quitting anytime soon

If you want to learn how to use market profile, trade futures & or trade equites: Trade along side JJ & Ray at http://www.microefutures.com

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