Anyways, today there is was a single indication from the algorithm to go long. It came at 1213.75 in the early hours.
Friday, November 18, 2011
Nov 18th Algo Trades
Market choppiness has started to persist..... the push and pull between the bulls and bears can clearly be felt in the markets, and this puts many longer-term traders on the sidelines as they await some kind of trend to establish.
Thursday, November 17, 2011
Today's Algo results
What a blood bath day.... the algo picked mostly bottoms of the days today, although it was a down day.... it showed sensitivity to the 10:35am top to call for top of day, but did not trigger a signal! Here are the long triggers for today:
As you can see signals work best with already established support and resistance areas.
As you can see signals work best with already established support and resistance areas.
Wednesday, November 16, 2011
RK Algo results
Here are today and yesterday's algo top and bottom picking indications.
You can see that the tops were picked almost perfectly, the bottom was picked after 3:30pm which is too close to the close to be taken as a trade because the market doesn't get enough time to play out the trade.
Today Nov 16th,
Nov 15th,
You can see that the tops were picked almost perfectly, the bottom was picked after 3:30pm which is too close to the close to be taken as a trade because the market doesn't get enough time to play out the trade.
Today Nov 16th,
Nov 15th,
Tuesday, November 15, 2011
An Indicator to Rule Them All
Finally after a lot of research, back testing, and some strenuous programming, I've drawn up the first version of this new market indicator... and I haven't given it a name yet..... suggestions are welcome haha
I don't think I'll ever consider any indicator, algorithm, or strategy complete, and will continue to evolve it make it better..... but for now I consider it workable.
Now a little background... this algorithm developed completely by accident when I was trying to figure out ways to analyse real-time tick data of all underlying S&P500 stocks so I could develop a long/short strategy involving all the 500 stocks.
This algo, originally meant for another purpose, started to pin point market tops and bottoms intraday which were tradable on the ES Futures. Sometimes it is so damn accurate at picking market tops and bottoms intraday that it's scary. BUT as I learned long ago in physics class, there are always times when a rule breaks down. For this algo, it happens to be market disruptions, for example huge news that hits the market during the day which causes most traders and more importantly computer algorithms which usually trade different strategies against each other to align and take the market in one direction without giving it a chance for correction. So as you may have already guessed, this is a counter-trend algorithm as it tries to pick an intraday market bottom or top before it actually happens.
So until I decide against it, I will put up my daily ES charts with markets at times of indication, exactly when they are given. Although I will be posting the charts after the day is over, I will NOT move or put in the indications after the fact.... they will be put in while I'm making trades, in real-time.
Also note that, the algorithm comes up with different "likelihoods" of reversal when it gives the signals, this will not yet be put on the charts. So you will only see the indications, but not the confidence level yet.
Below is the Nov 9th indications on the 1 Minute ES chart.
and Nov 10th,
Also, you will notice some trend lines and support and resistance lines are drawn during the day, as well as green up triangles and yellow down triangles... which is another one of my programmed indicators.
It is worth mentioning that there are days when NO indications are given, and I will probably not post these days' charts.... otherwise I'll try to keep posting the results here on this blog.... STAY TUNED FOR MORE.
I don't think I'll ever consider any indicator, algorithm, or strategy complete, and will continue to evolve it make it better..... but for now I consider it workable.
Now a little background... this algorithm developed completely by accident when I was trying to figure out ways to analyse real-time tick data of all underlying S&P500 stocks so I could develop a long/short strategy involving all the 500 stocks.
This algo, originally meant for another purpose, started to pin point market tops and bottoms intraday which were tradable on the ES Futures. Sometimes it is so damn accurate at picking market tops and bottoms intraday that it's scary. BUT as I learned long ago in physics class, there are always times when a rule breaks down. For this algo, it happens to be market disruptions, for example huge news that hits the market during the day which causes most traders and more importantly computer algorithms which usually trade different strategies against each other to align and take the market in one direction without giving it a chance for correction. So as you may have already guessed, this is a counter-trend algorithm as it tries to pick an intraday market bottom or top before it actually happens.
So until I decide against it, I will put up my daily ES charts with markets at times of indication, exactly when they are given. Although I will be posting the charts after the day is over, I will NOT move or put in the indications after the fact.... they will be put in while I'm making trades, in real-time.
Also note that, the algorithm comes up with different "likelihoods" of reversal when it gives the signals, this will not yet be put on the charts. So you will only see the indications, but not the confidence level yet.
Below is the Nov 9th indications on the 1 Minute ES chart.
and Nov 10th,
Also, you will notice some trend lines and support and resistance lines are drawn during the day, as well as green up triangles and yellow down triangles... which is another one of my programmed indicators.
It is worth mentioning that there are days when NO indications are given, and I will probably not post these days' charts.... otherwise I'll try to keep posting the results here on this blog.... STAY TUNED FOR MORE.
Wednesday, October 26, 2011
Trading is a zero-sum game? Bullshit!!!
Have you ever heard this before? "Trading is a zero-sum game!"
This is a statement that is in most beginner "learn how to trade" books, and its bogus! If you haven't heard it, the basic premise, is that for every buyer that takes a trade there is a seller, and vise versa..... so when you make a trade someone is taking the other side of it, so in every trade there is a winner and a loser. The winner being the person who called the right direction, and bought when prices moved up, and the loser of this would be the guy who sold to him.... this implies that you are only buying and selling from one person!!!
The intention of the statement is to think that if you're buying and someone is willing to sell to you, then what is it that the other person knows that you don't know.... and what if the person taking the other side of your trade is a trader at a bank who obviously has access to better and faster info than you sitting at home and putting on a trade through the internet. And why is it that you think you're out smarting the other person who obviously just took the opposite side of your trade!!!!
The statement makes sense to a beginner trader, because it seems logical, if I buy then someone else is selling to me.... so he must be taking the OPPOSITE side of my trade... and if I WIN, then he must LOSE!
This idea is NOT true.... someone IS taking the opposite side of your trade, but only at that moment. Think about it like this.... Google (GOOG) IPOs at $100 and starts trading, and for simplicity assume that there are NO short sellers, you can either buy new shares or sell your already existing shares. Buyers come in and bid $100.50/share, the sellers are the founders of Google, bankers who own shares as part of the IPO and other similar parties..... if they are satisfied with $100.50/shr then they will sell to the buyer. Now the price of GOOG is $101.50... now comes along another buyer who is willing to buy at $101/shr because he thinks GOOG will go to $120 and bids $101.00/shr, now if the founders OR the guy who bought at $100.50/shr want to sell at a higher price they can do so because there is a buyer..... And so on the price moves up.
Look at the transactions above, THERE ARE NO LOSERS!! Everyone has made money and the guy who bought at $101.00/shr is neutral on his position. So even though trades were made, there were NO losers!!!
The person who took the other side of your trade wasn't a banker with more info who KNEW you were being suckered at $100.50, but perhaps a founder who wanted to sell out of his shares fast.... yet he still made money!
Now you're saying well prices can't go up forever, so there has to be a loser..... well you're right! Let's say that through many trades the price of GOOG was bid up to $400, where someone just bought some shares at $400, but some unfavorable news came out and people who owned shares got scared, now there are no bids above $400, but there is someone who would buy GOOG at $395, so one of the founders sells to this bidder for $395/shr....... now the price is $395/shr. Even here everyone who has bought below $395/shr has been a winner and continues to be a winner, but everyone who bought higher than $395/shr has now instantly become a loser!! BUT this is only a select group of late buyers!
So the statement that trading is a zero-sum game and that for every winner there is a loser who took the opposite trade is BOGUS!!! Do NOT think of trading in that way! Many buyers and sellers come to the market , some are buying for the long-term, and some buying for the short-term... some are selling out of their positions while others are buying their shares, anticipating more future upside... and so goes the market!
Wednesday, September 28, 2011
Price movements explained
Well it's been a long while since I've posted to this blog, but I've been learning incredible amounts since starting to trade full-time and I want to share some of them with you.
The financial markets are a complex machine, a collection of Billions of buyer and sellers of a wide variety of financial instruments.... stocks, futures, bonds, forex, derivatives and other structured products.
Most beginner traders look at individual stocks which are usually the well known and talked about stocks like RIMM, GOOG, AAPL, GM, DB, etc. and they try to trade single stocks and pick winners or time the long and short positions in each of these stocks just by looking at their charts. BUT they don't see or grasp relations in the financial markets yet and they get frustrated about why that stock didn't go their way.
Let me give you a broader view, investors bring money to invest, the collection of all the money in the world is limited. Even though this isn't completely true, it helps if you think of all the money in the world as a constant amount. Now all this money wants to be invested for the MAXIMUM return with MINIMUM risk at every second of every trading day! For this to happen the money has to MOVE from one place to another, and from one instrument to another. Also at any one time, certain financial products are more favorable and promise better returns than other, or perhaps more safety than others.
For example, let's say investors own bonds in Alcoa which pays 6% interest, now all of a sudden Alcoa offers another set of bonds with the exact same characteristics as the first, except it pays 10% interest.... wouldn't you expect the savvy investor to sell his 6% bonds and come buy the 10% bonds? ... So the price of the 6% bonds goes down as demand goes down, and the price on the 10% bonds go up as demand goes up.
The world financial markets work exactly the same, total invested money stays the same, but it gets moved to what is perceived to be MORE favorable. So recently you've seen US stocks go down while everyday treasuries go up. Investors are seeing stocks as risky and treasuries as safe... so money comes out of one and goes into the other and it drives their prices respectively.
Now take one step back beyond the US markets and look at it globally... there are millions of other investors in the world they want to put their money in the best place. But what if all of a sudden US is thought of to be near bankruptcy?? Now it's not safe for anyone's money. So global investment money would come out of the US as a whole and go somewhere else, maybe for example Asian Stock Markets! So now US stocks AND treasuries fall as demand for ALL products go down.
So the single US stocks that you may be looking are a molecule in universe of global financial markets. Although important, greater forces are at work when it comes to if that stock will move up or down. So no matter how great of a company Google or Apple is, when money is in rotation and it rotates out of stocks, or out of the US markets in general they will go down.
There are millions of factors which dictate where money will go, but let's look at one example, if US Dollars become cheap relative to global currencies, then buying US investments becomes cheaper for the global money. The European fund that was looking to buy the S&P500, for 1 Billion Euros can now buy MORE of those shares because his 1 Billion Euros buys more US Dollars now.... so US markets are little more attractive now! So exchange rates too have an impact on the markets and the stocks you select.
Although this was a very brief description, it gives you an idea of how everything is interconnected and when deciding what to buy or sell, you have really take a step back and see the whole picture... because these forces are the MAIN forces driving markets and you should not bet against them!
The financial markets are a complex machine, a collection of Billions of buyer and sellers of a wide variety of financial instruments.... stocks, futures, bonds, forex, derivatives and other structured products.
Most beginner traders look at individual stocks which are usually the well known and talked about stocks like RIMM, GOOG, AAPL, GM, DB, etc. and they try to trade single stocks and pick winners or time the long and short positions in each of these stocks just by looking at their charts. BUT they don't see or grasp relations in the financial markets yet and they get frustrated about why that stock didn't go their way.
Let me give you a broader view, investors bring money to invest, the collection of all the money in the world is limited. Even though this isn't completely true, it helps if you think of all the money in the world as a constant amount. Now all this money wants to be invested for the MAXIMUM return with MINIMUM risk at every second of every trading day! For this to happen the money has to MOVE from one place to another, and from one instrument to another. Also at any one time, certain financial products are more favorable and promise better returns than other, or perhaps more safety than others.
For example, let's say investors own bonds in Alcoa which pays 6% interest, now all of a sudden Alcoa offers another set of bonds with the exact same characteristics as the first, except it pays 10% interest.... wouldn't you expect the savvy investor to sell his 6% bonds and come buy the 10% bonds? ... So the price of the 6% bonds goes down as demand goes down, and the price on the 10% bonds go up as demand goes up.
The world financial markets work exactly the same, total invested money stays the same, but it gets moved to what is perceived to be MORE favorable. So recently you've seen US stocks go down while everyday treasuries go up. Investors are seeing stocks as risky and treasuries as safe... so money comes out of one and goes into the other and it drives their prices respectively.
Now take one step back beyond the US markets and look at it globally... there are millions of other investors in the world they want to put their money in the best place. But what if all of a sudden US is thought of to be near bankruptcy?? Now it's not safe for anyone's money. So global investment money would come out of the US as a whole and go somewhere else, maybe for example Asian Stock Markets! So now US stocks AND treasuries fall as demand for ALL products go down.
So the single US stocks that you may be looking are a molecule in universe of global financial markets. Although important, greater forces are at work when it comes to if that stock will move up or down. So no matter how great of a company Google or Apple is, when money is in rotation and it rotates out of stocks, or out of the US markets in general they will go down.
There are millions of factors which dictate where money will go, but let's look at one example, if US Dollars become cheap relative to global currencies, then buying US investments becomes cheaper for the global money. The European fund that was looking to buy the S&P500, for 1 Billion Euros can now buy MORE of those shares because his 1 Billion Euros buys more US Dollars now.... so US markets are little more attractive now! So exchange rates too have an impact on the markets and the stocks you select.
Although this was a very brief description, it gives you an idea of how everything is interconnected and when deciding what to buy or sell, you have really take a step back and see the whole picture... because these forces are the MAIN forces driving markets and you should not bet against them!
Monday, August 8, 2011
What a day!!!
Downgrade of the US credit to AA+ from the coveted AAA had a devestating impact on the market. Check out the market breadth.
Where the vertical axis is the number of S&P500 stocks who's one day return (vs. yesterday's close) is plotted on the horizontal axis. The distribution is incredibly negative!!!
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