18th Oct 2016 – Bund Daily Trade Plan

News

0930 UK CPI 1330 US CPI

Stats

DATR 0.68-

WATR 1.66+

p.WK.50% 64.78

M.50%

Weekly Summary – Bof of Range in play. ERC down with strong down close followed by normal range down week with strong down t 163.04 t2 162.57

Previous Day – Range up day with strong up close bac 63.57 t1 63.90 bac 96 t 64.86

General Bias SC = +1

Big Picture

60min – Short TR, for cont, exp to hold 63.57/60 bac 62.80 (rf that is back above 04 and 15)

15min – Long TR, for cont, exp to hold 63.36 and bac 63.57

Long Hypo – if price holds 36-30 then longs t 46 t2 57 bac 57 t 69 t2 78 t3 90-96 (watch for bof 96)

Neutral Hypo – if price bof/ holds 57-60 then shorts t 47 t2 36-31, bac 31 t 19-10; if price holds 19-10 then longs t 47

Shorts Hypo – if price bac 10 then shorts t 00 t2 90-81 (watch for bof 81)

Red flag levels – For short trades bac 96 For long trades bac 62.81

17th Oct 2016 – Bund Daily Trade Plan

News

1000 EZ CPI 1330 US Empire State 1415 US Ind Prod

Stats

DATR 0.72-

WATR 1.66+

p.WK.50% 64.78

M.50%

Weekly Summary – Bof of Range in play. ERC down with strong down close followed by normal range down week with strong down t 163.04 t2 162.57

Previous Day – Down day at d.bz at the 2sd extreme of bal in the brexit range. Range low at 62.56

General Bias SC = +1

Big Picture

60min – Neutral TR, in bal, for m/t direction bac hi at 96 or lo at 63.15

15min – Short TR, for cont, exp to hold 47-56 and bac 15

Short Hypo – if price holds 37-47 then shorts t 19 t2 15 bac 15 t 04 (watch for bof) bac 04 t 90 t2 80-70 bac 70 t 56 (watchf or bof) bac 56 t25 t2 00-90 (gap fill/support)

Neutral Hypo – if price holds/bof 15/04 then longs t 30 t2 40 t3 47-55; if price / bof 47-56 then shorts 7 40 t2 30

Long Hypo – if price bac 56 then longs t 60 t2 60 t78 85-96

Red flag levels – For short trades bac 96 For long trades 63.04

It’s not me, it’s you – the relationship between your edge and variance.

It’s not me, it’s you – the relationship between your edge and variance.

One of the important things in trading is understanding from a probability perspective what is likely to happen, when you actually use your trading system over time.

Why is this important.

If we do not understand what results the trading system is likely to produce, then we cannot answer the following questions when we review our trading.

Does my system still have an edge?

Is any under performance of the trading system down to variance or is it the trader underperforming?

What do I mean by that?

The best way to explain this is to use an example.

We have a trading system that has win rate of 50%. The average winners are 1.5 bigger than the average losers, and we risk 1% of our account.

First let’s look at the probability of having a losing streak. There is a 76.8% chance of having 5 losers in a row.

If you were using this trading system and did not know that there is a high probability of having 5 losers in a row, then when this happens the first reaction could be the system has no edge and start looking for a new system.

Or the reaction could be that I am trading like shit and need to sort my trading out.

The above statements could be true, but having 5 losers in a row with this system is not an indicator of either of these statements.

Is the next trade going to be a winner?

It took me a while to understand this, but we do not know probability of the outcome of the next trade.

If we have a trading system that has a win rate of 70%, the next trade does not have a 70% chance of winning. The win rate does not refer to individual trades but to a sample size. Having a win rate of 70%, says that over a large enough sample of trades, 70% of the trades will be winners.

So what is the probability of the next one to be a winner. The answer is 50%. Why 50%, we cannot tell what order the winners and losers are going to come. So we do not know the outcome of the next trade, we just know that if we follow our trading system, that over time we will have 70% winners.

And the fact that we do not know what order the winners and losers will be in the sample size, we only know the overall percentages.

This means that over a large sample size, the actual return on the account balance can be different.

Using Monte Carlo to understand the variance in our trading system.

What is Monte Carlo? Here is the an article that explains it better than I could.

I am using Monte Carlo to simulate a trading system over a 500 trade period and what effect that will have on the account balance. But as we do not the outcome of each individual trade, the order if winners / losers are randomised.

I then rerun the simulation for another 50 times, and this gives me a range of returns.

The best way to look at this, is that we are comparing the returns of a trading system over 500 trade period against the same trading system x 50.

This is a trading system with a win rate of 50%, winners 1.5 r , losers 1 r and risk per trade 1% of account balance. Starting account balance is 10000 USD.

1. Across the 50 simulations, the worse draw down was 66%.

2. The highest finish account balance was 51,219 USD

3. The lowest finish account balance was 19,854 USD

Whilst the trading system is profitable, that actual returns are different, and different by 31,365 USD.

How do I use this information?

Every quarter I enter the previous quarters system stats into the spreadsheet, including the average number of trades per day. This will then give me likely figures for the variance in expected returns, I then break this down into months and weeks.

Once I have these figures, I use these in my end of week reviews to see how I am performing against the theoretical system. Thus giving me a benchmark range to compare my actual performance against.

I have included the excel spreadsheet at the bottom of the article so that you can run your own stats.

Here is a quick video on how to use the spreadsheet.

Here is a copy of the spreadsheet.

mc_example

Weekly Trading Review – Missing you

Weekly Trading Review 10-14th October

Performance

An up week, but still trying to get to grips with micro management issues. The plan to manage on the 15 min time frame, highlighted a couple of grey areas in which trades this applies to. I will work on this over the week end.

A slight increase in errors this week, which I will look to not repeat next week and but will keep an eye on.

Overall Goals

The number of opportunities and the orders placed was a good ratio, missed very few opportunities when I was at my desk. But the number of fill trades compared to no fills had a massive jump this week.

My average grade is B, this is partly due to the change in my grading system to reflect my current goals of reducing micro management and picking correct targets.

Last week Goal

The main goal of last week was to manage the 60min level trades off the 15min chart and to ensure that correct targets where placed.

How did I do.

Not particularly well. Very inconsistent. Areas to work on, exactly which trades are managed on the what time frame.

And then the next step is to stop being a feckin fairy and get on with it.

What did I do best this week and how I did I do it?

Good focus and good read this week. Time went quickly and I felt in tune with the market even when it was choppy. My mini plans reflected this with good setups.

What did I do badly this week and what lead me to do it?

The micromanagement problem which already has an ongoing programme to deal with this. So nothing to add to this at the moment.

The other major thing is the missed trades and no fills. I had orders in the market at the appropriate level so the number of missed trades due to having no order in dropped massively, and one of the missed was less than 2 minutes into the market open.

But no fills have been slowly increasing.

What is the problem?

Of course, the no fills are skewing my results, as all the no fills are winners, as to be a loser it has to fill.

Even if I reduce my no fills by 20% it would make a significant difference to my results and that is even if I still micromanaging the trades like a knob head.

So it is definitely a problem, that can yield good results.

Why do I have this problem?

At the moment I am not sure.

Is it fear of losing that I place my order in the wrong place?

Is it that I am trying to enter so close to where I am wrong, to get the best risk reward that I just end up not getting filled?

What I am going to do?

2 weeks ago, I started a new data set of my trades, with a few changes in the grading to reflect my current goals and how I track levels and bias.

I also changed how I am monitoring the no fills. I know also monitor where was my order in comparison to where it should be, and by how many ticks my order would have to be moved to guarantee a fill, what my stop was on each order and what was the ultimate MFE.

Once I have collected enough data, I should be able to see how much I am missing the fill by.

With this information, I can then look at the increase in risk (if I keep my stop where it is) and compared that against the potential reward by looking at the ultimate MFE.

I am also, going to include an individual review of each no fill trade on playback, with screenshots and notes, so that I can see if there are any alternative strategies that can be employed. I will do this once a week.

What am I going to practice on?

I am going to skip the deliberate practise this week on the order flow. Instead I am going to work my way through the review process on the backlog of no fill trades. As I feel there is greater potential there for reward, compared to the amount of time invested.

14th Oct 2016 – Bund Daily Trade Plan

News

0800 SpanCPI 1000 EZ TB 1330 US Core Retail

Stats

DATR 0.72-

WATR 1.66+

p.WK.50% 64.78

M.50%

Weekly Summary – Bof of Range in play. ERC down with strong down close t 163.00 t2 162.57

Previous Day – Hit daily targets, and ended in neutral up day with neutral close.

General Bias SC = +1

Big Picture

60min – Neutral TR, in bal, for m/t direction bac hi at 96 or lo att 63.17

15min – Long TR, hold 65 bac 96 for cont

Long Hypo – if price holds 73-65 then longs t 85 bac 85 t 92-96/ watch for bof/ bac 96 t 04 t2 12-15 t2 18-24 bac 28 t 40-52

Neutral Hypo – if price holds/bof 92-96 then shorts t 73 bac 73 t 65; bac 65 t3 50-47l if price holds / bof 47/50 then longs t 73

Short Hypo – if price if price bac 47 then longs t 30 t2 17

Red flag levels – For short trades bac 96 For long trades 63.04

13th Oct 2016 – Bund Daily Trade Plan

News

0700 Ger CPI 1330 US Initial Jobs 1600 US Crude

Stats

DATR 0.72-

WATR 1.66+

p.WK.50% 64.78

M.50%

Weekly Summary – Bof of Range in play. ERC down with strong down close t 163.00 t2 162.57

Previous Day – ID.bof of 63.81 hold 63.15 and bac 63.50 for t 63.72 t2 63,82-92

General Bias SC = 0

Big Picture

60min – Short TR, for cont, exp to hold 92 bac 15 then 04

15min – Short TR, for cont, exp hold 50 bac 15 (rf unable to bac 31)

Long Hypo – if price holds 32-25 then longs t 45-50 bac 50 t 60 t2 72 t3 78-82 bac 82 t 92-98, watch for bof

Neutral Hypo – if price holds/bof 50 then shorts t 32-25 bac t 15 ; if price holds / bof 15 then longs t 30 t2 45

Short Hypo – if price bac 15 then shorts t 04 / watch for bof, bac 04 t 90 t2 80-70

Red flag levels – For short trades bac 92 For long trades 63.04

12th Oct 2016 – Bund Daily Trade Plan

News

0745 Fr CPI 1000 EZ Ind Prod 1200 US OPEC
1300 US Dudley 1440 US George 1500 US Jolts

Stats

DATR 0.72-

WATR 1.66+

p.WK.50% 64.78

M.50%

Weekly Summary – Bof of Range in play. ERC down with strong down close t 163.00 t2 162.57

Previous Day – ID. Hi at 63.92 lo @ 63.40 m.bar hi @ 64.18 / lo @ 63.31

General Bias SC = 0

Big Picture

60min – Short TR, C.PB ip, for cont of short tr, hold 08-25 and bac 40 and 31

15min – Long TR, for cont, exp to hold 72-66 and bac 92

Short Hypo – if price holds/bof 92 then shorts t 80 t2 69, bac 66 t 55-50, if price bac 50 t 40 bac 40 t 31, watch for bof at 40 or 31

Neutral Hypo – if price holds / bof 08-18 then shorts t 92 t 2 80 t3 69 nacx 69 t 55-50, if price holds 50-55 or bof 40 then longs t 69

Long Hypo – if price holds /bof 69-60 then longs t 80 t2 92, bac 92 t 08-18; if price holds / bof 18-25 then shorts t 00

Red flag levels – For short trades bac 24 For long trades 40/31

11th Oct 2016 – Bund Daily Trade Plan

News

1000 EZ ZEW 1600 US KASHKARI

Stats

DATR 0.72-

WATR 1.66+

p.WK.50% 64.78

M.50%

Weekly Summary – Bof of Range in play. ERC down with strong down close t 163.00 t2 162.57

Previous Day – Down day with strong down close, in d.bz and val1/2 of brexit bal

General Bias SC = -1

Big Picture

60min – Short TR, for cont, exp hold 72-84 bac 30

15min – Short TR, in bal, bac 48 for deeper pb or bac 30 for cont

Neutral Hypo – if price holds / bof 30-20 then longs t 45 bac 48 then longs t 64 t2 72-82; if price holds/bof 72-82 then shorts t 50 t2 30

Short Hypo – if price holds / bof 48 then shorts t 20 bac 20 t 04. watch for bof at 04; bac 04 then t 82

Long Hypo – if price bac 82 then longs t 92 t 98 bac 98 10-18; if price holds 10-18 then shorts t 84

Red flag levels – For short trades bac 82 For long trades bac 63.20 then 04

10th Oct 2016 – Bund Daily Trade Plan

News

0700 Ger Trade Bal TBA Eurogroup Meet 1400 Fr Auc

Stats

DATR 0.72-

WATR 1.66+

p.WK.50% 64.78

M.50%

Weekly Summary – Bof of Range in play. ERC down with strong down close t 163.00 t2 162.57

Previous Day – Down day with neutral down close, daily target done. Current in minor d.bz

General Bias SC = -1

Big Picture

60min – Short TR, for cont, exp hold 40-53 bac 63.56

15min – Neutral TR, for dir, bac 64.25/63.72

Neutral Hypo – if price holds / bof 16-25 then shorts t 00 t2 83-72; if price holds / bof 83-72 then longs t 00 t2 12 t3 16-25

Long Hypo – if price bac 30 t 39 t2 43-51; watch for bof, bac 51 t 62-72

Short Hypo – if price bac 72 then short t 63.62-56; watch for bof, bac 56 then shorts t 30

Red flag levels – For short trades bac 65.25-30 For long trades bac 63.71 till 56

Bund Order Flow

Bund Order Flow

On Thursday 6th October, I saw the following tweets regarding order flow.

I record the ladder data, so below is the playback of the high and low in question.

Bund High at 6/10 at 164.87

Bund Orderflow

Bund Low at 5/10 at 164.36

Bund Order Flow No.2

Notes

On the High at 164.87

Made high and trapped buyers a couple of ticks from the high.

Pulled back and then went into a micro balance and built a mini hvn.

Then broke down. The breakdown was not as aggressive as the break up on the low at 36.

High was made on one attempt.

On the Low at 164.36

2 attempts to make the low.

Trapped sellers a couple of ticks from the low.

Pulled back and then went into a micro balance and built a mini hvn.

The broke up, with sellers getting out / very short term stops going off.

What do you see?

Please free to comment on your thoughts below.

Here is Adam‘s take on it

Bund Order FLow