Post 13 EWU Observations from a New Student

Hi Jody,

I continue to demo trade the BO-3 with good success. Friday, I had an issue where I had a conference call and was already late for the call and I forgot to update my stop even though I had drawn the new stop on my chart. That cost me and turned a nice little winner into a break even trade. So, until I can change my conference call time, I’m only going to trade Monday through Thursday mornings. Today’s trade was classic BO-3. I caught 2%. I need to expand the number of instruments I follow, but I don’t want to overwhelm myself with too much nightly analysis, so I’m just demo trading two, for now.

I can’t state enough how much writing out a business plan has crystallized many facets of what I am doing. Much of it was fantasy, I just put down how I would like things to be. I’ll adjust as I go when my fantasy meets reality. I’m going to have to constantly rewrite the plan as I get more clarity. It has really made me think very hard about just what kind of trading I’m most suited for. Frankly, I’m not sure.

For now, I’m happy with my little BO-3 system and I realize that I’m ready to trade the BO-4 in demo mode. It has a lot of similarities to the BO-3, except that we need to see a pullback to the Tunnel. I find myself able to capture BO-4s pretty easily in simulated trading. Now that I have the rules for my BO-4 system, I’m getting ready to tackle the BO-1.

One of my biggest unknowns right now is exactly what kind of metrics to keep on myself. Since my trade plan rules are so specific, it seems that I should compare every trade screen shot to my rules to see if I inadvertently or deliberately broke any rules. Of course there are trading dollar and point results that I can monitor, but I need metrics that tell me something about how well I’m performing, not simply a diary of activity.

I’m totally fascinated by the Semaphores. I have to stop myself from spending too much time studying them! Using replay mode is a really interesting way of developing an understanding of their repainting characteristics. For those who might be interested, on the S&P500, over the last 16 Royal Semaphores going back to 9/4/2012, the median peak-to-peak % move is 6.9%. For the last 41 15-Minute Royals going back to 11/16/2012, the median peak-to-peak % move is 2.5%. Going back to 11/12/2012 the last 41 5-Minute Royals had a median peak-to-peak % move of 1.5%. (I didn’t do that by hand! I write computer code for a living). I have a lot more information that I gathered, such as how quickly they cross the Filter, Wave and Tunnel. It appears that the key to the Semaphores is managing the repaints.

Still so much to be done! But I’m loving it.

-dave

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