Author Archives: ernie
Quick recap
Ernie’s daily routine and eating habits, puppy behavior problem, trading strategy inspired by Russell, discussions on risk management and adjusting exposure to market conditions, trade performance and market conditions, using averages in trading strategies, displaying a gray area in the risk analyzer, tracking the trailing stop loss, reducing exposure during periods of low volatility, and trading strategies based on overnight market movements.
Summary
Daily Routine, Puppy Problems, Electrolytes, Red Meat Indulgences
Ernie initiated a discussion about their daily routine and eating habits, mentioning their preference for red meat and occasional eggs, with occasional indulgences in scallops or swordfish if prepared by their wife. They also shared about their need for electrolytes and their unique way of consuming them. Ernie then transitioned to discussing a problem with their puppy, who had learned to open a waste basket and distribute its contents throughout the house. They shared their attempts to address the issue by purchasing a puzzle feeder, but the puppy had managed to overcome it. Ernie concluded by expressing frustration about the puppy’s behavior and their inability to correct it.
Trading Strategy and Market Closing Insights
Ernie discussed a trading strategy inspired by Russell’s suggestion, which involves placing a trade prior to market opening with the center strike set at the close of the session. Ernie demonstrated the strategy using a trade filled just before the market opened, with the center strike set at 4,800 and a limit order of $4.50. Kevin and DaveBrown discussed adapting this strategy to different markets and emphasized the importance of waiting for the market close before initiating a trade. The conversation concluded with Kevin sharing insights on market trends and the significance of trading during uptrends.
Investment Strategies and Risk Management
Kevin and Ernie discussed investment strategies with a focus on risk management. Ernie shared their approach of adjusting their exposure and risk according to market conditions, while Kevin suggested the need to adjust risk-to-reward based on market retracement. Ernie also introduced the concept of mulling around or the roundabout approach in trading, which involves gathering information before making decisions. They touched upon the idea of not missing out on trades and the potential of adjusting trading methods to improve results. laura asked Ernie about the put or call indication in their trading log, to which Ernie admitted its lack of informational value and stated they don’t include it.
Trade Performance and Market Influence Discussion
Ernie and laura engaged in a conversation about trade performance and market conditions. Ernie clarified that their trade performance is not influenced by the market and shared their trading habits, including their usual entry time. laura inquired about Ernie’s experimentation with different entry times and whether they would suggest a consistent time. Ernie recommended a specific timeframe over a specific time and shared their experiences with earlier trades capturing more of the bigger move. Ernie also mentioned that they had started placing more trades before the market opens due to their busy schedule, and they had not observed any performance difference depending on the day of the week or time of day. Ernie also expressed skepticism towards the statistical average approach.
Trading Strategy: Averages and Reflection
Ernie and laura proposed using averages in trading strategies, suggesting a three-day weekly trading plan to control averages and allow for reflection, a suggestion Ernie agreed with. Kevin, however, voiced concerns about potentially missing market opportunities with this approach. The team acknowledged the shortcomings of this method but agreed that it still provides useful information. laura highlighted the benefits of interactive discussions and the importance of asking questions. Ernie emphasized the importance of controlling exposure and timing when entering the market, noting that the morning session is generally the best due to less volatile market conditions and potential for greater impact on option pricing.
Date and Price Slice Adjustments in Risk Analyzer
Kevin and Ernie discussed how to display a gray area in the risk analyzer by adjusting the dates correctly, with Ernie explaining the need to set the upper date to tomorrow’s date and the lower center right date to today’s date. laura then sought Ernie’s help in understanding how to set a price slice for the current price, which Ernie, laura, and Troy worked on figuring out together. Troy suggested leaving one slice unlocked to track the current price, while Ernie suggested using the dollar sign to fix the slice to the price. They also discussed the possibility of adding a break-even slice, but concluded that this was not straightforward.
Tracking, Exiting, and Analyzing Trades
Ernie shared their method of tracking the trailing stop loss by manually monitoring the price movement while they’s away, and using their tolerance level to decide when to exit a trade. laura, Ernie’s colleague, understood their process and asked questions for clarification. Towards the end of the meeting, Troy demonstrated how to set break-even slices on their trading platform, which Ernie found useful. Ernie also mentioned that a developer is working on a separate app that will superimpose zones and volume profiles for better market analysis. Lastly, wayne expressed interest in discussing their account privately with Ernie.
Risk Management and Trading Strategy
Ernie discussed their strategy of reducing their exposure during periods of low volatility in the market. They shared that they have been gradually decreasing their exposure, which has led to smaller wins and losses and a tighter equity curve. Ernie also emphasized the importance of managing risk and suggested that contracting exposure can lead to better performance. They mentioned that they have had a streak of 11 losers in a row, which is beyond statistical averages, and they are determined to keep those losses small. Ernie also shared that their average risk-to-reward ratio is close to 12, higher than their total average, by pushing trades further out and managing trade size. laura and Troy participated in the discussion, with laura inquiring about how Ernie limits risk and Troy emphasizing the importance of managing trade size.
Trading Strategy: High Risk, High Reward
Ernie and James discussed a trading strategy that Ernie uses selectively, which involves putting on a big trade when the market pricing is unusually low. Ernie explained that they looks for high volatility that would cause pricing to be abnormally low, then waits for accelerated premium decay as volatility drops. They demonstrated this with a chart, showing a recent instance where they took advantage of a large drop in the market the previous day, leading to an unusual pricing scenario. Ernie emphasized that this strategy should not be used frequently due to its high risk nature. James suggested testing this strategy on a machine, which Ernie agreed to set up.
Trading Strategies and Market Analysis
James and Ernie discussed trading strategies based on overnight market movements. Ernie shared their approach of waiting for significant drops and placing large orders if the price is favorable. James proposed dynamically adjusting the center strike based on market movements, an idea that Ernie found time-saving. Ernie also discussed their approach to market pricing and volatility, emphasizing opportunities in price ranges around 29 to 31 dollars and recommending ‘analyze mode’ for tracking pricing. JonathanLA added a metaphorical perspective. Ernie also shared experiments with a time-based strategy but found execution challenging. They emphasized the importance of putting on a capital-efficient trade and managing profits effectively. Towards the end, Ernie and vcoate arranged a phone call after the market closes to discuss an account issue.
Volume Profile Analysis and Trading Strategies in the Market
• Market Overview and Trading Strategy: Discussion on the market’s current state, including a focus on negative economic indicators and their impact, and the Fed’s narrative suggesting a dovish approach.
• Candlestick Patterns and Technical Analysis: Ernie talks about interpreting candlestick patterns, like the evening doji, and emphasizes the importance of context and statistical significance in technical analysis.
• Trading Execution and Price Selection: Insight into selecting appropriate prices for trades and the importance of patience in waiting for trades to fill.
• Profit Management and Risk Tolerance: Ernie discusses his approach to managing profits and setting trailing stops based on risk tolerance and account size.
• Investing in Short-term Treasuries and Money Markets: Conversation about investing in short-term treasuries and money markets for better fund management and interest returns.
• Detailed Volume Profile Analysis: Ernie explains how to effectively use volume profile in trading, focusing on the importance of high-resolution data and identifying key levels in the market.
Summary
In the daily meeting, Ernie delved into various aspects of market analysis and trading strategies. The session started with a discussion on current market conditions, highlighting negative economic indicators and the Federal Reserve’s dovish approach. Ernie emphasized the importance of context in interpreting candlestick patterns and the limitations of technical analysis without statistical backing.
The conversation shifted to practical trading tactics, focusing on the process of selecting appropriate prices for trades and the value of patience in allowing trades to fill. Ernie shared insights on managing profits, setting trailing stops, and risk tolerance, especially in different sized trading accounts.
Investment strategies outside of direct trading were also discussed, with an emphasis on short-term treasuries and money markets as a means of fund management and securing interest returns. Ernie provided detailed guidance on using volume profile in trading, stressing the need for high-resolution data and identifying significant levels in the market. He debunked common misconceptions about market indicators like the point of control and moving averages, advocating for a more objective approach based on market memory, as supported by mathematician Benoit Mandelbrot.
Comprehensive Analysis and Strategy Discussion
• Market Trends and Volatility: Discussion on the importance of following market trends and adapting to varying volatility levels, highlighting the relationship between market conditions and optimal trading strategies.
• Trading Discipline and Detachment: Emphasis on the significance of maintaining a detached perspective in trading, avoiding biases, and the importance of consistent strategy application for long-term success.
• Role of Habits in Trading Success: Stressed the necessity of developing positive trading habits, understanding the root causes of bad habits, and implementing a systematic approach to improve trading practices.
• Utilizing Trading Tools Effectively: Shared insights on effectively using tools like Thinkorswim for detailed analysis and the importance of spending time in the analyzer for better trading decisions.
• Optimal Timing and Trade Execution: Explored strategies for optimal trade entry times, considering market volatility and price action, and the significance of being flexible with trade timings.
• Practical Advice on Trade Management and Risk: Offered practical tips on managing trades, understanding risk-to-reward ratios, and handling trade settlements and order execution challenges.
Summary
The daily meeting on December 14th covered a comprehensive range of topics essential for effective trading. The discussion opened with an analysis of current market trends and the impact of volatility on trading strategies. A significant focus was on the importance of discipline and detachment in trading, highlighting the need to avoid biases and the importance of following consistent strategies for long-term success. The role of developing positive trading habits was emphasized, along with a systematic approach to identify and correct bad habits.
The meeting also delved into the effective use of trading tools like Thinkorswim, underscoring the importance of spending time analyzing trades for better decision-making. Strategies for optimal trade timing were explored, emphasizing the need to be adaptable based on market conditions and volatility. Practical advice was shared on managing trades, understanding the nuances of risk-to-reward ratios, and handling the complexities of trade settlements and order executions. The meeting served as an insightful platform for sharing strategic insights and practical tips, enhancing participants’ trading skills and strategies.
The Realities of Trading and Market Manipulation
• Market Manipulation and Government Influence: Discussion on how government actions, especially monetary policy and interest rates, significantly influence market trends and inflation.
• Media and Financial News Critique: Criticism of mainstream financial news for skewed reporting and corporate influence, highlighting the need for skepticism and independent verification.
• Brokerage Business Models and Trader Misconceptions: Exposure of brokerage motivations focused on generating commissions from traders, and the misleading nature of certain trading strategies and rules promoted in the industry.
• Trading Strategies and Approaches: Insights into various trading strategies, including butterflies and futures, emphasizing the importance of understanding risk-reward ratios and market inefficiencies.
• Personal Trading Practices and Experiences: Sharing of personal trading experiences and practices, highlighting successes and challenges in different market conditions.
• Critical Thinking and Self-Reliance in Trading: Advocacy for critical thinking, skepticism towards popular narratives, and reliance on one’s own research and understanding in trading.
Summary
The meeting on December 13th delved into a deep discussion about the realities and misconceptions in the world of trading. The speaker critically examined how government policies and actions, notably in monetary policy, directly influence market trends
and inflation. They expressed skepticism towards the narratives pushed by mainstream financial media, which is often influenced by corporate interests and misleading in its reporting.
The discussion also highlighted the business models of brokerages, which are primarily focused on generating commissions through trader transactions. This leads to the promotion of certain trading strategies and rules that may not necessarily be in the best interest of traders. The speaker emphasized the need for traders to understand the true nature of these strategies and to be critical of the information being fed to them.
Personal trading experiences were shared, including the use of various strategies like butterflies and futures trading. The speaker noted the importance of understanding risk-reward ratios and how to capitalize on market inefficiencies. They stressed the importance of personal experiences and learning from one’s own trading journey, rather than blindly following popular methods or advice.
The meeting concluded with a strong message advocating for critical thinking and self-reliance in the world of trading. Traders were encouraged to question popular narratives, conduct their own research, and develop their own understanding of the market to make informed trading decisions. This approach, according to the speaker, is essential to navigate the complex and often manipulated world of trading successfully.
Navigating the Complexities of Modern Trading: AI, Market Analysis, and Strategic Positioning
• Exploration of AI in Trading: In-depth discussion on utilizing AI as a tool to enhance trading strategies, with a focus on navigating its biases and leveraging it for informed decision-making.
• Market Dynamics and Trading Decisions: Analysis of market movements in response to economic reports such as CPI numbers, with emphasis on the importance of agility and skepticism in trading.
• Strategic Trading Approaches: Detailed conversation on managing trading accounts, including the application of the box trade technique to various spreads and the crucial aspect of managing drawdowns and position sizing.
• Health and Wealth Integration in Trading: Ernie shares his personal health journey and its integration into trading, highlighting the significance of overall well-being in successful trading.
• Technical Guidance on Trading Tools: Practical tutorial on setting up and interpreting the Volume Profile indicator in TradingView to enhance trading decisions.
• Impact of Societal and Technological Changes on Trading: Discussion on the broader implications of AI and technology on the market and society, including potential shifts in labor dynamics and market behavior.
Summary
The meeting encompassed a holistic view of trading in the modern age, touching on various aspects crucial for successful trading in today’s complex environment. The discussion opened with an exploration of AI and its application in trading, emphasizing the need to use AI as a supportive tool while being aware of its inherent biases. This led to a broader conversation about market dynamics, particularly how economic reports influence market movements and the necessity for traders to remain agile and skeptical.
Ernie shared insights into his personal health transformation and how it integrates with his trading lifestyle, underlining the interconnectedness of health and wealth in achieving trading success. The meeting also provided practical advice, including a step-by-step guide on setting up the Volume Profile in TradingView, a valuable tool for traders to understand market dynamics better.
Additionally, the conversation delved into strategic approaches to trading, discussing the importance of managing trading accounts with proper drawdown strategies and position sizing. The meeting also touched on societal and technological changes, speculating on how AI and automation might reshape labor dynamics and influence market behavior.
Overall, the meeting presented a comprehensive view of trading, blending technical know-how, strategic approaches, personal well-being, and an understanding of the evolving landscape of technology and society.
Exploring Trading Strategies and Platform Familiarity
• Discussion on Paper Trading vs. Real Trades: Challenges with paper trading platforms and the importance of familiarizing oneself with trading platforms for effective execution.
• Understanding ES and SPX Correlation: Clarification on the correlation between ES (E-mini S&P Futures) and SPX, including the nuances of futures contracts and their impact on trading decisions.
• Box Trade Explained: Detailed explanation of the box trade strategy as a method to circumvent the Pattern Day Trader rule, emphasizing the need to understand its mechanics thoroughly.
• Profit Curve and Trailing Stops: Insights into how profit curves change throughout the day and the significance of trailing stops in managing trades.
• Pattern Recognition and Trading Psychology: The importance of experience in recognizing market patterns and the psychological aspects of trading, including the impact of patience and detachment.
Summary
One primary topic for this meeting was the challenges faced in paper trading, highlighting the necessity for traders to become adept with their trading platforms for better execution of real trades. The correlation between ES (E-mini S&P Futures) and SPX was discussed, elucidating how these instruments mirror each other and the implications for traders.
A significant portion of the meeting was dedicated to explaining the box trade strategy. This strategy is employed to avoid the Pattern Day Trader rule, particularly relevant for accounts under $25,000. The mechanics of setting up a box trade, its purpose, and execution were thoroughly examined.
The meeting also delved into the dynamics of the profit curve throughout the trading day. The discussion emphasized the role of trailing stops in managing profits and losses, underscoring the need for traders to understand how these stops shift with market movements.
Lastly, the meeting touched on the importance of pattern recognition and the psychological aspects of trading. It highlighted how experience plays a crucial role in making effective trading decisions. The discussion also acknowledged the variability in traders’ responses to similar market scenarios, driven by their individual experiences and psychological makeup.
Overall, the meeting provided a comprehensive overview of several key trading concepts and strategies, with a strong emphasis on the importance of experience, platform familiarity, and psychological factors in successful trading.