Category Archives: Retrospective

Retrospective for January 21

Adapting to Market Volatility: Insights and Strategies

Quick recap

Ernie shared his trading experiences and mindset, highlighting the importance of not focusing solely on win rate but also on preserving capital and being comfortable with small losses. The team also discussed the current state of the market, with Ernie predicting a potential rise due to inflation and the Federal Reserve’s monetary policy. They also discussed their trading strategies, with Ernie emphasizing the importance of managing premium decay and focusing on the directional aspect of the strategy. Towards the end, Ernie discussed the potential risk of overconfidence after a series of successful simulated trades.

Summary

Trading Strategies and Mindset
Ernie and Laura had a conversation about trading strategies and the mindset behind successful trading. Ernie shared his experiences, mentioning that his trading week was somewhat successful, with mixed results but no significant losses. Laura praised Ernie’s handling of challenges and his confidence in his methodology. They also discussed the importance of not focusing solely on win rate but also on preserving capital and being comfortable with small losses. Ernie emphasized the need to understand the edge and avoid risky strategies that could lead to big losses. Kevin agreed, highlighting the importance of accepting small losses.

Austrian Economics and Trading Insights
Kevin, Ernie, and Laura had a discussion about a book on Austrian economics. They appreciated the author’s storytelling approach and the comparison of Austrian economics to the evolution of conifers. They highlighted the importance of skills like controlling drawdowns and staying in the game. Ernie clarified the role of market makers in the stock market, emphasizing their role in providing liquidity rather than manipulating the market. Laura expressed interest in learning more about order flow, which Ernie acknowledged as challenging but important. The discussion concluded with Kevin emphasizing the need to learn from experienced traders.

Trading Strategies and Market Analysis
The team discussed trading strategies, with Ernie elaborating on a fisherman’s net analogy, comparing it to their wait-and-see approach. Kevin and Laura added their insights, noting that the added money butterfly does not significantly impact their strategy. Later, Dave raised concerns about changes in the meeting link and calendar, which Ernie acknowledged and attributed to user issues. Ernie also mentioned potential changes to the daily meeting link to improve functionality. The team also discussed the current state of the market, with Ernie predicting a potential rise due to inflation and the Federal Reserve’s monetary policy. Ernie also demonstrated a technical analysis exercise, predicting a value of 5,239 using an ABC correction. Towards the end, they briefly touched on astrology’s influence on the market.

Roundabouts, Boston Driving, Investing Strategies
The conversation covered various topics, beginning with a discussion about the reemergence of roundabouts in Connecticut and their presence in Massachusetts. The discussion then shifted to a humorous conversation about driving in Boston. The conversation took a financial turn when Ernie shared his intention to start investing in long puts, a strategy he believes will allow significant profits when the market collapses. Ernie also explained his trading strategies, emphasizing the importance of a capital-efficient trade with a minimum 1:9 reward-to-risk ratio. Jill, a new participant, sought clarification on short strikes on the butterfly, which led to a conversation about their trading strategies.

Trade Strategy and Volatility Management Discussion
Ernie Varitimos discussed the trade strategy that adjusts widths according to volatility and risk tolerance. He highlighted the importance of managing premium decay and focusing on the directional aspect of the strategy. Ernie explained that their profit management framework dictates when to exit a trade, not waiting for the market to pull back. Ernie also shared insights on the potential returns of their strategy, ranging from 25% to 1,000% return on risk. Herb Lauw added that he uses the volume profile to follow the trend and pick a direction. Ernie emphasized the importance of considering the overall volatility regime when determining the cost and potential profit of a trade. He also discussed the behavior of the premium in the final hours of the 0 dte te and how it decays, emphasizing the need to play both the premium decay and be in the right place at the right time to capture additional profit.

Trading Ranges and Volatility Adaptation
Ernie Varitimos discussed his approach to trading ranges in response to changing volatility. He stressed the importance of not treating every trading day the same and adjusting to specific conditions. He shared his experience that there is no significant difference in his performance or return, regardless of when he trades. Ernie also emphasized the importance of continuous adaptation and improvement in his strategy, which involves collecting a wide range of data and making micro adjustments weekly. He also shared his personal trading strategy, which involves putting on trades before the market opens or around 9:45 to 10:15. Finally, he explained the advantages and disadvantages of trading the E-mee features.

Ernie’s Performance and Strategy Discussion
Ernie Varitimos discussed his recent performance, which saw a drop in his win rate to under 50%. He identified a significant drawdown but clarified it wasn’t a major one and shared his strategy of becoming more conservative to protect against long losing streaks. Despite a 13 out of 15 losing streak, Ernie was only 1.6% down. He emphasized the importance of understanding the reasons behind mistakes and adjusting strategies accordingly. Ernie also discussed the use of the profit taker, explaining it was not mandatory but a tool to raise awareness. He also addressed questions about the impact of holding a trade through the day and the reliability of trading simulators. The discussion concluded with Ernie sharing some of his successful trades.

Simulator Practice for Trading Beginners
Ernie Varitimos discussed the importance of practicing on a simulator before using real money, suggesting that beginners should aim to do 1-2 trades a day. He emphasized the need to focus on execution skills rather than accumulating simulated dollars. Ernie also highlighted the potential risk of overconfidence after a series of successful simulated trades. Towards the end, he explained a strategy where insurance trades are placed three months out, with the goal of then investing in undervalued equities if the insurance pays off.

Sunday Retrospective for January 7

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.

Sunday Retrospective November 12

Zero DTE Retrospective: Mastery Through Patience and Consistency

• Reflective Approach: The meeting stressed the importance of retrospection for continuous improvement in trading strategies.

• Asymmetric Risk Strategy: Reiterated the necessity of adopting an asymmetric risk approach to preserve capital and maximize potential rewards.

• Market Opportunity Timing: Emphasized the unpredictable nature of market opportunities, highlighting the need for consistent market participation.

• Profit Management: Discussed the challenge of knowing when to hold or fold a position and the psychological aspects of securing profits without regrets.

• Trading Discipline: Underlined the importance of detaching from the outcomes of individual trades and focusing on the consistency of the process.

• Execution and Review: Encouraged meticulous logging, journaling, and reviewing of trades to build knowledge and improve decision-making.

Summary

The Zero DTE meeting provided a platform for traders to look back at their past week’s performance, discuss areas of improvement, and prepare for future trading. The session reiterated the fundamental importance of maintaining an asymmetric risk to reward ratio, which serves as a bedrock for capital preservation and unlocking significant returns. A major topic of discussion was the unpredictable nature of market opportunities and the importance of staying engaged in the market to capitalize on these moments. The psychological aspect of trading was also examined, particularly the challenges traders face in managing profits and accepting the outcomes of their trades. The dialogue touched upon the importance of detachment from the results of each trade, instead focusing on following a consistent process and learning from each outcome. Traders were encouraged to document their trades thoroughly, using annotation and journaling as tools for reflection and improvement. The overarching message of the meeting was one of strategic patience, discipline, and the value of a steadfast adherence to a proven trading process for long-term success.