Trading and Luck.
Does luck play a part in trading results and if so – how much?
One of the trades we did which was recently signaled by the new Power E-mini Momentum System, gives us a perfect example of how things can play out differently on a trade depending on WHEN you personally get in. You will see that the System Alerted a Long Signal at 1912 right at 9:05 Cme Time. (The times at the bottom of the chart are west coast times where I live)
You will note that within about 15 seconds some Institutional ALGOs hit and popped the market, and in like 1/10 of a second, jumped and gapped the price substantially. (See Volume Spike on Chart).
Catching a live fill on your entry on that first pop up would have been difficult if not impossible because of the super thin/fast market there.. but a little less than half a minute later, there was a live fill 1 tick past our Trade Trigger price at 1912.00 on the pullback.
As time went on, you will notice how the trade experienced a -1.25 point draw-down, but price turned back around without hitting the full 2 point stop. Next you will see that the price clanged around just a bit before popping and running to hit the 1 point delta target. After that the trade continued higher eventually running to hit our full 4 point target.
Now the interesting thing here is that if you had gotten filled on that trade during the first breakout move up -you would have hit the 1 point delta target straight away and gotten your stop up -1 point below entry to create a no-lose configuration. Notice however, that you would have unfortunately been knocked out of the trade at B/E during that -1.25 draw-down dip that I mentioned.
This is a really great example of how 2 traders can take a trade based off the same exact trade signal, but by luck of the draw, end up with entirely different results. One trader captures 5 points while the other gets knocked out before things take off.
Don’t Shoot The Messenger.
Keep in mind folks. The Automated System’s job is to detect potential Momentum Breakout levels and alert us. Period. That’s it. Nothing more, nothing less. It is then our job as traders to exploit the potential price move by entering and managing trades.
A Good Analogy.
Picture if somebody built a nifty wave detection machine for surfers.. that could pick out the strong ones before they started to roll in. That’s its job…and that is all it is responsible for.. nothing more, nothing less.. it is still up to the surfer to paddle out, there, CATCH and RIDE the waves.
Even though the new Power E-mini Momentum Breakout system routinely signals some of the highest scoring trade alerts you will ever come across… no one will always be able to MATCH every single Trade Signal that gets sent out perfectly.. there will will always be variables that come into play in the trade execution part. In reality though, we don’t have to worry about catching every single trade identically, as long as we can get close and finish with a profit a the end of the week. (For 80% of Day Traders just finishing the week with a net gain is a rarity)
Also, keep in mind, that different brokers have different execution speeds.. (that may even vary from time to time due to their server loads and current market volume, etc) and a lot depends on the number of orders lined up ahead of us at any given point in time when we attempt an entry. This is part of the game and one of our main challenges at times can just be trying to get live fills on our trade entries. (Note: The system does not know if or where you personally got filled on a trade.. but computes entries, targets, stops.. etc. based solely on market price movement). One other thing is that SIM trading may give you fills when you might otherwise not get a fill on a live trade.
Finally one nice surprise, (See chart again) notice how the Momentum Breakout system signaled its trade alert just BEFORE the big ALGOs turned on and popped the market. I have been noticing that we have been getting lots of system alerts JUST BEFORE the ALGOs fire off… (effectively front running the big boys) Makes me proud that my new system is sniffing out the large momentum breakouts BEFORE the big wall street HFTs are detecting them.
I didn’t exactly plan on this when I was designing the system, but it is a happy coincidence anyway…
Trading can get a bit messy.. (like playing rugby in the mud..) but at the end of the day, we can still score points and finish with a decent profit.