Breaking out of a 2-day range is a powerful thing, and in that context, just about any kind of entry signal you use is going to make you happy! The key is knowing when you have a powerful context to trade in, and betting big. Think about it… mechanical rules are great, and scalping is great, but do you really want to take most of your position off at +1pt when you are expecting 8 more points in the move? I know I don’t. So, I’m doing a lot of work on understanding where we are in the market story, so I know when to expect big action.

For bonus points, if you measure the move prior to the breakdown, you’ll see a projected target down to 1090. The move overshot that a little, down to 1088, but then paused for a while. Cool.

:-)

[...] OK, yet another area. It almost made it into Version 7, but we weren’t quite happy with it. A general subsystem for dealing with wavelets. Integrating wavelets into everything they can be. Images. Signals. And symbolic computation. Dealing in effect in a quite general way with nested as well as periodic decompositions.

Yeah!

There’s already an add-on called Wavelet Explorer, but I imagine what they’re cooking up will be much more interesting.

Also lots more stuff fundamental to financial computation and plots are on the way!

Exploring new Technical Analysis ideas is exactly 1/3 of the benefit I expect the team to bring all of us, and this is a great example. The other 2/3 of benefits I’m expecting are:

• Practice at reading the markets… sticking our collective necks out and learning from our successes and failures.
• Indicators will be developed.

There’s honestly very little participation thus far in the real-time chart reading area. I hope that changes… we have to overcome our fear of being wrong. It is a great benefit to your own trading to commit your ideas to writing and then assess the results.

The other two areas, though, are coming along nicely!

Let’s say you are playing for breakouts up after higher lows, and breakouts down after lower highs. I’ve drawn blue lines over the main rhythm of the chart, and marked a potential entry (click to enlarge):

The orange line represents the breakout zone where you’d buy. But, what’s wrong here? The pullback to the supposed “Higher Low” is not the size of the general market rhythm! In fact, it’s just one bar. So if you are playing for small-frame breakouts, you better jump back out with small-frame profits or you could be in for a disappointing trade.

The next screenshot shows the horrible outcome of that trade, and takes us to the next potential setup:

Again, this pullback to the potential “lower high” is just a couple bars wide. Not the size of our basic market rhythim by any standards. If you get short here, prepare for the worst.

The next screenshot shows that, after the fact, this tiny so-called “lower high” doesn’t even look like a small peak at all! I haven’t marked every single wiggle, but if you look, you can see lots more places where traders can be fooled if not in step with the markets. Finally, I’ve marked an actual, in-rhythm lower high (it’s the one with two exclamation points, followed by a huge run down). See the difference?

… and here’s one from just outside the hotel:

They are from a low-quality camera-phone, but you get the idea.

Notice the total lack of other people in these shots, which was probably my favorite aspect. Going in November helped, I’m sure, but also the hotel is mostly surrounded by residential areas. Not a whole lot of tourists around.

Fine food, beautiful scenery, lots of rest, and lots of champagne did me good! Posting should pick up again next week.

I haven’t talked about it much, because there hasn’t been much to say. Nearly all the time I could free up went straight to EOTPro instead of automated trading research.  It’s no surprise why… I remember when we had 17 members total.  Now we have 17 members named Dave!

EOTPro is still growing, and working on expanding in new and exciting directions.  That means even more demands on my time and attention.  About a month ago I asked myself again if I should stop trading altogether so that I could devote more energy to the project. This made me a little uncomfortable.

So I quit.

Okay, it’s a bit more complicated than that, but the main reasons are:

• I want time to focus on my own trading, which hasn’t improved much over the last year (the first year I can say that since I’ve started)
• I’m really enjoying the new collaboration team I’ve started.   I think we are starting to see the benefits already, and it’s very early in the game.
• I was seriously influenced by the book, ‘Free.’   I don’t really want to be in a business model supported by locked down information anymore.  So I’m releasing all of my indicators through the collaboration team now, in free and open source.

I love the EOTPro folks, and wish them well. If you ever find yourself looking for a live trading room, I don’t know of anything better. If you were following my work through EOTPro and want to follow it into the future in open code for a lot less money, check out the Team (and the intro and questions posts). Of course some things will still be released totally free through the blog as well.

I’ve spent a looooong time thinking about this, and finally reached a firm decision while on vacation. It was a lot of money to walk away from, but in the end I always choose quality of life over money. I highly recommend that to everyone!

I hope tomorrow is more interesting.