Simon Maelzer's "Day Trading The Indices" Thread

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Ok, guys and gals.

I'm going to start this thread and commit myself to it for the next few months. Not every hour, but certainly every week and most days. I will fit it in with my trading operations and other proprietary market research work. Could very well be interesting times to do it following a very turbulent August.

The thread will be how I go about trading equity indices intra-day
This is not my primary job, I am a Global Macro Strategist first, but trade Futures intra-day if I get the time. Normally 1-2 hrs a day, sometimes a bit more.

I trade primarily the ES-mini contract.
But also sometimes Nasdaq100 Future, FTSE 100 Future, Bund Future and CL Future
I use ProRealTime data and Platofrm
and Market Delta for order entry with CQG data feed.
I'm based most of the time in the South of France where the sun shines and internet is quick!

I will start the thread with a little primer on h finacial markets, then move on to my techniques and set ups.

The motive of this thread

+ To share, educate, inform and enlighten

+ and to gain followers and raise my profile (yes I will be honest, I have commercial interests beyond this thread, but I am no phony - I will let my background (if you research me) and the coming posts on here do all the talking).

Whilst I realise there will be haters and controversial characters on this forum, I am not preaching any particular way or I am "Mr right" at this game. This is just how I go about business and how I see the world that has been backed by a lot of research and 15years+ of hard graft.

And I do ask people to keep this thread clean, civilised and sensible. Let's not lose our dignity here!

But what I do promise, is that I will talk about the truth and reality of financial markets that has been my journey. I will also mention some random anecdotes from time to time (probably when markets are quiet!).

So, who is along for the ride?

Sincerely,
Simon Maelzer

Disclaimer
None of this should not be construed as financial advice and is in the spirit of "the sharing of knowledge". If you require specific financial advice seek a FCA certified practitioner.

I will do my best to avoid spelling, grammatical errors and typos, but can't guarantee a completely error-free body of posts. (note- you do see errors on the BBC's website from time to time. But the difference is, I don't have skeletons's in the closet like they do:LOL:)
 
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Before we start - The reality of learning to trade (and in fact a career as a trader)

success.24552752.jpg
 
Lesson 1 (you rarely see this mentioned in a Technical Analysis book)

Financial markets (just like your equity curve and your state of being) are STOCHASTIC - a random up and down process that evolves through time that is largely unpredictable - very much linked to the random walk

(note a process can be stochastic but still have an underlying directional bias that creates stochastic drift)
ftse101_stochatic_example.24553918.png
 
Lesson 1 (d) even the famous coin tossing experiment produces a stochastic process (non biased coin (although with a biased coin you would still get stochastic process but with "drift" bias))
coin_flip.24555444.png
 
Lesson 2
Financial markets (that are stochastic processes by nature) are also a type of Random Walk - a mathematical formalization of a path that consists of a succession of random steps. For example, the path traced by a molecule as it travels in a liquid or a gas, the search path of a foraging animal, the price of a fluctuating stock and the financial status of a gambler can all be modeled as random walks, although they may not be truly random in reality. The term random walk was first introduced by Karl Pearson in 1905.

From any point in time a financial instrument has the potential to take one of many different pathways - this is very important to understand and appreciate. see example below
 
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Lesson 3. Financial markets are not only STOCHASTIC RANDOM WALKS ,but they are also FRACTAL - geometric shapes that are self-similar at all scales (i.e. scale invariant)
fractal.24561318.png
 
Lesson 4. Arbitrary trend lines are very popular in Technical Analysis.. but markets don't move in straight lines? (especially when considering the fractal layering)
jagges_mkts.24561810.png
 
Right, must get back to work. Will return later to continue this thread.
Tks for viewing,

Cheers,
Simon



Link to a 52min presentation if you are interested - youtube)
https://www.youtube.com/watch?v=UQtMZV_S3Os"]Link to a 52min presentation if you are interested - youtube)[/URL]
 
Lesson 7. The stochastic zone - think of this as a zone where price always wan't to return to. The caveat being, you can get "boundary creep" where price trends agresively in one direction above or along the boundary of the zone.

t2w_stoch.245101212.png
 
Tips to formulate a basic trading system that gives basic signals

+ Experiment/Back test with lots of different data (both instrument type and time frames)
+ Find a drift setting (moving average type and period) and zone setting (standard deviation) that captures the majority of the stochastic price action
+Choose colour settings that suit you and make the signals "jump off the chart"
+Set up your workstaion/platform with multiple time frames using exactly the same model/configuration on each e..g Weekly, Daily, Hourly, 15min, 5min, 1min, 75 tick, 10 tick, 2tick - this helps capture the Fractal layers of the market

Note - I class myself as a semi-systematic/discretionary trader
 
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Using today's ES (SP500 Future contract) as an example and only 5 time scales to keep things simple -same basic model across all (why? because markets are scale invariant so price action has the same behavior characteristics at all time horizons. Thus a model on weekly data should also work on 15 minute, 1 minute or 10 tick data and give the observer the same analytical inference.)
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another screen capture from tonight's ES session - Look to short back to the mid-point on the 15 min - or to lower boundary if more aggressive - but manage risk always!
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