Weekly Market Overview June 13, 2021

For the past 22+ years of my trading career, summer time has historically been a rather quiet period of trading. Last summer sticks out as an example of a summer that wasn't all that quiet for trading. It seems that with everyone working from home and everyone running around with stimulus checks the summer of 2020 was quite fruitful. 

It isn't always the case that "Sell in May and Go Away" plays out, but I've spent many a summer over the years wishing I had left my desk and went to the beach with everyone else. 

Seasonally, we see a whole lot of sideways price action, mean reversion type of moves in the markets over the next few months, with September being the weakest month of the year historically and Q4 (2018 notwithstanding) being the strongest. 

This is why I got to work on building a scalping system that daytrade's the $ES (S&P500 Emini Futures), $EURUSD and even does incredibly well daytrading $BTC. 

Systematic trading works in all sorts of markets on all sorts of time frames, not just swing trading Forex or Futures end of day.  

I built this very short term scalping system around the idea that I didn't want to be held hostage by seasonality, the Fed, earnings season, time of day, day of week, family obligations, meetings or any other constraint.

One of the main requirement I had for this system was that I wanted a purely systematic trading system that I could trade nearly any time, day or night. So that if I decided I wanted to trade from 4-6AM it would work, just as well as 10am or 4pm or even midnight. 

When building a system you have some gives and takes. For this system my requirements meant that I could really only trade a few big assets that had a lot of volume day or night (and on the weekend in the case of $BTC). It does work on other assets at different times, but not as consistently as for the Euro, SPU's or BTC. 

To be fair, this isn't something that my "brilliant" mind came up with magically, rather it is a conglomeration of the key elements of dozens of systems that I've studied, built, been taught or learned by others and myself.

This reminds me of Isaac Newton's famous quote:

"If I have seen further it is by standing on the shoulders of Giants.

The entire system is based off of work I've done that others have shared, sold me, taught me, talked about, and stacking on top of that 100's of 1,000's, perhaps millions of manual backtests over the years. 

After accumulating about 1,000 manual backtests on this scalping strategy I was finally ready to take it live. For the past two weeks I've been live trading $ES and $EURUSD taking 32 trades. 

This is a monster of a strategy! 

The current average win rate is 75%, with the average winner gaining 1.46R and only losing -.93R.

In two weeks of trading we've earned 27R and have a very high SQN of 6.94

A scalping strategy isn't as easy to trade as an end of day swing trading strategy because it requires a high focus, and more importantly keeping the discipline to not go down YouTube of internet rabbit holes while you are watching the markets. By keeping track of my mistakes, and punishing myself for making them it forces me to stay focused and as a result, the account grows much faster. 

Here's a list of all trades since beginning live trading May 26th. Notice that there were 2 mistakes out of 32. I allow myself 1 mistake in 20, so as long as I keep disciplined this should improve. 

You'll notice the two highlighted trades, those are mistakes, regardless of outcome. One was a bigger winner than the other one, doesn't matter, it was a mistake. 

These results are exactly similar to the results of the 1000 trade backtest I conducted this past month, sometimes the win rate gets high into the mid 80% but 60-80% range is normal. 

The drawdowns on this systems happen, the worst have lasted a couple of days before getting right back to work and heading higher. Which is where we find ourselves right now, a small sideways drawdown in winning trades. 

The drawdown I am referring to is actually a sideways range in wins/losses on the far right edge there. On Wednesday we had 2 losing trades and then on Friday we didn't quite hit the profit target before I had to raise the stop to breakeven on two trades +.01 and finally another losing trade. 

That is very common with this strategy, when things aren't working it isn't devastating, but feels a little bit like jogging in deep mud or sand. 

The Scalping strategy is ideal for traders who are trying out or already funded at a prop trading firm or traders who have the time and patience to focus on making a consistent daily salary, if they have the willingness to put in the hard work and discipline to trade like this.

The Scalping strategy is NOT for traders who are  just looking to make a bunch of money really quickly, WITHOUT putting in the hard work. 

If you are interested in this type of strategy, and I know it isn't for everyone, then for the next few weeks I will be going over it and trading it live in the Trading Lab. 

In addition our cryptocurrency swing trading strategy is included in the membership which has done an incredible job of not getting slaughtered this past month and making massive gains with some traders up over 1,000% since last September, trading along with us. 

The Lab is a monthly subscription that you can cancel at any time if it doesn't work out for you, but if you've been wanting to take your trading to the next level, with 100's of hours of videos covering different trading strategies, backtesting, live trading, high performance trading and much more, you can really make a giant leap forward in a short period of time if you are disciplined and ready to put in the work. 

Join The Trading Lab

On to this weeks markets....

Current Long Campaigns:

• Gold (Gold futures)
• Silver (Silver futures)
• Natural Gas (Natural Gas futures)
• DBA (agriculture ETF)
• XLE (Energy ETF)
• GBP/JPY (pound/yen)
• AUD (aussie/yen)

When we talk about campaigns, think of them as military campaigns. We have a plan of how we will attack, but we adjust all along the way. In this case these are all long positions and we've added to them multiple times now catching these nice long trends. Like a military campaign, when we are tested and proven strong we add more to our position to capitalize on the enemies weakness, in this case the bears. 

This week the Fed announces their interest rates decision and will talk about it in their news conference after. This is happening immediately after the US 10 Year Yield had its worst week in a year.

And while $NQ (NASDAQ) is banging its head on new all time highs. 

The easy money for the past quarter has been in metals and the British Pound, while equity indices and rates have been a lot more like whiplash than easy money. 

$GC

$GBPJPY

We continue to stay on the sidelines in Equities and still expect more sideways mean reversion action over the coming months, but if the markets tell us that the bulls are back in control and ready for more, we'll happily adjust our position. 

This is the same stance we have on cryptocurrencies, despite all of the extremely bullish headlines, it'll take a few months before we see new all time highs in that space. At least that's our take at the moment while we continue to trade our weekly swing strategy on top of our core holdings.