MarketLife Ep 21 – Pulling the trigger: where, how, and why?

Podcast-Cover300A look at how to execute trades: where they set up, and how, when, where, and why to pull the trigger–to make the decision to get into or out of a trade. Here are the show notes:

  • Key assumptions:
  • Most of what we see is random.
  • I will be wrong a lot.
    • So I can’t be emotional about being wrong
    • I can be “wrong” can be for many reasons, most of which are beyond my control and knowing.
    • Losing trades are a combination of “real” patterns failing and random garbage
  • Application
    • Wait for a market to make a big move
      • Bands and averages
        • Tendencies around bands and averages
        • How to use
    • Decide mean reversion or momentum?
      • Does it matter?
        • Yes, but you could make a good argument that it doesn’t
        • Can make $$ being long or short at nearly any point (can also lose!)
    • Momentum
      • Sharp move usually leads to at least one more sharp move
      • A trending market is likely to continue
      • Momentum against the trend is a problem
      • Action following the move can help to separate
    • Mean reversion
      • Large moves are reversed
      • Spikes out of non-trending markets tend to fail (meaningless statement? No.)
      • Keep everything “smaller”
  • The actual entry
    • Doesn’t matter as much as context
    • Many books with numbered bars, but is this the best way?
    • Identify context (potential) first.
    • How to get in?
      • Sorta doesn’t matter
      • Breakout of previous bar
      • Lower timeframe
      • Previous close
  • What matters a lot more:
    • Correct risk
    • Getting out
    • Trade management decisions

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Enjoy the show:



Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.

This Post Has 3 Comments

  1. Adrian

    Adam, thanks for this new episode. I have 1 question (and sorry if the answer is already there, but I missed it): keltner bands are drawn at EMA(close, 20) ± 2.25 * ATR, where ATR = EMA(TR, _x_); what’s the value of _x_ that you use? I may guess it won’t be a big difference if I’d use Wilder’s original recommendation of 14, or if I’d use 20 (just to have the same depth used for the keltner channel middle band), but I’d like to find out your preferred setting. (This parameter would be relevant for me, as I want to do some backtesting using the exact keltner bands that contain, as you stated in the keltner stats page, 85+% of traded prices.) Thanks again

  2. A_Joe

    Super Episode ! Thank You again ! A Point to be aware of, is with regards to the characteristics of the Asset class & Personality of the Instrument being traded too.

    Example : A reference can be found in 10 Dec’14 Post (Search ‘The most important thing you need to know about commodities’) wherein Mr Adam mentions that Commodities tend to trend better & Stocks tend to mean revert more often.

  3. Mark Aston

    I agree – very good episode, very useful and helpful.

Comments are closed.