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Whenever we discuss an important aspect of trading in our hotComm room, you will find it mentioned here too, so that you can refer to it at anytime. There are a also few two letters initialisms and words that we use in our hotComm room that have certain meanings, sometimes differing from what they are commonly used. This is done for our convenience and speed in our communications.
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Markets Open
NS or nervous start is the name that we use to describe the way some days markets open the regular session. On most days the open is a highly volatile period and if you are a new trader avoiding the first 30 minutes is recommended.
A few days each month it has been observed that this volatility is producing a large number or trend changes as measured by GemsBot that last a few minutes each while their range and volume is substantial and are not successful. This negativity is a clear sign that later on during the day we will most likely get some great and very successful trades in both directions.
When this is observed it is mentioned in our hotComm room and usually it ends up being one of the best days for trading, once the initial choppiness is over. It is hard to pin point the reasons why this happens, but a logical explanation is that big players have very strong opinions that is divided between buying or selling the markets. So the first half hour they both try to prevail with their views until one side is temporarily giving in. Later on during the day this battle of big players continues at a reduced speed resulting in great trades in both direction.
So when you see this mentioned in the room avoid trading early and be ready to ride with the good trades that normally follow it.
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Classification of Trades
Main Trades produced during regular hours are classified the moment they are triggered and through their initial one minute period. Trend and Fast trades are tagged as Weak, Normal and Strong and Sync trades as either Normal or Triple Trade Trigger (TTT).
The classification of Main Trades can be used in two ways. If you are trading with one contract at a time, you may elect to follow only those trades that start with a higher classification. Sorting them in order of reliability, which at the same time is inverse to their frequency, they are:
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Triple Trade Trigger
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Sync
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Strong Fast
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Strong Trend
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Normal Fast
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Normal Trend
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Weak Fast
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Weak Trend
If you are trading a multiple number of contracts, you may adjust your exposure to the market by entering fewer contracts when a Main Trades have lower classification. The Continuation Trades will offer you enough opportunities to add or re enter, if the trend develops into a great run.
It is important to understand that while we tag trades with different names, they only describe various facets of trading. When you are new to GemsBot, they help you to see them and trade separately as if each one is an independent way of trading. The more familiar you will become with the system the more you will see their interplay and then you may elect to concentrate on those that suit most your own trading style.
Like all else in trading, trades prove their relative value over a period of time. There is no trade with a 100% success level, but the nearest they are to this number the better. Even trading a system with 80% accuracy level it still means that 2 out of 10 trades are losers and they do appear in a random way. Successful traders accommodate for this by using Trade Management.
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Choppy Periods
The enemy of any trend following system are the Choppy Periods that inevitably occur almost every day with varying duration. GemsBot detects these ranging Choppy Periods in a number of ways and rates them with three grades:
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When the trend direction of the four instruments are way apart, which is the most severe case, it is noted as Choppy Period in the Market Status cells in columns A and B of the spreadsheet. At the same time the background color of these cells and the uppermost cells in the same columns of the scrolling part are Baby Blue colored.
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When the net difference in trend direction of the four instruments displayed is only two of them, then it is noted as Far from Concurrence and the relevant cells have a Light Yellow background.
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When only one instrument is Flat while the other 3 have the same trend direction it is noted as Close to Concurrence, which is the least severe case of a Choppy Period and the background color is Dark Yellow.
Initiating a trade when the Market Status is showing a Choppy Period, is of the highest risk, with Far from Concurrence being still risky, while when Close to Concurrence is seen it is of a lesser risk.
Trades are more successful when we have Concurrence in the same trend direction for all four instruments.
It is apparent that during Choppy Periods trading should be avoided. There are a number of clear signs that GemsBot generates that signify the end of a Choppy Period and return to normal trading. They are listed here sorted in order of their success:
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When Sync Trade is triggered for all four instruments you have the clearest indication that the Choppy period has finished.
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A Fast Trade initiated for the instrument that you are trading is also a clear indication that trading can resume.
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When a Spread Trade is generated, again for the instrument that you are following, then choppiness is over for that instrument and it is tradeable.
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Finally when the Average Market Strength as shown in column A of the spreadsheet has a value larger than +100 or less then -100 then you get a good indication that we left the Choppy Period behind us.
So paying attention to the above points and trading accordingly you could easily avoid the negative trades that choppiness creates.
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CrossRoads
CR or crossroads is a pattern in the market that is detected a few times, if at all each day. This pattern is observed when there is a substantial move for any particular instrument either long or short of at least 5 ES, 40 YM, 8 NQ or 3 TF points as measured from the first entry price produced by GemsBot. This 1st leg is followed up by a smaller move or pullback that is much weaker but strong enough to trigger a reverse Trend trade.
This 2nd leg may create a small number of ticks profit or loss and the Market Strength is stalled, with a spread value of 0, and normally at low levels, that may last a few minutes. GemsBot is trying to establish whether this 2nd leg is a pullback or indeed a reversal of trend. In other words it is at crossroads, a point where a choice must be made and it is idling to take the right direction.
If it is a reversal the Market Strength increases rapidly and successful Continuation trades are triggered. If it is only a pullback, the 3rd leg breaks out of the choppiness of the 2nd leg with a Trend trade in the same direction of the 1st leg. This 3rd leg is frequently a great trade producing far more points that the 2nd leg may have lost and sometimes exceeding the profits of the 1st leg.
The way to trade crossroads is simple to follow and what may appear a negative pattern it ends up to be a great period of the day. Once you see a great run of at least 5 ES, 40 YM, 8 NQ or 3 TF points you should be on alert. When the end of this 1st leg great run is associated with stalled Market Strength numbers a crossroads 2nd leg is likely to occur.
You make take the 2nd leg with reduced number of contracts and tighter trade management or if you are trading only one avoid it altogether. This way you are risking less if it is just a pullback and you will get an opportunity to get a great trade with the 3rd leg. Should the 2nd leg be a reversal you can add contracts with the Continuation trades and benefit from it. Bear in mind that the 1st leg has already been a very good trade and you are risking less during a crossroads pattern.
Concluding, the importance and difficulty of the 2nd leg trades is such that overrides any other considerations, including the success of the timed trades.
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News
We use the Econoday site for the classification of scheduled news at three levels. 1) Market Moving, 2) Merit Extra Attention and 3) Other Key Indicator. You will find a link here and you should be checking it every day before you start trading. Bear in mind that the same news item gets different classification from Econoday, to reflect the current expected influence in the markets.
Trading during scheduled Market Moving news times is very tricky and requires profit targets and stop loss values much larger than usual. The reason is that most traders avoid them, resulting in much thinner volume which in turn accelerates the market action.
You will notice that most of the times, the direction that GemsBot is indicating immediately prior to the news release is the one that markets take, once the dust has settled down. However, unless you are a high risk trader, it is recommended to close you position 3 minutes before Market Moving news and not to open one until 3 minutes have passed.
With news that Merit Extra Attention, you should be cautious in trading through them, either by reducing the number of contracts or setting tighter profit targets and stop loss values.
With Other Key Indicator news your usual trading should not be affected under normal conditions.
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ES Magnet valuesEvery day algorithms produce two Magnet values for ES. The first one is available at 9 am ET and is used for Regular Hours trading until market close of the same day. The second one is produced after market close and is used for Premarket Hours trading until 9 am ET of the following day.
Using the Magnet value is simple. Trading the signals that point to the direction of the Magnet value increase the reliability and performance of the trade. The effectiveness of the magnet value is higher during periods of the day when the Advance Decline Indicator, which is continuously updating in the spreadsheet, is anywhere between -500 and +500.
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Watch Out Alert
WO or watch out is an audio alert the system produces to warn you of a possible end to normally great period of the day. This takes into consideration all four instruments and is applicable when you are trading any of the four.
When the three Trend entries for each instrument have been inserted and are in the same direction you see in the spreadsheet and hear the audio alert "Full". This signifies that all instruments have a definite trend established.
When this period of the day, which is normally an excellent period, is about to come to an end the first sign we get is the exit of a Trend trade for any of the instruments. The total number of the 12 Trend entries is reduced at least by 1 and the watch out is simply to tell you that your trade maybe soon be exited, if it is not already the one that triggered the alert.
You should be using this audio alert to reduce positions or be ready to exit altogether.
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Directional Days
Directional days are the ones when some news relating to company, sector or macroeconomic data prevails. They are characterized with one or a few great moves near the regular hours open and then many choppy moves throughout the rest of the day in both directions. They are always associated with large ADD numbers in excess of absolute 1,500.
Once they are detected you will see a posting in our hotComm room. Trading only the Sync Trades with tighter profit taking and stop loss values is the way to stay profitable even in such choppy days.
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Spreadsheet Change Over
The Pre Market spreadsheet and Regular Hours spreadsheet differ in the way they trigger the trades. Lower Market Strength numbers are used Pre Market to reflect the lighter volume.
The change over takes place around 9 am ET when the Magnet value applicable for Regular Hours is produced from the Pre Market data. There is a small interruption in the video transmittal then, lasting less than 1 minute.
When the Regular Hours spreadsheet starts running there are artificial times of 1:11:11, 2:22:22, 3:33:33 and 4:44:44 shown for the first entries for TF, ES, NQ and YM respectively.
The reason is to avoid the generation of a false Sync trade, in case all the instruments have already been trending in the same direction with the Pre Market spreadsheet with more than one minute difference in initiation time.
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ADD, TRIN and TICK values are shown in the spreadsheet as a guide only and are not used directly for trading. The following numbers is just one interpretation of them.
ADD, the Advance Decline Indicator, is the difference of advancing minus declining stocks on the NYSE. Values in excess of +1,500 or below -1,500 indicate a directional bias in the market.
TRIN is short for TRaders INdex, a technical analysis indicator calculated by taking the advances-to-declines spread and dividing that by the volume of advances to declines. Values below 0.9 indicate a bullish direction while values above 1.4 a bearish direction.
TICK is the NYSE cumulative net of all upticks minus all downticks at a given point in time during the day. It is highly volatile and values worth noticing for scalping purposes are when in excess of +500 or below -500.
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Audio alerts quality in our hotComm room is poor and there is a very good reason why. Audio takes a long time to be heard; just the words "Good Morning" take at least 1.5 seconds. Since GemsBot refreshes every 5 seconds and does all the calculations, prints the spreadsheet and produces the alerts within this period, alerts had to be shortened to the bare minimum. This way the video can be seen without delay that normal audio would cause.
The audio alerts were recorded in a professional studio by a local female radio personality. Then they were processed to last milliseconds. After the initial period and by observing the video while listening to the audio alerts you will become familiar with them.
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MF or muffin is the name we we use to describe all ES Main trades that are triggered anytime between 10:15 ET and 10:45 ET and have a higher success rate than normal. The name has to do with the muffins that some brokers have with their coffee at this time of the day.
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CC or cheesecake is the name we use to describe all ES Main trades that are triggered anytime between 13:15 ET and 13:45 ET and have a higher success rate than normal. The name has to do with the desert that some brokers have to finish of their lunch at this time of the day.
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BT or beer trades is the name we use to describe all ES Main trades that are triggered anytime between 15:15 ET and 15:45 ET and have a higher success rate than normal. The name has to do with the drink that some brokers have to celebrate or drown their sorrows at this time of the day.
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wee g or wee george, is GemsBot nickname. A wee Scotsman inside the computer writes all the numbers fast... . he eats haggis, porridge and shortbread. Much to my dislike, he is more often right than me, big George. Enjoy your stay in the room and make money trading without stress. 
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