Inside-Out-Trading [Key To Consistent Profitability]


Inside-Out-Trading changed my trading around. From a hit and miss trader to a consistently profitable one. The journey has been one hell of a ride. I know you are excited to know about it so read on…

But before you start Inside-Out-Trading…

Please consider if the following things sound familiar to your trading,

  • You track multiple technical indicators for a given market. Some of them essentially show the same thing. Like using more than one Oscillator or multiple Moving Averages. Do you sometimes feel overwhelmed by them? Do you often miss out signals on one of the indicators and realize it only after the markets have moved?
  • You are glued to the TV Set before an important announcement. You do multiple permutations and combinations for the event result and take positions accordingly, before the event. Do you then find yourself getting too anxious about the outcome of the announcement? Does your stop loss often get hit in the ensuing volatility post the event? Do you beat yourself up for not figuring out the outcome correctly or about taking the wrong position?
  • You are a fan of fundamental analysis, but often get anxious looking at the short-term market movements. You invest in a stock and then worry about the short to medium term swings, which sometimes go against you. Do you then try to trade around your original position? Or do you try to hedge your original position and end up losing money on your hedges?
  • Are you trading based on tips or recommendations of a stock guru? Well, I don’t even want to discuss that further…

If you are doing any of the above and thousand other similar things, then you are trading outside-in. There is nothing criminal in doing that, the only problem is you won’t ever feel or be in control of your trading. Because all the above things are dependent on exogenous factors.

Factors that are outside of your control and sometimes impossible to know in advance. Now if your trading is based on uncertain events, which you have no control over then your chances of success are slim. Majority of trader universe trade like this and then keep wondering why are they not successful.

To remove uncertainty from trading never do this…

Traders read about how to trade, they study the next hot thing, an indicator or an algorithm or some such thing. They get all excited that now their fortunes are going to change. But once again end up with the same result, losses. Now losses are a part of the trading game, but only if you have control over your trading process.

If you are going to rely on something that you have no control over then how can you expect to control your outcome? In martial arts, a student is often asked to control the outcome. That does not necessarily mean to always come out a winner. But even if you lose, be safe and healthy to fight another day. There is no point in losing your fighting ability to just win one fight. A great fighter is a sum total of all his fights, likewise, a trader is a sum total of all of his trades and not a single one.

In fact, great traders often say any one trade is insignificant in identifying your trading success. It is the repeatability of your success that matters in the long run.

So how do we become consistently successful in this extremely competitive game of trading? If outside-in trading is not such a good idea what is the alternative? Is it inside-out trading? If yes then how do we do that?

I know all these questions are cluttering your mind right now. That is a good sign, it means you are curious and want to improve your trading. You want to learn something new. So let’s get straight to it.

Here is the solution, go Inside-Out…

Yes, the solution is inside-out trading. You may have heard top-down or bottom-up trading. This concept is similar in many ways but applies to each individual trading instrument. A trading instrument moves up or down in price based on the buying and selling of the traders trading in it. If buyers are more and aggressive the instrument is likely to move up in price and vice verso for sellers.

If there is a good news associated with a stock the buyers are more eager to acquire it, on the other hand, if the news is bad people holding it would like to get rid of it. It is always the action of the traders that causes the instrument to move up or down in price. What spurs the traders into action is external to the instruments price movement.

That is why we at GTTE try to focus on the generator of price movements, namely traders actions and try to figure out what the stocks, commodity, future, etc are going to do.

So how do we do it, inside-out trading? Well, we do it by trying to figure out what the Smart Traders [those who often come out on the winning side] are doing. Are they buying? Selling? Are they present or absent? These are few of the questions that we try to answer when we are trying to trade the markets.

Do we always come out on top, no not always? But there are certain benefits of trading inside-out that outweighs any other method by a huge margin. A few of them are,

  1. Every trade you take may not be a winner, but you will surely avoid a lot of bad trades.
  2. You don’t have to watch TV again, unless of course for entertainment purposes.
  3. No need to track all the events and their dates to run after that opportunity which lasts for fleeting second and often traps traders in bad positions.
  4. Incredible peace of mind, a lot of your mental load will be released and you can trade without anxiety, yes that is possible.
  5. This way of approaching the markets will greatly improve your market understanding. Crucial to avoid bad trades and not miss out on the meaty ones.
  6. And many many more….

Ok, so we use inside-out trading, but what tools does one use to make it happen?

Well here is the low down on the tools required for this type of trading…

We believe all these tools have the ability to look behind the obvious and that is the price, to give you the real picture of what is happening in the markets. While or go one level deep, can go two levels deeper than the ordinary price chart with volume.

It may seem a bit over the top for the uninitiated, but trust me once you get to know these methods and the correct way to apply them, you will believe. And for that very purpose, I am sharing an example that includes all the three charts that I use. That is Market Profile, Order Flow and VSA charts covering the same trade.

Go through this example for better understanding of inside-out concept…

The charts are amply annotated so go through them one by one and see how the trade develops and gets executed.

market profile trade setup

order flow trade timing

VSA trade setup

So that is how we observe the market generated information, that is we observe the markets from inside and gradually move outside to timing our entry. This inside-out approach has improved my trading so much that I can’t be happier that I discovered it. The only regret is I should have discovered it sooner.

Just in case you are wondering how the trade worked out, here is the follow through move. Our target was hit comfortably.

trade result

Ok, so that was it. The inside-out approach and a nice example to go with it.

So where do you go from here…

Now, if this method of analysing and trading the markets piques your interest then you can learn this too.  I have covered the first part that is the Market Profile part, in my home study course Market Profile Gateway To Profits Course.

You can find more about it by visiting this link – Market Profile Gateway To Profits Course

Best Regards

Dean

Lesson 6: How To Secure Good Reward To Risk Ratio? Trade Timing!

Trade timing is crucial…

Believe me I have done it on more than one occasions. The mistake is to use only the timing tool to make trading decisions. 

If trading were that easy any Tom, Dick and Harry would have come up with a Buy-Sell system and made a killing in the markets day in and day out.
 Trust me it is not that simple. 

You can achieve lasting success in the markets but you have to put in the efforts. There is no easy way out of this.
 

So you have to first understand the trading logic so you can make sense of markets movements. 

Then you have to put the current market development in proper context so you can understand what the market is trying to do in the present.
 

Listen carefully…

Once and only when you are through with the above two steps should you move on to the third part that is timing your trades. 

You can trust me on this or you can learn this the hard way, that is by losing a bundle! Choice is yours! Should you chose to listen to me read on! 

Timing a trade is easy. All you have to do is just watch the markets like a hawk and spot some regularly recurring patterns and hit buy/sell when you spot one.” This sound directly contradicting to the things I shared in the Don’t do this email. 

It is, but there is one thing that has changed here.
 

That is you are now aware of trading logic and current context. 

So the let me rephrase the above statement. Once you are aware of the trading logic and sure of the current context, “all you have to do is just watch the markets like a hawk and spot some regularly recurring patterns and hit buy/sell when you spot one.” 

So what are those patterns and where do I spot them? Well I use two methods to time the markets viz. and/or [VSA] charts. 

Lets start with Order Flow Charts. 

Order Flow [OF] Charts OF charts plot all the executed orders in the markets. Plus they make a key distinction as to which side was the aggressive side in that transaction. 

We are all aware of Market Orders and Limit Orders. 

Market Orders are the aggressive type. And in any executed transaction at least one side (ie. Buyer or seller or both) has to put in a market order.
 Exchange records the side which was aggressive and then tells us whether the order was execute on the bid price or ask price. 

Trade executed on bid price is an aggressive sell order and on ask price is aggressive buy order. 

On an OF chart the aggressive sell orders show up on the left side and aggressive buy orders show up on the right side.
 Look at the following chart.

When buyers are greater than sellers colour of the cell is blue and when sellers are greater than buyers the colour is red. 

Then there is something called as delta, which is nothing but the difference between buyers and sellers on any given bar shown at the bottom of the chart. 

If delta is positive (blue) it means total buyers on that bar were greater than the sellers and vice versa. The delta number gives the first signs of exhaustion, by giving us nice divergence. 

It is better explained with an example. The divergences can be both positive or negative. Look at the following chart it shows both OF chart and MP chart for context,

Now there are multiple ways you can use OF charts and not all can be covered here. 

But just remember one thing timing comes after trading logic and current context.
 Mess up the order and mess up your dream of becoming a consistently profitable trader.

VSA Charts 

VSA is a gift given to us by legendary Tom Williams. He has compressed Wyckoff’s principles onto the smallest of time frames. 

VSA charts can be used as a great timing tool if you don’t have access to often costly OF charts.
 

So here goes, methodology consists of applying the Wyckoff’s principles to individual bars. 

Based on the three factors viz. Spread or range of the bar, position of the close and volume associated with the bar, Tom created a number of signals. 

Each signal suggests a specific condition of the market and based on that condition you can gauge what markets are trying to do. 

The concept of SM is borrowed from the works of Tom Williams. 

I have incorporated the AMT and MP Charts with that concept and designed my own framework.
 Look at the following charts for a preview of how the VSA system works.

It’s not possible to go into each signal in detail, but you can use this technique as a viable alternative to OF charts which are costly. 

These charts are free. Just check out my VSA AFL for Amibroker in the White Paper PDF that you downloaded at the start of this course!

Alright then! We have covered a lot today and so far in the course. Hope you have enjoyed it so far. 

In the next email, I will put everything together for you and will be answering some FAQs. These are some of the common doubts traders come across, so don’t miss it it will be filled with a tremendous value I promise. So don’t miss…..

Dean

PS: Just one more thing please fill up the form below so that we can serve you better! 

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