How I’m Trading the Current Market Madness

To view this email as a web page, go [here.]( [Roger Scott Newsletter] October 15, 2022 How I’m Trading the Current Market Madness Wall Street has turned to algorithmic trading more and more in recent years. Retail investors not only have to compete with the deep pockets of institutions and other big-money traders, but also with their complex equations and automatic buy and sell triggers. But as the saying goes, if you can’t beat ’em, join ’em! Now more than ever before, it benefits everyday investors to learn the tricks of the trade and create their own algorithms. That’s why today, I’m going to cover the three pillars I follow to build a strong foundation for my algorithm-based strategies. Pillar No. 1: Individual Trades or Clusters One of the first things you want to decide when building your own system is whether to focus on individual trades or clusters. A strategy focused on individual trades is exactly as it sounds — you’ll set parameters designed to aid in identifying the stock, fund or option with the most potential to move in a specific direction. An example of a system built on individual trades would be my Pattern Trader strategy. With Pattern Trader, we screen stock charts for activity that matches the five specific patterns on which the strategy is built. A strategy built on trading clusters involves buying several stocks, funds or options within a specific sector, or different sectors like we do with Alpha Rotation. In this strategy, we enter four positions, usually going long three and short one as a hedge. We’ll hold these trades over a two-week period, then look to switch up our holdings depending on the broader market. I like to think of the entire cluster almost as a single, more diversified position. Pillar No. 2: Keep It Simple, or Risk ‘Curve Fitting’ My next pillar for building an algo system is keeping things simple... I prefer to choose three or four rules, and stick to them. Let’s use Pattern Trader as an example again... - We screen for five specific chart patterns. - We enter the trade the day after the system identifies a stock chart that matches one of these patterns. - We exit as soon as we hit our profit target. Most of the time, this is just a matter of days. That’s about as straightforward and simple as you can get! (If you’d like to try my Pattern Trader strategy, I’ve got a special never-before-seen offer available today. You’ll get full access to video training, trading alerts, an updated trade tracker… everything you need! [Check it out right here.]( Curve fitting is when a trader becomes preoccupied with creating the perfect system. They change up the rules or add new indicators, backtesting the data until they develop a system that’s perfect and delivers great returns. The problem with curve fitting is the trader has spent so much time ensuring the system is perfect in regard to the backtested data, it doesn’t work for future trades... Meaning you’re not only sacrificing your time for something that won’t necessarily work, but also your capital. Pillar No. 3: Profit Factor My last pillar when it comes to developing my own algo trading systems is the profit factor. This is where I test the system to determine whether or not it’s worth following. You can do this by backtesting some data, but remember…as I mentioned above, it’s dangerous to over-optimize since you risk curve fitting your system. You might find that the system you’ve created isn’t even useful, and it’s in your best interest to scrap the whole thing and start over. But starting over doesn’t mean you failed… It’s all part of the learning process — because there’s always something new to learn! In times like these, it’s always good to have a few different strategies up our sleeves. ________________________________________________________ Roger Scott 27+ years of trading experience. Traded multi-million dollar accounts and has trained thousands of new and experienced traders. ________________________________________________________ [How “Shadow Blitzes” SLAY During Earnings (Live Webinar)]( Earnings can either make or break an account, you know this. And as many traders hide in fear or just simply sit on the sidelines during earnings season… Lance Ippolito starts salivating… Smelling the massive trade opportunities! You see, not only has his proprietary “Shadow Blitz” scanner helped him lock in winning trades week in and week out over the past few years… But it’s also proven to THRIVE inside small earnings windows! Join Lance’s live class this morning @ 10 a.m. EDT, where he’ll lay out his game plan for earnings next week and how you can be in the best position to trade them! [Click Here to Join!]( ________________________________________________________ 1 Long, 1 Short Trade Idea for a Market Digesting New Inflation Data October 12, 2022 The major indexes were flat Wednesday morning, with investors concerned the most recent inflation data will drive the Federal Reserve to keep raising interest rates. [Continue Reading]( My Top 2 Stocks and Critical Price Levels to Watch October 11, 2022 The major indexes were down again Tuesday morning as the Nasdaq closed at a two-year low on Wednesday. [Continue Reading]( [Roger Scott] A WealthPress Publication ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. 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