How I’m Trading the Current Market Madness

To view this email as a web page, go [here.]( [Roger Scott Newsletter] December 3, 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, 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! 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. ________________________________________________________ [The Fed Is at it Again…]( [Clicking this link will automatically register you for periodic mailings and updates from WealthPress ([privacy policy]( In just a matter of days, the Federal Reserve is doing something that could send shockwaves yet again through the market… Stocks could soar or plummet in a matter of minutes. That’s why Chuck Hughes has been working on an [underground project]( to help traders get in front of the big announcement… [Clicking this link will automatically register you for periodic mailings and updates from WealthPress ([privacy policy]( It’s already shown the power to warn investors not once, not twice, but FOUR times before the collapse of the S&P 500 back in January*… And now it’s signaling something much more powerful — which is why Chuck has a special message he wants to share… [Go Here to See What It Is]( [Clicking this link will automatically register you for periodic mailings and updates from WealthPress ([privacy policy]( ________________________________________________________ Bear Trap or Bull Move? Plus My Top ETF and Option December 1, 2022 The S&P 500 and Nasdaq ended their three-day losing streaks Wednesday as Federal Reserve Chair Jerome Powell appeared to confirm the central bank would start to slow down the pace of its rate hikes [Continue Reading]( How I’m Gauging Price Action as Bulls Lose Momentum December 2, 2022 The major indexes fell Friday morning on stronger-than-expected jobs data as investors worried that a healthy labor market will give the Federal Reserve more reason to continue raising interest rates [Continue Reading]( * Profit examples represent buy and sell signals generated by the Champion Indicator Strategy from 09/03/02 to 9/28/2022 and may not be typical. Profit results are based on simulated trading and not actual trades. No actual money is invested, nor are any trades executed. Simulated trading services in general are also designed with the benefit of hindsight, which may not be relevant to actual trading. There are risks involved with trading including the risk of loss. [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. WealthPress provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from Wealthpress LLC are for your informational purposes only. 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