Gaming the Markets
Posted on September 24th, 2008
Written by Richard
Posted in: N/A (old archives)
We played a game today in the eotpro live room, that I think I had seen in an article by Linda Bradford Raschke a long time ago. I’m not sure. [Edit: I found my original post on it here. Anyway, the idea is to pick a timeframe, and set a timer for some random amount of time near that timeframe. When the buzzer goes off, you must make a directional trade. And, you must stay in the trade for the amount of time you picked. Then, you repeat the process.
Obviously, you do this in a sim account!
The idea is, I think, twofold:
- You improve your market intuition. You can do this exercise with your indicators on, and you can do it with your indicators off to help you as a chart reader. You can do this exercise watching only the Level 2 quotes to improve your tape-reading ability. The possibilities are endless. And, since you are making trades, you are more likely to stay focused and interested in what you are doing. So many traders, myself included, can’t watch the markets without their eyes glazing over, if they are not trading.
- You get over your hesitancy to get in a trade. If you follow the rules, you must act… even if you are not sure of the market direction, you have to pick a side. I think this ability translates well when you go on to do actual trading. The best traders I know tend to have a market bias in their head even before their entry signal pops up. Then, they can act immediately when their intuition and their signals match. It’s a real advantage.
Doing this exercise at several time frames is useful, because your bias for the next 5 minutes will be different than your bias for the next 30 minutes, for example.
Anyway, my time in the live room covers the lunch hour, so we rarely get big moves while I’m on. In a low-volume environment, it’d be best to chose 10 minute windows, probably. To keep things exciting, though, we went for 2 minute windows. That is: I set a timer for 2 minutes. When it went off, the room voted to get in long or short. I got in and set a timer for 2 minutes. When the timer went off, I got out of the trade. Then I set a timer for two minutes to trigger our next entry.
Even in this horrible choppy section of the market:
We broke even exactly after 4 rounds. And, sadly, not 10 seconds after our last exit, the market surged in our favor. We would have had a big sim profit, if time were just shifted a short amount. Those are the breaks! We’ll probably play this game once a week or so, since people had fun.
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© 2010 Richard Todd. I am not a financial advisor, and nothing on the site should be considered investment advice or actionable recommendations. I'm just an individual, saying what I think, and sharing my experiences.