Peaks, Valleys, Oscillators And Other E-mini Trading Delusions

I cant deny there is an unmistakable thrill in picking that exact moment the price action on an e-mini trading chart peaks and the trend changes

. Of course, the thrill is a rare one for me because it is always accidental. I dont try to pick the price or time when the market will peak; along the same line, I dont try to pick when the market will bottom out. There may be some very intelligent e-mini traders who have some innate ability to ascertain these moments; I am not one of them and neither are the overwhelming majority of traders in the market on a given day.

Of course, there are a significant number of traders attempting determine when a peak or valley may occur. The number of traders who will perfectly time the appearance of the elusive peak in a rally is small, no; the number of traders who will discover the peak of a rally and profit from that discovery is smaller than small. In my experience, its a small fraction of the total number of those who seek to find the peak.

I always wonder why most traders dont settle for all those ticks that lie between the peak and valley of a rally. The ticks between the top and bottom of a move count for exactly the same amount of money as those at the very top and very bottom of a move. I will admit that trading the middle of a move isnt as satisfying (at an emotional level) as carving out the top or bottom 5% of a given move. Then again, at this point in my trading career I am trading to earn a living and there are only fleeting moments of emotional euphoria in the average trading year. I am more interesting in accumulating ticks, and dont really care when or how I earn those ticks; they all count the same, and I want as many as I can earn.

This bland kind of thinking I am explaining has concerned me of late, because I find myself sounding like my father. He was generally concerned with notions of efficiency and less concerned about style and as a young man, his pontifications on efficiency over style left me thinking he was a very confused man. Where was his sense of the thrill? Now I find myself, God forbid, abandoning my preoccupation with thrill and seek only efficiency. There is something very disturbing in that realization. He was right, after all.

As a younger man, I adorned my chart with oscillators and well-thought out combinations of moving averages, hoping to hit that magic combination of algorithm karma that would propel me into equation driven nirvana. Yet as I get older, my charts get more stark, more bare and bereft of those once magical oscillators. Somehow, I realized that oscillators (despite their sophisticated and undulating linage) were just derivatives of the price action. Oh, there was one distinct difference between my oscillators and the price action. They lagged the price action by 2 or 3 bars. The more I thought about it, what good are near reflections of price action that I could already easily observe inwellthe price action itself. It occurred to me that if I was to identify peaks, or even juicy trades, I needed to trade in real timenot 2 or 3 bars behind the price action. It occurred to me that things just werent adding up in my favor. For all my youthful exuberance, Id been chasing butterflies.

Gradually, not all at once, most of the oscillators disappeared from my chart. I still use a couple of indicators for filtering trades I spot on the chart in one system I trade, and the other system I trade is stripped clean of the squiggly oscillator lines. I just have price action, swing points and support/ resistance.

Something crazy happened in the decades I have been trading, too. With less oscillators and my search for ticks limited to those boring, hum-drum ticks in the middle of a solid rally because my search for the peaks and valleys has waned, I am making more money than the exciting years of oscillating my way in search of market tops.

Its a crazy story, isnt it?

by: David S Adams

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