The Problem Simply Feeds on Itself

The problem simply feeds on its self. The promoted psychological character of a trader that turns the odds 90/10 against

There is nothing weak in the psychological character of a trader that turns the odds 90/10 against him being a winner like the industry promotes. Rather it is systemic in the system. Here how.

This premise, “You're only as good as your last trade.” Is used by sales that bring in new accounts, they will promote systems to follow the P&L and know that which of the three systems he can close them on when one has been on a winning streak.

We all know what happens is they are just starting in time for a series of losing trade.

This is the number one rule that salesperson of financial products learns. Consumers eat it up, no pun intended, as they chase missed opportunities, that is the hot running P&L.

The market, on the other hand, is a predator, it stalks the consumer and does just the opposite of what it should when the public expects the more of the same.

Over the years the old school defeatist mentality is still headlined today in virtually all of the printed marketing material.

Like, this one sent by a competitor with the subject line: “Nine Reasons Humans are Hardwired to Fail at Trading.”

What I can guarantee you is that you don’t need to be a trained psychoanalyst to be a good trader. You don’t need to know the most intimate part of your psychological makeup to win at trading.

All you need to do is stop chasing the last winning trade and stop avoiding the most recent loser based on an emotional response.

The old school’s response to this is applying statistics to the trailing P&L a something that is after the fact, “ex-post facto.”

What Contrary Thinker provides is before the fact, “a priori.” Visually it is on the left-hand side of the trading strategy before the market price data goes into the trade formulas that executes the entries and exits.

No, the Technical Event Model does not preclude individual losing traders, rather it gives the trader an external tool to know when to get off the profit run and when to stop paper trading a system in drawdown and start trading with real money.

Its primary objective is to control the big risk, avoid the maxxie drawdown; and to take full advantage, as much as your account size permits, of an approaching opportunity.

Contrary Thinker's New Paradigm is not yet widely recognized. The old transactional based breed of financial advisors will not let go of their old business model and will remain stuck.

The New Paradigm in essence or central formula is a switching mechanism that dictates when to use and when not to use particular types of trading strategies for the duration of the cycle.

Contrary Thinker's models are composed of several indicators when they all reach an extreme in the same time window they anticipate the context of the markets, which creates a strategy bias for the upcoming period.

Understanding what the forthcoming market backdrop is likely to be can help you see the better market strategy opportunities, see average or normal opportunities and helps you see risk when the market context contradicts the market strategy.

The old school says this cannot be done. They have a hard time allowing any accuracy at all to “predictive models” of market price. They certainly will not buy into forecasting market systems.

A Contrary Thinker does through its Technical Event Model. The model forecast when a particular trading strategy is about to run well or when it is about to go into a drawdown or worse yet a max drawdown.

It is not a microscopic filtering out of individual trades, so there will be losing trades from any robust trading system.

Rather, it is a top-down method that is looking for Micro events to pre-stage market particular market condition or context.

Why top down? Simple common sense, a Contrary Thinker wants to know what the larger accounts are doing. To do this, the filters are applied to larger bars compared to the bar the system is trading.

In other words, small accounts trade the smallest bar possible and larger accounts trade the bigger bars, the time horizon of small money and big money are also the same relative proportions.

The model is the combination of my %C-Original and Contrary Thinker's Historical Volatility, a measure of range and a measure of directional change respectively.

The model looks at them both on a larger bar. So depending on the bar size, the system is trading it may be a daily down to a 30-minute day trader, or a weekly bar down to a daily bar swing trader.

The Technical Event Model (TEM) uses proven proprietary models that anticipate the trading volatility of the markets to create a strategy bias for the upcoming period.

Here is the key working assumption of the four major rules, which the rules apply to the trend following, volatility breakout, types of strategies!

I did Pro-Directional strategies first because they are the most popular and normally profitable strategies. Furthermore, the rules can be flipped to fit anti-trend systems.

Lastly, to prove the merit of this model, we have put the code into visual indicators, user functions and code in our best trading systems to prove that the TEM works and isolate any names from one market to another.

For example, %BB-DBR is both a breakout friendly and a failed breakout (reversal) style of trading system. Trading the e-mini Russell, it ran a winning streak from a May 2 Rule 2 until a late June Rule 1. The system with the TEM filter made 9k on 32 trades, with Agro set to on it made 40k on a win streak of 11 trades.

The computer test turns the system off after a Rule 1 and turns on Aggressive trading after Rule 4 and 3. Therefore TEM sees %BB-DBR trading TF to have normal conditions after a Rule 2 and above average ratings after a Rule 4.

As a trader you do not need to know the intricacies of TEM, all you need to have is a basic understanding of it.

Where this breaks down

• [Draft , Jack to add failure modes and conditions under which this framework breaks down]