Episode 7: High Frequency Trading (Part 1)

Female Speaker: Coming from NetPicks headquarters, it’s The Day Trading Authority with Mark Soberman and Brian Short.


Mark Soberman: All right, everybody. Welcome to the latest edition, version, issue, I don’t know what you say with the podcast, but welcome to the latest Day Trading Authority podcast. This is Mark Soberman and I’m joined today by Brian Short, as always. And also we have a special guest which we will introduce in a moment, but that will be top secret until we get to that point of the program. So again, welcome, everybody. Brian, are you with me today?


Brian Short: Mark, I’m with you, and once again, it’s great to be back, looking forward to another podcast session.


Mark Soberman: Sounds good. So obviously, when you listen to this, it could be any time of the year. These are always timely. They never run out. It’s that type of information, but it is November for us, hard to believe at this point that we’re going to be running into the holidays here pretty soon. It does impact trading a little bit, keep that in mind. Especially for the day traders out there or even you swing traders understand that Thanksgiving week always quiets down and then, of course, you already know that we’ve got our December holidays. Obviously, there’s plenty of things that should really make for some really nice trading conditions for everybody the week that we’re talking here. We actually have really great trading for most of the week until really here Friday when it finally sort of die down a little bit and consolidate it.


I want to give you a few links. Just make sure you go to netpicks.com/podcast. If you want to catch up on back issues, that’s a great place to go. Of course, iTunes is even better. You can go ahead and you can subscribe in iTunes, and that will make sure that the latest issue, podcast, whatever we’re calling it, will show up on your phone. That’s how I do it. And you can subscribe that way, which is really easy, and then you can be in your workout or in the car or streaming on Bluetooth, whatever is easy for you. We’d love to have a great review from you, if you wouldn’t mind, in iTunes. That’s always helpful. If you appreciate this free information that we share, that would be excellent. Another couple of links, netpicks.com is a great place to go. There’s something called the LearningCenter on there. There’s lots of free information. Go to the LearningCenter. Put your email in, if you want. There’s multiple articles that are written and released every single week, videos as well. You’ll learn a ton and there’s no charge for any of that.


The final thing I’ll pass along is we’re on a roadshow right now. We’ve been traveling all over the US and this is to do with our Premier Trader University, and you can also go to premiertraderuniversity.com. Make sure you put an “e” on the end of premier. And typically, if we have a roadshow going, it will–a little pop-up will come up and it’ll tell you what cities we’re heading to next, and we’d love to meet you, so give us a great opportunity to talk to you, teach you a little bit about trading, share our latest systems, and it’s been great so far. We’ve met all kinds of people in a number of cities, so a lot of that is coming up. So just go to the website; you’ll always get the latest information there. Brian, before we bring in our special guest today, I don’t know if you had anything else you wanted to throw in or if I forgot anything?


Brian Short: No. That’s pretty much it. You reminded me that I’m going to be leaving here for the week and going on the road. So we would welcome you if you are going to be in the Phoenix area, and I know this might not be timely, but we’re going to be in Phoenix, Orange County, L.A., and the Vegas Investors Expo. So if you happen to hear this in the next day or so, and can get out to those locations, that would be awesome. We’d love to meet you in person.


Mark Soberman: Very good. All right. So what we wanted to do today, a little bit different than our normal format. Typically, we have some specific sections that we cover, but we wanted to bring in Troy Noonan, and Troy has been with us for quite some time. I have no idea when it comes to calendars and length, but it’s been years and Troy is really one of our main system developers. He’s had out for the last few years a very successful Seven Summits Trader. Some of you may even use it in your trading even today, and sometimes we call it, for short, SST. And we’re really excited because we’re releasing in this upcoming week, as part of our university, the brand new system called the Trend Jumper. So it’s officially called the PTU Trend Jumper. It’s a high-frequency trading system. All kinds of focus on Forex and Futures, and I know I said high-frequency, but it actually is even high-frequency swing trading.


So it’s day trading and swing trading Forex and Futures. It’s really Troy’s brand new first thing in a couple of years, at least here, people that have been beta testing it or going crazy for it. So we thought it would be a really neat opportunity to bring Troy on. Let me ask him and Brian ask him some questions about the Trend Jumper, what’s so good about it and what it can do. So without any further introduction, Troy, are you with us?


Troy Noonan: Yeah, I am. I am, Mark. Hello, Brian. Great to be here today.


Mark Soberman: Well, it’s always great to have you, so let’s just jump right in and I’m going to ask you a few questions here. I’ll put you on the spot. The first thing I’m going to really start with is just what the heck is Trend Jumper and what’s it all about.


Troy Noonan: Okay. Good question. The Trend Jumper is a result of my calling live trades in a trade room for four and a half years, everything I’ve learned and kind of digested. And then just kind of turn into the Trend Jumper also my experience of developing and trading the SST for so long, it’s a really simple strategy based on pure price action, and what it tries to do is identify immediate support and resistance levels on the chart that it could jump off of for a high percentage reliable profits.


Mark Soberman: Yeah. You know, one thing it’s always interesting with a podcast like this is that we understand visually you don’t get to see this, so we’ll do our best to describe a few things. But one thing you may want to do, you can go to netpicks.com/hangout and you can even see, you know, some of the demos we’ve done recently just in case there’s something you want to do, or go to premiertraderuniversity.com and we always post to our blogs and things like that, walkthrough, so you can sort of visually see what Troy is going to be describing. But, Troy, what are some of the, you know, on the Futures side, you know, what are the markets where you’re seeing the best results?


Troy Noonan: Mark, I am seeing really good results on a whole bunch of markets. I’m trying to look at just a variety and for sure the four major E-minis, the Russell, the Dow, the S&P, and the NASDAQ, very consistent performers. I like to use tick charts, but you could see that it’s working on other types of charts as well. I love the petroleum products, crude oil, unleaded gas, which you turn me on to, works great with Trend Jumper. And I really like heating oil futures as well, but it works great with the grains. Wheat is one of my favorites. It works good on the others as well. And I’m also showing some DAX and Euro-Bund during the European trading hours which is also doing excellent.


Mark Soberman: So let’s say somebody has $5,000. You know, they’ve had a little bit of experience trading Futures. They’re really not profitable or they’ve been breakeven, you know, what would you recommend? I mean, those are lots of great options but, you know, there’s always, you know, we got to make decisions on what to trade. So if I’ve got five grand, what would you tell me? Where should I start with Trend Jumper?


Troy Noonan: You know, in the world of trading, of course, you know, five grand isn’t a whole lot of money, but it is sufficient. You can begin trading and Trend Jumper is an excellent choice because the risk is so small on most of these trades, and it gives you such a great risk-reward ratio that–and also just high percentage winners. I would say you can start with a Dow E-mini, the NASDAQ or even the S&P, which, you know, hopefully you practice first. The S&P does take a little bit of additional practice because it’s got some additional challenges, but with $5,000, you can do it, and I think you can trade the grainss. I mean wheat futures would be an excellent choice.


Mark Soberman: Yeah. And I think those are perfect recommendations and, you know certainly, we always say, you know, as your account grows, it’s really easy just to trade a second contract, and then you also can start to add additional markets so, you know, certainly, like Troy mentions, you know, the Dow E-mini, NASDAQ E-mini, wheat futures, it’s all going to be well within, you know, a comfort zone. Now, if you start with–what if somebody wants to start with $25,000, I mean, do you have any advice for that person?


Troy Noonan: Well, yeah, I do. I would say, first of all, pretend you only have $5,000 because if you’re new to trading or you’re new to the system, you want to protect your capital and make sure that you master the strategy, and that involves building up a belief structure. You have to actually give yourself the gift of the big perspective, okay? So let’s just say you’ve done all that, then you could easily trade crude oil, unleaded, any of the petroleums. I mean, heating oil, unleaded gas and crude oil are three amazing choices. Of course, you can go with the other ones I said, and you could throw the Russell E-mini in there, and there’s probably a whole bunch of other good choices as well.


Mark Soberman: I guess sometimes it’s also the time of day that you’re available. Most of these are US market hours. You know, when do you typically suggest people trade? I mean, as far as–do they trade during lunch time, in the evening? You know, when is the best time to typically day trade the Futures?


Troy Noonan: Well, if you’re day trading Futures, the best motion in the market is when you want to be trading. If there’s movement in the market, then the Trend Jumper just works great and you always find good movement right when the market opens. You wait a couple of minutes. With crude oil, I like starting 10 minutes prior. Actually, there’s some good movement early on, so for me, it would be 8:50 a.m. Eastern Standard Time. But with the E-minis, I want to wait until the market to open, 9:30 Eastern or 8:30 Central, and then wait like two minutes, and then from that point on, you could trade. And I think it’s, you know, good to just try to get one winning trade, a positive result, and then you’re done, and keep it very minimal and just steadily grow your account like that. Minimize your risk exposure to the market.


Mark Soberman: And I guess we would say if you’re in Europe or Australia, I mean, we literally have installed base with our systems like SST in over 100 countries. So what are some of the markets maybe they can consider if, you know, US business hour morning isn’t good for them?


Troy Noonan: Yeah, that’s a great question. Well, the European session has some great options. I mean the DAX is a really good one. You do need a larger account for that, but I think you’d be very happy with the Euro-Bund, very steady, you know, 9:00 a.m. Eurex exchange time, I believe that would be, what, 9:00 a.m. in Germany, I think, if you had to put it to a geographic location. And you start–


Mark Soberman: Yeah. I think 3:00 New York time in the morning just to–if you want to work backwards from that.


Troy Noonan: Okay. And so again, it’s just been doing really great. I mean, just today alone, the DAX had one winning trade, quitting with the first trade, 49 points. I mean that’s 1,225 euros and the Euro-Bund, I was able to get 16 ticks and that was good for 160 euros.


Mark Soberman: Yeah. That’s a nice thing about, I think, the Euro-Bund, you’re right, is you can definitely–it’s a smaller account, friendly, it’s not super volatile like you mentioned. It’s per tick is 10 eurodollars. The symbol, for those of you who want to take a look at it, is FGBL, and there’s tons of volume, so there’s all kinds of liquidity on that. It’s kind of equivalent to our interest rates futures here in the US and, you know, there’s lots of volume on interest rates futures in the US. And for the DAX, the symbol is FDAX, also has great volume. I’ve never had a problem with liquidity, including on multiple contracts, very minimal slippage, so that can be a good one.


Another one that’s been mentioned to me recently by James Kessick who works for us out of the UK is the FGBX, and I’ll probably say it wrong, but I’m going to say it’s called the Buxl. I don’t know how they say it in Europe. It’s B-U-X-L. That’s what I’m saying it, so–but the FGBX and I’ve done some looking into that and it’s got great movement, but also it’s kind of a step up from the Bund. Its 10 euro per tick, so unlike the DAX which is 25 euro per point, but it also is sort of like twice the–how do you say this–almost like each bar is sort of double the size, so it’s sort of double risk, double reward compared to the Bund, but probably not quite as much risk and reward as the DAX, so maybe it falls somewhere in between the two. So that would be two great choices and I guess–I mean, let’s talk about Forex a little bit. I mean, certainly Forex in the European hours would be good as well, as well as the US with the Trend Jumper.  What are you experiencing with Forex? What are your recommendations there?


Troy Noonan: Yeah. That was actually my next point because you do have people in Eurasia, too, and Forex is a good choice for them as well. For me personally, I prefer to use slower charts and swing trade Forex. And my favorite trade is, with the Trend Jumper, it’s using a daily chart. In that way, I just look at my charts once at the end of each session and place my trades, and I’ve just found it to be extremely easy to trade and very profitable, and quite resilient as well. And even when you experience a lost here and there, it seems to snap back with much larger winners, and 2012 has been a banner year actually for a swing trading Forex of Trend Jumper.


Mark Soberman: So do you think the approach is daily chart, just trade the euro, US dollar? Is that kind of the strategy?


Troy Noonan: No. Actually, you wouldn’t–first of all, you wouldn’t get enough activity with a daily chart. You’d only get like zero to three trades a month, for one thing, with any one chart, but also you wouldn’t be taking advantage of one of the strengths that Forex offers, and that is diversification. So because it’s an end of day chart mark and because it’s so easy to take your time, think through, place your trades, I literally follow 15 different Forex pairs, and then that keeps me pretty active because if I’m only getting zero to three trades per month per pair, but then you multiply that by 15, I’m taking several trades every week and that’s gotten me doing pretty darn good, and I’m just as busy as I want to be trading in that fashion.


Mark Soberman: I guess doing it that way, too, you sort of want to get yourself out of the prediction business, you know, trying to fundamentally guess what market is going to take off and get hot, right? I mean just by kind of having that broad exposure.


Troy Noonan: Yeah. I mean, it’s funny you bring that up because that’s so true with day trading as well. I mean, I don’t know what you felt about these sessions leading up to and during the day of the election. But in my mind, I was thinking that the markets are just going to chop back and forth, and indecision and just be terrible, especially with how close the election was. And the fact of the matter is it was the exact opposite. I mean, we saw some of the best trading we’ve seen in a long time, even on the day of the election and the day after, and leading up to it. So trying to predict, I think, is fun, but when it comes to the business of trading, I don’t think there’s any place in that, other than just you end up shooting yourself in the foot and it hurts you. I think it’s a mistake.


Mark Soberman: Yeah. I mean, I’m personally probably the world’s worst fundamental trader. I mean, every time I think something is going to go one way, it goes the other way, and that’s just being completely honest. But I actually read a study recently where they looked at Fox News, CNBC, CNN, whatever, any time the pundits come on and we’re not just talking economics, pretty much anything, and it’s literally no better than a coin toss, 50/50, on any issue. I mean, prediction. The difference is people can come on to all those different TV shows and make all their stupid and false predictions, and there’s no price to pay, right? There’s never any accountability. But us, as traders, we have all kinds of accountability because we feel it, where, we feel it in our accounts. So I think you’re right. I mean, I think when you start to make a lot of opinion, I know for me, boy, anytime I make or have an opinion is when I start to lose money.


Troy Noonan: Absolutely. I totally agree. People press me on what I think the market is going to do and I kind of look at them and I go, “Yeah. It’s going to do that.” “Will it go up?”


Mark Soberman: That’s how I am. Yeah.


Troy Noonan: “Or down? Is it going to win?” “Oh, yeah, it’s also going to lose.” I mean, it’s just going to do what it does and all I want to do is be there to take the trade that’s according to my trade plan, what’s the next trade? Because that’s my job. Running my trading business is exercising my business according to my plan. I don’t care what the market does, as long as it does something.


Mark Soberman: Yeah. I’m with you on that. I’m going to go play tennis here in a little while and one of the guys I play with, you know, knows that this is the business I’m in. He’s also a Forex guy and he’ll always–he’ll come out and say, “Yeah. The Dow was up a lot today.” And I’ll be like, “It was?” I have to go ahead to go my iPhone to really realize that it was. Even though I may have traded the market, I don’t really care if it was net up or net down because, right, we’re just trying to take advantage of action in either direction. We don’t have any bias. It doesn’t matter which way any of these things go to us and that’s really one of the beauties of it. With Trend Jumper, what would you say, let’s say–first to the–call it the beginner or advanced beginner, you know, what kind of learning curve or something like that that maybe, you know, answer that same question for somebody who’s got some experience?


Troy Noonan: Okay. Well, I mean, even as a beginner, I’m going to assume that you at least know what a chart looks like, and you know that a green bar is up, and a red bar is down. I mean, could I assume that for a beginner? That’s fairly–hopefully–yeah. Hopefully, the beginner–


Mark Soberman: Yeah.


Troy Noonan: –has done a little bit of due diligence.


Mark Soberman: Yeah. I assume they have a little bit of experience, not a lot though. You know, they definitely haven’t been successful and they have–you know, they’ve played around a little bit with trading.


Troy Noonan: Well, the beginner has to learn the rules of the strategy. It’s really simple. It probably takes about 15 minutes to learn the rules. It might take another, you know, an hour or two with some repetition to then assimilate the rules and know them through and through, but it’s a very simple, easy learning curve, much different than the SST, which did require quite a bit more. And so once you do that though, you have to also teach yourself and train how to execute your trades and that requires practice.


But the good news is that you can do it all in a simulation account for free and keep all your capital safely on the sidelines, so you can learn how to trade, you know, for no money, really. You got to open an account, but once you’ve got your account, you don’t have to risk your money. You can learn the system, learn how to trade with all the money safely parked, and then you could just take your time. I mean, there’s no hurry. If it takes one person a day or two, maybe it takes you a few days longer just because, you know, you’re working really hard at the execution or there’s one thing you haven’t figured out yet, no problem. I mean, you just keep at it. Repetition is the key, really. Like with anything.


And for the intermediate or advanced trader, I mean, you’re going to love Trend Jumper because you already know how to execute trades. You go in with your bracket order already, you have a template in your platform, you know, whether you’re using the Matrix or TradeStation or the Dome or NinjaTrader, you have a template in there. You place your trade, and you just slide your stops and targets to where they need to go. It shows you right on the chart. In essence, you know, you click on the bar that gives you the trade, the whole trade is laid out for you, all the information you need, and you just kind of follow it. It’s really simple actually. You’ll learn it really quick.


Mark Soberman: What about for somebody with the experience?


Troy Noonan: Well, that’s actually what I was just referring to those–


Mark Soberman: Oh, okay.


Troy Noonan: –intermediate traders, those with experience.


Mark Soberman: Okay, got it.


Troy Noonan: Yeah, easy, easy.


Mark Soberman: But where do you–


Troy Noonan: One of the easiest systems.


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