Feature in Focus – Profit Seeker

Published on: January 04, 2023

When you are trading, have you ever had a “déjà vu” sensation? That feeling that you already lived that same situation before, especially during or after a losing trade, but you just can’t place it when it happened? Frustrating, isn’t it?

This is where Profit Seeker comes in. When creating your own Trade Types (trading setups) and specific Hashtags, you will be able to create statistics that will allow you to discover patterns you never thought possible, but also track your trades as no other platform does.

You will know which Trade Types are giving you more profits, you will know what trades you are having trouble with, #fomo, #momentum, #hope, and what time of day you are more active but not necessarily more profitable. What day of the week are you trading more long positions than short positions, and much more.

With all the statistics Profit Seeker is able to give you, you will finally track your “déjà vu” trades.

Notes:

Today we will be taking a look at the Profit Seeker. With this tool, you will be able to slice and dice your trading results in ways you never thought possible. Go through your trade history to find anomalies, for example, do you know which day of the week your performance is stronger? Which time of the day, your performance is weaker? Are you trading more shorts or longs? Are you prone to trade more breakouts or pullbacks? With all this knowledge and much more, you can fine-tune your trading, taking it to the next level, so you can do more of what works and less of what doesn’t.

And let’s start right off with our first example, we have a nice upwards running PnL, we can see that daily performance has been positive, with Mondays showing the best performance of the week and Fridays the weakest. We can also see that 4 pm has the worst performance, so let’s take a closer look. We click on it, we can see the running PnL of that time period with a drawdown of $3K, and let’s now look at the trades done during this period, by opening the trade list. We can see the culprit here, a $3K loser. Looking at the hashtags this trader wrote, the trade started as a scalp, there was momentum at that time, which means… the market was moving fast, the trader hesitated, meaning… he thought of closing the trade, but obviously that did not happen, and it became a hope trade, the trader simply started to hope that the trade would come back to him, and the longer he waited, the further prices moved away from him. Notice how a trade that started as a scalp, in the end, the trader spent 38 min in it. He waited, and waited until he could not take it anymore and took the loss.

Let’s reset the filters.

Something we can also analyze, is the longs’ performance… we have a nice upward-running PnL, we have a bit of a drawdown here, and Tuesdays, are not a good day to trade long positions. 

Let’s now look at the shorts’ performance… also with an upward running PnL but showing some draw-downs, and in terms of the day of the week, Fridays, are also not a good day to trade short positions. We can also analyze more closely these draw-downs, by selecting that period on the chart itself, as you can see.  And let’s select the 9 am and the 2 pm time periods, which are showing the worst performance, so we can better analyze the combined drawdown of both periods.

Let’s reset the filters again and let’s move down, where we can also analyze the trades by account, symbol… by time in trade, but also by trade type and hashtags which we can set at the time we are creating the trades journal.

The 2 biggest trade types this trader has traded, are scalps and ranges. Let’s analyze them more closely. Looking at the scalps first, we can see an upward-running PnL, and that big drawdown, coming from that $3K trade we’ve looked at before. Looking now at the range type, the running PnL is a bit different. We had an initial drawdown and slowly this trader has been trading ranges more accurately.

Looking now at the hashtags’ performance, remember that hope trade that the trader used, we can see that 7% of all trades have been hoping trades, of which 9% have been winning trades and a whopping 23% have been losing trades. Looking at them more closely, we can see how these trades have been hurting this trader, and if we look at the hashtags pairs, we can see that momentum trades, where markets are moving fast, are one of the problems this trader is facing. He is hesitating and when the market run from him, he seems to freeze, not wanting to take the loss and starting to hope prices come back to him. We saw that 9% of the hoped trades do generate a profit, but the losses he is taking… sooner or later, will kill his account.

This trader needs to better plan his trades, need to have a set of rules when trading fast markets, or just stay away altogether. He cannot hesitate taking a loss. He needs to stop hoping prices come back to him and get out of the position as soon as possible.

Another tool Profit Seeker has, is a statistical table, so you can easily analyze some of the most common statistics traders like to look at. Remember, all statistical data we show is based on the calendar period you selected here.

So we can see this trader’s maximum gain and drawdown, his average win and loss trade, and also his largest win and loss trade, which clearly shows a problem. We can also see how many winners, losers, and scratch trades he traded.

Below we can also see his percentage winning and losing trades, his profit factor, the average MAE and MFE, the average hold time per trade, and when applied, also the several commissions paid.

Let’s now look at another example, where we have a trader with a big drawdown of $11K. 

Something we can do here is to create a set of rules to see if we can limit this trader drawdown, we could for example stop trading after a couple of losing trades. 

Let’s say the trader stopped trading after 8 consecutive losing trades, we can see that his drawdown would diminish to only $8K. And if he had stopped trading after 4 consecutive losing trades…, now his drawdown would have been only $2K, and his profit would be at $9K instead of only $681. 

This is the power of the Profit Seeker. It’s a fully interactive tool, and I guarantee you, you will spend fun hours analyzing your trades and finding patterns in them, you never imagined.

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Order Flow itself is simply information. Just like charts, it can be used in a number of ways, some good and some bad. But let's first break down order flow into it's components so we all agree what we are talking about:

Order Executions/Tape Reading - This aspect is the real flow of orders. It's the information we see in Time & Sales, Footprint Charts, Cumulative Delta. It is looking at market orders, either as they execute or historically. I guess this is the "true order flow". Every trade is a buy and a sell. We look at market orders because we consider them to be more aggressive. When someone trades with a market orders, they are giving up a price to get an instant fill. Limit orders on the other hand just lazily sit there waiting for a market order to hit them. Often these are market makers with no directional conviction. So we see market orders as being more significant.

But we don't use these in isolation.

Volume Profile/Positions - The tape reading part helps us assess various things like momentum, traders getting stuck, balance of trade BUT the volume profile helps us understand where people are positioned and likely to get stopped out. I sometimes call this "Order Flew". It's important to know when trades will be "washed out" - for example - if we have a volume cluster on the S&P500 Futures and the market moves up 100 points and back down to it, it's unlikely short term traders on either side that were positioned there will still be there. But recent, nearby volume helps us assess areas of positions.

Market Depth - The bids and offers, the lazy passive orders waiting to be hit. This is part of the story but in terms of overall importance, I'd put it at around 20% at most. For example - if you return to the high of the day on any market, the offers will be quite large directly above the high. It means nothing at all. It's just a quirk of the market. It does not help you tell if a price will hold. On the other hand, if you see large depth and as we approach it, we see more added to the depth in front of that price, it means others are front running that depth and that is a useful bit of information.

This is the key - it is all just information. Just like price charts are information. When people look at Order Flow, they consider it to be a technique more than a set of information. They look for things like iceberg orders and decide to make a one rule trading system to fade every iceberg, For these people - yes, order flow trading is overrated because they are trying to ignore everything else going on in the markets and construct a trading system a chimp could execute.

For those looking to improve a decent trading approach, the best thing to focus on in Order Flow is momentum. Once you can read momentum you can:

• Avoid getting into positions when momentum is against you.
• Confirm trades are working after entry when momentum goes your way.
• Exit trades in profit when momentum fades.

That's perhaps the easiest way to use order flow because momentum is easier to read. It's about the market continuing to do what it's already doing. On the other hand, reading a turn in the market with order flow takes a higher level of skill and a little longer to learn.

Order flow can't put lipstick on a pig. It won't help you 'improve' something that doesn't work anyway, which is why whenever someone calls me, the first thing I ask is what they are currently doing and we discuss whether they need a reset or whether it will actually help.

When Jigsaw started back in 2011 - we were one of the first in the space and certainly had the best education. It was always going to attract the underbelly of the trading education/tools world and now we see stuff out there that is so complex but so impressive and futuristic that new traders are drawn to it like moths to a flame.

So here's my advice when looking at Order Flow

• Order Flow can't improve something that doesn't work.
• Order Flow can be used on it's own, without charts to enter and exit the market but you also have to be able to recognize different market states that need different/altered setups. There is nothing magical about this.
• Don't start jumping at shadows and take 50 trades an hour in your first week looking at Order Flow, be selective. It can be exciting to see cause and effect play out in front of you for the first time but don't overtrade.
• Do drills to learn how to read it before you trade it.
• Markets can only go up and down. Don't overcomplicate it. If you have too many Order Flow tools on your screen - you will not be able to make consistent decisions. Less is more.
• Take time to choose a market with a pace you like. Interest rates might send you to sleep, the DAX might give you a heart attack.

It is hard to see how a set of information could be overrated. It is true that some methods of presenting this information are better than others. It is also true that some people simply get on better with different tools (e.g. Footprint vs DOM).

There's a middle ground between complexity and simplicity that will leave you making consistent decisions where you improve over time. For those people, Order Flow will be way underrated because they will be the one's getting the most out of it.

Those that jump in with both feet on day one and those that have 100 different tools up, for those, it's a painful experience.

Keep it simple and manageable. Start with momentum reading and build from there. You will never look back.