Strategy Building - The lab experiment.

Hello, Anons.

Today, we learn how to stop getting spoon-fed and how to build strategies for our trading journey.

You need to keep this list in mind:

1. Journaling is vital.
2. Some strategies can die if you don't take care of them.
3. To survive, strategies have to evolve over time.

0. Foreword

Years ago, after the first few months of crypto trading, it was very clear to me that I didn't know sh*t and was relying on other people's strategies to reach break-even.

I felt like a real donkey at the time, so I decided it was time to develop some actual strategies. I decided to treat it as a science experiment. I was the researcher, the spreadsheet became my laboratory, and the strategies were my little lab rats.

My little strategies were nurtured, forced to fight in some wicked game, and put down without remorse if they didn't meet the goals. Never love a strategy unless it loves you back.

Let's get to work.

1. Toolbox

The first thing you need is your Kiyotaka chart; the second is a spreadsheet.

Use the chart to develop your speculations. I don't care what strategies you adopt, you can use Market Profile, TA, Fibs, or f*cking moonphases. This is not the topic of the guide.

What I want you to do is for each strategy, you write down the following:

1. Your speculations. These will build your convergence theory. At least THREE E.g.: a price path, a certain level, a high sweep, and so on.
2. At least three "why" for taking a trade. At least THREE. They should converge to make a solid argument.
   E.g., a draw on liquidity, single print repair, mean reversion, Fibonacci golden ratio, etc.
3. At least one invalidation argument. They should converge to make a solid invalidation point. At least THREE.
   E.g., when you feel like a donkey because you're clearly wrong.
4. Your trigger for opening a position.
5. Your risk (stop loss). It can match your invalidation argument.
6. Your reward (take profit/s).

It doesn't have to be fancy, and should look like the following:

Let's go over each point and try to make sense of them.

2. Thought process

Disclaimer: I'll do this on top of my head. If you use this thing to trade you do it at your own risk. If I hear you complaining you took this trade and f*cked it up, I'm going to give you the hat.

1. Speculations

Let's have a look at the Btc chart.

Very well, we have:

a. a very consistent VRVP Value Area spanning across different days. There are three volume spikes in the VA, and we are currently sitting in the lower one. We are above VRVP VAL. We know that price tends to slide through Low Volume Nodes (LVN) and slow down in High Volume Nodes (HVN), where most of the liquidity is pooling.

b. There are some Single prints left behind, and we know that they usually attract price.

c. VRVP POC is right above us. We know that's the fair value, so it tends to attract price. Go read the market profile series if you don't know what that means.

d. We are sitting on the lower band of VWAP, and we know that price reverts to mean. However, the whole VWAP is now closing into our level. (This is purposely bullshit).

It looks a bit smelly, so I need more data: let's zoom in and have a look at the heatmap.

e. HA! there's a lot of orders sitting right below us. I speculate most of them are stops! Three interesting levels: 90k, 89k, and 88k. see the following figure.

Alright, we have found some speculations. Let's write this stuff down so we remember.

This is how your spreadsheet should look.

Now you have a clear entry, stops, TPs.

Now, I want you to do this THREE TIMES for each charting session. And then I want you to compare results for each strategy. What was strong? What was weak?

For example, the VWAP thing is total bullshit, I put it there because that thing has no foundation.

I won't go through it again, I'll just make one example for the sake of it.

Let's ask our favourite dead mathematician. I'll just do it quickly. I'M HALF ASSING IT. But stay with me on this, I'm pointing at the moon, don't look at the finger. Okay Anon?

What does this medieval Italian Cabal say? We can ask ourselves: is this a trend or a retracement?

If it's a trend, we missed our best entry already.

A next best entry for the trend might be the golden ratio area between 0.618 and 0.786, therefore a (contrarian) long to that magnet.

Let's check what happens if we treat it as a retracement.

Obviously, same sh*it.

Now, a golden ratio area seems like a good magnet for both situations. We could long from to the golden ratio area upon a retest of the 87k.

To my dear Elliott Wave trader friends: forgive me, because I'm about to sin.

But what if this is a wave 4?

What if this is a B wave instead?

Look for convergence in different theories and methods, and write them down in a NEW section of your spreadsheet. I want you to plan a new trade based on new speculations completely.

Warning: this is BS.

Let's say I decide it's a wave C waiting to happen, so we complete wave B and then target highs to 100k. But we only hit 97k. Seems unlikely for a C wave.

You need to observe what happens. Does something hold? Then it will survive. Delete what didn't survive, like the VWAP bullshit I put above which will clearly fail.

Did the Fibs survive? Good, carry it forward in a spreadsheet where you keep building on your previous speculations that deserve to survive. And move the failed ones in a "killed off" section. They most likely won't be revived, but they deserved to be remembered. So you won't make the same mistake again.

So for example, let's say this trade goes well, and I was wrong on the VWAP thing (because I made it up) and about the EW (because I can't do EW yet, I made it up again).

This is how the new spreadsheet will look.

Now, for the next charting, you can keep speculating on fibs, and build again on your profile speculations.

When one or more fail, delete them. Look for new alpha.

The advantage of this is that you are looking for convergence. When MANY things point at the same move, you have built a good speculation. If they succeed, it means you were right in your assessment. Keep following that track to confirm it wasn't just luck.

Of course you can still f*ck up positioning, entries, and other stuff.

But that's a lesson for another guide.

Until next time.