Hello everyone, My name is Grimnokk. It was requested that I make a post here in the forums to outline my daily BF’s that I set up. So here goes that post as requested.
First I would like to tell you a little about myself. I have been a paying member of Apex since October of 2014. I have demo’d since the beginning and went live with my account in the middle of January. During my demo time I played with a lot of different systems. And what I learned from that experience is that you really do need to focus on one system and get that down. Then when you have that system down, demo another system until you can add that one to your toolbox.
While demoing all these different systems, I stumbled on to the concept of Butterflies. And they really appealed to me. They fit my trading style, my time that I had available, they just clicked for me. So I really buckled down and started studying them. Looking at different time frames, different instruments. I started pulling all kinds of data for these and analyzing these.
Starting in November of 2014 I started a trading log and kept track of all my trades. I not only kept track of wins and losses but I kept a screen shot of all the trades, what they looked like when they opened and what the results were when they finished. I would also add notes to all the screen shots about what I was thinking and what I saw and what made me take that trade. I can NOT stress this enough, that was probably one of the best things to learn from.
Get in the habit of doing this. Go back and review your trades. See what worked and what didn’t. Also don’t be afraid to hop in the pit and ask questions. Post charts. Get feedback. There are so many wonderful people here that are willing to help. Use that tool.
Ok. So let’s get down to business. I know you all are ready to see some charts and some more stats, but there are a few things that I want to cover first. I am including some questions that I have been asked and some that I have not been asked but that I think are important. I will try and edit these questions as time moves forward to keep it up to date in the first post if there are more questions that I missed that get asked later.
What is a Butterfly? A butterfly, or Iron Butterfly (BF or IBF for short), is a risk reduction strategy. It is where you sell an upper wing and buy a lower wing. This is not a get rich quickly strategy, but really are any of them if done correctly. But this is a risk reduction. By having an upper wing and a lower wing, one side is always protecting the other. Because price of the underlying can not expire above and below the two wings at the same time, one side will always profit.
What if there are no contracts available at the time of analysis? Well this is purely up to the trader to decide what to do. But my personal opinion is that you skip the trade and move on. You get to keep your capital to trade another day with. No biggie. There will be more setups.
Can I leg into a trade? Absolutely you can. You are the trader and can make whatever decision that you like. However my opinion is why would I want to? Do you honestly think that if the pair that you are thinking about legging into makes a large move to be able for you to leg in, that the price is going to stop and say “Hey I just filled this order, I’ll turn around now� Now that’s not to say that I have never legged into a trade, but I want both wings on with in about 10 minutes of each other.
Can I take a one wing trade? Again, absolutely you can. You are the trader and make your own decision. But again why would you want to? This then defeats the purpose of the BF. Remember it is a risk reduction strategy. If you only have on one side of the BF, how are you reducing your risk? You’re not. You are taking a directional trade and are no longer trading a BF.
What about stops? I am just going to say that you should use them. Period, the end, do not pass go. One loss with no stop on is going to take you awhile to recover from. Remember reduce your risk, don’t increase it.
What time frame do you take these trades? The time frame that I use for these trades is 1pm to 11pm Est. I typically start looking at my chart around 12:30 and start getting things set up. WARNING: This time frame crosses the dead zone of Nadex. So if you trade spikes your stops are going to do nothing for you. So from 5pm to 6pm Est you can do nothing with your trades. This is a risk that you have to be willing to take if you are going to trade this time frame.
Can you use a different time frame? Absolutely. But you need to DEMO, DEMO, DEMO that new time frame. Make sure you know what to expect from the pair during whatever time frame you decide upon.
Ok, now we can get to why you really came here.
Trade setups for today 02/17/15.
Eur/Gbp
As you can see in the screen shot, it was a rather small expected move about a 40 point range. This is great, that is what I look for. However where the problem comes in is look at that strikes. The only ones available at that time that were even remotely possible were .7440 and .7420. That is a 20 point spread. That barely covers the close to close range. The strikes I would have liked to have, the ones selected in yellow, are not even printing a price. No thanks I’ll skip this one and move on to the next pair.
Gbp/Usd
A 80 point move expected here. This isn’t horrible, but it’s not great either. But in looking at the strike available at the time, you could have gotten 1.5380 and 1.5340. The prices were about right for these, however you are only covering 40 points of that 80 point expected move. Strikes I would have liked to have gotten, the 1.5320 might have been able to leg into, but the 1.5400 there was no way I was willing to take a leg in for that one. Still way out there as far as price is concerned. No thanks, I’ll move on.
Usd/Chf
Another 80 point expected move here. Again not horrible, but not great either. This one is a bit different than before. I would be looking for the .9380, which you might have been able to leg into @ 22, but there was no way I was getting that lower strike of .9300. This pair has no setup either. No thanks, I’ll move on.
So what did we learn today? It’s ok to not take a trade. I would much rather keep my capital to trade another day than chase a trade and give that capital to the MM’s.
Hope this has helped some. I will try and continue to update this post with more trades as I take them.
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