Trader Arrested for Manipulation in 2010 Flash Crash

Day Trading CoachThis week, the U.S. Department of Justice arrested trader Navinder Singh Sarao, who is believed to be partially responsible for the May 6, 2010 Flash Crash. U.S. prosecutors believe Singh weakened markets through manipulation to cause 2010’s 15 minutes of financial free fall chaos that brought the world’s biggest markets to their knees. His arrest has left regulators and investors very concerned.

How can one person have such influence? Sarao allegedly employed a technique called “spoofing” and “layering.” By placing and removing thousands of orders on the E-mini worth tens of millions of dollars over hundreds days outside the range of market price / execution, it is believed he was able to reduce the price of E-mini futures. Once price dropped and became imbalanced by the cycling of his algorithm during the trading day, he was able to sell contracts ahead of declines and buy them back before anticipated recovery.

On the day of the Flash Crash, prosecutors claim Sarao created vulnerability in the market by repeatedly placing large orders over several hours. It is said he caused close to $200 million worth of downward pressure on the E-mini S&P, thereby representing up to 29% of sell orders. A large trade from an unknown U.S. investor then contributed in causing the crash. As a result, other markets such as the Dow Jones industrial average, began a virtual free fall. The Dow dropped nearly 600 points in minutes. Eventually, the major indexes recovered. However, the confidence of ordinary Americans was shaken. In addition, the event has brought scrutiny to the nature of electronic trading and regulation; particularly that of high-frequency trading and the effectiveness of said regulation.

Over his five-year manipulative trading career, it is believed that Sarao made $40 million. During this time, the Chicago Mercantile Exchange (CME) tolerated Sarao’s alleged manipulation and market destabilization. As a direct result of the Flash Clash, $879,018 is his estimated profit.

Currently, Sarao is awaiting extradition. He was arrested by British authorities on Tuesday. The CFTC is seeking, “disgorgement, fines, and trading suspensions” related to wire and commodities fraud among other counts. His arrest was largely due to a private whistle-blower’s detective work and financial analysis of the Flash Crash, which was provided to the CFTC.

A month before the crash, Sarao created a corporate entity in the Caribbean called “Nav Sarao Miling Markets.” Also before the crash, the CME had questioned him about his trading activity. In response, Sarao called the exchange, and in an email to his own broker describing this, he told the exchange “to kiss my ass.”

What do you think?

Webinar – Have a Trading Plan Before Entering the Market

Remember, the training in this video does not even scratch the surface of the trading techniques taught in the eight week coaching program known as Mentorship. A new Mentorship class starts today, April 22, 2015. Click here to find out more. We can get you up and running today with the first week’s materials.

Do you make intuitive guesses or blindly trade without having defined trading plan? For starters, it’s important to be aware of upcoming news events. John Paul shows you where to get a news indicator that will show you times high-priority news events will occur. You can then avoid the volatile conditions these news events usually cause. After the news volatility subsides, you can look for a trading opportunity as discussed in this video. Remember the market is a zero-sum game, trying to create equality with buyers and sellers. There is no frequent correlation with positively perceived news driving markets higher or negative news creating bearish conditions.

The Atlas Line produced a short signal at around 10 a.m. EDT. Why? Two consecutive candles plotted below the dashed Atlas Line. Price soon headed short, creating favorable conditions for this trade. If price was to later close twice above the line, then you’d see a long signal.

We know how John Paul uses the ATR to determine the profit target and stop loss on the E-mini. What about the 6E (Euro FX)? At around 40 min in, you’ll see how he performs the calculation by moving the decimal points over.

Later in this recording, you’ll learn some very important advice about trading with ranges and the 0%-50%-100% Fibonacci tool.

The Difference Between NinjaTrader’s Dynamic and Static SuperDOM

We often get asked about the difference between NinjaTrader’s Static SuperDOM and the Dynamic SuperDOM. For those of you unfamiliar with what a SuperDOM is, it’s NinjaTrader’s way of displaying the instrument’s currently traded price, bid buy and sell prices, and allows for order placement among other things. Some platforms call the DOM a price ladder or matrix.

What’s the difference?

In the following picture, we can see a Dynamic SuperDOM on the left and a Static SuperDOM on the right both set to the same instrument. Is there a visual difference? Yes! On the Static, the price rows are “static,” meaning the rows stay in place regardless of price movement. When price reaches the lower portion of the DOM and exceeds it, the Static price ladder is “climbed down”. The inverse is true when price rises to the highest rung of the price ladder. In comparison, the Dynamic DOM constantly shifts prices in each rung of the price ladder – it does not wait for price to reach the upper or lower limits of the ladder.

How do you tell them apart?

The Dynamic SuperDOM has a HOLD button on the top left. The HOLD button assists you with submitting and modifying orders. During volatile conditions, you can “freeze” the price movement. The button will then change to HELD.

Why are there two types of SuperDOMS?

The first reason is trader preference.

The second reason is that the Static SuperDOM uses patented technology from a company called Trading Technologies (TT). Quick history lesson – TT was granted patents after NinjaTrader already adopted the behaviour of the static SuperDOM. Since TT can blow the whistle on companies infringing on its static DOM patents, NinjaTrader was proactive and agreed with TT to charge NinjaTrader users $0.10 per side for trading futures via the Static SuperDOM. This fee and agreement has been established within NinjaTrader since 2006.

Do I get a choice between Dynamic and Static?

Some brokers may require use of one type of SuperDOM over another. We find that both are suitable, although we prefer the Dynamic SuperDOM because there are no extra fees to use it. In some cases, brokers will provide Static SuperDOM credits. Otherwise, the credits can be purchased from NinjaTrader – http://www.ninjatrader.com/purchase-transaction-credits.php

Part 2 – Live Atlas Line, Super Year, Stop Losses, and More – Live Webinar Recording

Here’s part two of the most recent webinar. Miss the first webinar? Click here to watch. First, we start off with a review of the Super Year. We already had a good trade with a retracement from the previous 50% level for about 22 points around March 16. If price breaks the most recent highs, John Paul expects for another good long trade. Don’t expect the market to go straight up! That’s why we use a large stop. The market rarely goes in one direction consistently. Therefore, your stop loss has to be large enough to allow for regular price movement. What about a time-based stop? Watch the video to find out.

You’ll also see the first Atlas Line signal of the day plotted live. It’s configured to play a doorbell sound when a Dbl Bar Long or Dbl Bar Short trade appears. The profit target for the first Atlas Line Dbl Bar Long is 2.25 points (rounded down from 2.4) or 2097.75. The first stop in place would be the catastrophic stop (4.5 points – 2x the ATR). If the profit target or catastrophic stop is not hit, then we’ll manage the trade by getting out at four candles (20 min.) on a 5-min chart. In 20 min. time, that could be a small profit, break-even, or loss. A prove-it stop is another type of stop whereby a closing candle on the opposite site is the point at which you close your position. You’ll have to watch the video to see if this trade works.

One of the things John Paul teaches in Power Price Action and Mentorship is trend identification. A trend on a 5-min chart looks different from trends on an hourly, daily, or weekly chart. For 5-min charts and the E-mini S&P, John Paul uses the 6/6 rule to identify trends. Six candles plus six points occurring is a trend. This is explained further in the video.

Near the end of the video, you’ll see how to calculate the ATR value on the 6E and how the Atlas Line performed.

Click here to find out more about our next Group Mentorship session that begins April 22, 2015. All courses and software are included.

CME E-mini and Equity Trading Hours Explained

We often get asked for the official E-mini S&P 500 (ES) trading hours. The CME Group website has all the hours listed for the various E-mini markets as well as other equities, energies, commodities, and interest rate markets. Click here for the full table or click the image below to see the full list.

Highlighted is the regular E-mini S&P 500 market that we trade. Note the time shown are US/Central (currently UTC-5), so that is why 8:30 a.m. open outcry is listed instead of the US/Eastern (UTC-4) equivalent of 9:30 a.m. Therefore, if you want U.S. East Coast time, add an hour to all times shown.

Click the image to see the CME’s full list of trading hours

We find it best to trade during hours of consistent volatility. This means we start looking for trades at the open outcry time (market open), even though the market is open nearly 24 hours. On weekdays, the E-mini S&P 500 is available from 6:00 p.m. EDT the previous day until 5:15 p.m. EDT the current day with a trading halt from 4:15 p.m. to 4:30 p.m. EDT. Click here for contract specifics.

Live Atlas Line Signals During Price Action Webinar – March 13, 2015

The Group Mentorship Program that begins March 25, 2015 includes the Atlas Line and many other trading methods. Submit the deposit and you’ll receive the first week’s course and software head of time! Click here to find out more.

In this webinar recording, John Paul shares his live charts to a large audience of traders. In the video, he first covers long-term trading strategies for 2015. Even for daily charts for swing trading, the ATR can be used to determine expectations of where price can reach, either short or long. The market has consistenly retraced for or five candles for each dip. One option is to go long two points above the previous high. The expectation is to wait 54 days for the market to reach this point. If the market never reaches this value, it is statistically unlikely that a higher high will be made. Watch the video to see this explained further.

At 19:40, John Paul shows the Atlas Line because a signal has occurred. The Atlas Line price action trading software produces live Long or Short signals. A signal is produced when two bars close above (a Long) or two bars close below (a short) the Atlas Line (the dashed pink line). There are a number of stop loss strategies discussed. If the profit target is not hit, you take whatever stop comes first. Were the live signals in this webinar successful? You’ll have to watch to find out.

Good Friday 2015 Trading Hours

We’ve had a few calls and questions during the Mentorship training about the CME / ES trading hours for tomorrow’s Good Friday holiday. Simply put, the CME equities like the E-mini S&P 500 will be closed tomorrow as of 9:15 a.m. EDT (UTC-4, New York Time) onward. The next time they open is Sunday evening at 6:00 p.m. EDT. The last time to trade the E-mini is through the evening tonight, although activity may be slower than normal because of the Friday holiday.

In other words…

Thursday, April 2, 2015
Normal trading hours through the day and overnight

Friday (Good Friday), April 3, 2015
CME equities (E-mini S&P) closes at 9:15 a.m. EDT (UTC-4)

Sunday, April 5, 2015
Markets open at 6:00 p.m. EDT (UTC-4) as usual

Click here for the official statement from the CME.

CME Index Futures Trading Holiday Calendar for 2015

2015 Trading HolidaysHere is a look ahead for trading holidays in 2015…

*All times listed are in the US/Eastern (ET) time zone; the same as New York time. All listed closures apply to CME equity products (futures) such as the E-mini S&P.

Holiday Market Hours
Dr. Martin Luther King, Jr. Mon., Jan. 19: Early close at 1:00 p.m. ET
President’s Day Mon., Feb. 16: Early close at 1:00 p.m. ET
Good Friday Fri., Apr. 03: Early close at 9:15 a.m. ET
Memorial Day Mon., May 25: Early close at 1:00 p.m. ET
Independence Day Fri., Jul. 3: Markets close early at 1:00 p.m. ET
Labor Day Mon., Sep. 7: Early close at 1:00 p.m. ET
Columbus Day Mon., Oct. 12: Normal hours
Veteran’s Day Wed., Nov. 11: Normal hours
Thanksgiving Thu., Nov. 26: Early close at 1:00 p.m. ET
Christmas Thu., Dec. 24: Early close at 1:15 p.m. ET
Fri., Dec. 25: Closed
New Year’s Fri., Jan. 1, 2016: Closed

Click here for the official listing from the CME website.

Gold Investment Strategies in 2015

Gold FixingAll About The Big Picture….

2015 is shaping up to be a somewhat-volatile year for the gold market. January brought on a fairly sharp uptick in prices following alarming lows late in 2015. And yet, the recovery already appears to be on hold, with prices having dropped a bit in recent weeks (though not to the low points of last November). Naturally, there’s a great deal of disagreement among investors and financial publications as to where gold prices are going from here. BusinessInsider.com posted a widely read report citing a very negative outlook on the price of gold from Credit Suisse, which named strength in the U.S. dollar and the rise of equities as financial hedges as the reasons for bearish predictions. Even so, plenty of independent analysts have forecasted a relatively strong (though not lucrative) year for gold.

Given this level of uncertainty, now seems an appropriate time to revisit some of the strategies involved in playing the gold market. Back in 2012 we posted an article on the Gold Fix, essentially outlining the process by which six specific London bankers meet to manipulate the price of gold. Full details are in the article, but it basically goes like this: these men meet and state values of gold they wish to buy or sell until the group reaches a net sum of zero. Independent interests are naturally at play in this process, and for that reason the meetings add an element of unpredictability to day’s end gold prices. This is the case regardless of larger trends in the market.

Before anybody gets too worked up over this manipulative process, however, consider that it’s mostly relevant in day-to-day trends. This can perhaps have a strong impact on gold futures and ETF traders, but for the gold market as it pertains to the actual purchase of precious metal, daily manipulation shouldn’t be as significant a factor.

To clarify, many investors view the concept of gold investment as the purchase and storage of gold bullion—a process that generally takes place online at independent gold markets where prices are updated in accordance with world standards. However, the idea with investments like these, as opposed to playing futures or ETF markets, is long-term holding. Online marketplace BullionVault.com manages over $2 billion in assets at any given time with this practice and encourages investors to feel confident with long-term holdings by offering a choice of secure vaults around the world for the actual storage of physical gold. While the site also allows for immediate purchase and sale of bullion to suit investor needs, the idea of storing metal caters to a more far-sighted approach that’s typical of this corner of the gold market.

It’s ultimately clear that there are two different sets of strategies to apply depending on your brand of gold investment. For those who take a day-trading approach to the market, gold-fixing manipulations add a degree of uncertainty to an investment that’s already facing increasing instability because of external factors. And for those looking more to long-term storage of physical gold, larger market factors such as those pointed to by Credit Suisse in its 2015 outlook will be of the greatest concern.

For most strategic gold investors, it’s the latter that should be more relevant. While gold certainly can be day-traded, and even online vaults cater to this style of trading, the more traditional approach to this particular commodity has always been long-term. People generally invest in gold as a hedge against deflation in currency values. If prices rise, it’s because of varying unease and uncertainty in world economies. So even in a 2015 that’s looking difficult to predict for gold, keep your eye on the big picture. Gold fixing is impossible to predict and shouldn’t have a strong impact on a long-term investment, and week-to-week shifts in prices as we’ve seen early in 2015 will blend into the larger trends of the year as time moves on. Investing in the first place is a decision for each individual investor, but in gold, reacting to small shifts is foolish once an investment is made.

How to License Indicators for NinjaTrader | Day Trade to Win Getting Started Licensing Steps and Support

For new and existing Day Trade to Win clients, this video tutorial will show you exactly how to get up and running with our software for NinjaTrader right away.

Many of our day trading methods include software programs (indicators) for NinjaTrader. In order for these indicators to work with NinjaTrader, you need to follow the steps shown in this video. Once your computer’s license has been activated, you will be able to install and use our indicators on your charts.

These instructions are intended for new customers and existing customers who are using a new computer.

Here are the steps in the video:

1. Open up NinjaTrader > go to NinjaTrader’s Control Center > go to Help > 3rd party licensing
2. For Vendor name, type in “DayTradeToWin” without quotes with the exact capitalization shown
3. For User defined ID, type in your first name and last name without spaces, e.g. “JohnSmith” without quotes
4. Click Submit
5. Your Machine ID license will be generated below > select the entire license with your mouse OR right-click and Select All > Right click > Copy
6. Go to your email and compose a new message to [email protected]
7. Use a subject like “NinjaTrader License”
8. In the body of the email, right-click > Paste (your NinjaTrader license should appear as copied from the previous step)
9. Send the email
10. Await our response to confirm your license has been activated

All of our courses and software are provided in the Mentorship Program. Click here to find out about the next class.