The Market Is About to Do Something Insane Next Week…

0:00Today is asking anything Friday and one of the biggest questions that we keep having is when is the new spy plan going to be available so we're migrating the plan ETF that we had had for a little over a year into a spy specific plan and a NASDAQ QQQ specific plan. Then we're going to be having a sector rotation plan where anytime the sectors are really moving you're going to be in whichever sector is moving on top maybe even the sector that's coming off the bottom as well. Then we're also going to be building a plan that has the sector intelligence map that shows you not only which sectors moving but which industries inside which sectors are moving and really narrowing down to where the money is going to. But the first plan that we're going to be lighting up is the spy plan and we've been working unbelievable hours to do this Joe and deep thought have literally been working almost 24 hours today. I don't know when they're sleeping to get this this plan in. And I can show you some preliminary results now here's the thing it will change I'm telling you right now it's not set in stone but there are some changes that will be coming.

1:01But a lot of this on the entry side is quite familiar that you're already familiar with I should share my screen professional youtuber at work over here. There we go. Okay, so this is run 180 that's got that not Scott but Joe and deep thought have been working on. And in this over the course of six years it traded 43 times now I do want to talk about some some some statistics that we should talk about here right so everything we're going to be talking about is based on historical data right this is no guarantee a future results right past performance is not indicative future results. This is a video made for educational information purposes only don't listen anything that say I'm just a random guy on the internet now with all that out of the way the back test was actually created on two years of data. And then it was sampled on four years of data beyond that point which I didn't realize I only found that out yesterday I was like wait what okay good job guys. And then we do have data from 2016 that we're going to throw this this back test at as well to confirm more out of sample data that the that the strategy should hold true now again remember this is subject to change but I'm going to give you all the all the tea that I can spell right now.

2:20So over the course of six years that's 43 trace now some of you are like well that's not enough remember this is not meant to be the one and only thing that you trade that that I trade in the out of fund I should say because I am the portfolio manager for the out of fund. This is supposed to be one of the multiple things that we're going to be running concurrently in the out of fund and if it sets up eight times a year you know what I like that every couple of months it sets up cool that means I can do other things right. 79% win rate like this is crazy talk like actual crazy talk 79% win rate which definitely made me feel like man this could be overfit but we'll talk about overfit in just a couple of minutes average win 3.32% on the spy and average loss 0.6% on the spy and that gives you a profit factor your average gain divided by average loss of five to one basically so your risk to return your risk to return I always like to say risk to return but it's really returned to risk your return to risk is five to one in this case in this back test results.

3:29Now going a little deeper here are some ratios that you might be interested in just the sortina ratio gain to pain gain to pain monthly relative risk of return. Mar ratio tell risk ratios now let's talk about what the entries and exits look like so first off 10 over 20 price over 50 right trending up higher obviously that always makes sense because it's just math it always works next getting a buy signal in the the S and 500 next the fear and greed going anywhere from 0 to 82 so widening out that ban from 0 to 82 really improve the results now I also want to I also want to to to stress the fact that these are not random numbers right we ran sweeps on these things we we were like okay well what 0 to 6 what 0 to 60 what 0 to 70 right we ran all the numbers and we found that the sweet spot was 0 to 82 so that's pretty interesting right no overhead order blocks and interestingly enough this is the role we already had in place

4:31that are at least 30 days old within 2% price because you want that price movement right you want to be able to make it run next we want to make sure that the fear and greed is rising on the spy which by the way I saw some people talking about hey what didn't you take the trade I don't know what some of you drink the wrong cool it alright some of you really drink the wrong cool it and actually you're like the worst people on planet earth and I don't know why you watch your videos at all because you're like I want you to fail so hard I want the outlier fund to lose so much money you should have taken that trade if you if you actually had the plan in place and it was so good why are you change like what are you doing seriously like like I want you to go look in the mirror and think about what are you doing like seriously anyway old plan ETF actually would have set up a couple days ago new plan ETF which we didn't trade would not have and the market definitely sold off recently and one of the key things that would have kept us out is the fact that the the outlier fear and greed is going down it's like okay well actually that's cool all right cool so we want to be doing that

5:42next block entry if if it's under the 10 you may don't take the trade and then one thing that was a surprise to me is the value zone actually works against you on the spy actually works against you on the spy so we have turned off the values on this case now the idea of this is we want it to be somewhat familiar we also want to be maximizing our returns right that is a number one goal is to maximize returns the outlier fund and we want to be doing that and then provide you the information so you can trade on that if you choose to we're not going to tell you to do that so they have to you but what we're talking about here is not to not to dissimilar from what we're already trading with plan ETF and then making these changes now the exit rules are a lot more nuance and I don't want to give them a lot of airtime just yet because there's there are a lot more nuance but what I do want to talk about is the options data so one of the things that I wanted to do was previously in plan ETF

6:42was we were running full port on spxl okay now to some people you're crazy why would you do this to other people like me it made total sense like if you're going to go full port into a mutual fund why would you not go full port into spxl like it just there wasn't any sort of issue to me for that but what we were looking at is it's like okay hang on let's say that we had a hundred thousand dollar portfolio and we went full port into spxl that would give us 362 shares okay but let's say that we went full port into spy because the price of spy that would give us 132 shares 100,000 to five a 77 gives you 132 shares so my thought was what if we could mimic going into full port on spxl but with spy options so we spent a lot of time specifically on this and what we came out to is a lot of time and what we came out to is okay if we were to get full port into spxl that would be 362 shares since it's a triple leverage ETF on the spy this would be 132 times 3 396 shares make sense okay so what we did yesterday was we looked at 45 days 60 day and 90 day options now of course we've mentioned this a million times before and you should know this by now because you're a smart person the amount that you pay for these options goes up over time it is effect just like an inch

8:02insurance contract if you go from 30 days to 60 days to 90 days is going to get more expensive over time the dollars to delta changes quite a bit 47 dollars per delta on a 75 DTE at 45 days 74 dollars in delta 75 DTE is 60 days and 92 dollars per delta at 90 days so I was thinking where really is that sweet spot where is that sweet spot at and I got to thinking about the trades over here and the average days held is in the back test average days held is 26 and a half days so my original thought was let's go for the 45 day it's the cheapest one it's twice as long as the average trade so it's good to go but running the data is quite interesting a few things that we found was this is the spy returns this is where we are looking to roll out at any point in time and basically to extend the duration of the trade if we can't extend the duration of the trade and it

9:15measures in that time frame then it gets highlighted yellow over here filter my color there you go now it's about a quarter of the time but one quarter of the time count 12 about a quarter of the time it would have expired beyond the 45 day so it's like you know what how much more money is there actually be made and the answer is a lot there's a lot more money left to be made while these trends are still going on so I did a standard deviation crystal out the old calculator I didn't understand her deviation what I found was that the standard deviation was 19 days so the standard deviation of the number of days during the time is 19 what is three standard deviations three standard deviations takes 99.97% of all occurrences and so it's like you know what rather than 19 days if we multiply that by three aka three standard deviations it's going to give us 60 days and that's what we're going to do is we're going to do a three day days and that's 60 day contract is right there now if we were to say let's take 20% of the portfolio and that gets us roughly 360 shares 360 delta is give or take I should say 270 delta so 75 times 3.6 270 delta it would be full port at 396 but at 270 not too dissimilar but we'd be able to capture basically 99.97% of the moves within one

10:44cycle and then to make that even better to make that even better we found we I don't know if this is the tab for it but what we found was this will work you can roll you can roll your heart out you can do $2 wide you can do $5 wide you can do any sort of wideness you want and the profitability doesn't really change right if you're in the same cycle like this is a five day trade despite one up 2% the options went up 20 something percent if you're in the same cycle you can roll your heart's content assuming you keep our our rolling rules taking those partial profits keeping the trade on reducing your risk and it doesn't really impact it. However if you get to the point where you've got a roll out in time. I can find an example here you go now this one because it's 56 days and also this one right here. Is that 91 days now granted we didn't get to capture the whole 91 but we got a lot more of it at 60 days than 45 days.

11:48Because you don't get to take the full advantage of the move. Even if you roll all like crazy you're still leaving a lot of profit on the table still leaving a lot of profit on the table and again roll into your hearts desire still leaving a lot of profit on the table but if you're within the same. Same expiration the the profits are not all that dissimilar. So Chris got really deep really complicated this morning but there's a lot going on in the background specifically for fund the the outlier fund and I've made this really armato right armato is is a hundred percent fund first. What can we do to get the outlier fund to make masters of the universe money and you guys can watch along and do whatever you want to do i'm not telling you to do anything about that. What is the timeline for the desktop version as soon as we can that says the timeline. Yes or no consistency in position sizing is paramount in achieving accurate expectancy I would say yes I would say yes and the reason that I would say yes is because what you're trying to do is.

12:53This is really lock in how big the losers are as a percentage of your total portfolio you can let your winners be all over the place right you want your winners to be all over the place you want for standard deviation winners you want one standard deviation winners you want those winners to be everywhere. But you want to keep those losers really really tight so that consistency and position sizing is is super important what do I think about s qqq so this is an inverse qqq I think it's great if that's what you want to trade i'm not going to stop you by all means go for it. Are we looking at markup theory not yet maybe at some point but it is not on the table at the moment. What are the best online tools for back testing well outlier is in process of building the back testing tools inside of our platform so i'm going to tell you it's going to be outlier soon but you're not going to like my answer i have been back testing manually for years and years and years and years. Issue with back testing manually is you've got to be honest right there's there's the there's a very likely.

13:56A currency that you're going to introduce forward bias into back testing and let me show you what I mean by forward bias let me turn off some. Let me clear my notes on here and i'll turn off the value zone and then what we'll do is we'll do a bar replay start new our replay makes a big difference okay. Let's say for example you're like i'm not sure I would take that trade because it's got an order block coming up. Oh yeah see that definitely wouldn't have taken that trade and then you'd be like um. You know what I definitely would have gotten right here. Why would you have gotten right there. Because it went up in the future. We don't in fact that's what we watch the video on just a couple days ago unbelievable forward bias being shown on. SCHW leave. SCHW this guy was like oh I did this incredible hedge fund trading strategy and I picked this exact candle to get in well that's really interesting who would have thought that that exact one candle and you.

15:00Exact one situation was the exact one that was the kickoff of this huge rally over here how about that isn't that very interesting that's what's called forward bias right you can see the future so therefore. You act differently because you know what's huge is going to be but in reality we don't have the Nancy Pelosi plan right looking at this right here I don't know what's going to happen today there's lots of Jack wagons on YouTube who will claim to say. Oh the charts are saying this or that's going to happen we don't know this thing right that's why you have to build in losses into your plan because if you knew what was going to happen why would you have losses so dumb why would you take losses you be so down to take lots you be said to dumb boy. And so what I would say is a good tool is in. Start new in. Trading you down here here random bar. And then you wait for your setup okay so let's do 10 over 20 price over 50 right here on random bar.

16:04Looks like now granted random bar happened right here okay you've got one close over one close under one close over one close over there it's been chopping back and forth and this is one of those times where I say you might make a buck. A loser buck right you might make a buck or lose a buck but but really nothing's happening let's say for example that we click this one at time. Man 10 over 20 price over 50 still didn't work geez Louise this guy has no idea what he's talking about okay I can click forward a couple more times and we wait and we wait and we wait and then we wait okay this would be an entry candle then our 20 price over 50. And what happens next. Hey not bad hey not bad now remember over here it was the same 10 over 20 price over 50 here was the same 10 over 20 price over 50. But I didn't know what was going to happen here I picked random bar because I picked random bar and I said you know if I were to back test this this could be my entry that.

17:08Randomly was a solid entry okay well let's select another random bar and do the same thing. So now we have to wait for it to come back down. All right now we got that reset. Now we look for the next 10 over 20 price over 50. Good thing you didn't take that right and so this is one of the ways that you can do back testing. Is you just click there you go 10 over 20 it's a little under right there there's your entry candle. Another one that just happened to be good. Really good. I'm looking forward to close back under the 50 oh my goodness great that's a good trade. Now did I know what was going to happen no and not at all and that's a really key distinction whenever you are doing your back testing is literally hit random bar.

18:11And then wait for the setup to occur. And then there you go 11% gain right here now I just showed you two examples two examples is great but you can be fooled by randomness that is a. That's a book by missing to live which I don't love because I feel like he takes that and and puts it to an extreme where it's like oh yeah I mean all these people who have made money in the market you just got full by random I mean anybody can win the lottery. So these guys who happen to do it year after year after year they definitely just continue to win the lottery after year after year. That's not the same thing right in this case two random instances can show you being fooled by full by randomness so if you're going to do something like this. You need at least 50 occurrences 50 at least not 350 50. The more instances you get the better but again this is how Chris did it for years it is manual it sucks it's work but it could be absolutely worth it to you you get to decide what is worth it to you or not.

19:14T Raymond asks about this by plan have we done enough testing we are getting to that point honestly I feel very confident with it when we get that 2016 data loaded in which should be today I'm hoping and then run it and make sure that the the expectancy still comes out positive it's not going to be the same it'll never be the same and and that's what some people get to get. This is a misconstruct as well is like you can have an expectancy that is unbelievable on certain sets right unbelievable on certain sets so that's why you want as many occurrences possible so that that expectancy doesn't just work in this pocket or this pocket or this pocket but it works in a lot of different pockets and then overall we talked about going at least for 50. Bro imagine the the amount of data that you can get and it's just like flipping a coin right and that's why say you can be fooled by random us right these two right here we're two heads flipped in a row i'm reading the book more money than more money than God right now I read I've read it a couple times but it's one of my favorite books.

20:19And he talks about how you can absolutely be fooled by randomness right imagine that there was a coin flipping contest for every adult in America and after the first hundred you had you still had you know I think was several thousand that have flipped heads in a row every single time and they they would be writing their books about it they'd be selling courses about it they'd be doing you know all these press tours about just how brilliant they are all their secret techniques to get that that that heads every single time. When it literally is just random when it literally is just random but the more data you get the closer you can get to what that expectancy is i'm running out of time already i'm going to. i'm going to rapid fire these cost you how you do my dude Charlie class starts next Tuesday so next Tuesday mornings Tuesday and Thursday mornings at EM Central time we're shifting our content for the next eight weeks to do Charlie class now Charlie class is our 100%.

21:19I'm going to do everything that I know about trading now I got some feedback on alpha class that it was to disorganize I got some feedback on Bravo class that it was too much figured out on your own so i'm trying my best to you okay I really try my best your guys last I checked i'm not charging you for this okay i'm doing the best I can to help you be successful with that being the case I would recommend going through alpha and Bravo and then going through Charlie class is I mean basically teaching the same thing through. In three different ways why not use micromanie futures at five dollars a tick by how mean so do you if that fits your personality and your portfolio go for it absolutely. Let's see. I think I heard you say you will exit trades one week before expiration absolutely freaking yes and that is what we were. That is some of the rules that we are building into here so for example if we took a 45 day trade we want to be out by day 38 right we definitely want to be out by day 38 now you don't have to do that but the reason we do this is because of gamma risk when you get closer to expiration let me pull up a option chain here when you get closer to expiration.

22:37Alright let's say you go with. Change this to all expiration. When you get closer to expiration your option will either be in the money or out of money it is binary there is no gray area okay when it is out of the money it has no value. In all there black and white clear as crystal you get nothing you lose good day there i don't want that to be the case i don't want to have no value i want to be out of the way before the last week that way even if my trade is a loser even if it's falling out of the money it's still going to have some value to it. I don't want to go to a zero ever I don't want to go to a zero ever so you are 100% correct on that. Okay let me rapid fire these as much second. Are you prioritizing plan spy the plan to queue because plan in plans to take more time are they all being worked on a parallel we are going step by step I step so spy plan is first and then plan cues and then plan sector rotation think about it this way Chris Chris had Chris had one of those like evil just.

23:48Here imagine we work really really hard and come up with amazing numbers on one bounce by and then we take those amazing numbers and we apply them on cues and we make adaptions on cues and now we've really dialed in spy and we've really dialed in cue now we can move over to the next. Plan which would be the 11 sectors now we have data from one data from two we push the data from one to two into to one back and forth then we can apply that to 11 stocks see where i'm going here right we're from one to two. To 11 right and then we maximize these guys figure all that out and then we go from 11 to. 9000 right the idea here is to is to compound our knowledge and then compound our wealth and that's why we're going in that order it's exactly why we're going in that order. Okay let me do two more and i'll try and do as fast I can Pat says what do you buy and calls on today literally nothing because my trading plan doesn't set up i am not the type of person and the out our phone is not managed by a portfolio manager who is always looking for do you know doing anything that you possibly can.

24:53The idea here is to have a plan and to execute that plan and don't do anything in the meantime sitting cash and f up so you don't sit in cash and don't f up I should say so you don't have up that way when the next time comes around and your plan sets up you're good to go. Okay um. Let's see one more question. Oh Brandon I thought number one goal is to minimize risk absolutely absolutely and that's why we're going to be using the options. That's why we're going to be using options is because number one we're reducing the risk right if we're going from 20% of the account that mimics 100% of the account in spxl we've reduced our risk and then as I mentioned earlier we found that you can roll your hearts content within the same expiration cycle therefore reducing risk over and over and over and over.

25:53Okay so yes you're 100% correct so I got to run thank you guys for hanging out with me this is asking anything Friday be sure you subscribe and I will see you this afternoon.