How to Choose: Trend Preference or Flat Preference
2018-10-19

 

Depending on the goals and time of holding the position, trend and flat preferences for trading are available to market participants.

Trend Preference - the probability of price reversal from the locked-in range upon return based on the availability of locked-in open positions, against the prevailing volume of which it is profitable for the market maker to quote or maintain the price (Chapter 1.5).

Flat Preference - the probability of price returning back to the locked-in range after going beyond TPSL levels based on the absence / loss (triggering of stop-losses) of a significant imbalance of open positions, against the prevailing volume of which it is profitable for the market maker to quote or maintain the price (Chapter 1.5).

With an increase of a futures liquidity, a probability of strong imbalances in the locked-in ranges decreases, while a probability of an appearance of the gravitation ranges increases.

So if you want to speculate liquid futures contracts every day I recommend "Flat Preference", if you want to try your luck and hold position more than 3 trading sessions I recommend "Trend Preference".

From my Second Edition LRA book you will learn how to use preferences (Chapter 2.4).

Tom's Note

New LRA Reports 16-11-2018 are available.

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