How to Interpret Night Owl™ Nightly Blog Posts

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Night Owl™

Aeromir Expert
Dear Night Owl™ Trader –

To help you understand how Night Owl™ works, I’ve attached three screenshots of typical nightly posts to the Night Owl™ Crude Oil and Euro Currency blogs at the Aeromir site. Most of the discussion below will pertain to the Night Owl™ Crude Oil setup for the January 14, 2020 session. The Euro Currency nightly posts in the Night Owl™ Euro Currency blog at Aeromir are in the same format as the CL/QM posts, and they work the same way. The attached screenshots were active during the January 14 trading session of Feb CL/QM and Mar 6E.

Night Owl™ is a complex mathematical trading model. It provides Night Owl™ traders with two key pieces of information:
  1. The expected direction a market will go in the next session to attain the delivery Target Price (i.e., long or short); and,
  2. The stop-loss price at which Night Owl™ will regard its directional expectation as wrong.
In between the opening price at 18:00 Eastern US Time and the stop-loss price, Night Owl™ provides a range of Square of Nine prices to use for potential entries. Night Owl™ suggests an entry price as denoted in the attached Setup screenshots with the “@” symbol. I’ll refer to that price as the “@ price” and the list of lettered Target Prices to the right of the @ price as the “@ line”.

In Night Owl™, a setup is a win when the first faded target price elects. Night Owl™ target exits usually will be the first faded Target B to elect, although sometimes they'll be the first faded Target C to elect. Each entry post identifies the desired Night Owl™ target (i.e., Target B or Target C).

You must remember that Night Owl™ targets are dynamic, based on however many faded entry lines elect first. Night Owl™ fades its MIT exits by two ticks. I preach fading heavily in the Night Owl™ videos, because so many non-Night Owl™ traders play Square of Nine prices at their absolute values. Those who only recognize those absolute values without fading run the risk of front-running of their prices. More about that below.

In the case of the 1/14 session, the entry post identified Target B as the Night Owl™ desired target for its Feb CL/QM play. This information appeared in the highlight NOTES line at the bottom of the Setup post. (It’s slightly out of view in the screenshot, but it identified Target B as the desired Target Price.) Afterward, as the Target B Attainment post stated, Target B at 57.725 elected following election of the 58.325 entry line (with a one-QM-tick entry fade at price 58.300).

Whether a Night Owl™ trader would take a secondary entry on any entry lines following the @ line is a choice each Night Owl™ trader must make. If one would not take an entry from the 58.325 line in this 1/14 example, he would use the alert mechanism in his trading platform to notify himself of elections of any line at which he hadn’t taken an entry. Those alerts would serve as his reminders to adjust his Target B exit price to the new, closer value.

In other words, a Night Owl™ “win” occurs at the FIRST Target B (or Target C, as identified in the nightly blog post) to elect following election of its corresponding line in the posted Night Owl™ Price Array.

Let’s follow this example through, step by step:

For the 1/14 session, the Night Owl™ CL/QM blog post recommended short entry at the @ line price of 58.200. I STRONGLY advise you to fade this entry by one or two QM ticks. That is, you would place your short MIT order to fill either at 58.175 or 58.150 in this example. Give the market its due and show your respect to the market. As a practical matter, a Night Owl™ win always recognizes the 2-tick fade (either QM or 6E, respectively, as appropriate).

During the 23-hour-long CL/QM session, the 58.200 line elected following its open at 58.075. However, market continued retracing against the expected Night Owl™ short side direction. That is, market initially went up. Eventually, though, it reached 58.300 and then turned downward in the expected Night Owl™ direction. Note that 58.300 is within two ticks of the 58.325 line, so its B price at 57.725 became the new Night Owl™ Target Price. That is the meaning of “dynamic targeting”.

If you would not have taken an entry (faded or not) at the 58.325 line, by using the alert functionality of your trading platform, you could have set an alert to notify you when that 58.325 line would have elected. Again, I recommend fading entry prices by one or two ticks. On that night, I set my alert at price 58.275 by using a 2-tick fade, which is my usual practice.

Market continued falling and eventually reached Target B at 57.725, so Night Owl™ scored a “win” at the 2-tick faded price at 57.775.

Here is an important point to recognize regarding dynamic target prices:

The low of the 1/14 session was 57.700 in both the Feb CL and Feb QM markets. If you simply had left your targeted exit price at the @ line Target B value of 57.600 (or faded at 57.650), you would NOT have realized a win in that 1/14 session! Eventually, your trade would have stopped out at the identified stop-loss line at 58.600, which was 3 lines behind the @ line. (Note that the Setup post told you that the Night Owl™ stop-loss line was fixed in place for that session at the 58.600 line; i.e., 3 lines behind the @ line in this example.)

Each nightly Setup post will identify which line you should use as your stop-loss line. Sometimes, they’ll be close, such as one or two lines behind the @ line. Sometimes, they’ll be farther away, such as four or five or even occasionally six lines behind the @ line. My point is, it’s incumbent upon you to read each night’s post, because that stop-loss line will vary from session to session. However, unlike the dynamic targeting process, stop-loss lines remain fixed in place for the length of each session.

A few additional things to consider or remember are the following:
  1. As I mentioned above, Night Owl™ provides two pieces of information – its expected market direction, and the line at which its predicted direction will be wrong (i.e., the stop-loss line). The various lines in the Price Arrays represent the Square of Nine prices between the 18:00 opening price and the stop-loss line.
  2. Some Night Owl™ traders allow market to retrace to a Price Array line first and then take the next line above it as their entry on a stop. By doing this, they never miss a move, although their entries often will occur in front of the @ line. On the other hand, when the @ line hasn't elected before the first faded Target B elects, they've got profit that @ line traders won't have. This scenario does happen occasionally, perhaps once or twice per month.

    That is, the @ line is the first limit (or MIT) line I recommend, based on the degree of retracement I expect a market to make first. Market may not always retrace to the @ line before it reaches its first Target B. So, if you're a trader who needs "action" and wants to be in a play every day, you might want to consider using an OCO for your first entry – for example, placing an MIT order at the @ line for one leg of the OCO entry, and placing a stop order at one of the lines in front of the @ line.
  3. Because Night Owl™ is traded at an investment bank at which they'll play substantial lottage and often take entries at each line in the arrays to elect, I tell Night Owl™ traders to use their own discretion to determine the amount of fading. That investment bank fades its prices, and they're large enough to turn a market with their front-running before an absolute Square of Nine value otherwise would elect.

    Thus, I fade entries and MIT exits with two 6E or QM ticks each. Note that I said this is what I do; it's neither "right" nor "wrong". So, I follow the same convention in posting the outcomes. Other Night Owl™ traders use smaller fades; some don't fade at all.

    Those who don't fade get better results on their individual trades, provided that their entry or exit prices have elected. Otherwise, if their prices haven't elected before market has turned and run in the opposite direction, either they've missed an entry or an exit. OCO entries can help with this. There is not one "right" answer. Each trader must adopt his own approach that best suits his style and acceptance of slippage.
  4. Night Owl™ no longer attempts sashaying™. While I know one Night Owl™ trader in Boston who has coded sashaying™ into his own trading program, I dropped sashaying™ from Night Owl™ when the programmer at Capital Discussions was unsuccessful at programming it. Stop lines identified now in the daily Night Owl™ posts are fixed in place, although faded. Night Owl™ has not sashayed™ since coming to Aeromir in October 2018. If you don’t know what I mean by sashaying™, don’t worry about it.
  5. Night Owl™ no longer backs off its stops. Doing so is too cumbersome, and the programming effort at Capital Discussions failed. Instead, stops are fixed in place at the lines identified in each session's CL/QM and 6E posts.

    In the occasional cases of multiple @ lines, Night Owl™ will have multiple stop-loss lines, too. You can choose to play the first @ line or wait for the second @ line to elect. (See the attached 1/14 Night Owl™ long Mar 6E Setup post for an example of this.) Remember, that second @ line might not elect, depending on the depth of retracement following the opening price. Night Owl™ recognizes both @ lines in such situations and adjusts entry lottage accordingly.

    Multiple @ lines tend to occur when the distance between the 18:00 opening price and the stop-loss line initially identified by Night Owl™ is far away. In that case, it will identify a closer, intermediate stop-loss line and another @ line.

    If both stop-loss lines were to elect, the aggregate loss would be smaller than if the intermediate stop-loss line had not been in play. On the other hand, that intermediate stop-loss line might enforce a loss that otherwise would not occur, if market were to turn and go in the expected Night Owl™ direction before electing the second, farther-away stop-loss line.

    So, it's a trade-off. In the case of the 1/14 Night Owl™ long Mar 6E play, if Night Owl™ had not recognized its intermediate stop-loss line at 1.11550, but only used the farther-away 1.11370 stop-loss line, its 1.11550-line entry would have exited profitably. One would not have been "wrong" to re-enter at 1.11590, 1.11640, or 1.11700 lines on stops after stop-out at the intermediate 1.11500 stop-loss line, however. That's up to each individual Night Owl™ trader.

    That is the reason for multiple @ lines – to try for profit again, if the intermediate stop-loss line were to elect. On 1/14, in the case of Mar 6E, it was the second @ line that succeeded, and its success was greater than the loss at the intermediate stop following election of the first @ line.
I suggest you take a day or two to digest all the above. Each trader's psychological make-up is different with respect to how aggressively or cautiously he'll trade.

If you're aggressive and need entries every day, take your first entry at the @ line or even in front of the @ line. If you want only trades at which your reward-to-risk ratio will be 2-to-1, for example, wait for retracements to those lines that only will be one or two lines in front of the stop-loss line.

The latter case is a cautious strategy, for which you must recognize that you'll miss many market moves in the Night Owl™ expected direction. On the other hand, on those days when your entry near the stop-loss line will elect, you'll have comparatively smaller risk versus bigger reward than if you had entered at the @ line. One Night Owl™ trader at Topstep only takes her entries at the line in front of the stop-loss line. Thus, her reward-to-risk ratios on her entries are high, but she only takes a few entries per month. That's her choice.

As I said, each trader must decide for himself how much risk he's willing to take at entry versus the risk that he'll miss a market's move in the expected direction. This is a decision you must make; neither I nor anyone else can make that decision for you.

So, in conclusion, remember these things:
  • Night Owl™ targets are dynamic, not static. Even if you don't enter at a second line in the price array following your initial entry, if that line should elect, its faded Target B (or Target C) will become the new and desired exit for Night Owl™. Your trading platform's alert mechanism can help you keep track of those entry-line elections when you won't enter additional lottage at those lines, so you'll remember to adjust your target exit price to the new, closer price.
  • Always fade your entries and exits to minimize front-running by institutional, big-lottage traders.
  • Decide whether you wish to be aggressive with your entries, so you won't miss moves in the expected direction, versus cautious with your entries, so your risk of dollar loss relative to your reward of dollar profit will be low. But in the latter case, your risk of missing a move in the expected direction will be higher. Using OCO entries (with one leg being an MIT entry and the other leg being a stop entry) can offset this issue somewhat.
I hope the foregoing helps you.

With regards,
For Markusha Oil & Trading Company, LLC

Mark Ansel
Developer of the Night Owl™ Trading Model


6E setup

2020-01-14 Aeromir Night Owl™ 6E Setup.png

CL Setup

2020-01-14 Aeromir Night Owl™ CL Setup.png

CL Target Acquisition

2020-01-14 Aeromir Night Owl™ CL Target Acquisition.png

Step-by-step Dynamic Targeting

Step-by-step dynamic targeting.png
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