FNL's Opening Bell Live Trading Session and utilizing OODA Loop
Over the last year, the Opening Bell session with Jeff B and Rob B has become one of FNL's favorite sessions.
One of the biggest areas of improvement for FNL Traders at OB has been developing the OODA Loop skill on various time frames prior to taking a trade.
For those non military folks, you may be wondering, "what is ooda loop"? Sounds like some ride at Knotts Berry Farm!!
Well, lets take a brief look at OODA loop and how it can be applied to a variety of situations that require critical thinking with changing information.
The OODA loop is the cycle - observe-orient-decide-act, developed by military stragist and US Air Force Colonel John Boyd for his pilots to cycle through a decision making framework quicker than their adversary and thus giving them an advantage in their decision making.
We could spend an hour on the technical aspects of OODA loop, but the main takeway is that Boyd wanted to reduce reaction time and enable quicker and streamlined decision making.
For me (Rob), I have used OODA Loop in not only my trading, but my other passions in life, Poker and Fishing. With Poker, you are constantly using OODA loop as your situation changes with every shared card that hits the felt, betting ranges, new players to the table, etc.
Fishing may be a little more vague in how you can use the OODA loop. I introduced OODA loop to my bass tournament partner, John L and it literally turned our season around after a poor showing in our first tourney. We ended up taking Angler of the Year in ABA, not an easy feat, and John credits using OODA loop for this turnaround.. You can read more about how we applied OODA loop to our tournament bass fishing in an article written by John for Western Bass. https://storage.westernbass.com/mag_wb/wb_mag_summer_2021/page22/index.html
Lets get to why you are reading this! How are you using OODA loop at Opening Bell?
One of the areas that has helped our trading the most, is reviewing multiple time frames when we sit down to our charts to trade. Our first objective is to gain a sense of direction and then decide the risk levels we want to use. In session, with both Jeff and Rob sharing charts, we start with a weekly chart, then daily, 4 hour, 60 min, 30 min, 15 min (Rob's favorite). Only after we select a direction to trade do we move to the shorter time frame charts to execute the trade (typically we look at a 5 min and even a sometimes a 3 min chart to trade on). When our long term and short term charts are telling the same story, it gives us much more confidence in our trade decision!
Usually the the chart reviews are sufficient to decide direction but sometimes the charts have opposing views (long term vs. short term). When that happens we will to use different indicators to try to clarify the highest probability direction that the OB price action will go. We may look at whether Bollinger Bands are flaring, where the price action mean (center) level is, if EMA's are twisting about each other, where price action has established a comfort zone during the night and previous days, etc. Lastly we look at historical information we have collected over the last 3 years to try to gain an advantage at opening bell. There are times when our position (better stop, more room for profit) may outweigh my direction. This is not the norm, but it does happen.
Once we have picked the direction of the trade, we need to decide on the risk level we each (separately) will use in the trade. Looking at the confluence of the above charts and indicators we will expand or contract our number of contracts and Profit/Stop levels. Ideally, we will find the right direction, position, contracts and P/S for a successful trade but we are in it for the long term and do not fret individual trades.
Jeff and Rob go over all of these charts EVERY day at opening bell, BEFORE we make any trading decisions. We get great collaboration from other traders at FNL and by the time we are ready to take the trade, we have a pretty good idea of what direction and risk management strategy we should be using. Now we are wrong about 45% of the time, but understanding and utilizing proper risk management, we are ecstatic with a 55% win rate!!
Since Rob implemented this OODA loop at OB, his Opening Bell trade has improved from a 50% win rate to a 58% win rate over the last 50 trades. While we are happy with a 50% win rate using proper risk management, an increase of 8% literally doubles the points!
Whether you trade OB or another time of the day, maybe using OODA loop prior to your trading session will help you plan and execute your trade with more confidence. After all, isnt that what this is all about? Come visit our sessions and please ask questions about the OODA loop. If you have not attended a live trading session at FNL, be sure to request a free visitor pass at www.futuresnetworks.com.
Trade Well at FNL