Welcome to The Discovery Trading Group

 Announcements  Comments Off on Welcome to The Discovery Trading Group
Nov 292011
 

We are a group of professional traders founded by principals of a quantitative research firm which develops strategy and periodicity diverse programs and risk modeling tools. Our own internal process involves using this webspace as a collective resource for sharing both discretionary thoughts during intraday sessions and as a sort of virtual think tank for our ongoing quant research. A big part of that research has consistently shown that the ‘Holy Grail’ of the purely mechanical, single market intraday trading strategy that produces near linear returns without significant ongoing adaptation DOES NOT exist. As such we have found that for most traders pursuing single market intraday strategies, an adaptive, risk management focused discretionary approach is likely to bear the most fruit. Ironic, given that rigid, purely mechanical systems are what the vast majority of retail traders (including us at one time) seem to be in relentless pursuit of. 

In the spring of 2010 we created a private, member only forum behind the blog devoted to our ongoing discussions related to discretionary analysis of market structure, price action and order flow to like minded retail traders as a sort of experiment. Since we have always found the format in which we use this space privately to flesh out ideas to be so beneficial, we wondered if it might be even more fruitful to increase the sheer numbers of those participating in this process and with that, DTG as it exists today was born. By any measure, the experiment has been almost unfathomably successful for us in terms of it’s role in keeping us sharp in whatever discretionary or quantitative work we happen to be engaged in at the time. Sharing our experiences and interacting with the greater numbers continues to spark new ideas for all of us, making our little experiment a huge win on all fronts in our book. For information about the type of trading that is the foundation for what most members are focused on here, follow this link:

Methodology Framework

 Posted by at 11:24 am

Don’t Worry, Be Adaptive

 Educational Content  Comments Off on Don’t Worry, Be Adaptive
Jan 192018
 

I happened to be in the room early today and suggested several potential ops to stalk for bulls and bears as usual, two of which for the bears are illustrated here. The first is the short momentum scalp keyed on stalking a market maker liquidity pull on the retest of the Globex low line. And the second is the trend continuation op on PB to the Globex low line after firm break below. As it turned out both materialized as hypothesized, but likely didn’t turn out as profitable as hoped for most members. Always remember that whatever the market does post your entry is never in your control. How could an unknown future ever be, right? Seems obvious I know, but it will rarely fail to challenge your emotions when it happens. Sometimes, despite being “right” according to your strategy/process there just won’t be as much meat on the bone as you would like. And as always your ability to capture whatever is there for the taking will be a function of the adaptability of your risk/reward overlay to market context and volatility changes. The main takeaway here being that if you are still using a rigid fixed tick/point stop and target criteria for your trades,, you might seriously consider the ongoing potential pitfalls of doing so.

So first we see the characteristically thin prints in dark red as market makers pulled bids to goose price over the case line right around the figure print (2800 even). The momentum was definitely set in motion and the speed picked up which was exactly what the short momo scalpers were stalking to hop on, but it very quickly petered out. It rotated up off the low there and you can see the volume thickened at the bottom of the pink area as many of those shorts covered out for a few ticks profit at best or a scratch at worst. Case in point number one – sometimes you have it right but it won’t pay you off to a large degree. Such is trading, but at least if you are adaptive you can get what it gives you. And as for the continuation shorts, they were happy to see the buyers disinterested on the first push back up there at the high side of the pink area hard rejecting the case line from below. This lack of interest from buyers continued on the second push in red with the bulls unable to even reach the VWAP. Surely what many classic intraday swingers were looking for also to hop on the continuation bear train. From entries there they were no doubt thrilled to see another big liquidity yank set in motion in yellow and price charge under the current new low. So far so good, right?

The next structure below by my measure was framed by the former 96-97’s MR line turned potential S from above as marked. As it turned out the 97’s side drew the action and provided plenty of liquidity to scale into in blue. Note swelling of print counts right in the kill zone as passive buyers stepped up against late chasing sellers. Those who’s models had them still holding contracts for subsequent scales though were no doubt disappointed. Given the recent explosive range expansion days I’m sure many hoped for some follow through today to the down side, but as of this writing price action remained contracted. We subsequently rallied right back up to where the move started even quicker than the initial selloff. I highlighted the volume spike in purple to illustrate that it was no mystery of course why the action was right there. Those short from that same range earlier still holding positions and not wanting to turn winners into losers covered out by lifting offers just under the swing line. I wouldn’t be surprised if more than a few members were in that flow as well scratching the second half of their shorts. If your model rules had you holding through the ranging that followed and you caught the later move down to the next structure below which was the 94’s, good on you. But remember, those who didn’t haven’t made a “mistake”. All you can do is execute your process rules trade by trade, adapting to context and volatility and find your edge over GROUPS of occurrences, not trade by trade. I still see the majority of aspiring traders out there trying to [i]explain[/i] why they win or lose event by event. I realize it’s a broken record at this point, but you need not predict the future to be a successful trader guys and girls. But you do need a repeatable process paired with sound management of risk and bankroll…

About the Author

Discovery Trading Group is a unique dojo focused on mentoring aspiring futures traders since 2010. It’s emphasis is on guidance in building bespoke processes and risk overlays rooted in market structure, price action and orderflow, with sound adaptable risk management as a priority.

www.discoverytradinggroup.com

FUTURES TRADING IS RISKY AND LOSSES INCURRED IN CONNECTION WITH TRADING FUTURES CONTRACTS CAN BE SIGNIFICANT OR TOTAL. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. WHILE THERE IS GREAT POTENTIAL FOR REWARD TRADING AND/OR INVESTING IN COMMODITY FUTURES, THERE IS ALSO SUBSTANTIAL RISK OF LOSS, INCLUDING LOSSES EXCEEDING YOUR INITIAL INVESTMENT. YOU MUST DECIDE YOUR OWN SUITABILITY FOR TRADING AND/OR INVESTING. FUTURES TRADING AND/OR INVESTING RESULTS CAN NEVER BE GUARANTEED. THE PRINCIPAL OF DISCOVERY TRADING GROUP IS NOT A COMMODITY TRADING ADVISOR AND IS NOT HOLDING HIMSELF OUT TO THE PUBLIC AS SUCH. THEREFORE, NOTHING HEREIN SHOULD BE CONSTRUED AS AN OFFER OR ADVICE TO BUY OR SELL COMMODITY FUTURES, OPTION OR FORWARD CONTRACTS, OR INVEST IN ANY COMMODITY FUND OR POOL. https://discoverytradinggroup.com/a-disclaimer

 Posted by at 6:41 am  Tagged with:

01/18/2018 ES Trade Plan Worksheet

 Pre-market Commentary  Comments Off on 01/18/2018 ES Trade Plan Worksheet
Jan 182018
 

US stocks indexes once again closed at record highs yesterday, a complete erasure of Tuesday’s selloff.  The new US Tax law is starting to show some dividends.  Apple announced plans to repatriate a portion of its overseas cash.  The move creates a one-time US tax bill of $38B and an announcement to pump $350B into the US economy over 5 years through updating their company sites, investing in a new campus powered by green energy, hiring 20,000 US employees, initiating a stock buyback program and increasing dividend.  Market focus remains on corporate earnings.  AXP, BBT, BK, KEY, and MS are on deck today.  The economic calendar includes Housing Starts, Philly Fed, and Claims @ 8:30am EST. and Oil @ 11:00am EST.  After yesterday’s big move, volatility may take a rest today.  However, as written on Tuesday, if the 2810s are cleared, the bulls may run.  Size bias is short into the 8:30am numbers on relatively lighter overnight volume.

 

 Posted by at 6:56 am

01/17/2018 ES Trade Plan Worksheet

 Pre-market Commentary  Comments Off on 01/17/2018 ES Trade Plan Worksheet
Jan 172018
 

The US east coast is being hit by another round of wintery weather.  Mixed words between the US and North Korea created a range expansion bearish move yesterday.  The ES is rebounding, and focus remains on corporate earnings.  GE and Ford are tumbling this morning.  GE’s CEO hinted of breaking the company into smaller companies and Ford expects lower profits in 2018.  Ford also said it would expand its line of electrified vehicles to 40 models, including 16 full electric vehicles by 2022.  Meanwhile, Infiniti announced they would go 100% electric vehicles by 2021.  Today’s earnings include the big banks GS, BAC, and USB.  The economic calendar focus is Industrial Production @ 9:15am EST, and the Fed’s Beige Book @ 2:00pm EST.  Volatility has loosened up because of yesterday’s drop.  Today’s volatility will depend on reactions to corporate earnings.  Size bias is long into the US session open.

 

 Posted by at 7:48 am