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 Introduction

 Posted by at 11:24 am

12/12/2017 ES Orderflow Narration

 Educational Content  Comments Off on 12/12/2017 ES Orderflow Narration
Dec 132017

Given how “major” the 67-68’s MR structure was I suppose it’s no surprise it was so heavily stalked and discussed in the room. Given the aggregate context I suppose it is also no surprise so many seemed to be long biased around this area as well. Be sure to see the chat transcript as usual for more color, but especially this time as there were some focused points made about thick and thin prints on first and second pushes into structures and how the order of those can show directional conviction or a lack of at the time in many cases.

So here we see the initial move legit testing the case 68’s in purple. As I said in the room I wasn’t really surprised to see the thin volume into the high there as MM’s were likely going to test the waters by pulling offers and trying to see if any shorts were left to puke or if any new longs were bullish enough to buy the case high. Though I do think spots like that can be bread and butter for countertrend scalpers, in my opinion the only interest to intraday swingers was to note volume didn’t get thick into the high there from sellers stepping up against the buyers. This was followed by a fairly shallow pullback in blue trapping quite a few sellers but not quite pulling back deep enough to test the YC. Beyond that we saw a classic pullback low failure right into the 67-68’s line in light green on paper thin volume from exhausted sellers and massive long delta divergence led by size. I’m sure for most members who were bullish swingers that was the first rotation that really jumped off the page. But for those who waited for a break of the then current high set in purple there was a second similar pullback on super thin volume with strong delta divergence in dark green, again with size leading out hard. The strongest interest from size yet as I pointed out in chat.

The recent theme of continual new all time highs being made has led to many discussions on the topic of whether or not your intraday swinging model has a provision for trading ‘into air’ as I call it – entering positions looking to trade into new highs with no prior structure to lean on or frame your risk/reward scheme with. Once again today obviously you had to decide whether you would take on a long position at all from the 67-68’s structure, and if so where you intend to look to scale with no known market structure overhead. For those defaulting to raw PA and flow we saw the buyers begin to run out of gas in the short run in pink as I pointed out in chat. Note the thinning volume into the top there and the strong short finish off the high from size in the stats. This was followed by a real battle on the second push in red which ended in even less bull delta conviction and even stronger short finish from size off the high there. Either spot would have been enough of a clue for most members to consider scaling or flattening I’m sure. To say volatility is contracted lately would be an understatement, but given that I doubt any intraday swingers can complain with solid three handle moves to a first scale in this kind of environment. Just my .02…

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.


 Posted by at 4:41 pm  Tagged with:

12/12/2017 ES Trade Plan Worksheet

 Pre-market Commentary  Comments Off on 12/12/2017 ES Trade Plan Worksheet
Dec 122017

The DOW and S&P500 cash indexes closed at record highs yesterday while the ES came within 1 tick of its 2668 March contract high overnight. A probe into new highs is certainly in the cards today; the question is whether or not the bulls can run. Janet Yellen’s last Fed meeting as Chair starts today with an announcement tomorrow. As stated yesterday, expectations are for a third rate hike this year. The economic calendar focus is PPI @ 8:30 am EST. No Fed speakers scheduled, however ECB’s Draghi speaks @ 2:00pm EST in Frankfurt. Today’s volatility will depend on how the bulls react to new all-time highs. Assume a slow grind higher above 2668 unless proven otherwise… With a Fed announcement tomorrow, good chance volatility dries up as the day wears on. Size bias is long into the US cash session open on light overnight volume.


 Posted by at 7:21 am

12/11/2017 ES Trade Plan Worksheet

 Pre-market Commentary  Comments Off on 12/11/2017 ES Trade Plan Worksheet
Dec 112017

It’s a Fed week with a policy announcement on Wednesday afternoon.  It’s expected the Fed will raise interest rates.  US Tax reform is still in focus and expectations are a bill will be passed and signed by Trump before the end of the year.  CBOE bitcoin futures started trading to some wild movement…  Contracts opened at $15,460, fell $40, then rocketed to $18,850.  The CME halted trading twice to slow market volatility.  The economic calendar is light with JOLTS @ 10:00am EST.  Expect volatility to continue to contract as the ES nears its 2668 March 2018 contract all-time high.  If the high is cleared, then maybe the bulls can run.  Until then, it will be easier for volatility expansion to the downside.  Size bias is short into the US session open on light volume.


 Posted by at 7:53 am