Welcome to The Discovery Trading Group

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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

01/25/2018 Martin Luther King Day

 Pre-market Commentary  Comments Off on 01/25/2018 Martin Luther King Day
Jan 152018
 

US Stock markets are closed today for the Martin Luther King Federal holiday.  DTG will resume posting tomorrow.  Do something, enjoy the day away from the markets!

 Posted by at 6:07 am

01/12/2018 ES Trade Plan Worksheet

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Jan 122018
 

Another day, another record high for US stocks as the DOW rallied 205 points with blue chips Chevron up 3%, Boeing up 2.4% and Caterpillar up 2%.  As mentioned yesterday, Trumps strong arm on NAFTA is affecting the US auto industry.  Fiat Chrysler announced they would be moving their Ram truck production from Mexico to Detroit where they’ll invest $1B in their assembly plant and add 2500 jobs.  In retail, Walmart announced their closing or converting 63 Sam’s Clubs to better align their real estate for their evolving strategy to compete with Amazon.  Earning season kicks off with big banks JPM, WFC, BLK, and PNC announcing.  The economic calendar includes CPI and Retail Sales @ 8:30am EST.  Volatility remains a tough call as the ES hits blue sky.  Globex volume rose last night, selling into the rally.  Size bias is once again short leading into the 8:30am numbers but price has moved up far enough that it may be difficult to close the gap back to yesterday’s 2768.50 settlement.

 

 Posted by at 7:14 am

Is Timing A B*^ch?

 Educational Content  Comments Off on Is Timing A B*^ch?
Jan 122018
 

Well troops, once again we find a great example of what most members are keenly aware of by now. The good news being that market structures are almost always very predictable magnets for crowds on both sides, allowing for tight lines and risk overlay benefits that can be ground into edges over groups of trades. The bad news is just like any other indicator, price action and orderflow only tell you what IS happening right now and cannot foretell the future X minutes or hours from now event by event. The reason of course should be obvious, but has been the topic of many recent discussions on the forum related to finite vs infinite outcome games of chance (yes, trading is a game of chance folks, embrace that or be gone. lol). So here we see the action on the break above the 54-55’s structure (which had extended to include a new Globex high in the 56’s) and into the then current all time high 60’s structure. As would be expected, plenty were thinking enough is enough with this rally already and wanted to fade there, and likewise plenty wanted to stalk a shallow pullback to the 54-56’s from above to reload long there. And that brings us to the main message in support of the aforementioned realities of trading. Whether a bull or bear from these structures today as an intraday swinger, timing may have been a b*^ch…

 

First, let’s consider the initial test of the then current all time high 60’s. Shortly after the cash open we saw the case 60 even reject to the tick after strong buyer absorption and seller response in purple. Also note in the stats the largest size finishing net sellers into that push up. Obviously the bears who were strong in conviction not waiting for so called ‘confirmation’ sold into that push and made a score trading structure to structure. The next structure below the 60’s was framed by the Globex high 56’s and into the 54-55’s as marked to stalk a first scale or all out (the next below that was the one starting with the YH 51’s but we never got that far). For members reading significance in volume I’m sure many of you who were bears from the purple would have had a hard time holding through the buyers stepping up and absorbing new sellers in light blue at the high side of that first zone. They did eventually break through and hard reject prices below the low side of that same zone though so for those who held on to the bottom zone reject in dark blue, good for you. But the key takeaway here is there is no right or wrong in this stuff, just whatever your process specifics are seeking. If we consider that same action in light blue there is no doubt many bulls were looking for just that same action that bears from above were looking for to scale into, as is usually the case. Were the bulls that bought into that seller absorption on the first pullback  into the YH in light blue after break above “wrong”? No such thing is the answer. We never know what the aggregate of market participants are going to do and what effect that will have on price in the future, even when reading orderflow. Intraday swinger bears who sold the first test of the 60’s got to win, but intraday swingers who bought the first pullback from it had to puke for a loss. So like I said, timing can be a b*^ch…

But what about the action on the second test of that same all time high zone? As you can see this time the case 60 even was tested to the tick the second time around. But note on that first push in pink the buyers really exhausted into the high. That can often be a great signal for faders but in this case only was for the scalpers. Why? Almost immediately into that first pullback in light green passive buyers swarmed in and absorbed continuation sellers in a big way. From there we saw a second push double top failure in red, though again on thin volume with generally disinterested aggressive buyers. Were intraday swinger bears “wrong” to frame trades on either of those pushes looking for a move back into the 54-56’s or beyond? Obviously those who were short from there who read the super thin hard rejection of the VWAP in dark green were able to scale for a few ticks profit or a scratch at worst. But those who didn’t may have booked a full loss wishing they wouldn’t have waited and instead traded the earlier test in purple. Likewise, any bulls who didn’t catch that seller exhaustion hard reject in dark green may have missed getting in on the biggest move of the day as we saw the case high break and another big rip higher. Again, timing can be a b*^ch, but of course I say this in jest really. Only to continue to illustrate that you shouldn’t keep trying to build a trading process that evaluates itself on its ability to read whatever indicator and predict the future, one trade at a time. All you can do is execute your process in concert with your adaptable risk/reward overlay and see what unfolds event by event. Any edge that you are able to develop won’t really be able to be seen trade by trade without variance and will only be found over groups of occurrences. In our experience this seems to be the hardest fact for newer traders to accept – that they need not be able to predict the future in order to be successful. .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.

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 7:00 am  Tagged with:

01/11/2018 ES Trade Plan Worksheet

 Pre-market Commentary  Comments Off on 01/11/2018 ES Trade Plan Worksheet
Jan 112018
 

And on the 7th trading day, the bulls said “this has been a good year, let’s rest”; and thus came to pass the first stock down day of 2018.  Or maybe the small drop had something to do with Trump’s renewed threat to withdraw from NAFTA which has US auto manufacturers in a tizzy over additional political complexity for their supply chain which is heavily dependent on Canada and Mexico.  Bond markets have stabilized after China called rumors they would stop purchasing US debt as “fake news”.  The economic calendar focus is PPI and Claims @ 8:30am EST.  The 2760 all-time high is within today’s potential range and could easily be tested and/or probed.  Expect bullish volatility continue to contract.  Size bias is a divergent short into the 8:30am EST numbers, however the overnight Size volume was lighter than the past few days so I’m not giving the bias much weight.

 

 Posted by at 7:18 am