Welcome to The Discovery Trading Group

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Nov 292011

We are a group of professional and amateur 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 its 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 types of trading which are the foundations for what most members pursue here, follow this link:

Methodology Framework

 Posted by at 11:24 am

05/23/2024 ES Trade Plan Worksheet

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May 232024

The Fed minutes released Wednesday afternoon show that some Fed officials were willing to move rates higher if needed.  “Higher for Longer” continues to be the Fed mantra as inflation remains sticky.

Nvidia (NVDA) jumped 7% after hours after the company topped expectations, raised forecasts, increased their dividend, and announced a 10-for-1 stock split.  The company earned $6.12 per share on $26B in revenue, up 262% from last year.

Much of Nvidia’s revenue (about 45%) comes from data center demand for generative AI technology from big tech: Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), and Meta.  However, Nvidia CEO Jensen Huang said that “Beyond cloud service providers, generative AT has expanded to consumer internet companies, and enterprise, sovereign AI, automotive and healthcare customers, creating multiple multibillion-dollar vertical markets.

The stock split has fueled speculation that NVDA might be added to the Dow Jones Industrial Average, joining other big tech AAPL, MSFT, and AMZN.

In a rare bipartisan action, the US House passed the Republican-sponsored Financial Innovation and Technology for the 21st Century Act in a 279 to 136 vote.  Bill supporters argue that the bill provides regulatory clarity and helps promote digital asset growth.

However, SEC Chair Gary Gensler said the new bill “would crate new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk.”  Gensler maintains that cryptocurrencies should be subject to the same securities laws as other assets.

The bill allows crypto issuers to self-certify that their products as digital commodities not subject to SEC oversight, giving the SEC only 60 days to challenge each product.  It’s unclear whether the Senate will take up a vote on the bill.

Premarket corporate earnings include BJ’s Wholesale Club (BJ), KE (BEKE), Medtronic (MDT), NetEase (NTES), Ralph Lauren (RL), Toronto-Dominion Bank (TD).  Earnings after the bell include Deckers Outdoor (DECK), Intuit (INTU), Ross Stores (ROST), and Workday (WDAY).

The economic calendar includes Claims @ 8:30am ET, Flash PMIs @ 9:45am ET, and New Home Sales @ 10:00am ET.  Atlanta Fed Pres. Bostic speaks @ 3:00pm ET.

Volatility once again contracted on Wednesday with the ES 5-day average true range now below 30 points.

Whale bias is leaning bullish on heavier than recent overnight large trader volume.


 Posted by at 5:57 am

05/22/2024 ES Trade Plan Worksheet

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May 222024

The Fed and Nvidia, the two largest market movers of 2024 have events on the same day.  FOMC Meeting Minutes are released @ 2:00pm ET and Nvidia (NVDA) will release Q1 earnings after the bell.

On Tuesday, Fed governor Christopher Waller said he wants to see several months of favorable inflation data before lowering interest rates.  Most Fed members are on the higher-for-longer policy bandwagon.  The high interest rates are weighing on the federal government.

The US federal budget has passed a grim milestone: interest payments on the national debt are now the third-biggest expenditure and exceeds the $900 billion defense budget.  Just 2 years ago before the Fed started raising rates, interest rate payments were the seventh largest spending category behind national defense, Social Security, Medicare, other health programs, income assistance, and education.

In the 2010’s, the federal annual deficit was $829 billion.  Since the 2020 pandemic, the annual deficit has swelled to $2.24 trillion, skyrocketing the total federal debt to $34.6 trillion.

Retailers offered some insights into the economy’s health yesterday.  Lowe’s (LOW) sales fell less than expected as consumers continue to spend despite inflation.  Macy’s (M) beat their low bar earnings.

Inflation in the UK fell to 2.3% in April from 3.2% in March.  The sharp fall is due mainly to lower energy costs.  The prices of electricity, gas, and other fuels in the UK fell by 27.1% since the start of 2024.  The IMF now suggests the Bank of England has room for 3 interest rate cuts this year.

Premarket corporate earnings include Analog Devices (ADI), PDD, SQM, Target (TGT), TJX Companies (TJX), and WIlliams-Sonoma (WSM).  After the bell earnings include Nvidia (NVDA), Snowflake (SNOW), and Synopsys (SNPS).

In addition to the 2:00pm ET Fed Minutes, the economic calendar includes Existing Home Sales @ 10:00am ET and Crude Oil Inventories @ 10:30am ET.

Volatility continues to contract but reaction to the Fed Minutes or the Nvidia earnings report after the bell could start a directional trend from the consolidation area the ES has been working on over the last week.

No whale bias as overnight large trader volume was too light to be significant.



 Posted by at 3:44 am