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 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

12/01/2022 ES Trade Plan Worksheet

 Pre-market Commentary  Comments Off on 12/01/2022 ES Trade Plan Worksheet
Dec 012022
 

Wednesday’s rally sent the S&P 500 to a positive 5.4% up for November after Fed Chair Powell hinted the Fed would slow the pace of rate hikes at the next meeting.  Powell also said that he still thinks the Fed can manufacture a soft landing for the economy, reducing inflation while avoiding a recession.  The S&P 500 closed above its 200-day moving average for the first time since early April 2022.

The US dollar wrapped up its weakest month since 2010.  Since the Fed started raising rates, foreign investors have poured into US Treasuries which bid the US dollar to a peak in September.  The October and November rallies in equities has the US dollar easing back from its recent high.  The US dollar is also at it’s 200-day moving average, but as support.  If the dollar bounces, the S&P 500 will face headwinds.

Costco Wholesale (COST) is down 3% premarket after posting weaker than expected earnings.  Sales through Nov 27 were up 5.7% over last year, but slower than 7.7% for October and 10.1% for September.

Five Below (FIVE) is up nearly 9% premarket after beating expectations and showing a sales acceleration.  The company is benefiting from a US consumer shift to lower priced items and value.

Corporate earnings include Ambarella (AMBA), American Outdoor Brands (AOUT), Big Lots (BIG), ChargePoint (CHPT), Designer Brands (DBI), Dollar General (DG), G-III Apparel (GIII), Kroger (KR), Li Auto (LI), Manchester United (MANU), Marvell Technology (MRVL), Patterson Companies (PDCO), Toronto-Dominion Bank (TD), Ulta Beauty (ULTA), Veeva Systems (VEEV), Weber (WEBR), Zscaler (ZS).

The economic calendar remains full.  The main shows are PCE and Claims @ 8:30am ET and ISM Manufacturing PMI @ 10:00am ET.  Other data includes Personal Income and Personal Savings @ 8:30am ET, Final Manufacturing PMI @ 9:45am ET, and Construction Spending @ 10:00am ET.  The Fed’s Bowman speaks @ 9:30am ET and Bar speaks @ 3:00pm ET.

Volatility expanded in yesterday’s runup but should contract today.

Whale bias is bearish into the 8:30am ET numbers on strong overnight volume.

 

 Posted by at 6:54 am

11/30/2022 ES Trade Plan Worksheet

 Pre-market Commentary  Comments Off on 11/30/2022 ES Trade Plan Worksheet
Nov 302022
 

Fed Chair Powell gives a keynote address to the Brookings Institution @ 1:30pm ET.  Markets will be evaluating Powell’s tone (i.e., how hawkish?) before tomorrow’s PCE inflation data.  FedWatch is currently pricing a 70% chance of a 50-basis point rate hike in December.  Powell’s speech could challenge current market speculation that the Fed will soon slow rate hikes.

Jobs data will play a key role in the Fed’s decision.  The ADP November employment report is released @ 8:15am and October JOLTS job openings @ 10:00am ET.  The November jobs report will be released this Friday.

China posted weaker than expected factory activity; the lowest in 7 months.  The slowdown was caused by Covid lockdowns.  The PMI data is adding to speculation China will ease on their strict Covid policies.

Biogen (BIIB) is up over 2% premarket after unveiling promising late-stage trial data of their Alzheimer’s treatment lecanemab.  Data shows a success rate between 23% and 37% in slowing cognition and daily function decline.  Side-effects are high however and noted in 13% of the participants, including 2 fatalities linked to micro-hemorrhages.  The Alzheimer’s Association has asked the FDA to approve the treatment.

Hewlett Packard Enterprise (HPE) is up 3.5% premarket after posting stronger than expected earnings and issuing an upbeat forecast.  HPE was the service-focused division of Hewlett Packard that was spun off in 2015.  The company claims to now have a right-sized cost structure and substantial order book which will increase recurring revenues at higher margins.

Earnings for Wednesday include Donaldson (DCI), Five Below (FIVE), Frontline (FRO), Hormel Foods (HRL), La-Z-Boy (LZB), Nutanix (NTNX), Okta (OKTA), Petco Health and Wellness (WOOF), Pure Storage (PSTG), PVH (PVH), Royal Bank of Canada (RY), Salesforce (CRM), Snowflake (SNOW), Splunk (SPLK), Synopsys (SNPS), Titan Machinery (TITN), and Victoria’s Secret (VSCO).

The economic calendar is overloaded.  In addition to the ADP and JOLTS data, the calendar includes GDP, Goods Trade Balance and Wholesale Inventories @ 8:30am ET, Chicago PMI @ 9:45am ET, Pending Home Sales @ 10:00am ET, Oil @ 10:30am ET, and Beige Book @ 2:00pm ET.  Before Powell’s 1:30pm ET speech, Fed Governor Lisa Cook gives a talk on monetary policy and the economy starting @ 12:35pm ET.

Volatility seems to be settling in with an average daily range of the ES around 50 points.  Today’s Fed and economic data reactions could certainly increase volatility for today.

No Whale bias as large trader overnight activity was too light to be significant.

 

 Posted by at 6:26 am