Welcome to The Discovery Trading Group

 Announcements  Comments Off on Welcome to The Discovery Trading Group
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

03/20/2023 ES Trade Plan Worksheet

 Pre-market Commentary  Comments Off on 03/20/2023 ES Trade Plan Worksheet
Mar 202023

After a weekend of behind-the-scenes drama between 167-year-old Credit Suisse and Swiss regulators, the bank was forced into a merger with stronger rival UBS.  Swiss regulators were looking to hive off Credit Suisse into a zombie bank to be run down over time.  The $3.25 billion deal is good for the banking system, but a bad deal for UBS shareholders who owned the best run Swiss bank and now own the worst.  UBS will receive billions n liquidity and loss support from the Swiss National Bank as part of the deal.

New York Community Bancorp (NYCB) has agreed to purchase failed Signature Bank.  Their Flagstar Bank will assume all of Signature Bank’s branches, about $2.7 billion in deposits and a $12.9 billion loan book.  The FDIC said their Deposit Insurance Fund would take a $3.5 billion hit from the deal, less than 2% of the fund’s total value.  NYCB shares are up over 10% premarket.

Billionaire Warren Buffett is reportedly speaking with senior Biden officials about the current banking crisis.  Berkshire Hathaway owns shares in Bank of America, Bank of NY Mellon, and Citigroup, so getting inside information about the banking industry is naturally in his business.  In the past, Buffett loaned Goldman Sachs $5 billion during the last financial crisis and saved Solomon Brothers in the 90s after a bond trading scandal.  Buffet is likely looking for another lucrative deal that will help the current banking crisis.

Where there is crisis, there is opportunity.  Large bank stocks are down 5% to 25% since March 8.

The Federal Reserve made a Sunday move to increase the frequency of dollar swap lines to 5 major central banks.  This is the first time since before the pandemic and suggests the Fed fears that the US regional banking fears could spill into the global banking system.

This is a Fed week with an announcement on Wednesday.  Fedwatch shows a 40.2%% chance the Fed will not raise rates and a 36% chance of a 25-basis point raise.

Flight to safety is evident.  Gold is up to a one year high @ 2007.30 per ounce and Treasury yields are rising.

Monday’s earnings include Foot Locker (FL) and Pinduoduo (PDD).

The economic calendar is bare.

Volatility is high and should remain so for today which could turn into a directional day.

No Whale bias as large traders were sidelined overnight.


 Posted by at 7:27 am

03/17/2023 ES Trade Plan Worksheet

 Pre-market Commentary  Comments Off on 03/17/2023 ES Trade Plan Worksheet
Mar 172023

The 11-bank plan to save the 14th largest bank First Republic began with a series of phone calls by the CEO of JPMorgan Chase Jamie Dimon, Fed Chair Jerome Powell and Treasury Secretary Janet Yellen.  Dimon made the calls to discuss some bank capital issues.  The calls turned into brainstorming sessions about how to help First Republic.

JPMorgan Chase had already provided financing with the Fed of $70 billion on Sunday night, but that did not alleviate First Republic’s pressures.  Through brainstorming, the idea that JPMorgan Chase could give First Republic $5 billion in deposits came about.  What killed Silicon Valley Bank was the rush to withdraw $42 billion in one day by their customers.

At a Bank Policy event, Dimon took the First Republic deposit idea to his peers at Citigroup, Bank of America, and Wells Fargo who agreed to deposit $5 billion each.  Then these four banks got smaller commitments of $1 billion from smaller rivals US Bancorp, Truist, PNC, State Street, and Bank of New York Mellon.  Goldman Sachs came in late with a $2.5 billion commitment.

Basically, deposits that flowed from Silicon National Bank to the other banks was recirculated into First Republic as a float so it stay in business.  The move should strengthen the entire US banking system.  However, concerns still remain with First Republic.  The bank caters to wealthy individuals and 70% of their deposits are not insured.

In Europe, Credit Suisse received liquidity commitments of $54 billion which eases some contagion concerns there.  In a vote of confidence for the European banking system, the ECB raised interest rates 50 basis points.

FedWatch now shows an 88% chance that the Fed will raise interest rates 25 basis points next week.

Boeing (BA) is up over 11% premarket after the plane maker confirmed they had resumed deliveries of their 787 Dreamliner this week.  The company had received commitments for over 200 of the Dreamliners over the last 2 months.

Fedex (FDX) is also up 11% premarket after a Q3 earnings beat and forecast boost.  Cost cutting increased earnings to $3.41 per share, well ahead of $2.72 estimates.

No corporate earnings of note for Friday.

The economic calendar focus is Consumer Sentiment @ 10:00am ET.  Other data includes Capacity Utilization and Industrial Production @ 9:15am ET, and UoM Inflation Expectations and CB Leading Index @ 10:00am ET.

Volatility is high and today $2.7 trillion in equity derivatives expirations should keep volatility high today.

Whale bias is short into the US session open.


 Posted by at 7:35 am