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

02/02/2023 ES Trade Plan Worksheet

 Pre-market Commentary  Comments Off on 02/02/2023 ES Trade Plan Worksheet
Feb 022023

The Fed has a new favorite word, “disinflation”, meaning prices are rising at a slower pace.  This implies a soft landing might be achievable. The more times Chair Jerome Powell repeated this word, the more bullish stocks became; and Powell used the word more than 10 times.  About 20 minutes into yesterday’s press conference, Powell said, “We can now say, for the first time, that the disinflationary process has started.  We can see that.”

The tech heavy, rate sensitive Nasdaq closed up 2% for the day.

The Fed has increased rates 4.5% and the Fed funds rate is now the highest since October 2007.   Wording in the Fed statement suggested that the Fed may be near the end of their most aggressive tightening cycle in 40 years.  The 10-year note yields tumbled 10 basis points and the US dollar moved down about 0.1%.  CME’s FedWatch gives an 85.6% chance of a 25-basis point rate hike after the Fed March meeting.

With Fed risk neutralized for the moment, market focus will return to corporate earnings.  Heavy weights Amazon (AMZN), Apple (APPL), and Alphabet (GOOGL) all report after the closing bell.

But first, the European Central Bank (ECB) will release their policy statement @ 8:15am ET, followed by a press conference @ 8:45am ET.  A more aggressive stance than the Fed could put a damper on the stock market bulls.  ECB President Christine Lagarde will provide a more intimate take on the ECB’s actions in a podcast starting @ 10:15am ET.

Facebook parent Meta Platforms (META) is up nearly 19% premarket after posting weaker than expected earnings caused primarily by a $4.2 billion charge for layoffs and office closures.  Meta’s posted $32.17 billion in revenue of which about 97% came from advertising revenue.  The company announced a $40 billion stock buyback and CEO Mark Zuckerberg expects to lower costs between $89 billion and $95 billion.

Corporate earnings of Thursday include Apple (AAPL), Alibaba Group (BABA), Alphabet (GOOGL), Amazon.com (AMZN), Bristol-Myers Squibb (BMY), Canada Goose (GOOS), Cardinal Health (CAH), ConocoPhillips (COP), Eli Lilly (LLY), Estee Lauder (EL), Ferrari (RACE), Ford Motor (F), Gilead Sciences (GILD), GoPro (GPRO), Harley-Davidson (HOG), Hershey Foods (HSY), Honeywell (HON), Merck (MRK), MicroStrategy (MSTR), News Corp. (NWSA), Qualcomm (QCOM), Quest Diagnostics (DGX), Sirius XM (SIRI), Skechers (SKX), Starbucks (SBUX), Under Armour (UAA), and World Wrestling Entertainment (WWE).

The economic calendar includes Unemployment Claims, Non-Farm Productivity & Labor Unit Costs @ 8:30am ET, and Factory Orders @ 10:00am ET.

Volatility ticked up in Wednesday’s Fed fueled rally.  It will now likely decrease if the bulls try to push higher.

No Whale bias as large trader activity during Globex was mixed.


 Posted by at 6:50 am

02/01/2023 ES Trade Plan Worksheet

 Pre-market Commentary  Comments Off on 02/01/2023 ES Trade Plan Worksheet
Feb 012023

It’s a Fed day with a statement @ 2:00pm ET followed by an hour press conference starting @ 2:30pm ET.  According to CME’s FedWatch, markets are expecting a 25 basis point rate hike.  The Fed knows this, however the economy in many ways appears far from contracting towards the 2% inflation target and Fed Chair Powell will likely continue to insist that the Fed “has more work to do” in raising rates.

Tech companies are playing their part by laying off employees after over-hiring during the pandemic, however the layoffs so far are only a small fraction of the pandemic-era hiring and the labor market remains strong.  Chipotle (CMG) is hiring 15,000 workers and WalMart (WMT) announced raises for all hourly employees.

Key economic data in the 8:15am ET APD Employment Change and JOLTS Job Openings & ISM Manufacturing @ 10:00am ET provide the Fed with some fresh, last minute data.

The S&P 500 finished January up 6.2%, the strongest performance in four years and up nearly 14% since its October low.  The tech heavy Nasdaq rose by 10.7%.  Traders have bet on a Fed dovish pivot, a bet that could easily change today.

Meanwhile, earnings season is in full swing.  Earning for Wednesday include Meta Platforms (META), Aflac (AFL), Allstate (ALL), Boston Scientific (BSX) e.l.f. Beauty (ELF), eBay (EBAY), Evercore (EVR), Humana (HUM), McKesson (MCK), Meritage Homes (MTH), MetLife (MET), Novartis (NVS), Old Dominion (ODFL), Peloton Interactive (PTON), Thermo Fisher Scientific (TMO), and Waste Management (WM).

Economic data not mentioned above include the S&P Global US Manufacturing PMI @ 9:45am ET and Construction Spending @ 10:00am ET.

Volatility ticked up on Tuesday and has the potential to be high today, especially during the Fed press conference.

Whale bias is long into the morning economic data.


 Posted by at 7:06 am