May 052010

Sorry for the late post, RG had some business to attend to and will probably add to this post once he gets back. The market opened below our 1161.25 level and quickly moved down, crashing through the 1158.50 level until it started meeting some resistance at the 1156.50 level. I monitored the volume for an entry as price rotated between 1156.50 and 1155.00 and just did not see a good setup to get in long. The sellers looked like they wanted to stay in control. Price movement was a little crazy as it moved up to near our first target at 1160.25 before backing off. I considered trading the pullback into 1156.50 again, this time the buyers did step in before the ES started it’s rocket climb up through our second target at 1162.50. With the market volatility being so high and the 10am news a few minutes away, I sat on my hands and watched the potential trade unfold. I thought maybe I could get a short fade trade as price approached the 1166 level, but price just didn’t cooperate with the level. It fell 3 ticks short and then 15 minutes later when through to 1167.50. At that point, I called it a no trade morning for me.

RG did take a couple of trades which I think he’ll discuss a little later when he posts his chart.

RG: Yeah, I did have a couple. I’ll tell you I was really looking forward to this session when I was doing the morning work but I had to adapt to trading them pre-market. I was in LOVE with at least scalp fading the 62/61handles which I did on the first push down and then the “real” trade for the single trade a day methodology was the fade of the 57 handle, which I mentioned pre-market I felt was interim support. Of course it failed as support but it did hold for my rotation so I managed a point from there. Short day though. Done before the bell. lol. Crazy volatility today. But just noisy and weird. It comes from experience I guess but when the market gives me that jumpy anxious feeling I just know better. I was really kind of half paying attention to it. NJ was calling stuff out and I was just like, “huh” – “oh yeah, right…”. I just wasn’t into it and as he said nothing was setting up right. Actually, the last couple days haven’t been great. It isn’t that we aren’t making money or booking losses, it is just that we are in big, whippy, volatile, doesn’t know if it wants to trend or rotate land and we tend to do best with a certain kind of rotational market. This ain’t it. I said to NJ that the ES has been acting like a cross between Crude and the DAX. Weird. Maybe there will be an arbitrage trade into the close for us. We shall see.

 Posted by at 2:39 pm

  7 Responses to “5/5/2010 Post Trading Analysis”

  1. Hi RG,

    Thanks for the excellent webinar yesterday. The walk through of your morning analysis was extremely helpful.

    In the comments above, you mention a possible “arbitrage trade into the close”. Is this based on the cash/futures fair value premium?

  2. Sorry. Thinking aloud. Sometimes I forget our blog is now public and I’m not just talking to my team anymore. We have a complex arbitrage system we developed for the cash close that is beyond the scope of this blog. Yes, the premium is involved along with a lot of other stuff. It is what I would call a quant edged strategy which means that we don’t share the details with anyone on it. Unlike our market structure trading which is discretionary and binary and feel oriented – and as such not successful due to some exploited inefficiency, our quant stuff IS based on inefficiency and could be front run or other wise exploited and/or ruined by predatory trading. So I’m sure you can understand why we don’t share those details. Sorry I mentioned it – like I said I was just thinking aloud and forgot for a minute I had an audience. lol…

    Glad you like the webinars. ‘m struggling through them as best I can. I’m not much of a teacher but I’m just trying to do the best I can to explain what we do. Hopefully you are getting enough out of it to really make a difference in your trading.

    • You’re doing an excellent job as a teacher! Your detailed explanations in the blog are great and help set the context and understanding why and how the price/volume is behaving the way it does. The step-by-step examples in the webinar provide me a concrete process for analysis.

  3. Hello,

    I noticed some heavy responsive selling one handle below the VPOC at 70 handle. It was surprising that prices did not probe all the way up to it, but then I saw that that level had a cluster of TPO’s (I know Discovery does not look at TPO) from 69.5. It was good for a 5 handle trade had I taken it.


    • Trading from VPOCs and TPO clusters can work, especially on days the market is making big moves. Many market profile methodologies are based on trading from points of control. We’ve made a deliberate decision for DTG to take trades into acceptance areas (i.e. volume clusters) rather than from the center of acceptance areas. Trading into clusters works on both trending and range days where trading from VPOCs works best when the market is moving through the clusters. The volatility and trends of the last week or so have certainly provided many opportunities to trade from VPOCs.

  4. To the Discovery group: your images are too low res. Please increase the resolution of the images you offer. Thanks.

    • Aaron – The images are snapped at full resolution. Did you click on the thumbnail images to view the full resolution? If viewing in your browser, maybe you need to zoom in.

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