May 062010

Man that was a long grind waiting for a trade. As I said pre-market I didn’t want to trade the OL except to scalp which didn’t really set up either. I waited for the push down to test that last little rejection area around 53 with the intention of scalping that. I timed the entry on the shift mostly on feel and got super strong lift so I changed my mind and decided to hold for a full rotation. Filled at 54.25 out at 55.75. I originally targeting 56.00 but I hoped out as it slowed so I didn’t give any back. Lucky really. Worst case I would have got a few ticks but I timed that one just right. I will now wait for 46/47/48 and fade there again probably if it sets up and volume is still good which it has been so far.

 Posted by at 11:07 am

  7 Responses to “5/6/2010 Post Trading Analysis”

  1. Hi RG and NJ,
    What an afternoon!

    What are your perspectives on the craziness this afternoon? For me it was a reminder that anything can happen at anytime in the markets, so manage that risk. Also the importance of watching order flow because it just sliced through acceptance and rejection levels.

    It was amazing to watch the price flying up and down with such small bids and asks in the DOM.

    Hope you had a good afternoon. Glad I just watched in amazement.

    • You did a smart thing by standing aside. It was a wild afternoon, one where we could not risk client money on such movements. Whenever trader expectations change, all bets are off for support and resistance levels. Pure fear kicked in today. Once it was known there was a computer glitch that started the sell off, the almost sure thing trade was the long bounce. That was the high probability play. I’m sure many traders got hurt trying to ride the selling down because their stops were too tight. Worse yet, the traders trying to fade the down move got slaughtered.

  2. Thanks, no set ups for us as we are genrally done in the furst hour. But today it took longer so I hung around. We were able to scalp some at some of the other key short levels noy on the sheet but again, we really like to just trade in non-directionally convicted markets and catching the falling knife is an art. I felt great about the 46/47/48ish handle holding but as you say the flow was clearly hitting bids. The best ops are off the lows once the volatility comes off and the market returns to a bid/offer equilibrium/ After the sell off it did so in the low teens as I recall. NJ grabbed a bunch of points for us there ahead of the close, but not in the super rigid risk modelled principle accounts which we focus on here.

  3. Hello RG and NJ,

    I sensed a awkward volatility in the order flow today as if the market makers had a field day taking out stops every so often as we approached S3 and a little beyond that before all hell broke loose. RG, how do you tell bid ask balance has come back? Do you look for a period of consolidation?

    I really appreciate you guy’s very complete answers.


  4. Hi,
    How useful is order flow with such huge volatility? I think you would be have to be very brave to read order flow and base trading decisions on it in this market. On the other hand when I looked at my levels that I had drawn in from several weeks ago based on market profile levels. They completely sidestepped the volatility and were great reference points for fade trades. I didnt place any trades on them as this kind of activity is a new one for me to deal with but it gives me forward planning strategies and they cope brilliantly with expanding and contracting markets. The globex market is especially good at respecting levels on first contact too. Im not an expert at reading order flow so maybe that plays into my decision making process but longer term MP levels work ( 4 or 5 day composite levels) for weeks ahead.

    • Order flow analysis goes out the window with huge volatility. Take a look at the footprint chart from about 2:48pm EST yesterday. There is no order flow, entire bid or ask columns on my 6 P&F chart are zeros. I’ve never watched an event like this unfold using a P&F footprint chart. The new bars were clicking off like the chart was a ticker tape. Profile structures still provide some guidance in times of high volatility. Many long time frame traders and computer algorithms have predefined price areas where they want to take actions. So they do offer some support or resistance, but in volatility like yesterday, it’s very short lived.

  5. A candlestick chart of accumulated delta still works in this volatility. Where was a nice divergence at yesterdays bottom. Of course I did not have the courage to take that trade. I also increased my reversal size from 6 to 12.

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