May 182010

Not much going on today. We had the moves to some levels but for the most part things just didn’t set up right. I kept saying all morning the OH was going to fail and it did, but we never got to a key level after it did. We stopped basically in the center of last Thursday’s high volume cluster without getting to 40. We had a few scalp ops at the OH twice for a tick each and then again twice on the retracement to the 41 level we had. The only other setup was for the Biglots strategy short. It set up great but at that time I was watching the bid subsdide in the 10s and the Euro flatline and the VIX continuing to come off so it had to be managed dynamically. If you read it correctly you would have seen it stalling and just like yesterday it was only worth 3 ticks. I have meetings today so I’m probably done looking. I still think 50/51 and 35/36 are great ops and at least one of them will be tested . The market is very non-directional again today. Volume is mixed but leaning to the short side – but too light to make much of that fact or factor into your trading. The carry trade has started to come off again and the bid returns to the 10s as I write this and if it continues you can expect at test of 35/36 shortly. If you see that same strength in those markets though you may not want to fade it as there is a big low volume tail right under it. If it pokes through too far you could get run over as it shoots right down to the OL. Good luck and be careful…

 Posted by at 10:26 am

  4 Responses to “5/18/2010 Post Trading Analysis”

  1. RG,

    I see you have added a third pane to your PNF chart can you expand on what its capturing of filtering. Also can touch on what you use the Ticks column for on the same chart.



    • Can’t say much about the ticks column other than I study the speed and size of the transactions coming into a level looking for slowing and smaller trades or speeding up and bigger trades. This helps final determination as to whether or not I want to trade it. The third pane comes and goes and changes based on volatility and time of day. Sometimes I see a set up forming pre-market and want to trade it but 100-150 lots are too big for overnight most times so I use 50-75 as the cutoff for “big” overnight trades.

  2. Hi
    What do you make of the difference in volume – which today looks to be about 1/2 of yesterdays volume with the range about equal both days?
    “a few key levels which given the mixed sentiment should hold for at least a half rotation which is always what we seek” – What is a half rotation – 3 ticks on a 6 tick chart?

    • Volume is everything. It makes the markets choppier which can be good or bad for our type of trading. Too many variables to list. You just have to feel it out and make your own observations really. For us the biggest issue with light volume is not being able to trade the size we need to. It can make a huge difference and actually cost you money because your returns are tied to contracts divided by equity. Critical. As for today, the market shifted several times today to directional conviction to total lack of it. Once the 10s settled into a strong lift and the Euro resumed its sell off the volume came up again later when we flushed down. But the total was skewed mostly from the pre-lunch being so light more than anything.

      With the current volatility the ES typically moves in in 3-4 handle rotations. Holding for half a rotation now means enough action to take us to one of our typical targets which is less than two points.

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