May 242010

I was just saying to NJ I wish everyday could be as easy going as today. This is when fade trading really shines. Nice rotational and relatively quiet conditions. The only tricky thing today was to be flexible and realize when previous resistance became support. Since we went public I have been preaching about how one needs to listen to the market and realize when changes have taken place so you can capitalize on them. It isn’t easy if you are just starting I know, but stick around and/or keep coming back and studying the trades and you will get the hang of it in no time. You will note I originally had 76.50 on my sheet as a minor scalp short area pre-market. What happened was after the open it crashed right through it as if it didn’t even exist so of course I didn’t even look to scalp it. But then after the first high probe we came back down and really settled in at that level for several half rotations. After it had totally based in the institutions began buying heavy and we got a textbook Biglot setup which you could have ridden for as much as 2.5 to 3 handles depending on your TM strategy. Shortly afterward we had some retail suckers tee up and chase the headfake short. The contracts piled on into a stall and then the MMs swooped in for a classic Mousetrap setup long again off the same basic level. Nice quick morning. Again, for those hanging around be careful around the OH. Should be very volatile and remember, if the whole world can see it is an important level, don’t play the obvious angle. Wait for the high end of the range and get confirmation of flow and/or big traders before commitment short. That tail above worries me and it could get really wild and probe to almost anywhere. Hopefully you all will find the quick details and easier to follow format of the sheet more beneficial. Happy hunting…

 Posted by at 10:21 am

  3 Responses to “5/24/2010 Post Trading Analysis”

  1. The bars leading up to the Biglot had pretty small relative volume numbers, i.e. several hundreds at each price level and 6665, 5791, 4559 total contracts per bar. Other than speed at which the market moved through the prices, are there any other implications for the low volume? Does it make it a lower probability setup?

    When I did instant replay, it went by in the blink of an eye, which is probably why I missed spotting it the first time around.

    • I don’t remember that setup being overly fast. I don’t doubt what you see in replay; I guess I was just in a zone while stalking the trade. The whole morning felt more normal than the wild volatility we’ve been seeing over the last couple weeks. Volume was much lighter this morning, many of the prices only traded a few hundred contracts in each bar. So in this case, the volume on the setup bar individual prices is similar to the bars that proceeded it. I didn’t think about it being light when stalking the trade. Also, I’m not aware of probability implications of low volume setups other than low volume is generally fast and a setup may be hard to catch.

  2. Not sure what you mean here brother. The Biglot setup is about the bar before, not the entry bar. You trade on a down rotation retest of the low in this case and enter basically on the open of the next bar if you see that institutions were net buying (in this case) that retest. I don’t recall the speed of the BL setup bar (the one before) but I wouldn’t notice because I am always just watching the 100 lot delta number on the bottom on those if they don’t set up as traps.

    Yes, volume was very light today but all that effects is your fills and slippage if you subject yourself to it with your order types. As soon as the BL setup bar closes I usually just feel it out and in this case set a limit to buy the bid. I don’t remember it being so fast I had to struggle with it though. Hmmm..

    In light volume we generally use a sort of fill or kill approach as we don’t want to have more than one entry. What I mean is we will trade with quick limits (which we always do) meaning we don’t set limits but just buy/sell bid buy/sell offer on the spot and then whatever doesn’t fill after price moves off that first order price gets cancelled. What is weird is on a day like today you end up being a huge percentage of the market at that price, but then sometimes in high volume conditions weird stuff happens like you get 17 lots or something and that is it. Sometimes it will bounce around faster than the eye right on entry and we will get them all but it is hard to tell how many times the price was actually hit so in the end it seems like all one fill kind of to the eye.

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