Sep 272013
 

trade_130927

This morning’s example trade opportunity turned into what we call a “coin flip” trade.  It’s an open trade that gets trapped in a narrow range consolidation while the market waits on a significant news event.  As the news event approaches, one can either close the position to wait for the report volatility to settle or one can decide to create a coin flip trade and ride out the news.  The news can change trader expectations and thus cause the markets to price move directionally.  However, most of the time we have no idea how the market will react and which way price will move.  Thus there’s a 50/50 chance it will move in the open trade direction and that’s why we call it a coin flip trade (heads it moves in the trade direction, tails it moves against the trade).  About 10 minutes before the Michigan Consumer Sentiment report, a long order flow opportunity unfolded at the bottom of the DTG 82.25 long level on a retest of the low of the day.  However once a position was opened, the ES started rotating in a 2 point range on light volume.  There were many opportunities to scratch or take a small profit before the report, however given the small stop required, this morning seemed worth taking the coin flip.  The coin eventually came up heads as price broke downwards.  After bouncing off a new low of the day, another long opportunity unfolded outside a DTG level, however it was worth considering as explained

in the annotated chart below:

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