Jan 192018
 

I happened to be in the room early today and suggested several potential ops to stalk for bulls and bears as usual, two of which for the bears are illustrated here. The first is the short momentum scalp keyed on stalking a market maker liquidity pull on the retest of the Globex low line. And the second is the trend continuation op on PB to the Globex low line after firm break below. As it turned out both materialized as hypothesized, but likely didn’t turn out as profitable as hoped for most members. Always remember that whatever the market does post your entry is never in your control. How could an unknown future ever be, right? Seems obvious I know, but it will rarely fail to challenge your emotions when it happens. Sometimes, despite being “right” according to your strategy/process there just won’t be as much meat on the bone as you would like. And as always your ability to capture whatever is there for the taking will be a function of the adaptability of your risk/reward overlay to market context and volatility changes. The main takeaway here being that if you are still using a rigid fixed tick/point stop and target criteria for your trades,, you might seriously consider the ongoing potential pitfalls of doing so.

So first we see the characteristically thin prints in dark red as market makers pulled bids to goose price over the case line right around the figure print (2800 even). The momentum was definitely set in motion and the speed picked up which was exactly what the short momo scalpers were stalking to hop on, but it very quickly petered out. It rotated up off the low there and you can see the volume thickened at the bottom of the pink area as many of those shorts covered out for a few ticks profit at best or a scratch at worst. Case in point number one – sometimes you have it right but it won’t pay you off to a large degree. Such is trading, but at least if you are adaptive you can get what it gives you. And as for the continuation shorts, they were happy to see the buyers disinterested on the first push back up there at the high side of the pink area hard rejecting the case line from below. This lack of interest from buyers continued on the second push in red with the bulls unable to even reach the VWAP. Surely what many classic intraday swingers were looking for also to hop on the continuation bear train. From entries there they were no doubt thrilled to see another big liquidity yank set in motion in yellow and price charge under the current new low. So far so good, right?

The next structure below by my measure was framed by the former 96-97’s MR line turned potential S from above as marked. As it turned out the 97’s side drew the action and provided plenty of liquidity to scale into in blue. Note swelling of print counts right in the kill zone as passive buyers stepped up against late chasing sellers. Those who’s models had them still holding contracts for subsequent scales though were no doubt disappointed. Given the recent explosive range expansion days I’m sure many hoped for some follow through today to the down side, but as of this writing price action remained contracted. We subsequently rallied right back up to where the move started even quicker than the initial selloff. I highlighted the volume spike in purple to illustrate that it was no mystery of course why the action was right there. Those short from that same range earlier still holding positions and not wanting to turn winners into losers covered out by lifting offers just under the swing line. I wouldn’t be surprised if more than a few members were in that flow as well scratching the second half of their shorts. If your model rules had you holding through the ranging that followed and you caught the later move down to the next structure below which was the 94’s, good on you. But remember, those who didn’t haven’t made a “mistake”. All you can do is execute your process rules trade by trade, adapting to context and volatility and find your edge over GROUPS of occurrences, not trade by trade. I still see the majority of aspiring traders out there trying to [i]explain[/i] why they win or lose event by event. I realize it’s a broken record at this point, but you need not predict the future to be a successful trader guys and girls. But you do need a repeatable process paired with sound management of risk and bankroll…

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Discovery Trading Group is a unique dojo focused on mentoring aspiring futures traders since 2010. It’s emphasis is on guidance in building bespoke processes and risk overlays rooted in market structure, price action and orderflow, with sound adaptable risk management as a priority.

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