Apr 222010

Pretty straightforward this morning. We scalped ticks a couple times pre-market around the 92 handle and as expected it got really volatile off the open. As soon as we saw the pressure building we parked orders and sold into it hard. NJ shorted 91.75 into 90.25 and I waited and sold 90.75 into 89.50 when it started to stall there on the second big push down. It eventually pushed way down but I took the money and ran fearing a hard bounce off 89 which I feel may be some kind of support and may be our basing point later in the day. We are done for the day as we have other business we need to get to. Have fun guys. Should be some good stuff today.

 Posted by at 9:48 am

  8 Responses to “4/22/2010 Post Trading Analysis”

  1. I had a few levels to fade on the downside, 92, 90 and 87.25…I took the 90 long and an 8 tick loss. I know that I saw the 87.25 as a better level before the open than the 90, but didnt have the patience to wait. I have reviewed my trades for the last 4 days and noticed that the first trade/level or level I had selected has not been the best trade, the second or third has. Live and learn.

    • All price levels are not equal. That’s why we give the stronger ones a strength rating each morning in our trading plan. Sometimes we trade the stronger levels (i.e. the 2s or 3s in our trading plan) blind, but most times we watch how price reacts at those levels. Before we had bid/ask volume delta charts, we used to watch price on a DOM to see how it reacts to each level. Watching price on a delta chart is a little easier because the chart captures and sums the bid and ask volume history. In either case, reading the reaction of price is a skill that is developed through practice. The great thing about MarketDelta is that you can replay the bid/ask delta charts at the levels each day and develop your own feeling as to when price will bounce and when it will break.

      Thinking about intraday trading as a hard set of rules (like waiting for the 2nd or 3rd price level) is a mindset of trying to mechanize your trading. You are better off evaluating each level as price approaches and deciding whether or not the order flow (i.e. the price movement and bid/ask volumes) supports the trade you are anticipating (assuming your risk/reward ratio is right for the trade).

      • Thanks NJ that is good advice, and makes sense…. getting out of that mech mindset and just deal with each price and level based on what is happening then and there.

  2. Hi RG,
    Why did you expect a big move at the open and at the 92-94 level, which is what happened?

    • A combination of things. Mostly that institutional volume has really been coming on strong to the short side and overnight volume was huge. As much as we have seen in an overnight session in months. I have felt we have been overbought forever, but until I see institutions really selling I don’t react. IMO the Greece thing and the yield curve is a really big deal as was the Credit Suisse miss. The pre-market volatility between 94-92 scared me and here is why: it wasn’t because of news. It was all chopped up and gnarly and yet it shrugged off decent jobs number and flat PPI which is the best we could hope for now. When I put all these items together I thought we might sell off which is why I cautioned that area off the open for fade trading. I said pre-market that I thought 89 was interim support and I confess I was surprised that we punched through and was more surpised that since we did, we didn’t test 85.50. There may be a nice scalp fade coming up at 95.75, but I would just scalp it if at all. I have a feeling we may actually stretch out and test the 97 handle before the close. If not, I bet we retrace and base in on top of 89 again.

      • How do you see that “institutional volume has really been coming on strong to the short side” or to the long side for that matter? Basically, how do determine institutional volume?

        • Ticks & Volume within ticks of large order sizes sustained over periods of time.

        • Look at the first chart in the DTG annotated charts post from yesterday: http://www.discoverytradinggroup.com/archives/870

          At the bottom of the chart there are 2 sets of statistics. The bottom set represents institutional buyers with order sizes of 100 lots or larger. The volume is divided into buy volume (i.e. the long side) and sell volume (i.e. the short side).

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