Wednesday, September 3, 2008

Wednesday Notes - Classic Post-Trend Day

3:25pm OK, we got pretty much what we expected with some magnificent, multiple-opportunity oscillation market moves -- on both the DAX and ES -- on this classic post-trend day. As I gather my thoughts, I'm actually a bit surprised that I closed my last trade at 12:58pm and haven't traded since, yet I was reluctant to do much with anything but Aces after a strong morning performance. Interestingly, my Globex ES trading was slightly negative and I also passed on buying the first ES dip, but I traded the DAX well during its main session and then had the ES motor purring nicely on a number of subsequent swings in its main session to grow the day's chip count by $16K.

Did pretty well on nailing high-probability shorts on the 10:05am and 10:45am moves toward Tuesday's resistance, and the increased volume has been a nice blessing with trade entries often moving immediately into profit status upon entry, allowing for some risk-reducing scaling down and free-riding. Welcome September!

Adjusting to the increased volume and more predictable pace has admittedly taken a bit of effort, yet for the most part it's felt like getting off the August tricycle and hopping on the September 10-speed ... as it should.

Having said all that, I did get sloppy a bit during the Globex session and also passed on a couple of decent probability afternoon swings which may have suboptimized the day's results somewhat. That should give me something to improve on heading into Thursday, and hopefully we'll get a market push into the mid-1280 resistance area (trusting until broken) to do the dance all over again.

Overall, I'll grade today an A for market reads (not too difficult as it was aided by the classic post-trend day rhythm ... and this time with volume!), B for executions, and a A- for not exposing the morning's chip gain to less predictable PM action.

Yet the only test that ever counts is tomorrow's ... as today's test and every quiz ever taken in the past is now history and completely irrelevant.

The final grade gets released on December 31.

Stay the course Don.

4 comments:

cleon said...

Don,

I'm curious how rigorous of a definition you have for a trend day? I.e., what criteria do you look for to predict a nice ranging day like today? Just gut feel? or range expansion, high-to-low move, ATR, volume, etc...?

Thanks in advance and nice trading today!

dan said...

Don, I've been reading your blog for sometime now (really good stuff!). What exactly is the "post-trend day"? I've searched and am unsure if you are fading the continuation extremes, or looking to go with the trend once it retraces?

Thanks,

Dan

Don Miller said...

Hi cleon.

I don't use any specific definitions, although I do prefer a strong finish to the trend day such that (1) any futher extension the next day is unsustainable and thus likely to retrace toward the mean, or (2) any retracement runs into clearly established resitance from the prior day.

I also prefer the 15-minute chart to be the timeframe "in play" as it usually provides a strong intraday rhythm with ample profit opportunity.

Yet as Dr. Brett says, it's hard to describe that "feel". When I taught, I often saw many traders get far too caught up on trade setup details, which was often the case with traders who were previously engineers, programmers, accountants (self included), and similar professions that required an exactness in their fields.

Suffice it to say, I'm "simply" looking to enter wholesale and exit retail, and as a liquidity provider looking to place a number of trade sequences during the day, an oscillating market provides the most fertile ground for multiple entries and exits.

Hope that helps.

Don

Don Miller said...

Hi Dan.

I'm actually looking to do either -- or both -- of what you describe. Of the two, my preference is to enter "with the trend" on the next day's pullback and exit in to the subsuquent trend continuation ... which can be in the Globex or regular session (or both). This is because I prefer to trade with the trend and the market can get even more extreme initially the next day if the trend is strong and the turning point hard to sense ... especially if there are no double tops/bottoms or clear price vs. momentum divergences as was the case on Wednesday.

Yet I'll fade a strong further continuation if the TICK is extreme, there are divergences, or and the price bar simply unsustainable (have still never seen a market go straight up or down, although they can run a while). In that case, the exit is on the retracement toward the trend support(s) and I'd be looking for another trade to reverse the position and re-enter with the trend at my back.

Perhaps better said, I'm looking for wholesale opportunities to fade extreme trader emotions (as reflected in the charts) caused by either (1) continued panic short or long covering by losing traders which is likely the only remaining immeidate fuel for the market or (2) poor exits by traders who got greedy and didn't exit into the prior day surge resulting in a trend pullback ... which when combined with one more round of trend pullback-entering traders with new entries and loss-minimizing traders who were caught by the prior day trend and hadn't yet covered, often results in one more trend extension.

Or maybe even simpler, looking to do the opposite of what worked the prior day :-). Like anything though, it's probability of likely action and far from certain. Yet it's a rhythm that I'm very comfortable trading, even though I do run into occasional trouble and have to scamper a bit to get in sync with the "day two" evolving rhythm.

Hope that helps a bit.

Don