Friday, August 15, 2008

Friday Early Notes - DAX for Breakfast

4:06am Nice 1st hour breakout on the DAX with 3 Line Break a nice trigger. Note the combination of 1-min 3LB going long (6504), and a break from consolidation on volume. Jumped my signal a bit (consider wrist slapped ... I'm not a great breakout trader) but caught a piece of it and looking to buy any pullback so long as the 5-min trend stays long. Problem may be given the pace and strong break, there may not be much of a retrace, but there should be one bounce on any decent drop where stuck shorts have to cover.

There's of course no VIX to track in this session, but the feel and sense is volatility is waning substantially which bodes well for at least one reaction back up.

4:47am Textbook reaction to retest last high. Here's the 5-min follow-through:

4:52am Holding partial long "just in case" we extend. Will stop on 1 min 3LB turn.

4:56am Back to flat on stop. Maybe a push back down to the breakout top or one shake-and-bake before resuming. We've seen plenty of those in both ES and the DAX lately.

btw, my business plan does not include DAX profits as it's not my strength and main focus. That's why my strong July DAX results weren't expected. As I've said before, I find it a very difficult market to trade (often like grabbing a mosquito with tweezers) given its pace and much lower liquidity than ES. You have to nail the opportunity when presented and it's very easy to get shaken. You also HAVE to have resting exit orders in the market as it often spikes and then that's it (except on breakouts like above.) I monitor and trade it essentially to keep my head in the game and stay sharp with chart patterns. Plus, I'm not mentally very alert during the hours when Europe is trading. So my expectation is a small loss at the end of the year, with the results of my efforts reflected in improved ES trading -- which I believe has been the case over the last few years.

Another way I look at it is using it as a similar tool to an on-deck hitter who makes practice swings in the on-deck circle with a weighted bat. Then, when he steps into the batter's box, his normal bat feels light by comparison. Heck, whatever works. I only care about total bottom line on 12/31 ... doesn't matter how I get there.

5:10am Still looking for one more late Europe AM push.

5:22am Long DAX again on the 1 min turn. Path of least resistance still seems up to squeeze remaining stuck shorts. Stop is 6527. 15 min also suggests one more leg up. If we tick 6540, should run stops 10 points or so. Looking to exit on spike through 6540 if market cooperates.

5:35am Should get it. Looking for volume spike.

5:36am DING DING DING. Took partial off at 6542. Looking for 6550+ on final. Look at that volume bar.

And yes, I do keep changing the timeframe of the posted charts as I do on my own screen. Depends on what's telling the current story in terms of opportunity and trend "in play". Still looking for 6550+ on final (out most now) and sitting there waiting for panic covers and premature shorters to bail. Tapping fingers on monitor to see if it will help.

5:48am Looks like that might be it. Good example of the absolute need to have resting exit orders to capture the spikes. I caught the second highest tick on that primary exit.

5:50am Flatenning final on turn. Nice sequence. Jack be Nimble, Jack be Quick, Jack is going for a nap. More after the U.S. close and this weekend.


Anonymous said...

Don - Based on reading your journal & the use of the NYSE TICK as a timing tool, it would seem like your trading method is slightly different for the DAX as there is (to the best of my knowledge) no comparable indicator. Do you feel this may be impacting your results for the DAX?


Don Miller said...

Yes, it's probably one of the reasons ... the more measuring sticks, the better. Yet another reason is I simply choose not to focus on it as my main trading vehicle. Plenty of opportunity with the most liquid trading vehicle on the planet in ES.

Anonymous said...

Don - Gotcha. The majority of my trading is on commodity spreads so at this point, I am not a member of the CME and currently am not leasing a seat. The DAX seems to have a much lower cost structure for non-members that could make some high frequency strategies profitable on the DAX where it would not be on the S&P.

Thanks for the comments.


Anonymous said...

Don - Apparently IB has something dimilar to the NYSE TICK for the DAX -

I just found it and am going to check it out further.