Thursday, September 11, 2008

Thursday Notes - AM Offense; PM Defense

11:25am After dreadfully suboptimizing early morning Globex trading (profitable, but not nearly enough despite a full night's sleep) -- including botching the DAX's textbook retracement to 15-min resistance (how the hell can my DAX net be negative on that sequence setup???) -- I seem to have again found my mid- to late-morning rhythm. And despite a cruel ES stop-triggering 11:04 spike into its own 15-min resistance -- which I managed around pretty well after learning my lesson with the DAX! -- the results have been OK.

11:34am ES going for a possible short squeeze here ... shorts may need to be careful over the coming sessions as shorting has been way too easy on pullbacks lately. My last cover off the 15-min resistance short was 1223 ... ES now trading at 1230!

I'll be frank here ... the minute trading seems too easy, watch out ... and that's how I feel right now (chunks of the last two weeks in a ridiculous zone with the exception of Tuesday's early struggles. Even when execution has been sub-par, the reads have been there). HUGE WARNING SIGNAL. And for that reason, I may back off the afternoon trading altogether unless there's some setup that's damn close to a royal straight flush.

Planning on taking a long lunch today.

11:52am Shorts getting squeezed for lunch ... ES at 1233 and going for Globex high. Triple checking to make sure I'm not short. Could see 60-min resistance here but personally passing and will reevaluate conditions after lunch. Naz outperforming ES ... interesting and maybe another reason to be cautious with shorts. 3LB has also been long since the turn off 1223.

12:34pm 60-min resistance holding for now. Did trade a couple of small scalps, but watching most of this. Heading to lunch.

1:56pm Back from lunch ... doesn't look like I missed much aside from chop. Dow +0.41 S&P +0.00. All intraday ES timeframes and VIX on the fence. Teeny volume bars last few hours. Will it be a quiet PM??

2:11pm Lots of little spurts on no volume. Got some of that 2pm pop long, but keeping PM sizes very light. VIX suggests up but volume pathetic. You can see shorts getting in some trouble trying to time a turn on the 1-min chart ... not going to make that mistake.

2:25pm What's interesting is I'm biased long for the moment but not really trading it much ... more just staying out of short trouble. Not real good at trading afternoons anyway. Will only consider shorting a spike or clear turn from here. This is where the blog is definitely helping my trading as I think out loud about what I'm seeing.

2:58pm Not in sync with late day rhythms here ... doing light "keep head in the game" scalping yet slightly net negative. BUT, only trading teeny sizes (5-10 contracts vs. 30-60 earlier today) and retaining most of the morning gains. Tricky rhythms continue on almost no volume.

3:14pm Getting a few paper cuts ... but looking back at recent responses to comments, my win/loss today is good illustration ... likely only around 50% (my guess 80%+ in the AM; 20% PM ... feel only) but the size difference on the winners has been significant as I've been barely trading any size at all this afternoon. Thus, I've held on to most of the AM gains. Many years ago, I'd have given it all back.

Market definitely frustrated PM shorts. Nasty turn sequence with few solid short triggers.

4:00pm Late Lehman Brothers buyout rumors as ES runs 20 points into the close ... more frustration for PM shorts.

Intriguing day recap ... traded 2 of the 3 sessions "poorly" by my definition (underperformed in Globex session, nice AM on good size, poor PM but on small size) but chip count up another $16K and held onto 95% of AM win. Got a bit sloppy in the PM but managed sizes well. Definitely one of my better days in terms of size management.

If you traded the PM well, congrats. I chose to play defense instead.


Ziad said...

Hey Don,

I find it interesting how you continually change your position sizing. I tried doing that once but it seemed to slow me down as I had an extra decision to make regarding how much to size a position instead of just being ready and taking it quickly in a standard way. I know you size positions in a discretionary manner, but it would be interesting to hear your general principles on how you size your positions and why/when you decrease or increase your size. Maybe that could be a topic for your weekend video. And while I'm on the subject of the video it would be great to hear your thoughts on stops, as I too have noticed that they can in fact be detrimental to P&L- especially trailing stops. While they make us feel more comfortable emotionally, that doesn't mean they are benefiting our bottom line. And in fact that is a general principle I have discovered- that often the things that make us feel uncomfortable are actually more profitable and we thus have to learn to sit with discomfort to truly have great results.

On another note, I noticed you were remarking today about the light volume midday and early afternoon, but I think the reason it seemed light was because it was the first day of the Dec contract and the volume was being allocated pretty evenly to 2 contracts instead of just mainly one. In reality, almost every 30 minute time-period during the day had above average volume if you add the 2 contracts. Anyhow, that's not important now. But I do have to say that you gotta love the huge ranges we've been having. It's made for some great trading!



Don Miller said...

Hi Ziad.

I'll share some more thoughts on stops and sizing soon. Suffice it to say I typically ramp up size when I sense a "fertile" market or prime setup, and usually trade smaller in the afternoon. Decision-wise, it's pretty much instinct for me now so there's really no extra decision. Of course keep in mind I trade many sequences during the day so it's often just "reacting" to what I see and it's hard to describe (Dr. Brett was right on as usual on that.)

Good info on the contract split ... that had slipped my mind and it is that time of the quarter.

I'll do at least one video this weekend ... maybe two.