Thursday, September 25, 2008

Thursday Notes - Better Market Pace

1:48pm Nice to see the market get off yesterday's whip-o-matic and provide a bit better pace today. At this end, I waited for the market to tip its hand, and once it began extending from the open, focused on buying pullbacks and shorting extensions which have both done well for 1-2 points, although my VIX chart hasn't been providing data all day so I've had to focus more on the TICK and some feel ... which has certainly felt less volatile.

I've still been staying largely in protection mode in terms of size and trade frequency, which I think has helped me simply let the market come to me on unsustainable extensions (up or down), and have put in a fairly solid day.

2:33pm Nice drop to the 15 min support for a long scalp for 1-2 pts. Intraday timeframe trends very much in play today as is often the case after yesterday's chop-filled session. True to its form, the market rarely does the same thing twice in a row.

3:13pm Calling it a day. Any run into the close will set up Friday's open.

Generally, a solid performance at this end although I seemed to sleepwalk through it a bit in terms of energy and probably could have stepped up the size once the market found its pace. I'm definitely going to have to ramp up the energy level when Q4 begins next week.

Staying true to my Monday comment, we'll pass on the daily chip gain comment and simply score it at the end of the week.


Anonymous said...

Don, on average, how many points do you try to target per trade? I know you trade sequences, but at what point do you start taking some profit?

Looking over a few of the days, it looks like you average 0.5-1 ES pt per contract traded. That's just the average I came up with based on the total # of contracts traded and the resulting P&L, so it doesn't take into account the scratch or losing trades.

In my own trading, I've noticed a lot of my losing trades go 1-2 ES pts in my favor and then reverse, so I'm wondering if I should target 1-2 ES pts. On larger size, even 1-2 ES pts is good enough. Looking for some insight.

Thanks in advance!

Don Miller said...

Hey Fast -

Not sure I can provide a great answer as it often largely depends on the size of the trade at any given moment. For the same reason I can't talk much about point-based stops (because I manage risk primarily with size), actual per-trade point gains are similarly difficult to describe.

I suppose the real answer is dependent upon the market opportunity. For example if the market is clearly stretched and I time a fade well & hold on until the TICK retraces, profit could be 1, 2, or 3 points depending on how stretched the market is away from its mean. Heck, in recent conditions, it might be more.

But again, it depends on size. 15 contracts is usually the smallest I trade and if that's all I have on, I'll hold on for more than if I had 300 contracts on, in which case I'd look to bail quickly on a portion -- could be .75 even if there's multi-point opportunity -- and scale out the rest as the market moves in my direction.

It also depends on my frame of mind and immediate intent. For example, when I'm in EESM mode (see early July posts), I'm simply looking to restore confidence and may take .50 over and over again to get the brain back on track.

When I'm providing liquidity in a fairly tight market, I'll often target .75 - 1.5.

As I've said before though, keep in mind my transaction costs are low and I have the ability to mentally enter, re-enter, scratch, enter, etc. over and over again and it doesn't phase me in the least. Traders who can't or don't choose to trade as often would have to develop a different strategy.