Wednesday, September 17, 2008

Wednesday Notes - TICK leads the way

12:54pm Geesh, talk about trying to grab that sucker for some half-decent size. There's a reason this is my first post of the day since it took my hand-eye coordination the bulk of the morning (and 2740 x 2 contracts) to get in rhythm. My broker's definitely loving me these days ... so long as it's a win/win, that's more than fine with me.

Take a look at this morning's 1-minute TICK chart (click to enlarge) and the extent of (a) the extreme sub -1000 readings (note my chart is purposely scaled from 1000 to -1000, so the sub -1000 are the bottom flatlines) and (b) the few + readings above the blue line. One thing is certain ... this is EXTREME and likely won't continue for much longer, and while shorting has been the name of the trend game lately, we'll need to watch for a change in this pattern. In the meantime, buying the extreme low TICKS and shorting the approaches to zero is heaven for a scalper. (Again, that game will change soon enough.)

1:10pm Trading has been very thin on the DOME, and this is where my DAX and Globex trading ... listen up Steve :-) ... helps in this volatility. 3 Line Break, TICK and the VIX have also been helpful to set the market bias when prices are lurching up and down. Look how thin this intraday DOME is ... this is about as thick as it's been all day, and often the inside spread is only double digits!

I'll be tightening up the trading for the afternoon as it's important for confidence purposes that I continue yesterday's day session success into a booked P&L gain today. Plus, my brain is a bit fried and my hands a bit greasy from wrestling with this pig of a market.

2:30pm Yup ... tides are changing. Caught ES off 7275 after letting the fake and shake take out the early traders ... best exit 7975 (tiny size for fun) and scalp short off 8525 for 1.5.

2:35pm Ditto short off 8850 for +2. Definitely in rhythm and feeling it. Shorting for scalps only as the tide has shifted ... it also allowed me to reload after the first one.

Here's what I was seeing while managing the long sequence. Note the increasing TICK bottoms! We also never made new ES lows and 3LB had been long off the 1:50pm climb.

2:48pm That may do it for me ... interim 30 min resistance here but frankly tired and may let others have a shot at it. Quite a longer-term line in the sand at 1164ish as the market refused to cut through it on several attempts today. We also got an INTRADAY reversal for once ... it's been a while since the reversal didn't come right at open or in the overnight session!

Might get some 5-min (long) vs. 30-min (short) ES ping-pong here, and any sustained run into close will set up the morning.

A solid $24K ... this time with no offsetting overnight faux pau.

I hear there's another game tomorrow.


Ziad said...

Hi Don,

I have a couple of questions. The first one is regarding the concept of market pace. I know it seems self explanatory as to what you are referring to, but in reality I don't think it's as simple as it sounds. For instance, some days you talk about the great pace, and from my point of view it may have been a rather trudging and slow market. Other days have lots of momentum in my view, but you talk about the lack of good pace. So it seems that by pace you aren't referring to momentum or volatility per se, but possibly to the rhythm of the market- whether it is rhythmical or erratic. I'd love to hear exactly what you mean by it for your particular type of trading and what characteristics distinguish market pace for you.

Second, it would be nice to hear your insight on scalping. I realize that it is largely an implicit activity for you that has come about from many years of screen time, but do you have any general principles you can share as to what you look for in fading moves? I know you use the TICK, but what do you look for in the dome? Are you looking at the order flow (i.e. tape reading) or is it a "pace" based thing where you get a feeling when moves are likely to stall or peter out?

Thanks again and I look forward to your insights.


Don Miller said...

Hi Ziad -

I think it's more "rhythm" ... not only of the market, but how I'm aligned with it. And yes, that can mean different things to different people as some dance well with the Mamba, and others do fine with the Waltz.

I'd consider a market that's providing my ideal setups (pullbacks to resistance/support) ALONG with the ability to manage both risk and reward in terms of a nicely flowing market a market in good rhythm.

With respect to scalping, it really depends on the market's pace and trend timeframe in play, as well as how I'm feeling. I might look for a continual 50-75 cents opportunities or hold for more. I'm simply looking for wholesale price opportunities, and a 1-minute trend is very different from a 15-minute trend in terms of price objectives.

The DOME is pretty useless aside from sensing the market flow in the TT's static price ladder. It's a a great platform though and I always have it up so I can enter or exit at any time ... BUT it's very easy to get lost in the trees. I've definitely noticed more games being played on the DOME lately, including bogus appearing/disappearing sizes opposite the immediate move (i.e. asks flash heavy to fill the bid right before the surge up).

With respect to trade management, I never wait for a move to stall before taking profits, as I always take partial profits as the market is moving in my direction. As I've said before, I'm constantly adding or taking away size so long as I'm engaged in a trade sequence (flat to flat). Once the market bias is known, it's frankly difficult not to have a winning sequence ... which SHOULD be the case for anyone serious about this.

Keep in mind though by providing market liquidity for the CME (I lease a seat), my transaction costs are very small, and such frequent trading wouldn't work for people with a higher cost structure OR an inability (or no desire) to sustain such an extended mental focus all day long.

Many ways to do this of course.


Anonymous said...

Don, what type of seat do you lease at the CME? The IDEM seat can be leased for $125/month which seems like a great deal. Thanks for the joural!

Don Miller said...

I lease a IOM seat, which are currently selling for around $2,200/month. The breakeven figure for me is about 3,000 contracts/mo ... or a couple of days worth.