Monday, December 8, 2008

Monday Notes - Good to the Last Drop

4:15pm OK, I admit I couldn't resist the headline on the late-day Wile E. Coyote 18 point ES fizzle.

Well, I suppose "investors" and swing (long) traders deserve a break after this year's slaughterfest, and they got one until about 3:30pm today as the markets gapped up and had two separate surges to the north (the Dow flirting with 9000) before ending with a rather choppy whimper that significantly reduced the probability of what would have been tomorrow's highly predictable "morning-after-trend" trade. Dang ... it would have been there for the taking. Still, I'll look for an early oscillation or two.

At this end, I felt today's pace was often less than spectacular, which while not surprising for a Monday as the market finds it's new week's rhythm, was "spurty" enough to keep me on the sidelines for much of the day in capital preservation mode. Essentially, there was little extreme emotion of which to take advantage, until the 3:49pm drop. That, combined with the lower probability general trend day and declining volatility, resulted in modest 670 x 2 trading volume (670 contracts bought and sold for our new guests) at this end with a somewhat surprising +$14K chip gain on the day. I say "surprising" because $6K of it came from nailing a 3:49pm 902.50 wholesale long for a high-probability "I don't normally trade the last hour but that was too good to pass up" 60 contract scalp.

As I mentioned in this weekend's interview and throughout the blog, market "pace" is critical for me and is more important to me than any chart pattern, volume indicator, or other market attribute. Of course, equally important is my ability to match my own internal rhythm with that pace ... in a cheek-to-cheek type of dance.

One key throughout today -- as is often the case -- was the absolute necessity to exit positions on the TICK extremes to gain optimal wholesale prices, as subsequent sharp contra-moves were common as the day wore on. Heaven forbid one tried to enter in the direction of the trend on the TICK spikes ... duhh, those are the losing retail traders who are giving it up to us!

Another reinforcing concept the market provided today for those using moving averages, is the importance to look for "zones" of support via multiple lines, versus leaning on a single line which is like trying to predict the exact score of the Pats-Seahawks game at halftime. Such is why I choose to use both the 15 and 20 MAs on key timeframes such as the 15-min as noted on the attached chart. As with any indicator though, MAs are visual guides only and only useful in combination with others.


And while it's not quite time to count the final score -- the ticker to the left continues to speak for itself -- I did begin to look back at the year over the weekend, limiting my analysis to trading volumes so as not to jump the gun and look at the equity balance. After all, remember what happened to Michael Phelps' opponent when he lifted his head before he touched the wall!

Of course, many of you know my views on trading statistics in light of my style -- as their usefulness to me is largely limited to interesting after-the-fact anecdotes. Nevertheless, here are a few tidbits through the end of November, which will likely mean more at the end of the year when we place them side-by-side with the final scorecards.

Jan - Nov 2008
Total Contracts Traded: 593,458 (Includes both buys and sells)
Total ES Traded: 547,734 (92% of Total)
Monthly Range: 31,672 (Aug) to 79,574 (Sep)
Daily Range: 330 (Ironically, the 1st Trading Day of the Year) to 14,114 (One day in March)

And perhaps the least surprising numbers:

Market Days Traded: 235
Market Days Not Traded: (Including U.S. Holidays) 0

Yes, I did place a few Europe & Globex trades during July 4th and Thanksgiving, and I DO plan on taking some vacation after the race is done.

We'll of course revisit these at year-end as it remains inappropriate to look at the clock while still running the race.


Anonymous said...

Don - Your comment in today's post suggests retail traders aren't watching the $tick. Don't all futures traders watch the $tick? If you had to guess, what percentage of traders are using the $tick?

Anonymous said...

Hi Don,

I used to follow your QQQQ articles on TradingMarkets years ago. Do you offer a trading room service that I could subscribe to and learn?



Don Miller said...

Hi Mojo -

No idea ... although clearly, there are traders making decisions based on emotion, being "stuck", or other reasons that results in them making the decisions that makes the other side of the market at the extreme points. We've all been there, and still go there from time to time :-).

Hank -

No, I don't have a service, nor do I plan on having one. As I've mentioned throughout the blog, at this point in my life, my only interest is in trading and sharing my personal diary -- via the blog -- for those interested in looking over my shoulder.