Wednesday, February 11, 2009

Wednesday Notes - The Sun Came Up

3:30pm An amazing thing happened today ... the sun came up after all. And yes, I'm posting early as I've closed the day to avoid the potential "screw the whole day up in 30 minutes" pitfall after recovering 42% of yesterday's mess thanks to the classic morning-after-trend-day oscillations and a renewed commitment to focus.

A reminder that my self-assessment of daily performance can be accessed by clicking the scoresheet link to the left. It is usually posted shortly after market close.

Actually, I'm working on only three hours sleep as I intended on trading both the Europe and U.S. opens (well, I couldn't sleep!), and both cooperated nicely by providing strong fade opportunities on the first retracement back towards Tuesday's resistance points. So fade, cover, and repeat was the name of the early game as both opens chopped around, which as we all know is the expected -- albeit not guaranteed -- rhythm after a monster trend.

Perhaps I needed yesterday to finally stop trading on eggshells and move forward to more intense trading. Case in point: Last time I had a major bonehead day, it provided the foundation for the $700K Oct-Dec 2008 run. Maybe I needed that major butt kicking to make the fictitious draw feel real again. Who knows.

All I know is I always trade my best after a draw, both because large draws are usually based on signficant market moves which rarely repeat on consecutive days (thus providing high probability sequences on day two), and because it essentially coaches me into getting my act back together.

It's amazing that it often takes one large step back to move several steps forward.

But the sun feels nice.

Hand me the sunglasses.


NQJ said...

Hi Don,

Nice come back. Truly an inspiration.


Unknown said...

Glad to see you had a better day.

None of my orders were hit. I figured we would retrace to the pivot and I would fade that. Should have just stuck with the resistance level which was below the pivot. Once it backed off the resistance and faded I didn't want to chase it, because I like to keep the same stop limits and not stretch them to catch the move.

I knew we would trade lower, I just thought that we would go at least a tick below the previous days low. And that never happened.

Should have just taken the TICK fades today. Especially when they happen right at support and resistance levels.

Oh well, such is life for the amateur.


Severino said...

Hello Don,

How much does a gap influence you on how you handle the after big trend day fade play?

If you can not locate an area of support such as today for your trade fade sequence, do you scratch more and look to add more contracts on the turn back down? (Or up) Or does that go against the wholesale preferred way? (to sell, or buy)

Have you worked with VWAP that is fade play on a trendless ocillating day, back towards it?

Are you watching American Idol this year?

Thanks as always,


E said...

On range days lately it seems they like to jam the middle traders both ways.

Best r/r trades seems to be fading the boundaries with tight stops.

Not an exact science, but the sequence and rhythm was there.

Catching the meat of the range both ways is all we can hope for if our timing is right.

Trin backed off from + 6 to .62

3 min chart seemed best pace chart today?

Nice comeback Don.

Some days we have it, some we don't. Liars and gurus are the only ones that get it right everyday.


Don Miller said...

Thanks - F&W.

Apprazzr - Don't sweat it too much ... yesterday was amatuer hour for me.

Severino - A gap doesn't play much into my thinking as I'm typically fading the first move in either direction, although I PREFER to fade INTO the prior day support or resistance rather than fading a trend continuation ... but I'll still do both.

I tend to always fade the early moves, expecting oscillations given the mindset of how traders respond to monster trends as the market participants help the market seek equillibrium ... it's somewhat automatic.

As I said the other day though, it's only probability as the market can certainly still move hard early on day two, but I haven't seen it happen very often. And if it does, I'll try to adjust so long as my head is screwed on straight.

I've never used FWAP (to me, it would be like fuzzy dice in my way as I simply try to look out the windshield), and I've never seen American Idol.


Don Miller said...

E -

Good stuff. Yea, traders trying to trade day 2 like day 1 typically get hammered. I thought the pace was a bit rough early, but stuck to my guns on the pattern and it worked out OK. Europe and U.S. overnight seemed to prep me for the first opening fade.

Didn't notice the 3 min.

Yup, some days you're the bug, others the windshield. I still need to finish clearing the glass, but at least I can see out the window now.


Unknown said...

Speaking of TRIN.

Don, I noticed something interesting about it yesterday. Looking at the stairstep pattern of the TRIN I decided to overlay EMAs and found that everytime the TRIN returned to the 20EMA the market would start its next leg down. Today I kept it around and every time the TRIN passed through the line it looked like a big program fired off (based on TICK movement). I've also noticed on some days the TRIN trends towards 1 and then fades.

Have you ever seen this pattern of behavior in the TRIN or any insights?



Get In Get Out said...


When you scratch a position due to uncertainty are you using a limit order to scratch or a market order to scratch? Also when you do scratch is it mostly at a break-even price point or within a few points for a loss? Just Curious as I am trying to test out if it is better to put on a limit or market stop to sractch out a bad trade. About the european open you are talking about, Are you trading the sps after hours into the european open or a forex currency trade? I am in New York. What time does the European market open if I wanted to experiment & paper trade the european open? Thanx Don & glad to hear you are just about 50% back to par from the evil chart from Tuesday.

E said...


My wife put this in front of me recently. It is relevant to us macho men who think we don't need sleep every night.

Empirical evidence from your last year's performance substantiates their findings.

Skip to last 6 paragraphs if you are in a rush.


Don Miller said...


I use the TT Depth of Market screen for all entries, so everything is always limit by default.

Yes, I sometimes trade ES overnight off Europe charts, but the liquidity is usually awful and I don't do much overnight trading anymore.

Europe's pre-market session starts at 2am ET and the normal session starts at 3am ET.


Don Miller said...

Good stuff E ... thanks.

apprazzr - I never use TRIN, which to me would be like looking both ways 4 times before crossing the street instead of 3. For me, 3 is good enough.