Wednesday, March 4, 2009

Wednesday Notes - "The Jerk"

First things first before we get to Mr. Defazio's latest impression of Steve Martin at the end of this post.

5:00pm All things considered, an acceptable modest day at +$8K on very light trading volume at this end.

6:00pm OK, another day where the score doesn't tell the story. btw, here's my take on the "score" and why I reference it ... for all the talk about skill, executing a plan, and all the "warm and fuzzy" attributes noted on the scorecard to try to stay focused on the skill, in the long run it's ALL about the score. Yes, I believe daily & weekly #s mean little except in aggregation -- which is why I purposely avoid noting specific daily chip gain #s on the sheet and only show a general color -- yet we are trying to win this stinkin' game, aren't we?

I actually feel pretty good about my trading today in terms of having somewhat limited time to monitor the market during the morning session, while avoiding any late-day trouble during the post 3:30pm barf-a-thon. Most of the modest gains at this end came on the 2-3pm climb, as I was biased long after some price probes to the south failed to hold. Yet I kept size down given the market's tendency to not hold gains, which I was very comfortable with (vs. yesterday when I feel I undersized given the conditions).

btw, someone asked me in a comment the other day what I meant by "overextended", and my somewhat flip response was: Merriam-Webster defines "overextended" as "to extend or expand beyond a safe or reasonable point". Not sure I can do much better than that. Well, we can add today's late day 15-minute ES chart (attached; click to enlarge) to the dictionary.

So 725ish seems to be the magic number for now in terms of drawing a line in the sand to the north. Other than that, sticking to short-term trends continues to rule the day.

And thanks for all the comments last night, especially responding "knowing" I wasn't looking for advice. That tells me a lot about the professionalism of most of the onlookers. As the Pretenders say, "It's just a silly phase I'm going through."

Lastly, here's today's CNBC clip of THE JERK promoting the stupid tax bill. Just say no. He just doesn't get it ... and thanks to all forwarding the link since I don't watch the spin network. Good for CNBC for pushing back on him on behalf of traders (I can't believe I just wrote kudos for CNBC ... perhaps the world is indeed coming to an end.) And here's the link for the petition.

And a word to those on the Hill considering this: Picture this afternoon's late-day fall WITHOUT someone on the other side of the trade providing sellers a chance to get out ... think ES in the 600's. 500 anyone? Yea, that will fix everything ... not.


Martin said...

Don, I started following your blog after your traderinterviews. Love the open book format.

I've a question, when you differentiate between "providing liquidity" and "speculating", how does one provide liquidity?

If you've a post where you cover this, pls point me to it.



Don Miller said...

Hi Martin -

Check out the more recent (top) menu item in the "key post" link in the lower left margin, which is also Sunday's post.

By definition, in such cases I'm on the "other side" of the trade by posting on the bid and/or ask when others want to enter or exit the market.

Hope that helps.


Ric said...

Hi all,

Representative Defazio was on CNBC today promoting his ridiculous trader tax that would put many of us out of business. Link is here:

If you haven't already "signed" the petition against this tax, please go to this link and do so:


P.S. Thanks Don for allowing us to "peek" inside your world.

Martin said...

Don, I was looking for more specifics, I'll try write my question differently.

When I trade E-minis there's usually a very tight bid/ask spread and a large volume of bids/offers. I always assumed that most of the bid/ask volume is from other traders and there's almost always a natural open market.

So when you provide liquidity, do you just look for an imbalance between bid/ask size (e.g. 200 bid, 50 ask) and take the other side to provide liquidity? If so, do you turn around and exit that trade within seconds?

Is this something everyone can do, or does this require a special (non retail) direct access platform which allows you to react to these situations quickly?

Sorry if this seems trivial, it's just a very interesting concept and there's little information on how this works.


estrader said...


Do you implement cup & handle, head & shoulder, double top, double bottom formations into your strategy? Also Was curious if you stayed on the sidelines during the 2 p.m. Beige Book stats and if that affected your trading at all today. I was up over 1K today before the 3:30 lack-of-focus shakeout period and wound up taking a loss for the day during the last 1/2 hour. Taking this as a huge learning curve because I clearly saw the formation of a head & shoulders which actually turned out to be a double top formation at 725 signaling a strong downtrend & just got caught up with plain lack-of-focus after the 2 patterns of conviction for the short sequance trade. Gotta keep moving forward...

momo said...

deFazio obviously doesn't trade for a living, never has and probably couldn't if he tried. He has no respect for "day traders" who contribute "nothing" to the economy. Since when is paying taxes, and more than the average Joe, NOT contributing to the economy??! He has zero understanding of how little this has to do with "gambling". How can you make a living, day in and day out, if you're gambling, Mr DeFazio!?
What a TURD.

Don Miller said...

es - Yea, the patterns probably play into strategy, but it's probably more subconsious than anything. I do try to avoid trading around Economic releases

Ric - Thanks for the post ... keep 'em coming.

Don Miller said...

Martin -

I figured I misunderstood your question ... sorry about that.

One simply needs direct access to Globex where you can post buys (on or below the bid) and sells (on or above the ask), which most decent brokers provide.

Essentially, if you put out 1 contract on the ask, and someone buys at the market and "takes you out" (it's a first come, first served queue), you've provided liquidity.

I still always trade off technicals, even when providing liquidity ... the inside bid and ask sizes are often meaningless and full of fakes on both the U.S. and Eurex exchanges, although the general market depth can help in terms of setting market pace. For me, technical analysis will always rule the day.


estrader said...


What do you mean about cnbc being the spin network? You seem not to like cnbc so much? Dont you beleive that having cnbc on in the background helps, when in the rear instance a breaking news story comes out that affects a trade sequance?

Martin said...

Thanks Don, I really appreciate your response and your blogging style !!!

Just wanted to check if there's some super secret platform for CME members :-)

Don Miller said...

es -

I'll assume your question is rhetorical. I'll take tape reading 101 for $100 Alex.

Best wishes.

Don Miller said...

Martin -

Ohhh, "that" one :-).

E said...

To ES:

Please do yourself a favor. Been there done that in my early days, but never let a significant winner turn into a loser. It's like seeing the Yankees shoot one over the Monster in the 9th after you clawed your way to a lead in the 7th.

Risk/reward changes significantly going into the last hour after a day like today. Launch was 81.5, so wouldn't you want to take some of that home with you?

As far as CNBC, my trading didn't improve until I embraced TA and muted the BS'ers.

Better off listening to a winner like Joe Torre: "Win Today."

Step by step, one day at a time. :)

Just my 2 cents, passing along what I learned along the way.

"Tribulus" said...

Hi Don,

Love your style and scorecard concept.

Here's a clue I found helpful and may appeal to you.

"If you are thinking about something that you have been wanting and you are IMAGINING that IT IS happening then your emotion will be one of anticipation. You can tell by the way you FEEL whether you are IN THIS MOMENT, allowing or resisting your desire."

Helped me with a similar situation on size. Thought I'd pass it on.



Denarii said...

No one when talking about the traders tax - talks about the effects of the mutual funds. Most funds have an expense ratio of 1.5%. Does not the tax increase that by 0.25% in a lot of cases because many active funds turn their portfolio over at least once. How many jobs would this kill? Maybe there would be no more Etrade Baby comercials any more. I do not think I could live life that way.

Agree or not?

Glems111 said...

Don have you ever used market profile in your trading?

Peter Coussement said...

Hello Don,


There is a great BBC documentary published called "One Million Dollar Traders"

The torrents are available on the net. I watched it already, and it's really a must see i think.

Search for the following torrents online, there are 3 episodes (one hour each):

Happy Trading!


James Stollenwerck said...


Off subject...If you traded every day in 2008 even on vacation, you must have traded off a lap top wi-fi a certain amount of the time.

Ninja Trader, for example, doesn't recommend this because of signal lag, especially in times of high volume.

What's your experience with this, and can you recommend it?


E said...

Heaven Help us.


Don Miller said...

James -

I have zero problems trading with my Sony Vaio and Sprint wireless, and often trade via such a setup.

I use ESignal and TT, and have zero problems. Ninja may take more memory ... not sure as you'd have to check with them.

I don't need bells and whistles ... simply a small order entry window and a couple of charts ... preferably via two different providers so I know the data is valid.


Don Miller said...

Glemms -

Nope. Never have and never will. Got everything I need.


Don Miller said...

Denarii -

Not sure. My brain is taxed enough (pun intended) trying to read the intraday tape.