Approach to trading the ES contract

Status
Not open for further replies.
Today's a good day. All automated systems are go. No problems and I have some free time on my hands

So I sit down next to my good buddies (lets call them "Bob & Ted" as in Bob & Ted's Excellent Adventure). This morning they are bitching about the fact that I have them using a very minimal trading screen (couple of simple charts and market internals). The chief complaint is that I have "better tools" and so I have an unfair advantage.....

So I close down my workstation, pull out my laptop and put on a single screen, one chart, a 9 period ema with a close envelope around it and the default MACD on the bottom pane...thats all.

The "boys" laugh about this and say, "we are going to kick your butt today" and I say, "have at it tigers, this is probably the best chance you will ever get"

On the attached chart you can see where "Bob & Ted" got flushed out on a retrace. Also marked where I added to my position on weakness.

Scaled out half of my position along the way. As you can see this is going to be another 10 point move.

Bob & Ted are buying lunch and ironically they are happy as clams because they made some money....
 

Attachments

Update on that short trade.

A bit disappointed because I missed an opportunity to scale in some more.

We have a confirmed single so I may reverse if it doesn't fill in the pit. Although I am now looking ahead for 20 pts, the market could reverse at or near 903.75.

We'll see
 

Attachments

and we have 15 pts on this last stab down.

I have inventory to park but ideally would like to place it down a few points further. I am going to hold and wait until I get better clarity.

"Bob & Ted" wanted to go home early, but I did not let them. Naturally, as price continues further from their exit they seem less impressed with the day's profits.

This is turning out to be an excellent lesson about "expectations". Namely the market couldn't care less what you think it will do....If you "cash in" thinking you have caught a pretty good move, you may be surprised when you come back to your screen later on. The reason we want to milk trades (by scaling out) is because we have to overcome expenses. Most of the outlier trades happen in bunches during a year. knowing that, especially if you are a retail trader, you better not give up on a trade until that final bell rings. Any individual trade could be the one that really makes your year.
 

Attachments

End of the session and at about 1:11 or so price hit its low of the day at 887.75

I was able to unload inventory from 890 down to 888 on that last move. My best scale out was 888.50

So I missed my 20 pts by a few but I got my message across to my buddies (bill & ted) lol. They took 4 pts early in the session and gave back half of that on poor countertrend entries during the chop. I am pretty sure they were pissed that they couldn't find a way to get back on that short earlier, but thats the way this market acts. Often times, if you get on the right side early you have a nice winner. Conversely if you wait, or you wuss out on a winner too early, you have the unfortunate experience of watching the rest of the day as the market moves away from you.

Chart attached
 

Attachments

nice trade and nice hold. i entered at the IB retest on the 1min and then got out BE on the pullback at 898. obviously i should have held. what would have made you hold through it? breadth was really really weak, but i saw some stuff going neutral on the retest so i went out BE and couldnt get a reentry with a good setup.
 
Hi XB

I was "restricted" to a 2 min chart today, no MP no market internals, etc. so I don't know that my opinion has much weight to it, but I can suggest a couple of things.

First, you may benefit from watching $VOLD and $ADD if you have Esignal. They don't lie. Normally, on the open I have them both on 1 min charts. After that I change to 13 min charts and watch how each one acts during pullbacks. The other alternatives include cumulative delta (volume tools on Linnsoft's IRT package) and Market Delta footprint charts both of which have the capacity to show what traded at each price point.

In truth I did have an unfair advantage today, because I keep track of where resting buy and sell volume exists. I didn't have to have that data on a real time basis, because I knew where to expect a move. Its called doing your homework the night before.

Unfortunately speaking of "homework", I have to do some chores here in the office before I can leave, so I will have to sign off (or camp out here tonight).

I will try to post later in the evening.

Best to all
Stevesbg
 
Steve,

I havent tried VOLD. Im familiar with it, but for internals I use ADD, VIX, TRIN. Trin I believe gives a similar read to VOLD. (correct me if I'm wrong). Do you use volume profile to see where the volume is or to keep track of it or is there another way? I would have loved to have held that IB retest if I had a more confluence
 
$V0LD is up volume minus down volume on the NYSE. It updates every 6 seconds

$ADD is the number of advancing issues minue the number of declining issues. It also updates every 6 seconds.

These two indicators will sometimes diverge. When they do it often means that institutions are either selling into a rising market (as when $VOLD is up and $ADD is flat or down) or quietly buying (establishing positions) in a declining market ($VOLD is down & $ADD is moving up).

$TRIN is not in my opinion as useful as it used to be. I do not use it.

$Vix is also in my opinion of questionable value intraday

$TICK is useful if one knows how to read it.

$TICKI can tell you that program trades are executing. Readings above 18 often signal program execution.

Of these, I prefer $VOLD and $ADD on a 1 min basis on the open. Once I am filled I watch these two and make my decisions based on how they confirm or deny my bias long or short. When the market has passed 15 minutes I change from 1 min to 13 minute candles and I add an 89 period ema. As the $VOLD approaches and tests the EMA, I generally see significant changes in trend. I try to be on the same page as the $VOLD, long when it is above the 89 period ema, short when it is below. When both $VOLD and $ADD are moving together I consider that a strong indication of trend.

I use various means (volume at price, volume profile, market delta, cumulative delta, etc) to tell me how many contracts have transacted at the highs and lows. This tells me whether the locals or institutions have found buyers or sellers at these important price points. If for instance I am considering a short position at a potential high of the day, I look to see how many contracts "go off" at that point. If only a few contracts move, it tells me that there aren't many buyers (or stops) waiting there. That means I probably can enter short with minimal risk.

I hope that helps

Stevesbg
 
Interesting thoughts. What are significant numbers with VOLD? Which are the extreme above/below numbers to throw strong bearish/bullishness?

Do you use VOLD for entry and how tight do you get your stops? I usually target an entry on a retest before it gets there once I see selling/buying coming onto the tape with a MACD rolling over for a bit more confirmation. I also need a pause or pullback with VIX and ADD showing up. I enter on 1 min retests usually.
 
Volume is variable both seasonally and day to day, and that is why I use the 89 period ema instead of specific volume levels

As seen in previous posts, my $VOLD and $ADD are setup as candlestick charts with only the 89 period ema in place. I react to tests of the 89 ema, using it for confirmation at entry, to keep me out of a bad trade, or to exit.
 
Status
Not open for further replies.
Back
Top