Those making a killing- what are you doing risk mgmt-wise (that i'm not!)...

G

gangof4

i trade the ER2 and i am REALLY struggling with this recent volatility when i know i should be thriving. i see the p/l thread and i feel like i'm @ a roman orgy, but i'm the guy with the mop and bucket!

today was better, but yesterday, and especially last thursday, the chop killed me. the moves are so extreme that a bad entry with a 3 point stop gets taken out in a heartbeat. expand the stop and a woosh can turn into 7, 10, 15 points. narrow the stops and, well, forget about it.

so, any words of wisdom, from those who are making the most of the volatility, would be most appreciated. please include what you're doing to manage your risk whilst also taking advantage (2 things that i am finding hard to reconcile). you all can't be making perfect entries, so are you guys just living with VERY wide stops and not reaching max pain?

thanks.
 
ER2 looks like it has blackbox's taking out all trailing stops, I trade it every day and you can see this happening. Put in an order with a 5 tick stop and watch it get hit. I'm not sure what the guys in the P/L thread are doing, but they are making me jealous as well. ES looks a lot smoother, that is for sure, heck, even CL looks less volatile then ER2 right now.
 
Quote from john99:

ER2 looks like it has blackbox's taking out all trailing stops, I trade it every day and you can see this happening. Put in an order with a 5 tick stop and watch it get hit. I'm not sure what the guys in the P/L thread are doing, but they are making me jealous as well. ES looks a lot smoother, that is for sure, heck, even CL looks less volatile then ER2 right now.
More...

the irony is that my best market, BY FAR, is the HSI/HHI.HK- the most volatile equity futures i can find. i get my head handed to me there @ times, but the moves are big enough to offset the chop. somehow i cannot get this to translate to the ER2 in this volatility. in june, i was very consistent trading ER2- steady, unspectacular, but up 9/10 days. now, it's a struggle to break even. yesterday, down $800 was a serious win the way i traded!

clearly, i am doing something wrong- hopefully some of those managing this environment well will chime in (not looking for someone's edge, just how they're managing risk in a way that isn't killing gains).
 
I've given up daytrading this since I'm no where near experienced enough or even skilled enough to trade these conditions.

But I am bearish on the market as a whole, and am short some stocks via puts for when the big bad bear comes.
 
Heres a hint. If you find that your stops are repeatedly taken out causing you to lose money, why not change your trading method to take advantage of this observation! :p
 
<i>"clearly, i am doing something wrong- hopefully some of those managing this environment well will chime in (not looking for someone's edge, just how they're managing risk in a way that isn't killing gains)."</i>

A few things...

#1: From mid-2004 thru middle of last month, I was an ER trader almost exclusively. I've been trading ES solely for a couple of weeks, took my final ER trade this morning forever.

Was short 10 ES and it was working, shorted 2 ER on market order into one of those vaccuums and it filled -1.2 pts lower than expected.

bid/ask size on the dome was single digits to 10s. Some tick strikes had 1 - 2 contracts showing. That is untradable OI. Later in the day, I saw 10s and 20s five levels deep on the dome. That simply won't work... too many traders off the ER, insane spikes and gyrations thru thin air because of it.

ES has more size than any retail trader can exhaust, and the swings are modest to gargantuan right now. Only advantage ER ever had was bigger range size. That's negated now, hence zero edge for ER over ES.

#2: Wider stops are not the answer... same stops as usual, precision entries and willing to take the same entry signal two - three times if necesary. Better to use the same $$ normal risk on two tries at an entry rather than twice normal $$ risked on a single try.

The surges and rolling chop (read that as ranging chop) are often giving two - three signals long or short near the same spot on a chart before it works.

#3: Trade smaller size. I'm trading 5 - 10 ES at a throw, well below what I'm capable of. Just willing to take more, sometimes many more trade turns per day than accustomed to these past five years. If/when volatility wanes, I'll up contract size and reduce trade frequency, that's all.

#4: Consider scaling into trades as market moves in favor. The swings are huge, and there are lots of them. You will catch some if your method is sound. When price action has moved far enough in favor to trail stop at par, consider taking a second position at the next entry signal same direction.

I've been waiting for tonight's short squeeze since Monday. Went long 1449 off the lows, considered doubling up when price action hit 1453 but instead got conservative and trailed stop to 1452.

That locked in +3pts or +20pts ES for the day and done. I had already missed at least another +20 or +30 more, so didn't play aggressive at 3:40pm est. Big mistake.

Doubling up when price action surges in favor can make one trade complete the whole day in times like these.

**

This wild, insane volatility won't last forever, unfortunately. It is very trying on traders who've never dealt with it before. Those of us who have can handle it. Nothing, absolutely nothing replaces live experience for this stuff. The speed at which tapes turn and move is mind-numbing. Keep big mistakes from happening, and enough good things will overcome.

By the time ES is trading 1200s, everyone left will have the hang of these wild tapes :cool:
 
If you design your strategy for markets behaving in one way (ie not making the biggest gaps in history or the biggest days (like hsi yesterday)) then one approach is simply not to trade.

Its very tempting to think one should make money all the time.
 
Quote from austinp:

A few things...

#1: From mid-2004 thru middle of last month, I was an ER trader almost exclusively. I've been trading ES solely for a couple of weeks, took my final ER trade this morning forever.

Was short 10 ES and it was working, shorted 2 ER on market order into one of those vaccuums and it filled -1.2 pts lower than expected.

bid/ask size on the dome was single digits to 10s. Some tick strikes had 1 - 2 contracts showing. That is untradable OI. Later in the day, I saw 10s and 20s five levels deep on the dome. That simply won't work... too many traders off the ER, insane spikes and gyrations thru thin air because of it.

ES has more size than any retail trader can exhaust, and the swings are modest to gargantuan right now. Only advantage ER ever had was bigger range size. That's negated now, hence zero edge for ER over ES.

#2: Wider stops are not the answer... same stops as usual, precision entries and willing to take the same entry signal two - three times if necesary. Better to use the same $$ normal risk on two tries at an entry rather than twice normal $$ risked on a single try.

The surges and rolling chop (read that as ranging chop) are often giving two - three signals long or short near the same spot on a chart before it works.

#3: Trade smaller size. I'm trading 5 - 10 ES at a throw, well below what I'm capable of. Just willing to take more, sometimes many more trade turns per day than accustomed to these past five years. If/when volatility wanes, I'll up contract size and reduce trade frequency, that's all.

#4: Consider scaling into trades as market moves in favor. The swings are huge, and there are lots of them. You will catch some if your method is sound. When price action has moved far enough in favor to trail stop at par, consider taking a second position at the next entry signal same direction.

I've been waiting for tonight's short squeeze since Monday. Went long 1449 off the lows, considered doubling up when price action hit 1453 but instead got conservative and trailed stop to 1452.

That locked in +3pts or +20pts ES for the day and done. I had already missed at least another +20 or +30 more, so didn't play aggressive at 3:40pm est. Big mistake.

Doubling up when price action surges in favor can make one trade complete the whole day in times like these.

**

This wild, insane volatility won't last forever, unfortunately. It is very trying on traders who've never dealt with it before. Those of us who have can handle it. Nothing, absolutely nothing replaces live experience for this stuff. The speed at which tapes turn and move is mind-numbing. Keep big mistakes from happening, and enough good things will overcome.

By the time ES is trading 1200s, everyone left will have the hang of these wild tapes :cool: [/B]
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i really appreciate your thorough response. i have been thinking of shifting to the ES or YM for the reasons you've stated. i have been stubbornly sticking with ER2 when, you're right, the only reason i trade the ER2 is for the movement (and .10 spread)- range in the ES is obviously not a problem now, so it's a better choice. i can return to the ER2 when things settle down.

thanks.
 
Quote from kiwi_trader:

If you design your strategy for markets behaving in one way (ie not making the biggest gaps in history or the biggest days (like hsi yesterday)) then one approach is simply not to trade.

Its very tempting to think one should make money all the time.
More...

i've cut my ER2 volume by 75% for that reason (trading with no confidence is a recipe for disaster)- i agree with you 100% (imagine that ;)

HSI was fun and scary yesterday. let my losers run and cut my winners way too much last night. still had a good night just looking @ the numbers. that said, given that i entered the post break swoon 15 points off the low, it should have been a LOT better (taking a 70 point gain instead of listening to the tape/charts and holding on for the 400 points that came over the next 1/2 hour. coulda woulda shoulda...
 
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