Looks like you are doing well with Nadex. Nadex is becoming more and more viable with volumes doubling the last year. Keep up the good work.
"Tight spreads" (atm, itm, slightly otm) trading
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I've been watching the daily bulletins' volume levels on nadex the past 6 months...it's still on an upward trend. We can actually trade corn now as it's liquid enough, couldn't do that 6 months ago...
Here's a standard ES long regression trade:
7/29/15 - Long 2089 4:30 US 500 @ 9:23 for $45/spread.
Rationale:
1. Use regression channels, a lot like bollinger bands in trends to get long the ES, it's pretty straightforward and has been the most consistently solid trade on Nadex.
2. Only long the /ES these days, no shorting:
a. Shorting the ES is very difficult particularly low volatility (VIX sub-20) environments
b. Yield curves are upward sloping globally, VIX is consistently below 20 (low vol favor uptrends), though ES has been flat for the past 6-9 months it still has yearly momentum...
---> So sticking to macro long for those reasons, don't short the ES in this type of environment...
See figure 1 for entry
Outcome:
1. See figure 2, made $55 on $45 risked
7/29/15 - Long 2089 4:30 US 500 @ 9:23 for $45/spread.
Rationale:
1. Use regression channels, a lot like bollinger bands in trends to get long the ES, it's pretty straightforward and has been the most consistently solid trade on Nadex.
2. Only long the /ES these days, no shorting:
a. Shorting the ES is very difficult particularly low volatility (VIX sub-20) environments
b. Yield curves are upward sloping globally, VIX is consistently below 20 (low vol favor uptrends), though ES has been flat for the past 6-9 months it still has yearly momentum...
---> So sticking to macro long for those reasons, don't short the ES in this type of environment...
See figure 1 for entry
Outcome:
1. See figure 2, made $55 on $45 risked
Attachments
An ES long trade today, similar to the last one that didn't work. Seems roughly the same, we're seeing low VIX/volatility for the day and get long on a pullback, based on regression:
8/3/15 - Long 2094 4:15 US 500 @ 10:27 for $39/spread (max gain 61)
Result:
Lose $39/spread on ES regression fade long
8/3/15 - Long 2094 4:15 US 500 @ 10:27 for $39/spread (max gain 61)
Result:
Lose $39/spread on ES regression fade long
Attachments
Notes on Inter-market Relationships:
1. USD/JPY and ES - Very positively correlated. USD/JPY up is a sign of risk on (Japanese investors/hedge funds are borrowing the yen to invest abroad, yen value goes down and USDJPY up --> Good proxy for ES when ES is closed and Nadex spreads are too wide in the US 500 binaries.
2. ES-NKD-DAX - all equities markets tend to correlate strongly, but certain times when one or the other leads:
- Pre -930 DAX leads ES slightly, for instance if the DAX is up .5%+ and the ES is only up ~.2% or so, you can be more inclined to get long the ES (or USDJPY as a proxy) pre-930
Post 930 - ES leads, almost always. So as DAX is in its closing hours, sometimes it lags behind an ES move and you can get long DAX (German 30 on nadex) after-hours.
Post-1600 - It *seems* like the ES can lead the NKD (Japan 225 on Nadex), if the ES has a very strong day, you're more inclined to get long the NKD after 16:00
3. Commodities relationships -
USDCAD - CL - inverse relationship, as oil's been tanking the last months, USDCAD is hitting multiple new highs. CL sometimes leads USDCAD
AUDUSD - HG - This relationship hasn't been strong lately (correlations decoupled) but usually an inverse relationship here. I.e. if copper is up strong, HG is going to tend to rise as AUD strengthens (AUDUSD down) on global demand for commodities
1. USD/JPY and ES - Very positively correlated. USD/JPY up is a sign of risk on (Japanese investors/hedge funds are borrowing the yen to invest abroad, yen value goes down and USDJPY up --> Good proxy for ES when ES is closed and Nadex spreads are too wide in the US 500 binaries.
2. ES-NKD-DAX - all equities markets tend to correlate strongly, but certain times when one or the other leads:
- Pre -930 DAX leads ES slightly, for instance if the DAX is up .5%+ and the ES is only up ~.2% or so, you can be more inclined to get long the ES (or USDJPY as a proxy) pre-930
Post 930 - ES leads, almost always. So as DAX is in its closing hours, sometimes it lags behind an ES move and you can get long DAX (German 30 on nadex) after-hours.
Post-1600 - It *seems* like the ES can lead the NKD (Japan 225 on Nadex), if the ES has a very strong day, you're more inclined to get long the NKD after 16:00
3. Commodities relationships -
USDCAD - CL - inverse relationship, as oil's been tanking the last months, USDCAD is hitting multiple new highs. CL sometimes leads USDCAD
AUDUSD - HG - This relationship hasn't been strong lately (correlations decoupled) but usually an inverse relationship here. I.e. if copper is up strong, HG is going to tend to rise as AUD strengthens (AUDUSD down) on global demand for commodities
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wow, someone else who watches the bulletin lol. Agreed, it is encouraging.
nice, the spreads are fantastic spreads for directional trading.
Here's a USDJPY mean reversion trade, based on a divergence from the ES (ES and USDJPY are highly correlated, normally).
1. The Fed's Lockhart states around 2pm that it's very likely he'll vote to raise rates in September. This causes an immediately strong move in the dollar index (DX). USDJPY Follows suit, spiking up rapidly...see figure 1
2. Meanwhile ES (See figure 2) tanks a bit on the news that Lockhart will be voting for raising rates...So USDJPY is shooting up, while the ES is substantially down - a divergence in pricing.
3. Short 134.2 X USDJPY @ 13:35, expiration at 3am on 08-05, Sell for $52, max gain is $52, max loss $48. See arrow 1 for entry, right around 134.2
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Note that as described in prior posts, I don't short the ES. Since USDJPY is a proxy for the ES, I am hesitant to short it also, however I figure that the divergence between the ES and the USDJPY is so large here (based on Lockhart's comments and the reaction in the dollar) that I can justify shorting USDJPY...
1. The Fed's Lockhart states around 2pm that it's very likely he'll vote to raise rates in September. This causes an immediately strong move in the dollar index (DX). USDJPY Follows suit, spiking up rapidly...see figure 1
2. Meanwhile ES (See figure 2) tanks a bit on the news that Lockhart will be voting for raising rates...So USDJPY is shooting up, while the ES is substantially down - a divergence in pricing.
3. Short 134.2 X USDJPY @ 13:35, expiration at 3am on 08-05, Sell for $52, max gain is $52, max loss $48. See arrow 1 for entry, right around 134.2
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Note that as described in prior posts, I don't short the ES. Since USDJPY is a proxy for the ES, I am hesitant to short it also, however I figure that the divergence between the ES and the USDJPY is so large here (based on Lockhart's comments and the reaction in the dollar) that I can justify shorting USDJPY...
Attachments
Here's a long into AUDUSD, based on momentum up after the Australian Fed announces its rate policy:
1. Australia releases a report saying it will keep rates at 2% @ 00:30 this morning. The market reacts positively to this news (inflation maybe?), driving the AUDUSD pair up substantially after the announcement. This is a momentum-based play...I don't know what the Australian Fed said, but there's a clear directional bias in AUD strengthening on the day...
2. AUDUSD consolidates around/under .74 for several hours after the spike up
3. Long .74 X AUDUSD @ 9:30, expiration at 3 PM on 08-04. Bought for $45, max gain $55.
Result:
AUDUSD continues to trend up, but Lockhart's announcement tanks the dollar around 2pm, ends up below .74 and lose $45/contract.
1. Arrow 1 - entry
2. Arrow 2 - Lockhart's announcement, completely reverses direction quickly on the news from Lockhart..
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So to discuss what happened, there's not much to be done here. I think it was a decent trade with a strong trend, no qualms about that. However, a catalyst reversed that trend (an exogenous event) and I ended up losing on the trade.
1. Australia releases a report saying it will keep rates at 2% @ 00:30 this morning. The market reacts positively to this news (inflation maybe?), driving the AUDUSD pair up substantially after the announcement. This is a momentum-based play...I don't know what the Australian Fed said, but there's a clear directional bias in AUD strengthening on the day...
2. AUDUSD consolidates around/under .74 for several hours after the spike up
3. Long .74 X AUDUSD @ 9:30, expiration at 3 PM on 08-04. Bought for $45, max gain $55.
Result:
AUDUSD continues to trend up, but Lockhart's announcement tanks the dollar around 2pm, ends up below .74 and lose $45/contract.
1. Arrow 1 - entry
2. Arrow 2 - Lockhart's announcement, completely reverses direction quickly on the news from Lockhart..
----------------
So to discuss what happened, there's not much to be done here. I think it was a decent trade with a strong trend, no qualms about that. However, a catalyst reversed that trend (an exogenous event) and I ended up losing on the trade.
Attachments
Hey,
So yesterday (09/17) the Fed at 2pm EST announces that they won't be hiking rates in September (typical lol...). This is a BIG deal...I don't know how the market will react to be honest, but clearly it was taken as an actual negative signal given the downside ES seen in afterhours on 9/17 and the downside the following day (Friday 9/18). So I'll jump back to 9/17...I'm normally very reactive to movements on big announcements like this and not proactive.
9/17 - Fed announces no rate hike in September, though probably a bit expected the dollar reacted dramatically and directionally...plummeting. So EURUSD shoots up and I figure there's enough juice in this announcement for a sustained move. Turns out I was partially right and partially wrong here...let's see...
9/17 - Long EURUSD 1.142 @ 14:49 for 39.5, expiry 09/18 @ 7 am. Added to the position @ roughly the same price shortly after (See arrows 1 + 2 in image 1).
This worked out really solid and I think a standard trade, though the price was already pretty extended. Ended up making 59.5/spread so about 1.5:1 Risk-reward.
09/18 - Long EURUSD @ 1.142 @ 09:08 for 47.5, expiry 09/18 @ 3pm.
This one didn't work out, EURUSD tanked out shortly after I got in and lost 47.5/spread. No regrets here though, EURUSD is performing strongly and I have an underlying fundamental reason to be short the dollar, and EURUSD is the best proxy to do that. See arrow 3, got long on a pullback.
Summary: See image 1 - These were standard trades post-fed announcement. The dollar tanks and I expect it to continue to tank, get long EURUSD on pullbacks in the trend.
So yesterday (09/17) the Fed at 2pm EST announces that they won't be hiking rates in September (typical lol...). This is a BIG deal...I don't know how the market will react to be honest, but clearly it was taken as an actual negative signal given the downside ES seen in afterhours on 9/17 and the downside the following day (Friday 9/18). So I'll jump back to 9/17...I'm normally very reactive to movements on big announcements like this and not proactive.
9/17 - Fed announces no rate hike in September, though probably a bit expected the dollar reacted dramatically and directionally...plummeting. So EURUSD shoots up and I figure there's enough juice in this announcement for a sustained move. Turns out I was partially right and partially wrong here...let's see...
9/17 - Long EURUSD 1.142 @ 14:49 for 39.5, expiry 09/18 @ 7 am. Added to the position @ roughly the same price shortly after (See arrows 1 + 2 in image 1).
This worked out really solid and I think a standard trade, though the price was already pretty extended. Ended up making 59.5/spread so about 1.5:1 Risk-reward.
09/18 - Long EURUSD @ 1.142 @ 09:08 for 47.5, expiry 09/18 @ 3pm.
This one didn't work out, EURUSD tanked out shortly after I got in and lost 47.5/spread. No regrets here though, EURUSD is performing strongly and I have an underlying fundamental reason to be short the dollar, and EURUSD is the best proxy to do that. See arrow 3, got long on a pullback.
Summary: See image 1 - These were standard trades post-fed announcement. The dollar tanks and I expect it to continue to tank, get long EURUSD on pullbacks in the trend.
