What is the edge in your trade?

[CharlesS]

... So entering short once the stop for the longs is hit is in my opinion terrible timing.

Seaweed, I was not offering an opinion on whether the stop-n-reverse to short was a good or bad trading idea.

My subject was the overall risk-reward of volpri's trading plan, when that short is seen as coupled w/ the scale.

He's the trader, it's his experience that deems the short to have a profitable trader's equation to offset a loss on the scale. I'm neutral about, though I do know that it makes sense to anticipate that a break below the large flag has lots of potential for a big drop -- it can be interpreted as the break of an Elliot Wave 4, or of what Brooks calls a Final Flag.

Also, we have no idea how he would structure that trade, nor how he might respond to all the market vicissitudes "down there". He's an experienced scalper, so expect that he would be able to improvise several responses.

 

[Real Money]

I guess I'll give my two cents:

1) Spread positions and control exposures.
2) Trade Management is absolutely crucial. I like flexibility in the positions I have more than anything else.
3) Situational awareness. What are other related instruments doing?
4) Secret sauce. I monitor cash-and-carry and reverse-cash-and-carry against the action in real-time, and note how it is affecting the other index products.

Good luck to you.

 

[volpri]

I think there is a huge problem with your assessment. When the full stop is hit, its absolutely shit timing to reverse the position. If we refer back to the pic, posted here again, we see that the stop is at 2915. The initial long is at 2928, and the high is lets say 2930. If price trades down to 2915, hence 15 points from the high, it is likely to retrace this move somewhat before going lower again, if it even does.

So entering short once the stop for the longs is hit is in my opinion terrible timing. Too often you see price test the high again before dropping further. In this case, if price traded down to 2915, I would say its more likely to go up towards 2930 again before dropping another 15 points without any retrace. Heck, you can even see the range on the left between about 2916 and 2920. Hitting 2915 would be a dip below this range, and then price could have easily shot back up after rejecting the break of the range. (if you're into that sort of analysis)

Either way, shorting after a 15 point drop is not adding to the probability of this trade.


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I will make some comments on this. I don’t think I said I would double-up or triple up when my stoploss is hit. I said if it was I would take the loss and look for an opportunity to double or triple up and get my loss back and be in the money soon again. Naturally, if the context is right I would wait for a PB after taking the loss to then short. Furthermore, I would be looking for a MM down from the BO of the bottom of the range to the hit SL or any PB in the area and extrapolate that down from the SL or PB. Major support would have been broken and the all night bull trend will have become a reversal into a bear trend.

So depending on “how” the SL is hit yes it could be terrible timing to short right then and there without waiting for a pb to inniate shorts. On the other had if the drop is fast and furious I am shorting immediately and adding on any pauses or pb.

If it hit my stop chances of it going back up to 2930 is very low. Maybe 20% to 30%. Of course, the market can do anything but if it breaks that range just above my SL then the bears are winning and I am looking to short and get my loss back. Of course, I am waiting to the best time to short. If there is no Pb after my SL is hit and if the SL hit with a series of strong bear bars or a large bear bar then I will be shortly immediately and adding to it on any successive PB’s.

 

[volpri]

I looked up and in post 20 here is exactly what I said seaweed.

“If I were wrong and my stop loss gets hit then I am out and and looking to double or triple up in the new direction and swiftly get my loss back and find myself in the money again. In such a case my original premise and bet was wrong and I gotta take the loss and get it back on another opportunity.”

 

[nooby_mcnoob]

What an absolute trainwreck of a thread. Started out with a perfectly legitimate question, but degenerated into this crap from REDP and co. Where are all the elite traders? The content on this forum keeps getting worse everyday.

This is how competitive people argue, don't cry...

 

[qlai]

I monitor cash-and-carry and reverse-cash-and-carry against the action in real-time, and note how it is affecting the other index products.

Hi, I've seen you use this term before, but I'm not sure what exactly you refer to. Are you saying that there is a rotation of money from index futures to stocks and vise versa? Or you are looking at other instruments like bonds or FX futures to spot money flowing into stocks and stock indices? This is detectable and meaningful for intra-day trading? Thanks!

 

[Real Money]

The HFT firms are performing arbitrage with ES, NQ,YM, and RTY against the underlying stocks, as well as synthetic portfolios that approximate the performance of these indexes.

This arbitrage uses colocation and program trading. The secret part is that some very smart people with deep pockets see this as an opportunity.

Who is on the other side of this trade? In other words, who is willing to give an arb to HFT firms? The answer will give you an edge.

 

[Real Money]

I'm the even smarter guy that knows how to use this to see the future!

 

[volpri]

I said this in my post 20. My excerpt.

“One final note: Remember this is a long bull channel that has morphed into that yellow range at the top. Bull channels function as BEAR FLAGS if you were to look at this on a larger time frame. So....when a BO of the yellow range does come 70% chance it will be south. So, the longer the range goes on I gotta be careful taking long positions at the bottom of the range betting price will go back up to the top. The safer bet as the range extends further and further sideways is to be shorting at the top of the yellow range. Expected successful BO of yellow range when it happens IS SOUTH. By successful I mean a BO with follow through.

However, if the opposite happens..i.e. the unexpected and the successful BO is out of the top of the range then odds are very high I will see two legs up in the form of a Measured move. Different ways to take this measured move. It can be the height of the yellow range up above the top of the yellow range for aggressive early long entries. Or, I can wait for the first PB of the BO of the top of the range and measure that distance from the top of the range to the PB and extrapolate that measurement up from the top of the PB for the second leg up. Thus I would enter long on the BO Pb betting on the second leg up.”

Well that BO was the unexpected event and set everything up for MM up after RTH’s. It was two legs as I mentioned above way before it ever happened. It was a measured move. I am showing two ways the MM’s can de drawn. Even if I just get in on the second leg and smaller MM I still make 4 points or so. BO, Ft bar, Gap does not fill from BO point to bottom of that FT bar. And FT is a good bull bar and has a gap between its close and the high of the BO bar. The little sideways action is where some longs are taking profit. Then strong bulls drive price up hard ending as an exhaustion bar at the top of the larger MM. Look at all those bull bars in that last move up from the bottom of the channel just before the BO. That should tell you something about the bullish pressure. It is building. They are winning..beating.. the bears in the channel. BO is looming but once it happens needs followthrough because most BO attempt in ranges fail. Of course, one will eventually succeed. In this case, the least likely scenario dominated. When that happens I look for 2 legs at least and MM’s. Please remember this. I do.

NOW remember I stated possible this scenario hours before it ever happened and I described how I would trade in the excerpt above from my post 20.

 

[volpri]

Uh oh..future..them’s fighting words on ET. Sure you don’t want to modify that statement?

I'm the even smarter guy that knows how to use this to see the future!