steve46

For general interest I think I will post today's "clean up" trade that occurred about 6 minutes early As mentioned a few posts ago, this is considered one of the easiest setups to take advantage of...because when it occurs it usually gives you at least 5 points.

Yes, well to elaborate briefly there is a single trade that sometimes occurs almost exactly one half hour before close of cash (the NYSE cash close). That trade is called "the clean-up" and it occurs as participants flatten or establish positions in anticipation of an event the next day or in Europe. It can be traded or one could simply observe and use the direction of that last trade to provide a way to establish a bias for trading in the Globex, Asian or European markets that follow. Actually there are many other examples but it would be a digression from the subject of your thread....In fact I see that I have wandered off the subject quite a bit...please feel free to remove this post if you don't mind. Steve

Sir According to this site I am a vendor...this implies that I have students....and I am commenting not only on my system, but on the several methods that I think could benefit all interested readers...for example, breaking up the day into sequences (morning and afternoon) seems to help me to stay focused. I believe it will help my students and others here to maintain their focus as the day wears on (just one example)..since I don't intend to continue teaching, I hope the comment helps traders in a general way. Thank you Steve

Still using the same basic approach with supply demand nodes and time-based pivots. At the onset of the Euro/Greece crisis, we did see problems with the system (because it used the DAX indice for confirmation)...since that time the DAX has stabilized and is working quite well again.....and happily we found an additional edge that is working quite well and integrates with our basic system... We intend to continue to work with a small group of students. During our process we have learned that one key to progress is to simplify concepts as much as possible. Trading as a profession is very demanding and it is often the case that people start on this road thinking it is going to be a quick path to riches...instead they find that it is often a grinding profession, requiring continous focus and discipline and the ability to accept and manage periodic loss. To help student deal with the everyday realities of trading we now break up the trading day into sequences (morning and afternoon) and we look for trade opportunities based in part on specific times of the day. This allows us to take regular breaks and maintain our attention at times when we are most likely to see tradable opportunities. As regards the concept of time-based pivots, it should be apparent (as we draw closer to the end of the year) that markets seem to orient to the idea of profit targets (based on the yearly, quarterly, monthly, weekly and daily open, high and low). The rationale simply put is that institutions are paid based on whether they can generate a profit for their clients, and it is easier to do so on the long side (the side the public is most comfortable with). As of this evening, the S&P futures touched 1263 (the year's open) and we expect it to test 1300 before Christmas. As mentioned (several times previously) we don't intend to go further than training this small group. Good luck to everyone. Steve

The subject is complex and can be approached in a number of ways. For intraday traders one assumes they have a risk management protocol in place otherwise why trade a system? Generally risk can be managed by position size, by stoploss placement and by managing proximity to risk events (managing the timing of trade entry in relation to economic reports, earnings reports and unanticipated events (usually "pending" or "breaking news" that causes markets to move). Finally one can manage risk by chosing entries that would be likely to benefit from anticipated economic or news events. As an example if one were to believe that markets would move positively on news of a solution or agreement to the current Euro problems, you would orient your entries to the long side in advance of meetings or announcements. This is more "macro" in terms of approach but thats the general idea. On the micro side, one may prefer to trade a system that produces a high percentage of entries that move favorably and then require confirmation. If you don't see that confirmation you exit either with a small win, a scratch or a small loss. I am using that approach now and the downside is that you have lots of little wins and losses to deal with (therefore you have to have patience and a good commision rate). For those who cannot find that type of edge, you may want to experiment with a scale in process that limits your initial loss if the trade goes against you right away.

I said something similar in the first posts of my thread on institutional trading....that didn't go over well....but it is essentially accurate. Personally I think what is going on is that transnational corporate entities (not just banks) are making large bets on the status of the Euro, using not only the futures but also gold denominated in Euro, and as well as Crude Oil. As these institutions make bets they accumulate portfolio RWA and inevitably they have to manage that risk by hedging in the overnight markets. As I mentioned to my students a few months ago, we can expect the US indices to climb to test the yearly open (for the S&P futures that would be 1263.50) and if they can manage it we should see 1300 and perhaps 1370 to 1400 by Christmas. Crude has seen its lows for the year and the Euro its highs (although I am not so certain about the Euro)....Certainly much of the excursion will occur as a result of what we used to term "stealing the trade"..Depending on what happens with Greece I think the last two months of the year may be quite a surprise to investors and speculators alike.

Yeah your correct...my mistake...however its an open forum, so when you post your comments all members are permitted to respond. If you want to have a "private conversation" send the other person a PM.... My other comment is similar to Bob Collett''s. Like others, I am interested as to why you would trade a "pattern" that proved unprofitable for several years.

None of them.... In my experience none of them have interviews that provide usable info for my system. I use Bloomberg Good luck

Having worked at an "overnight" desk for more than a decade my view is that both RTH (US markets) and Globex are approximately equal in terms of tradable opportunity. Whether a trader can profit from those opportunities depends in great part on whether the system they trade has an edge, AND whether they can manage position size and risk adequately. The only differences I see are that the Globex consistes of multiple markets opening one after another and the news and economic reports are more numerous, so one has to become aware of how various "events" may impact entries and existing positions. To put it bluntly the trader has to keep his/her head in the game a bit more when trading the Globex markets...there is more information to keep track of.. My current system minimizes this problem by looking for entry "in between" economic reports and so I am less likely to see whipsaws.

You know Bob, I would bet that the gentleman had a few drinks and slipped up, telling us the truth of his experience....now in the light of day so to speak...he prefers not to elaborate. The problem with all indicator based systems is twofold....one is lag....indicators have to process data and then represent it, then you have to take in the data and make the decision to enter (or not).....the result is that the trader is ALWAYS late to enter... and the other is that the only predictive value an indicator has is based on the idea (the hope) that participants trading size will act on that same indicator.....the result is sometimes it works....sometimes not...in fact as you can guess there can be long periods where it just doesn't work at all....not interested in slamming the gentleman however traders putting their money at risk should have some idea of the REAL risks associated with indicator based systems, Best of luck Steve

To the extent that austerity measures can reduce expenditures as a percentage of GDP they (Italy and others) may escape the brunt of the problem. With Greece however the issue if already cast if you will because even with austerity as voted on recently AND a haircut of 50-60% they will not be able to generate enough GDP to get back on their feet. The write downs are going to be drastic and (as mentioned previously) the EU will have to re-capitalize several banks and issue bonds in addition to what they are now planning to float....As to portugal and others only time will tell...based on my recent conversation with old colleagues in the industry that is what is currently being debated at troika meetings.

It is in the interests of the EU to hold together for the long run...although they cannot print money they have many other options. Greece it seems is being made an example of, in the sense that the measures they are taking are going to degrade civil society to the point where they will have ongoing problems for years, perhaps decades. This "example" will I think prompt the other countries including Italy and Spain to take pre-emptive measures to reduce budget expenditures BEFORE things get to this level. Bond holders will take the proverbial "haircut" and several national banks will have to be re-captialized, and it is likely that covered bonds will be implemented (easy to look up the term in Google for those interested). Ultimately there may even be a "Euro Bond" issued to take up some of the slack in terms of financing the ongoing debt of the several countries that are in trouble. Although the process will seem clumsy, because of the many soveigns involved in the problem, from what I am hearing it will be resolved over the next 8-10 months. The residual however will probably delay economic recovery both in Europe and the US for at least the same time period....causing continued political debate and controversey that will last right up into the US elections. On the horizon for both US and European theatre are negotiations to fix the ongoing mortgage problems by introducing a program to re-price those still existing bad loans and get them off the bank's books. Once this is in place, it will take another 16-24 months to get through the process of removing the overhang of bad debt in all countries. Although there are likely to be structural changes in term of governance for individual countries, for the most part financial institutions expect the Euro to stabilize and remain the common currency of the member nations.

Interestingly today's day traded in a similar way to the previous report Also very interesting was the news of Gadaffi being captured and killed that supported the move up just prior to lunch (NY time)...that news (not reported on the financial stations) came in about an hour ago in contrast to the news about Greek soveriegn debt which they decided to emphasize, probably because they have correspondents there.... Nice rebound off the local low at 1196.50

Yes, agreed, generally on the counter if you believed that the move up had legs you would be looking for buyers to come in right off of that first red candle down (on the second move up)....instead the response was anemic....specifically they couldn't hold the bid, and that is why you see a tail on that next candle...you can see just where they ran out of gas. Any short initiated after that candle was viable (provided you understood why it was happening). From my perspective that "understanding" (the conceptual basis for the move down) is the critical component of the trade. I don't remember the exact conditions now, but the data that produced the favorable report were thought to be temporary, and so participants decided to leave the field and in the absence of buyers, the market was re-priced to the downside (profit-taking).

I read the tape...looking at the roll speed, the size on the bid and offer, and in this case I saw the lack of buyers off the spike. Secondly I noticed that they couldn't hold the bid and this was confirmed by the selling tails on subsequent candles down. The VOLD and ADD showed institutions coming in to sell and programs firing off on the sell side. To me it was apparent that participants were going to take profit off of that report.

Yes, with respect to Josh's question, Negotiator has it right.....strong selling coming in on spike up (as traders decided "sell the news") and no follow through (to the upside)....its a common profit taking scenario. On my side I am reading the tape and I can see sellers coming in at the top of the spike. Then buyers come back trying to lift the bid but they don't have the horsepower to lift it....$VOLD and $ADD showed selling (especially $ADD) and for me that confirms a short entry (I start to look for a place to get short based on this data. Steve

You are absolutely right. It IS risky to hold a position into a signficant number, the obvious risk is that we might be on the wrong side or "surprised" by the result and see the market go against us. From my point of view in terms of professional particpation, I was taught that we are paid to accept.... and find an intelligent way to manage risk......how then does a professional do that? Well we put a couple of important concepts to work...one is "profit scaling" ...another is position size.....and yet another is "proximity" to risk... If we integrate these concepts into one idea, then what you would do is to start early in the process (say midnight or 4am of the previous evening) and simply put on 5 contracts, scaling out at 2, 3, 5, 7 and 10 points. Those with low risk tolerance could in fact be flat and out of the trade prior to the report release. To the extent that one has an idea about the outcome of a report (and they are willing to accept some risk)..you might take partial profit and hold a small piece looking for additional gains on the report release. and of course there are those who believe they have insight into the report result and are willing to accept more risk. When the report is released they are in fact the participants who cause the spikes up or down on your charts. Quite often they pre-position orders to buy and/or sell based on the expectation that the release will cause spikes up or down. This requires a different skill set and a method for accurately estimating local volatility. Its a subject in itself so I leave that for another thread. Actually report trading is a complex...I just wanted to provide an example of how it can be approached. Thanks

As with all report days, the pre-position process begins around midnight (US west coast time) The process is fairly simple....DAX opens and goes through a shake out...at midnight they start to mark it up anticipating a favorable report. At about 4am PST participants in the US start to pre-position for the report release...and at about 4:50am the train leaves the station. The "tell" is the basing pattern that forms at 4:10am and if you refer to the DAX chart you will see that at 4:50 or so, they retest a local low before taking off to the upside...nice bollinger band reversal at that time as well (see the attached chart). The strategy takes advantage of the "afternoon push" in Frankfurt. The process is symmetrical when participants believe that odds favor a negative report. For people in the US, you can play the midnight entry and hold, but you have to have the data to support your entry....I prefer to wait and get in later at 4-4:50 time zone so that I can see how the other players are positioned. You lose a little bit on the entry side but if you are able to hold a position, it is still a profitable strategy. Good luck Steve

Alright then you are almost there....now just remove the dramatic verbage and you've got it First of all, the general concept you outline is correct....after you get the technical issues out of the way, the last real obstacles are psychological in nature....and they are (in order of importance) focus, discipline, execution and risk management.... FOCUS There are plenty of smart people in the profession.....they are like high wattage light bulbs...extremely bright, but the light shines in all directions....to be successful in this profession "once the bell rings" you need to focus like a laser on the data that really matters......In terms of finding an edge...there are valid, viable behavior-based edges all around us....in my office we (I) find them the way I was trained to...by observing the way my target market trades and finding little niches that repeat...thats step 1....then you have to understand why (step 2) and finally you have to confirm the behavior (data collection and analysis) which is step 3.....and for those interested, for this last step I go back manaually to locate 400 data points (my estimate of a "statistically significant" sample size). DISCIPLINE Once you have verified that your "behavior" can be traded....you have to be disciplined (in a way that you already seem to understand)....you only trade that behavior or (assuming you have more than one setup) those that conform to your "rules" EXECUTION This is all about desire to succeed....for the "behaviors" that I trade, I have to get up very early or stay up late (depending on the day of the month). In other words I have to be willing to do what others won't....and finally I have to be willing to "take every trade"....because if you don't...you are "randomizing" your results....(you refer to Mark Douglas...he would understand exactly what I am saying)....the bottom line is that you show up every day...you take all the trades, you manage risk exactly as your plan outlines, and you take profits exactly as you planned....otherwise at the end of the year, the result you get is going to be a function of random chance, instead of your edge. RISK MANAGEMENT This last part is at least as important as any of the others. If you don't understand risk management including proper position sizing, even with a great edge, you aren't going to be able to grow your account efficiently....why does that matter? Because markets change and when you have an edge, you had better take advantage of it while you can...anything can happen, you can get sick, family obligations can get in the way, you can experience "technical difficulties"....etc...so you make the most it while you can...I like "fixed fractional" for position sizing. Sounds like you have a decent understanding Good luck getting to the finish line... Steve

Mr. Howell I like your idea...I assume that you will evaluate the applications so that you pick people who have the best chance to benefit from your appproach. Like many others I would be interested in hearing from those scholarship winners, just how the experience affected their trading. Good luck with your program

To the previous poster in answer to your question I did ask about the "outage"....the person (customer service rep) I spoke to was NOT willing to go into detail. When asked about the recent problem all that he would say was that it was an "Internet outage"? At the end of our brief conversation the gentleman suggested that I keep the 24 hour number at hand "just in case".....(that inspires confidence doesn't it).

Bollinger Bands (and the moving average basis) are part of ongoing research. So far the results are promising. So yes I do like them..

If by "structural reference" one means context, then the context or framework around which we trade is certainly important. For my purposes the evaluation of context begins the evening prior to the open of a RTH session. This initial evaluation provides the big picture for my work the next day....Just prior to the open, I review events to make sure that my view of the world is as accurate as can be, and then switch to the smaller picture of events that concern the open If we have news, or economic events that affect the markets prior to the open, we can observe how markets react and use that reaction as a way to predict how markets will act On Friday, we saw an economic report which surprised to the upside. While the initial reaction was to the upside (see the attached chart), the subsequent reaction or "counter" was a sell off. Looking closely at the reaction of markets we saw that professionals and institutions alike, viewed that improvement as temporary and were inclined to sell that news. The sell off was substantial. That sell-off combined with concerns about the status of the Euro currency provided skilled participants with all the information needed to anticipate not only the open but the continued selling that occurred throughout the morning session. In other words it required no technical analysis, only an understanding of the concerns of the various participants and then a method that allows us to see how that concern is translated into action. Another structural element that one can bring to bear is analysis of what professionals call "lengh of line"...using Friday's chart simply compare the length of the up and down trending segments as the market trades down to its low at 10:00am PST...what you see is that the down trending segments are longer than the uptrending retracements, however as we approach the low that changes, providing the first signal of an impending reversal. As the market transitions into the up phase, notice how that relationship changes. at the bottom we have an equivalence as the up and down segments are approximately equal in length. and predictable the next series consists of a longer up segment followed by a shorter segment that is now properly called a "retracement". There are additional clues on that chart that an observant trader can use to direct their decision making process, but I will leave that for another post...good luck Steve

For the original poster I think that new traders trying to learn the S&P futures have trouble because that market is noisy. Most do not understand what the impact is on their trading. Generally what they experience is being whipsawed out of trades as the market takes out their stop, then reverses and proceeds without them. A couple of things that may help First...know that the primary job of a trader is done when markets are closed....people that make money in this market do so by learning to observe market behavior and find little niches that allow them to profit. It can be something very simple, for example, the S&P futures tend to take out previous swings high and low by a few ticks or even a point or more, before reversing. This "testing" process is what causes traders to be whipsawed out of trades, and then the market reverses, leaving the trader with a loss or a small win, watching as the market continues away from them. Seeing this I decided to develop a way to see where those test point exist, AND I learned (again by observation) to locate specific times when the market is likely to move (based on tests of those "nodes"). My point is the market is right in front of you....anyone with eyes, a pencil and piece of paper can do it. You have to learn to be a good observer. This is my way...it may not fit you, but it is one way of dealing with a complex noisy market. I hope it helps. Best Regards Steve

Hi If you are trading the S&P futures, I would suggest that it is almost impossible to make money as a one lot trader . Also there are other considerations...assuming you have a valid concept to trade, you need to be willling to endure drawdowns...with a small account that becomes impossible. So you're starting with the odds against you. You really need at least $10,000 to $20,000 min to make a go of it. If you can't get this kind of capital together I think your best bet is to sim trade. From the standpoint of strategy, if you have a valid concept, you need to have the ability to focus consistently on the critical elements of your system (so that you don't miss trades), and you need to be disciplined enough to enter and stay with the trade long enough for your edge to kick in. Finally (just my opinion) you need a system for position sizing and profit taking. I suggest fixed fraction (some traders use 2% of account size) for position sizing, and in this market I suggest taking profit using a "scale out" system that takes partial profit at 2, 3, 5, 7 and 10 points. As you can see, you really can't do this with a $3,000 account. There are two sides to trading, the mechanical and the psychological....once you have the mechanical stuff down, you need to have a way to maintain your mental status through the ups and downs. Just try to keep it simple, have faith in yourself and be patient. Good luck Steve