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Today I was testing trading the US close 2pm-4pm, as in my timezone that's a bit more doable. So the plan was to get up early (my time 4am) and see how I would feel/react/trade in a different session time to what I've been doing previously. I was mainly interested in either the Treasuries or the ES during this session depending on which markets looked better from an opportunity point of view.
The treasuries had a good trading day and were trding at the high of day with a bit of activity coming in but were generally quiet. So I didn't see anything tradable there. However the ES was a very different story.
First off, NQ was an absolute monster with the daily range entending into the extreme. Clearly something was driving it. The ES likewise looked like it had a good day but was trading below yesterday's low in a clear downtrend. So my initial bias was short but I was just watching it at that point. That's when everything changed and the news of Pelosi announcing that they were going to impeach Trump came in. At that point a massive amoount of volume entered the market and zapped ES back towards yesterday's low. This is a a pure momentum play is my favourite setup. Overall a +ve day although I made some mistakes that meant that I could have walked away with a much higher win rate than I did. The one thing to remember is that in a momentum drive, having stops too close will hurt you (2 initial trades with 8tick stops got smashed). I was able to fix that quickly and ended up +ve.
Trade review:
Trade 1 & 2 [-8 & -5ticks momo]: Both of these were momo trades but I had my stops way too narrow. Got whipped out in the action. But momentum was going strong so clearly not finished.
Trade 3 [+12ticks momo]: Pure momentum trade at 2pm ET. A masisive amount of volume entered the markets pushing ES back towards vwap and the YL. The momentum stalled just under YL with a 1200 limit line at 2980. I have removed the stops and just rode the momentum on this one. This trade brought be almost back to break-even for the day.
Trade 4 [+15ticks momo]: Continuation of momentum after Pelosi's announcement.
Trade 5 [+4ticks momo]: Continuation of momentum.
The last 3 trades where progressive scalps with profit taking along the way as long as momentum continues
Trade 6 [-3ticks momo]: Misread the action here as ES looked like it was heading higher but in fact had entered a chop-zone. At least I reacted well and just cut the trade for a 3 tick loss and realised that it was better to wait until a better opportunity was presented. It also looked like there was some support building below with very large limit orders sitting just below my entry and pushing the market up. This was probably a a trade I didn't have to take and patience would have been better. I gave back some profits as a result and didn't really have a clear reason to trade it other than support and what looked like momentum entering.
Trade 7-9 [-14ticks fade]: At this stage ES became choppy and I cut down my size to just 1 contract per trade. I was thinking that I could read the action but unfortunately that wasn't the case. Classic case of "better to sit on your hands".
Can you help answer these questions from other members on NexusFi?
The day was dictated by Trump's impeachement announcements and the tick for toe between various parties
Certainly, while impeachment may well happen, it would need to be passed on to the Senate, where, given the Republicans hold 53 seats (of 100), we would need to see at least 20 Republican senators vote against the president and what are the chances of that happening? Very low I'd say, although I am not a political 'expert', but I listen to the markets. So, the fact that S&P 500 futures and USDJPY are modestly higher from the time Pelosi formally announced the inquiry details the markets are not overly concerned.
If they genuinely felt Trump would be stood down by the Senate, we would not see the S&P500 at 2966, the VIX index at 17.05%, US 2s at 1.60%, while I hazard a guess that USDJPY would be closer to 105.00. Asian markets are down today, but there is absolutely no panic.
Looking at the ES, it had a mixed pattern during the Asian/UK sessions and then a clear up-trend emerged towards the end of the US session
My bias at that point was to go with the trend and thinking that the US markets weren't spooked by all the impeachement stuff. In fact, it was quite the opposite.
Daily Review
Another positive trading session for me with a very pleasing win-rate of 71%. Today I was mostly focussing on the ES as that looked like it had a better setup with a solid trend in place and a clear strength to the upside as the market heqaded into the close. So today was really just a matter of waiting for the right order-flow patterns to retrace into the EM20 (which was heapily tracking above the EMA50 and vwap and then go long.
This approach proved nicely profitable today as I effectively did almost 10% +ve to my sim account. The other learning for me is using the charts to identify "points of interest" and then switching full focus onto the DOM is the winning combination. Interesting to see the stats for that. My trading log, was 80% negative before I made this change. Since then, my winning days are 4/5 so that's an 80% green rate. Quite an initeressting realisation. The only thing that I did not do as well as I had hoped was to hold onto each trade long enough and as result my average win was smaller than normal. Still, better to bank profit and not let the price take you out and reenter later if the conditions are right.
Overall another great trading session.
Trade review:
Trade 1 [0ticks trend] - scratch trade initially as I simply didn't want to be taken out and sit through drawdown. Read the price action a bit wrong, but happy with my reactions.
Trade 2 [+1tick trend] - trend trade but a quick exit due to a reversal happening.
Trade 3 [+8ticks trend] - trend trade as there was really nice bid action happening. Bids just kept stepping up and chewing through the offers. Very nice move on momentum into the trend. Nice exit once the move was finished. These types of trades are the bread-and-butter.
Trade 4 [+4ticks trend] - another great trend trade although I was starting to feel that I could have held the previous one longer and simply added to the position. Still, I'm playing with a very small account size for it's probably better to just be in/out
Trade 5-6 [+2ticks each trend] - both of these trades were at the top of the upward move and price action looked like it was being exhausted. Managed to scalp out 2ticks each but overall, ES was heading into the final showdown at the close. I did think that ES was going higher at the time hence the long entries, but it turned out it was being exhausted.
Trade 7 [-3ticks fade] - This was my mistake right on the close. The market made a strong downward move off the tops and it really looked like a valid pivot was in place to start a reversal back towards value. What I didn't take into account was the fact that it was that the market was about to close and a new value area to be established. The massive volume of contracts traded right on close was astonishing and a new POC was established right on my enrtry level. I ended up exiting for a 3 tick loss so gave some of my profits back but should know better for next time to just sit on the sidelines at the close and let the market do its thing.
Major news items:Trump's impeachment probe intensifies. More protests in Hong Kong. Poor PMI data in Europe as shares in Eu turn down. Further US market delisting of Chinese firms China says it would hurt both sides. US/China trade dispute talks are nearing with both sides in pre-negotiations. Both sides claim any agreement that might be reached will be cosmetic in nature.
Gold summary:Gold fell to 1,446/oz as dollar index hits a two-year high and some optimism around trade war talks has shifted equities up. Gold could head towards 1,420 support level.
Oil summary: Oil prices down as trade war continues to weigh on growth outlook for China (largest importer of Oil). Prices down 0.9% to 55.43. Lower oil prices tend to help American industrial companies with cheaper fuel costs.
Economic data: Aussie RBA reduced rates by 0.25 to 0.75 while also noting two further reductions over the next 12 months. US Fed now expected to lower by 0.25 as well (38%). Today we await US ISM economic numbers at 10am EST (00:00aest). While the rates market is undecided on an October cut to the fed funds rate, the focus has moved to the Fed's balance sheet and the likelihood of asset purchases, predominantly to keep the repo market in check. Whether there is causation and a direct link between the Fed having a bigger balance sheet, higher excess reserves and a weaker USD is the subject of increased debate. However, if the Fed is going to go down the road of 'QE lite' then it makes fascinating viewing and could, in theory, be a headwind for the USD and good for gold and stocks.
Options market for ES: Significant options market skew to the downside. Put/Call ration at 10.59 with 25delta showing a 68% chance of ES heading towards 2825
Intraday Technical Analysis & Key Levels (where are the stops positioned?)
Summary: ES trading at the top of yesterday's range in the Asian/UK sessions although is now heading below vwap. Options market showing significant skew to the downside so that is consistent as ES enters the pre-open hours.
Key levels (obvious stops/liquidity areas): 304 contracts at 81.25
Daily Review
Good trading again during my session. ES was range-bound before 10am as ISM was due then. So I sat out until the ISM number came in, which was dismal and drove the market down on very high volatility. Once that settled and the ES established a downward trend, that's where most of my trading too place. Once again, my approach to enter on pullbacks into a trend and aim for small targets is really paying off now. I can see the consistency of my approach and my earlier decision to cut out charts from my decisioning process is really working well.
I'm not going to review each trade here. They were all basically the same. All short trades, into a declining market which is driven by fundamental changes and news flow. This is probably my favourite market setup and which is where having a great DOM really benefits.
While I'm working with a tiny account, this approach is great and probably the only improvement is to continue getting better at reading the DOM and tape to confirm entries. In this session, I was quite good at that at the beginning, but this later deteriorated (and win rate suffered a bit) when the market entered into a consolidation area. At that point it would have been better to come up for air and take into account thye bigger picture on one of my charts. Just sitting it out wouold have created a better results at that point. So have to practice the art of trading the DOM, then recognising that a consolidation is happening and pausing to wait for another opportunity. Still a damn nice results on the P&L.
My monthly running win rate is now steadily climbing (at 58% now) and I'm hoping that I should be in a position to switch to LIVE trading in another 2 weeks (by mid October). My plan was to do that once I can profile various markets, gather stats on my trading activity and iron out any issues. I have now done that and for the last 2 weeks (since mid Sept) my stats are showing really good consistency. The market that's emerged out of my profiling as the most suitable to my personality and trading style is the ES. This is good but I also want to profile the Yen/USD as that also has nice movement patterns during my daytime so may offer some additional trading opportunities in a better timeframe. I will do that once I am comfortable with the consistency in the ES.
I acually didn't mind the US treasuries, and they can be good at times, but I found that the slowness was hard to focus on. I will monitor the ZN for opportunities and perhaps trade around the 8:30am mark if it looks like a good move can be expected. For now though the ES is offering better trading environment and certainly better profit potential.
