May 25 2022 Results & analysis

Embarrassing that I missed the FOMC minutes day in my prep! Very amateurish.

Still would have taken the short @ open but 1/4 or 1/2 position as stats were bearish.

Mostly executed as per my plan though.

Short @ open - stayed till end.

Scaled in @ Y-C and stopped out small @ Y-H. Should not have bothered with this as this is a very low probability trade on FOMC minutes day (which tends to be bullish before the minutes and bearish after).

Second scale is partly planned but not closing it soon, like my 1st failed short, is inexcusable. It should have been closed once new high made after the shakeout.
I will NOT count this day as stats failure as it's my fault to look specifically at FOMC days stats.

Is my remote permabear personality trying to resurface? It doesn't have a chance now b'cas of my firm trade management/risk rules and odds based trading. However, I notice that my winning longs are not full sizes and losing shorts are fat.

'Oh what a tangled web I weave'.

FOMC Minutes stats

We have over 100 sample days, which is always good.

Overall, mildly bullish with profit factor 1.3

However, during bull markets, this becomes a bit more pronounced at 1.6 and bear condition like ours now, it's breakeven now at 1.0

If you throw in short term bearish conditions like 20 day EMA, it's lot bearish at 0.4.

Hence I would have still taken the short but would have been lighter in size. I have also tried to fade the extremes in the past with favorable results (only when I have hard stops above immediate whipsaw extremes).

There are also other intra-day quirks like if bullish before minutes, then bearish close etc but the sample size of current market condition is too small to have any meaningful conclusion.

Overall, it's probably not worth trading on these days. I saw this statement in many experienced traders' journals here!

Instrument change.

I will be trading SPY instead of DIA for the next 2 weeks. After that I will likely transition from microYM to microES.

Trading signals are similar for both instruments and I don't expect big changes in terms of profitability, execution and emotions. I have also traded them in the past.

Though they are highly correlated, SPY/ES has more research data, more commonly discussed in this forum and it will be easier for me to get involved in SPOO thread discussions eventually.

Finally, it's very liquid and traded 10x times more but it's not a concern for my small trading size. I am not TT yet!

Edit - I will stick to DIA for the testing period of 2 weeks. It may be easier to analyse trades. I also like the round numbers of YM. Easy to do mental math compared to quarter points of ES

May 26 2022 Market Prep

Stats are neutral for gap up open today with no clear directional bias. If I have to pick a side, it's slightly bullish. Mainly because of the fact that bullish close on FOMC days in a Bear market is likely to continue but the sample size is small @ 10.

Overnight action has been very bullish and hence I wouldn't want to fade it. Going long is also risky as we are butting against the resistance during this bounce from 52 weeks low few days ago.

I don't have a clear plan or edge. Tempting to fade ONH as the risk is small but it would be countertrend at this stage and hence I need to see some weakness first.

No trading today.

Bullish open from the open but no decent pullback to enter. This is the 3rd time in the last 2 weeks where 'waiting for better price' strategy didn't work.

However, I had 1/2 position on the previous 2 occasions, unlike today. I am in no rush to adjust my strategy as Market is unidirectional recently.

This behaviour of the market could be b'cas of Bear market i.e below 20 and 200 EMA. Since we closed up 20 EMA yesterday, I expect the usual tug of war price movements between Bulls and Bears to resume intraday.

Low volume after the first 10 mins also made me hesitant. I probably should pay more attention to price and less on volume, especially if the trend and momentum are strong.

Seasonal change.

YM moved above 20 DMA but still below 200 DMA. Harsh winter (bear) season is behind us (for now) and now, stats will look into this 'spring' season' data only. It's the shortest of the 4 seasons and markets spent less than 10% of the time. (400/5000 days)

I believe markets behave differently during the 4 seasons (based crudely on MA). I have some data regarding this and more importantly it makes sense to me. For instance, the strong Bull market i.e above 20 and 200 tend to have lower ranges i.e ATR, more frequent UP days and lower volume in general.

Strong Bear market or winter season often see much higher ATR, often to the downside & big volume. I can probably use VIX too instead of MA but I don't have the right tools to do that now. Will look into it.

May 27 Prep.

Stats don't have a clear edge and are mixed today.

Price action is bearish but Seasonally Friday is very bullish. Overnight is so far inside which usually bullish (presumably b'cas the prior trend will continue and stop ducks sitting above Y-H).

We are 1 timing daily and just testing last week's high. ?Bullish.

All these factors will tempt me to consider taking long today. But Yesterday's anemic volume leaves limited support below.

No clear strategy yet. Keenly watching.

Unnecessary small trade today.

Started the trade with neutral bias. Prepared to consider long but got mixed up with the differences in YM and ES price action.

YM was opening below Y-H (bullish) whereas ES was opening above Y-H which was mildly bearish stats wise. But Price action is quite bullish. Memorial Day and Friday bullish factors also behind the indices for a strong close.

Unfortunately, my fading mentality took over briefly and shorted SPY @ EU close. However, I had risk parameters quite tight. Once we made a new high post EU session, decided to take a small loss as the odds of reversal seemed low.

Done for the week.

Lacklustre trading this week. When the signals were neutral, instead of focusing on current price action, I became hesitant and inactive. Also decided to move to SPY for 2 weeks and then MES.

I was a member of FT71 convergent trading last year and considering joining again this weekend for a month or 2.

Stats - Closing more than 2%

Over 200 trading days closed 2% or more in the last 20 years.

What happened the following day?

Results - It closed up 54% times but the down days were more profitable. PF >1.5

1. In this market condition (spring), this result held up, albeit slightly less profitable to short.
(Interesting, this correlation does NOT exist in strong bull markets i.e price more than 20 & 200 DMA. It's actually more profitable to go long during those conditions. A wise man once said 'far more money is lost in anticipation of correction than correction itself in strong Bull markets').

2. If we gap up, it's even more profitable to short and somewhat less for gap downs.

3. Finally, we have 2 more bearish factors in play on Tuesday. Well, it's Tuesday and then post Memorial day.

Overview of my methodology.

I am very excited that I added probabilities into my prep few months ago and it's a real eye opener. Now I truly believe that 'You know nothing Jon Snow'

I'm mindful that stats are 'still about the past' and only a guide as to what's more likely to happen. The next step is looking at what's happening 'right now'. I am still having difficulties in over-riding my bias when the current price action is not in sync with past behaviour.

e.g. Wednesday stats were bearish and I went short but the price action was bullish. I know this month is testing phase of the stats and I should take the trade regardless of the price. But, I can feel my anxiety at the thought of going against the stats of 20 years. I'm planning to test the price action system next month and ignore the stats completely to gain confidence of my PA system. (I use EMA crossover to decide trend and momentum and time my entries).

Then this issue of identifying targets for scale outs and runners. Letting Winner turn into a loser, not scaling in to a winner and leaving too much money on the table are 3 major issues with me (and most retail). I saw all 3 in the last 5 trading days itself.

This made me think more about my methodology and this is what I came up with yesterday.

There are 4 parts to it.

1. Analyze the 'remote past' for repetitive crowd behaviour using stats. (current project).

2. Assess the 'recent past' price action by learning 'volume profile' and where player are most and least interested in. (Resuming my CT with FT71 to learn more)

3. Be Aware of the 'current' price action by observing ripster47 EMA cloud for trend and momentum, Delta for buyer/seller intent and Renko for accumulation/distribution.(next month's project)

4. Anticipate where price is heading in the 'future' (most novice traders, including me, do this most difficult step first without much consideration for the above 3 crucial steps). I use crude measures like support resistance and previous day levels for now. Lot of learning is expected later this year on this topic. Will start with Profile HVN/LVN for now with FT71. However, my major project includes learning broader tools used by our legendary @tigertrader i.e Credit spreads (domestic, international, corporate, US, Europe) yield curve, intermarket correlation, dollar index, VIX, $Tick etc. That's when I will likely start holding overnight positions and will attempt to graduate to a swing trader.

Happy long weekend. Lots of homework to do.