Friday, February 02, 2007

Friday, February 2nd, 2007 Morning Comments

9:59 AM - OK, we continue to appear in range bound mode, with trade slowing down a bit from the earlier, busier pace. One last point I want to emphasize is position sizing. I had a full size initial position on the first trade; half size on the second. I knew, shorting the market the second time, that we had just had a good runup on solid volume. While my overall idea of being in a range and moving to the AM midpoint worked out in ER2, the ES contract just wasn't feelin' it. When buying volume at a key price level turned higher than it had been several minutes earlier, I got out. Never fun to take a loss, but a limited loss on a small position doesn't put you in a hole. I've known a fair number of successful traders and one common feature is their ability to press the market when they're confident of their edge in a trade. But the flip side is their ability to *not* press it when they're just feeling a market out. Had the second trade gone my way, I would have had time to add to it and make it a nice winner. By entering with smaller size and not pressing it, I preserved my day's profitability. It's all about execution and sound fundamentals. That may be less sexy than finding that perfect setup, but day in and day out it's what making money is about. Have a great rest of your day; update tonite on the Weblog.

9:44 AM - Note the TICK and ER2 weakness. I continue to believe we're seeing a short term topping/trading range formation in the making.

9:42 AM - Basically on a short-term trade, I'll take my loss on a short trade if I see volume lifting offers above the point where previous buying had terminated, esp if it's buying from large traders. That tells me it's fresh market interest and I get out. The idea is to have ticks of losses and points of profits.

9:37 AM - Out of the market; small loss on that one. ER2 looking a bit heavy.

9:30 AM - Looking to see if we get a downward shift in the TICK distribution. Small short on the TICK bounce.

9:16 AM - Solid buying once again, with the TICK showing a distinct positive bias once again. It's back to that theme from yesterday: strong upside markets typically lead to trading ranges, not to sharp bear markets. We're getting good back and forth right now that may be part of such a building of a range. If so, the profitable strategy is to identify the midpoint of the prospective range and fade moves away from that. That's just a hypothesis at this point, but I'm flirting will a small short here for a return to the middle of the AM range.

9:06 AM - I try to trade with an "anti-confirmatory bias". What that means is that I keep myself alert to everything that *doesn't* fit with my trade idea. And the strength in semiconductors and DAX didn't fit. That was another reason I was quick to take profits. Now we see that those indices continue strong and the market overall has bounced decently. If you're going to get a washout or a big upside rally, all sectors will be in gear. If they're not in gear, it pays to take profits at the first target. Another one of those execution lessons.

9:01 AM - I usually will take something off the table when I hit the first price target. Nice to have cash in the bank. In this case, I may reenter quickly if buyers can't get this thing going.

8:59 AM - Hit pivot target. Out for now.

8:54 AM - Semiconductors strong, also DAX.

8:50 AM - My position is predicated on the hypothesis that we've put in a high for the day with that preopening runup. So I add to shorts on TICK bounces as long as TICK declines take us to price lows.

8:42 AM - Short some ES here; tight stop.

8:38 AM - Volume is high, lots of institutional participation. Great sell right out of the gate with ER2 weaker than ES and consistent volume hitting bid.

8:24 AM CT - Good morning! Two articles to start out the day; the first looks at what happens after consistent market strength; the second teaches a little lesson about trade execution. Pivots are posted on the Weblog. We got the pop on the jobs numbers, but note that the dollar has regained strength vs. the Euro and interest rates have moved off their lows. Net, net: I'm not sure the new data is truly leading to a repricing of currencies and fixed income, and that leads me to doubt if it will power a trend in stocks. Indeed, the indices have come off their lows. Trading below the preopening lows would suggest fresh selling and would take me out of any long bias. Back after the open!

8 comments:

Marc said...

Hi Brett,

The last couple weeks have been great trading for me (at least for my style). I do appreciate your focus on the TICK. This is something I watch more closely now and it helps confirm moves.

May I ask who or what platform you use for daytrading? I've always used Power Etrade Pro but it has been less than reliable of late and I'm starting to look around.

Thanks,
Marc

Brett Steenbarger, Ph.D. said...

Hi Marc,

Thanks for the note. I welcome constructive reader comments re: platforms that have been effective for them. I think TradeStation is worth a look--

Brett

Teo said...

Hi ,

Just to share my experience regarding Tradestation. It is really a wonderful trading platform with lots of capabilities like Easy Language and some other form of trading automation. My only feedback is the customer service and support is bad.

Henry Teo
http://www.mytradingjourney.com/blog

Brett Steenbarger, Ph.D. said...

Thanks, Henry, for the feedback and the link to your blog. I'd be interested in hearing from readers re: brokerages with superior customer support, solid platforms, good commissions, etc.

Brett

Teo said...

Hi ,

Regarding the brokerages , here are my comments for those I know and used before :

InteractiveBrokers - has capability to trade most world major markets , including Asian markets : Stocks , Options , Index Futures , Forex as well as Commodities Futures. Trading platform is simple and easy to use. Transaction of funds is quick and easy , I have no hassle with wiring funds to and fro. Service support is reasonable.

ThinkorSwim ( TOS ) - specializes in Options and has good charting features. Learning curve to use platform might be longer. Very useful if you need a lot of Options Analysis.

OptionXpress - quite similar to TOS , but is web based , so expect slower performance. Good for Options beginners. Service support is responsive.

Xpresstrade - specialized in commodity futures as well as Options and Forex. Also web-based platform but it is very user friendly. This company was bought over by OptionsXpress. Good customer and service support.

Oanda - is a non dealer Forex broker with rather narrow spreads.

Tradestation - per my earlier comments , I have the worst experience with the Customer and Service support. It took me about 3 weeks to fund my money back to my account. Emails were not answered and they are reluctant to listen to customer's feedback for improvement.
It was my regrets and embrassement to have recommended few friends to open tradestation accounts - most of them faced similar issue like me.

I believe they have huge customer base. My feel is that they need to meet customer satisfaction , otherwise they will lose some customers to competition ...

Great trading platform and excellent charting features.


Regards
HenryTeo
http://www.mytradingjourney.com/blog

Brett Steenbarger, Ph.D. said...

Great feedback, Henry. Many thanks!

Brett

Marc said...

I have looked at Tradestation since many people swear by it but the commission structure sucks.

For instance, if I buy 25,000 of the QQQQs at Etrade (normal trading for me), it costs me $7.95. Tradestation would be $150.

Am I missing something?

Thanks,
Marc

Brett Steenbarger, Ph.D. said...

Hi Marc,

No, I think you make a good point. Commissions for large stock purchase are different from futures commissions for an equivalent position. It's important to price out the instruments and size that you trade. TS is more competitive if you were buying NQs instead of a boatload of Qs. And, of course, execution counts for a lot. Thanks for the perspective--

Brett