Aug 092011

There was a lot of discussion on Twitter about how to trade this volatility.  My idea was not to trade it with real money.  I know I have a small edge in “normal” market conditions.  For expert traders, I think the increased volatility can increase profits.  For less than expert traders (me), it can be very risky.  So my idea was to wait for an perfect setup before taking any trades with real money.

The ES open tested up & was rejected and then drove down.  So that prohibited longs, which would be against the VA trend and intraday trend.  If price had stalled at yday low I would have tried a trade with a very tight stop but it stopped a few pts short so I didn’t even have the choice.

Then I waited patiently for my next level which was 47.50-49 area which was important yesterday and during Globex.  If it weren’t FOMC day I wouldn’t have faded the move up but since it was FOMC I was expecting a smaller range until the announcement.

It stopped short so I missed that one too but it came back up a second time and I got short 2 contracts.  My stop was above 52.  That made a 5 pt stop.  I’m not comfortable with that and so I quickly scaled one at +2 pts.  I actually wanted +4 +10 pts but it kept bouncing around 44 so I took my first scale there.  I settled for 6 pts on the second half.

And that’s why I think this volatile market is for expert traders.  I wasn’t patient enough.  Buyers came in around 39 and I bailed with 6.  A little more patience would have yielded 10.  That’s a huge difference.

Without the volatility, cutting a winner short might be 1 or 2 pts.  Today it was 4.  And those “extra” points are necessary to make the R:R favorable.

So overall it wasn’t a great trade.  It takes a lot of confidence to enter, especially when fading, and even more confidence to hold until the target.  I’m not quite ready for this but I’m glad I got to take a few real money trades yesterday & today and even more glad that I made some money doing it.  I also finish this week slightly below my weekly average which is remarkable considering I only traded 2 days so far.  The pressure is off to continue trading this week and I can either sit out or only take really good setups.

So if you’re not up to it, there is nothing wrong with not trading or trading on simulator.  As FlowTraderES told me yesterday “Cash is a position”.

I’m heading to the beach tomorrow.  Good luck to you for the rest of the week.


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