Dec 142011

The difficulty of holiday trading in December is compounded by rollovers and lower participation.  Here’s what I’ve observed:  Instead of one continuous auction, we have many mini-auctions.  Volatility will dry up and price will barely move until some external stimulus provokes market participants to initiate trades.  When this happens the market will then zoom to a new area where volatility will dry up and the cycle repeats.

For me it makes for especially difficult trading.  For one I need a lot of patient as the first trade from yesterday’s RTH session demonstrates:

If I’m going to trade like that, why trade at all?

A lot of my trading is based on my analysis of volume (I’m avoiding the “order flow” buzzword).  And lately volume has been reduced which makes my methods less effective.

We’ve also seen a little decoupling from the Euro as the Euro is dropping much more than ES.  I think one of the two may come back inline, will it be the Euro who will start going up or will the ES retest previous lows?

Over the past few weeks I’ve been modifying my plan mentally and I have lots of paper laying around my desk with “setups” sketched out on them.  Over the next few weeks I plan to put all that into a word document and focus all my attention in January on trading the updated plan.  I need to detail exactly what I must see in order for me to scratch a trade.  Lately I’ve scratched more winners than losers, so that needs to be more mechanical.

Just a word on scratching.. I normally do it when I think the trade is no longer valid.  I can exit without a loss.  But I know this is not the most efficient.  If a loss is on average 2 pts and a win is on average 4 pts, then I only need to be right 33% of the time to be breakeven and a 40% win rate would give me a profit.  When I scratch a trade, I’m saving myself from a 2 pt loss, but I’m also denying myself the potential 4 pt winner.

So lots to think about over the next few weeks.  I also plan to release an indicator I’ve been working on for a long time now.



  One Response to “Holiday Trading”

  1. Yes, it is a good idea to have some strict rules for execution. Planning is discretionary and execution might better be more rigid. E.g. you enter a trade in a biz area and you get your first target then you could shift your SL 1, 2 or 3 ticks above the last swing high.


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