Tuesday, January 19, 2010

Fighting Market Moves

I've talked with a few traders this morning who found themselves fighting the move higher in stocks. A common refrain was, "We shouldn't be this strong."

One of the great challenges that I experience in markets is achieving a sense of market trend and context to frame trading ideas, but not getting so married to those ideas that I lose touch with how the markets are trading right here, right now.

That is why I ground myself in such intraday basics as where we're trading relative to VWAP; how many stocks are advancing vs. declining; how many stocks are upticking vs. downticking; and how much volume is executed at the market offer vs. bid.

I create a mental checklist out of those basics and don't allow myself to trade against the intraday tide, if there is one.

It's great to trade with hypotheses, but dangerous to allow hypotheses to become conclusions before the data are in.

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4 comments:

madi said...

Brett,
This is no joke! Today, I traded with a guy using igoogle chat. He took a short on the ES at 1139.75 and then again at 1141.50. I told him that I wasn't going to be counter trend trading today. I learned a lot from him today by listening to him all day stressing out, sitting in pain. "This market is killing me...It should be going down!...this market is spooking me out...it's gotta come down." That was me, many times.

The first pullback entry didn't come until after 12:00 pm. at 1140-1140.5. This showed me that the market was quite strong today...Also, breadth is over 1300 and the VIX is under 18. I didn't take this trade because I didn't like the risk/reward. Now, it's 1:30pm and there may be no trades on the ES for me today...but, hey, I didn't lose any money and had no stress! There's always tomorrow.

Proptrader said...

Classic case today with UK cpi data....gbpusd managed only a modest gain after the release..market was already long gbpusd...so what followed was a steep sell off....gbpusd should have rallied hard! My profitable long soon became a repeat loser as I coninued to buy gbpusd on the dips. The tape doesnt lie!

Paul said...

I learned my lesson back in October 2008. Some fond memories indeed.

If the market is not playing your game, just stand aside until it does.

Gro said...

Again, this is a classic case of "needing to be right".

This is exactly what happened the whole year. The market has gained 60% since March and yet many people were bearish most of the time.