I actually meant to focus on the tape at hand today and get back into the swing of things on the trading front. However since my main Internet connection just went bust two hours ago I decided to use my connective idle time as an opportunity to talk about an issue many of you may have been battling with at some point or the other: Whether or not to scale into positions. Does it work? Should you do it? The quick answer (and you knew this was coming): well, it depends.
During my time away it didn’t escape my attention that you guys very much enjoyed Scott’s excerpts on tape reading. As you all know I am very much a systemic trader at this point but at the same time still enjoy following a variety of charts on a discretionary/analytical basis for three reasons: First I happen to be good at it as my thinking process follows a mixture between the analytical and the creative. Second it gives me opportunities for campaigns I would miss out on just focusing on my systems. Third reading the tape actually gives me ideas for building new automated systems. For all these reasons and more I decided to do one post exclusive to tape reading every [...]
One of the reasons why I entertained the mere notion of an E-Mini long campaign over three weeks ago was that, while market momentum certainly appeared to be maturing, there clearly was plenty of remaining potential for a continuation of the advance. Or in other words, don’t ever trade against a rally just because in your infinite wisdom you have come to believe that it has gone far enough. Lacking any clues to the contrary always stick with the ongoing trend.
Things continue to progress nicely for us on the trading front and I decided to not push my luck by entering any additional campaigns today. After all correlation risk is significant in this brave QE world as currency driven moves usually affect symbols across the board. Besides everyone and their poodle seem to be bullish right now, and to once more quote the great Mark Twain: “Whenever you find yourself on the side of the majority, it is time to pause and reflect.”