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Does Scaling-In Work?
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Does Scaling-In Work?

by The MoleMarch 24, 2017

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.

The practice of scaling into a position is universally applicable, no matter whether you are mean reversion trader, a contrarian swing trader, a trend trader, or anything in between. When it comes down to it we always prefer to buy as low (cheaply) as possible and to sell as high (expensive) as possible. Lacking access to a magic crystal ball we resort to various technical measures in order to flag moments in time when price appears to either have bottomed out or reached an exhaustion peak. For the purposes of the discussion going forward let’s focus solely on buying opportunities henceforth.

Any self respecting mean reversion trader will most likely employ some type of momentum measure (e.g. standard deviation, rate of change, moving averages, etc.) in order to decide when the price of an asset or portfolio has deviated a sufficient amount from its mean, thus increasing the potential to profit from an eventual reversal in the opposite direction. The further price diverts from its mean the higher the odds that the increase in realized volatility (RV) is capable of fueling an equally violent counter reaction. So depending on your capital commitment guidelines it may actually make sense to increase your R size up to a certain threshold.

But volatility is a cruel mistress and it’s equally possible that it will feed continuation in the very same direction. As a rule of thumb, the more violent and sudden the increase in volatility the less predictable are usually the odds of a reversal. Which is why it’s very much possible that our chosen entry point will turn out to be less than optimal and that price will drop much lower until it eventually paints a reversal, hopefully of course reaching our exit point.

If you happen to trade large position sizes scaling in is almost a must or in many times is implicitly enforced by limited liquidity. But many traders intentionally scale into positions hoping that it will offer them a better entry point on an average basis in comparison with ‘going all in’. Incidentally the same applies to scaling out techniques but once again we’ll be focusing only entries here in order to avoid confusion.

paths_of_mean_reversion

Now to illustrate the point let’s assume we have a system that enters long as soon as price touches the lower boundary of a Bollinger band, we will call that threshold L1. There is however the probability p that price continues lower by 5 or more ticks/pips before rebounding to our target area F – we will call that threshold L2. This produces three possibilities for us which are illustrated in the figure above:

  1. All-in at L1: We deploy our entire position size when price reaches our Bollinger threshold at L1. We simply do not care whether it will go lower to L2 as long as it doesn’t drop far enough to hit our stop.
  2. All-in at L2: We don’t do anything at L1 and wait until prices reaches L2 where we once again deploy our entire position size. Of course if price never gets to L2 then we deployed zero as we won’t get filled.
  3. Average-in: We split our position size between L1 and L2 (the split may of course be uneven). If we never get to L2 then we are only trading a fraction of our full position size. We are only fully positioned if both thresholds are touched.

Now let’s briefly talk about probability p and for simplicity sake we are going to assume that p = 1 if price is guaranteed to always reach our lower threshold at L2. Inversely if there is a snowball’s chance in hell that it’ll get there (i.e.  you’ve selected a threshold several standard deviations away then p will be approaching 0. Reality is usually somewhere in between and thus we consider a floating point and not a binary.

We now ask ourselves: Assuming that we trade only 2 contracts, that L1 is always been touched, and that we exit our entire position at F (no averaging out), what are the expected profits for each of our three entry alternatives?

  1. 2 (F – L1)
  2. 2 p (F – L2)
  3. (F – L1) + p (F – L2)

Clearly if p = 0, meaning there is zero chance that L2 will be touched, then method I is the most profitable. Inversely if p = 1, meaning that L2 will always be touched no matter what, then method II will be the most profitable. Since reality is almost always settles somewhere in between on average you would then think that method III should always be chosen.

But not so fast! Because if p < 0.5 on average then method I is more profitable than II. And if p > 0.5 then method II beats method I. Similarly if p < 0.5 then method I also beats method III and if p > 0.5 then method II also beats method III. We are unable to arrive at a clear winner – what a head scratcher!

So what does that all mean? Should we scale into positions now or shouldn’t we? As usual it completely depends on your strategy and the type of tape you are trading. In real life systems running on highly volatile symbols (natgas cough cough) on a short term basis may over time greatly benefit from a scaled-in entry method. And in many times scaling often produces a better system quality number (SQN) although it may wind up lowering basic expectancy. In my personal opinion the more realized volatility you are dealing with the higher the probability that scaling your entries (and perhaps even your exits) will lead to higher profits on average and at minimum to a more stable system with lower standard deviation.

Public Service Announcement

I won’t be posting on Monday as I will be in surgery for a few hours before the market opens. No worries, it’s dental related and odds have it that I will live to tell the story. This post was supposed to go up Sunday as a replacement but since I had to make due during today’s Internet outage I hope that you’ll be able to forgive me for being absent one session. Enjoy your respective weekends – I’ll see you all on Tuesday morning and most likely on Monday afternoon in the comment section assuming the anesthesia has worn off.

Credits go to Ernest P. Chan whose brilliant work on the subject matter inspired this post.


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • Mark Shinnick

    Scaling-in seems to be the only way to buy into volatility; one cannot seriously routinely position into it before it actually presents itself. Fortunately, the liquidity is quite good when the market timing is competent.

  • http://evilspeculator.com Sir Mole III

    @markshinnick:disqus @Ojuice:disqus Well, for me personally the ‘bearish case’ flags when I see clear technical evidence I can point at that a reversal has reasonable odds of occurring. I usually back that up with charts and analysis 😉

  • http://evilspeculator.com Sir Mole III

    Market timing is competent? Problem is that you never really know how low she’ll go…. so competence in this domain would consist of establishing average MFE/MAE values in order to pick your average L2 threshold.

    https://www.youtube.com/watch?v=ox-lfowevqA

  • Dyellowflash

    just touched my first target 20647 as stated in prev post. cleared 40%. hopefully can reach the other.

  • Mark Shinnick

    Yes, exactly. All that can practically be done is to hold powder dry and track downwards with some objective mechanism as the timing device. Even then, one needs other correlating inputs. Then, scale-in seems to be the only way to make it payoff.

  • BobbyLow

    Good stuff. In your “buying at lower BB” example, Scaling in makes sense because it’s almost like a pilot position in the beginning. However when trying to catch onto a trend (getting in after there has been enough directional movement to look like a new trend has possibly begun), Scaling in has not worked for me and has diluted profits because the second purchase was usually at a worse price than the first etc.

  • OJuice

    Yes. I was trying to encourage more definition on the term bear case. i.e. re-test of the bottom of the range, or complete blow-out to the downside. One being easier to provide evidence supporting a statistical edge than the other…

  • Yoda

    Go reds go.

  • Mark Shinnick

    Its a interesting point because the pilot position implies a lower exposure. Scaling-in should involve not only price, but potentially radically increased exposure too.

  • http://evilspeculator.com Sir Mole III

    Actually I often pick my entries on the 60-min and work my way up from there. Meaning I convert ST campaigns to longer term ones IF longer term thresholds or inflection points are breached.

  • http://evilspeculator.com Sir Mole III

    Trend traders who engage in catching break outs or get positioned ahead of break out moves may suffer from scaling their positions. On the other hand you may greatly benefit from scaling OUT however 😉

  • Mark Shinnick

    Believe me…that graduation is one of the reasons I think you are friggin SH.

  • Mark Shinnick

    What happens when we are hot and red and no action for a bit too long?

  • Yoda
  • Dyellowflash

    retouched 47. cleared another 10%. 07 to 47 is almost 3Rs for me. Now only left with 50% positions loosely split between Dow, US2000 and DAX.

  • Mark Shinnick

    Amazingly deft !

  • http://evilspeculator.com Sir Mole III

    Yup, trading ranges.

  • http://evilspeculator.com Sir Mole III

    Yoda’s head explodes.

  • Mark Shinnick

    Bot some tza, tight stop.

  • http://evilspeculator.com Sir Mole III

    BTW, tonight I’m finally watching Star Wars Rogue One :-)

  • Yoda
  • http://evilspeculator.com Sir Mole III

    I wonder what happens when you pull one of those two ends.

  • Yoda

    LOL, I turn brown

  • http://evilspeculator.com Sir Mole III
  • Yoda

    On wide-screen I hope

  • http://www.captainboom.com/ captainboom

    I’m willing to take one for the team, and volunteer to find out.

  • Mark Shinnick

    Stopped miners…for time being.

  • Mark Shinnick

    Ok, scaled-up and moving up stop on the tza.

  • http://evilspeculator.com Sir Mole III

    This is my home entertainment setup:

    https://i.ytimg.com/vi/Hncjahz8XCk/maxresdefault.jpg

  • http://evilspeculator.com Sir Mole III

    Gravity setting in again…

  • http://evilspeculator.com Sir Mole III

    Hands-on research leads to success.

  • ridingwaves

    I remember those days where you fought a sister just to turn the channel right next to the TV….and we fought over 7 channels…..too funny…

  • ridingwaves

    the issue is how to get the hands off, I would probably dip my fingers in crazy clue and be stuck on her forever…..scene 1-looks over shoulder to see if wife is around

  • Dyellowflash

    Damn… i almost gotten a short in precisely at 2345.6… i gotten 2345.7

  • http://evilspeculator.com Sir Mole III

    7 channels? Luxury!! I grew up in Austria and we only had 3 which really were 2 and a half. And it was in B&W for the first few years – yes, I’m that old… :-(

    https://www.youtube.com/watch?v=Xe1a1wHxTyo

  • Mark Shinnick

    Same here….shudder to think what we fight over these days :/

  • Dyellowflash

    I think i will just leave my 50% on the table for the weekend. Though will usu get screwed by MM during the 0 liquidity weekend hours, i had already taken 2.5-3R for 50% and the rest are mostly on guaranteed stops, so i am chill. Do people here trade with guarantee stops? Can try IG mkt as the brokerage. Should be useful when mkt gets crazy or if u dont mind holding positions through the weekends.

  • Mark Shinnick

    That’s pretty rarified air your dealing with…hard to relate to any guarantees.

  • Dyellowflash

    Oh… IG mkt has this guaranteed stops function. Which means if mkt gaps like 200 pts during the weekend but my stops is 20 pts, i only lose 20 pts + 1 pt of fees. Hoping for the mkt to gap up 200 pts so that someone (the brokerage) can feel more pain than me 😉

    For my the other brokerage, it does not has any guarantee stops, so on every thursday i will withdraw all my money except for 2R worth of cash required to make 2 trades on Friday. So if i have to hold and it gaps, … then LOL…

  • http://evilspeculator.com Sir Mole III

    So what’s the problem?

  • Mark Shinnick

    Thanks for this about IG.

  • Ronebadger

    NICE!!! These are my 39 year old speakers…15 inch woofers (Klipsch Cornwalls)

    https://uploads.disquscdn.com/images/caf3b5b16cc55ff06346a243f997a0833ea1b997d2ef2bd228aef24b38d55893.jpg

  • http://evilspeculator.com Sir Mole III

    You’re trading the ES right? The CME offers a stop order ‘with protection’.

    “Stop orders with protection prevent stop orders from being executed at extreme prices. A stop order with protection is activated when the market trades at or through the stop trigger price and can only be executed within the protection range limit. The order enters the order book as a market order with the protection price limit equal to the trigger price plus or minus the pre-defined protection point range. Protection point values usually equal half of the Non-reviewable range. Refer to http://www.cmegroup.com for a list of the Non-reviewable range per product. For bid orders, protection points are added to the trigger price to calculate the protection price limit. For offer orders, protection points are subtracted from the trigger price.
    CME Globex matches the order at all price levels between the trigger price and the protection price limits. If the order is not completely executed, the remaining quantity is then placed in the order book at the protection price limit.”

    There’s an example of the bid and offer and a video as well.

  • Trouzzer_Snake

    Mole – Have you run the data on your trend day alerts to see if there is an edge? Would love to see the scatter plot on that if you have it.

    Thanks!

  • Yoda

    I remember playing Pong on one of those.

  • Mark Shinnick

    Cool….just massive! I still love all my 1970’s EPI’s; opposite end of the woofer size spectrum.

  • StockTalker

    /ES 2340 again

  • StockTalker

    Testing the low

  • Dyellowflash

    Dow 20607 touched. I am out except for last 20%. 5Rs bagged. I am quite surprised that it reached it so late in the session on a friday. Usu my methods dont work as well on Fridays.

  • Dyellowflash

    I wonder if it will reached my max hypothetical target which is 87.

  • StockTalker

    Major move

  • Dyellowflash

    To be frank, i didn’t made a lot of coins today. Spread my fills between US2000, Dax and Dow. While Dow gave me 100 odd points, DAX and US2000 have not done much. Thankfully i switched the majority of my fills to Dow when the US mkt opens. That why i am left with around 30% of positions which r actually less than 2R profitable while Dow cleared all the TP areas.

  • Yoda

    Added to GDXJ long. I believe a big move is in the cards.

  • Mark Shinnick

    OK, thanks for this…never know about the magnitude but the position makes sense.

  • Dyellowflash

    Might be a mixed blessing. I am out of all Dows bcos they hit 3R n 6R TP target. But Dax is not even 1R and US2000 hardly 2R. I am going to remove the pre-set TP prices for these positions and see where they go.

  • Mark Shinnick

    Still observing steady slope of increasing volatility. Its relatively unusual behavior, but now hitting some resistance.

  • http://evilspeculator.com Sir Mole III
  • Mark Shinnick

    tza stopped for gain, flat…for time being.

  • CandleStickEmUpper

    I took a small NQ long position based on the Zero signals. Just banked 20 points in 30 mins. Thanks Zero and thanks Mole!

  • Yoda

    Craaazy tape!!!

  • Ronebadger

    Volatility is volatile…

  • Mark Shinnick

    Yeah…but holding within its local range.

  • http://evilspeculator.com Sir Mole III

    I just finished dinner – what happened? That’s quite some late session volatility.

    https://uploads.disquscdn.com/images/23272ddfbf6ccb3912ec9bb07b5c2ceb6e1197b2eeb4af9c334736e693c502b7.png

  • http://evilspeculator.com Sir Mole III

    Pays for a few more months of the Zero :-)

  • http://evilspeculator.com Sir Mole III

    What was your long signal btw?

  • http://evilspeculator.com Sir Mole III

    Actually no – great idea!! Unfortunately I deleted all those emails just a few days ago, Damn it!!

    Does anyone have those emails by any chance?

  • ridingwaves

    HCA vote….per my hunch this morning, I think they could jam this up and down for next couple days….its bullshit but it’s being broadcast so much the big boys are using it as proxy for moves…

  • http://www.captainboom.com/ captainboom

    I have them in my Mail archive going back to 2011. What would be the best way to get them to you?

  • http://www.captainboom.com/ captainboom

    Check your email. I was able to save them in bulk as an RTF file.

  • Scott Phillips

    I have them all – I ran the data a year or so ago it was a strong edge which for some reason went through a dry spell from memory.

    I’ll pull it out.

    That setup was from John Carter’s book BTW.

  • Scott Phillips

    I think Dyellow is trading on a bucketshop :-) So given it’s not a real market, the broker is free to “guarantee” not to rip you off on the fill (leaving them free to rip you in other ways)

  • Scott Phillips

    Nothing for nothing in this world :-) When a broker guarantees stops, it means you are trading some custom derivative which only exists on their platform. You lose regulatory protection (for what that’s worth) and you get the liquidity they want to give you (as opposed to trading with CME).

    It’s a double edged sword both ways, very enticing points, to cover the very bad points.

    The bottom line for me is that when I trade on a real market the broker makes a tiny tiny percentage. When I trade on a bucktshop the broker makes 100% of all the accounts that blow up. Obviously having incentive to see retail traders blow up, means that eventually they do blow up.

  • Scott Phillips

    Sign of a good trader. Look back on his twitter he was “calling” for a multi month breakout in DX not long ago.

    Facts change, he changes his mind.

  • Scott Phillips

    Like so many things trend following and mean reversion are opposites. Stands to reason appropriate campaign management is as well.

    Mean reversion gets better from extremes, so scaling in makes sense. Also, mean reversion systems are generally taking teensy tiny wins, so become sensitive to slippage and comms, so entering one side of the trade on a limit (especially during the fast phase of the move) means you are either getting no slippage or a small amount of positive slippage (a rarity) for one leg of your trade.

    Trend traders reduce the standard deviation of their trades by scaling out.

    The hedge fund trend traders use “rebalancing”. Which is counter intuitive, but makes sense.

    Trend trading works unequivocally better on long timeframes, the evidence that it works at micro timeframes is patchy at best (which is why quants generally do short term mean reversion and long term trend following/breakout)

    So a successful long trade might be held for 6 months at all. Your successful long trade will GROW, not just in winning %, but in terms of percentage of your account.

    Generally what the hedge funds do is decide on an acceptable amount of expected volatility per position, and scale the position out so they are back within that expected. For example if you bought 10% of your account as bitcoin at $400, and bitcoin goes up 300% and is moving up or down $200 / day, then you have your account balance jumping around by 5-10% a day. Which is unacceptable for investors, so they effectively bank profits by yanking some out of the winners, and sticking it into positions across the board.

    Also, the OPPOSITE happens with a winning short trade, it’s shrinking in terms of percentage of your account, in terms of volatility expected, etc. A decreasing volatility short trend (like VX or NG long term) will have to be added to periodically to maintain the correct percentage weighting in the account.

    Like we have discovered recently, since leverage is effectively infinite, for the pros its about reducing drawdowns so they can scale effectively.

  • Yoda

    PPT, BOJ bought the close?

  • Scott Phillips

    Mean reversion off VIX, VX futures (and it’s derivatives) is an edge that behaves very differently than most. Regular charting fails miserably on it, especially trendlines and the like.

    Because the VIX is a derivative, then the VX is a derivative of that derivative. Then plot a moving average or bollinger over that and you have a derivative of a derivative of a derivative.

    Like making a copy of a copy of a copy of an old cassette tape, after the second copy it’s no longer “high fidelity”

    Most of the time VX is in contango and a strong short. When it shoots up, it shoots up ridiculously hard. When that load is blown, the mean reversion effect is one of the strongest edges in trading.

    Easy way to trade is to get short on a break of the daily low after an X magnitude vix spike, while *staying* short most of the other time.

  • Mark Shinnick

    From their website:
    “IG Asia Pte Ltd.’s license is limited to dealing in contracts for differences (CFDs) and leveraged foreign exchange. If you would like further information on the services and products offered by IG Asia Pte Ltd, please contact our helpdesk on +65 6390 5118 or helpdesk@ig.com.sg.”

    Key definition: A contract for difference (CFD) is essentially a contract between an investor and an investment bank or a spread-betting firm. At the end of the contract, the parties exchange the difference between the opening and closing prices of a specified financial instrument, including shares or commodities.

  • TerpFan

    Can you share what you interpreted as a long signal. I’m a ZERO sub and would surely like to hear how you use it!

  • http://evilspeculator.com Sir Mole III

    It was about time you made yourself useful. Thanks mate :-)

  • http://evilspeculator.com Sir Mole III

    You guys are awesome.

  • Yoda

    Yes I remember that call

  • CandleStickEmUpper

    The first two up arrows

  • Scott Phillips

    A “contract for difference” is a bet AGAINST your broker. You win, they lose. You lose, they win.

    I don’t have a problem with my broker making 1 or 2% of my account value for doing a good service over the year.

    I do, however, have a problem with a broker taking 100% of my account value IF I blow my account up.

    To me, it seems a fundamental and irresolvable conflict of interest, but what would I know 😉

  • Scott Phillips

    I just checked the current chart. Looks a bit different now, like a coin flip again

  • ZigZag

    I saw John Cleese’s one man show last weekend; he’s still funny

  • Mark Shinnick

    This was a complete education for me today; the only bucket shop association I ever had was from reading Jesse Livermore’s book. I sort of doubt any would want me as a customer anyway :)

  • Scott Phillips

    Bucketshops have their place. For instance you can bucketshop a real trend following strategy where you can’t with a sub 1 million US account balance.

    Because trend following relies on diversification you have to be holding 1 contract minimum of 30+ positions. Not suitable for small accounts.

    But the idea that a bucketshop is giving you “stop protection” for free is laughable. They quite obviously

  • Dyellowflash

    Pals, I do not think some of you have interpreted the zero’s arrows correctly. In my opinion, the cluster of blue arrows should not be used as cue or signal to go long or short. When the blue arrow works, it should be a single clean arrow and candles turn bullish from there. https://uploads.disquscdn.com/images/169c09967069f1ee077119ab20a64fa5489c22395803b0763ea6d2b8cef6695a.png https://uploads.disquscdn.com/images/776922de47bf117d920d6b966a334aa515d46fdcdafb2db1f4327d7a13e70acd.png https://uploads.disquscdn.com/images/be1a754793a0192481d7b1800556c4097987d7b5d7f9bed089e1caf50407f989.png https://uploads.disquscdn.com/images/4d39ad80fd46bf58c06c52bd1aa0ac42b72f67ef57434415eacc49533fbfa232.png I based my observation since 2013 or earlier. I downloaded a copy of the daily zero everyday and kept a qualitative daily diary write-up on all my observations about the zero and … the legendary zerofx.

    In which case, I will believe that the situation is still bearish on Friday because the mole has hit pass 2000 and the lite shows an inability of crossing above 0.

  • Grant

    Steer clear of bucket shops. I have poured over many since IB left the retail market.

    1. MT4 is a no go zone.
    2. None of them have stop limit orders for a reason.
    3. To cover their spread, they will execute trades b4 the price on the chart hits your buy or sell (your setup) to make slippage look minimal….. buyer beware. Unless you like seeing what your system is designed to do suffer b/c of broker shenanigans, stay away.

  • Ronebadger

    Anyone watching Sunday night’s ES action?

  • Mark Shinnick

    Yes…somewhat. Looks like volatility is also continuing.

  • Yoda

    yup

  • yudhisthira

    /TF down 1.07% so far. Not thru Weds low yet.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    For the pirates.
    Channels have no edge, then again..
    😉

    https://uploads.disquscdn.com/images/e93212a38f30d3b6b098f11243df15562000660fb01426720174463fb4b78bca.png
    2345 was the Key level IMHO.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    if you look at the Friday 2-3pm fast moves. You can picture the stop runs, both ways.
    Another poster child of why I simply won’t hold over weekends.

  • Darkthirty

    Cleaned up quite a few off the tracks………..

  • Dyellowflash

    I did a very bad thing of picking up 2 Dows at 20510 a few hours ago, that looks like a cheap shot with a 15 pts SL. That doubled my shorts, but only increase my SLs from 0.3R to 0.4R. Got 60% of bullet left for 1 trade. Usu prefer to refill with proper trigger and vol during US mkt hrs, but there had been nothing vaguely bullish from the chart during the whole Asian session.

  • Dyellowflash

    Ok… the love escalated rather quickly… That’s 80 over pts dump, about 5R for me. cleared 1 Dow.

  • http://evilspeculator.com Sir Mole III

    Just a quick reminder that I’m under the knife today and won’t be putting up a post. Have fun without me!

  • http://evilspeculator.com Sir Mole III

    Learning the hard way?

  • http://evilspeculator.com Sir Mole III

    In strong trending tape the signal often gets overwhelmed. Those arrows work best in sideways range bound tape.

  • http://evilspeculator.com Sir Mole III

    Can you point at them? I only saw down arrows.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • http://evilspeculator.com Sir Mole III

    Okay I’m out of surgery and back at home. Everything went well fortunately but I’m a bit out of it and will relax for the remainder of the day.

  • Grant

    Saltwaterdog, you watching crude?

  • Yoda

    closed all positions in SDS and waiting for hint on tape direction

  • Dyellowflash

    For those who wish to short… hmm… based on current situation in the opening 10mins, probably have to start scaling in very incrementally even at poor prices. Stops will have to be wide and run some risks of a crazy reversal.

  • OJuice

    Entering a short position at this time is a terrible recommendation. Regardless of where the tape resolves.

  • Dyellowflash

    I know that as well. In an ideal world, i would love to fill at Dow 20610s. 150 pts UP from here. But I will fill incrementally 0.05R at a time every 10-20 odd pts up.

  • http://evilspeculator.com Sir Mole III

    This smells like a possible reversal play. Keep an eye on the Zero – if it remains flat or goes positive then use an intra-day spike low to go long.

    https://uploads.disquscdn.com/images/0f7313e747b5ddd1a27632753158d88a77f4c36e8a7e53b9f7cfc53856b5bb48.png

  • Mark Shinnick

    SSW behavior has been interesting; bot small pilot position the other day.

  • ridingwaves

    vix backing down from opening salvo to 14.70 area…
    lets see if we have any bull power left…
    2270 spx seems within reach

  • saltwaterdog

    Every day…. basis daily the SS > IP was the short entry. While I try to be objective about both sides after a break of the previous hammer low and today’s OP a long setup here would make sense to me

  • Darkthirty

    Now we know where mole has been, probably needed a powerlifter to help get it done…….http://www.zerohedge.com/news/2017-03-27/massive-100-kilogram-gold-coin-worth-45-million-stolen-german-museum

  • OJuice

    This is a short position you are building?

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Dyellowflash

    yeah.

  • ridingwaves

    anyone noticing the buying in XBI-IBB

  • Mark Shinnick

    Yes it does, there’s been plenty of time for bears to load up, and appears a mostly classic BTD. “What’s different” is the relatively solid support of gradually building volatility….which BTW appears to have reached a near term objective; Its obviously got to begin adequately crushing before removing my particular sell signalling.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Hence the surgery. probably a torn ligament.
    😉

  • Mark Shinnick

    Thanks.

  • AcoBrasil

    Just jumped on the IBB bus. Good call. Also re-entered BRZU this morning.

  • http://evilspeculator.com Sir Mole III

    GG – did you ever do what Scott suggested? Meaning actually record those Keltner channel touches and the resulting price moves?

    IF you haven’t done it until now then you ought to at least start recording them moving forward.

  • http://evilspeculator.com Sir Mole III

    All I’m going to say is that my alibi is water tight.

  • Mark Shinnick

    What’s the rationale behind your particular shorting campaign last few days?

  • Dyellowflash

    50% explained in one of the comment section during the last few days.

  • Dyellowflash

    Sigh… I might have to add the 50% in soon. The way the mkt is going, its either here in the next 15m or maybe it will be 150 pts later.

  • http://evilspeculator.com Sir Mole III

    Well, IF that is your ideal world per your lens then I strongly suggest you wait for those moments and then take action.

    If you’re averaging yourself to a full position size then that’s a different story. But then this would be your ideal world right now as this is part of your process, correct? You can either wait for an ideal entry or you can have some kind of measure where you start averaging into a position (see this very post talking about this topic).

    My point is that we should always only trade when the odds are in our favor per our rules.

  • http://evilspeculator.com Sir Mole III

    I don’t want to jump to conclusions mate, especially since I don’t know you that well yet – but it seems to me that you do not have a rule based process in place.

    Apologies in advance if you do – in our defense your comment stream suggests otherwise which is why we are asking pertinent questions.

  • StockTalker

    -4 /ES now, bears have a good grip ATM. Tightened my stop, waiting to see what happens at 2300.

  • http://evilspeculator.com Sir Mole III

    I should have added this: IF you draw enough lines on a chart one of them is bound to be hit. Whether or not you actually would have taken action at that point is a completely different story.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    thanks for asking.
    I was embarrassed that I would it get it incorrect. or just be biased.

    Could you post an example when your drugs wear off?

  • http://evilspeculator.com Sir Mole III

    I’m feeling a lot better than I thought. But I’m not supposed to work out for a WEEK!!! Screw that – in two days I am back at the gym 😉

  • http://evilspeculator.com Sir Mole III

    Hang on…

  • Dyellowflash

    Argh… do not be mistaken. I use the 5m and 15m chart to fill. Ideal price range, means i can see the big gap at weekend openings being a probable price for Dow to go up, but every trade i made is based on the 5m and 15m trigger. In this case, the 15m would have triggered a long if price dont start dropping now or invalidate that signal within next 45m. This leaves me with no choice but to “sacrifice” 1 full R to fill here because its the most advantageous place to fill. Being stop out here will mean i am wrong, and I got to wait for a long long time for the 15m to give a new sell signal, unless i am willing to go long, which i cannot do due to my 4hrly chart calling the overall directional trend being down since last Tue or Wed.

  • Dyellowflash

    In a nutshell, I am left with only 45m of time to short or exit all shorts. And that is the max time left.

  • Darkthirty

    Oral surgery of the maxillae is touchy…to close to your brain. Chill out, old man!

  • Mark Shinnick

    Ok, sounds like so you are short under a longer time filtered period itself indicating a bargain entry point.

  • Dyellowflash

    Its ok… my trading rules are rather weird. It is a mixture of price and time and across 3 timeframe. 4 hrly for decision-making about trend, 15m for “swing” in or withdraw out and 5m is the trigger. Normally I don’t scale bcos as u have seen, i deal with 15-30 pts SL and try for 3-6R profits asap. Scaling means i might have SL as big as 100 pts. But this is not exactly scaling bcos i planned to enter 5% at a time until my 5m triggers, then I fill whatever amount left unfilled. However, bcos the mkt is set up this way from the 15m reactions, i know that scaling or not scaling makes no difference at this point. This last line is really tough to understand… hard to explain.

  • Dyellowflash

    Yeah! But based on my 15m chart which is my counter-swing controller, i am left with 35mins left to short or exit all shorts.

  • Mark Shinnick

    Yeah…gotta watch out for a pneumatic blowout / infection into sinuses.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Yuck,
    I can only *imagine* the graphics.

  • ridingwaves

    oral surgery sucks no matter the operation….great way too shed some lbs though…

  • ridingwaves

    showing strength, PF chart has 359-380 dependent on method

  • ridingwaves

    be careful of those shippers right now, I think some hedgies are moving those symbols around right now..get in on right direction though and some change could be made

  • AcoBrasil

    The collapse of the health care bill definitely provides a good justification for the sector to move up.

  • Darkthirty

    You ought to see/smell the sepsis when it gets bad!

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    no no No!
    I had my wisdom teeth extracted at 18.
    the blood was bad ENOUGH.

  • ridingwaves

    12 wks of a wired jaw is probably just as pungent…

  • Darkthirty

    No wisdom? That’s your excuse?

  • Dyellowflash

    Last 10 mins for me.

  • Mark Shinnick

    Sounds a lot worse…extracted wisdom :/

  • Trouzzer_Snake

    Buy order entered @ 2329.25, stop below VWAP. Let’s see if it hits.

  • Dyellowflash

    Time’s up. The 15m chart long swing signals held strong. I got to start exiting my shorts and can’t take any new positions even if 5m triggers anything.

  • Dyellowflash

    Sigh… this is going to be close thing. It aint funny seeing my 8-9k (2R+) in the money position becomes -2k, but its still some way off SL of 1R. Will exit my positions taken today slowly if got opportunity to do so, but I will keep my leftovers shorts from Thur and Fri.

  • Dyellowflash

    Yippie! Irony of life. My 5m chart triggered a short opportunity Dow 20529 with 20 pts SL.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Better Lucky than Good
    I think you can appreciate the irony.

  • Mark Shinnick

    Yeah, this is so typical of the BTD thing; where the overnight drama preps the late shorts at the open for fleecing. However, if I were a bear, around now would be a good entry area with a very tight stop.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Gartman.
    need I say more?
    😉

  • Dyellowflash

    So i am lucky… i was surprised that it didnt ramp my SL. That was a mere 2 dow pts away for the weakest shorts entered today.

  • Dyellowflash

    Fair deal, i had 5Rs from Asian hours. And didnt even manage to give anything back other than my tracer position which lost 40 dollars. Bcos i took a position with 15pts SL at the highs and exited with over 90 pts. All done b4 US opened.

  • BobbyLow

    Afternoon folks and Happy Monday.

    Same O, Same O, with me. Long Silver position is still performing and will ride it until it stops.

    Opened new Long in Nutty Gas and a marginal Short in Miners today. I’ve tweaked my rule set on these two so I don’t have to close them out every weekend. There is no perfect way but Mark’s term “mental capital” can always be improved upon. :)

  • http://evilspeculator.com Sir Mole III

    @Gerbil_Gold:disqus – this one is for you ->

  • http://evilspeculator.com Sir Mole III

    Done – see new post.

  • Mark Shinnick

    No joke there…especially when I know I’m always one denial away from insolvency.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    A Big Thank You

    Dry holes everywhere.
    https://i.ytimg.com/vi/DXu9yw0NVaU/movieposter.jpg

  • http://evilspeculator.com Sir Mole III

    I prefer wet ones but I can’t post them here.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    LOL.

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    me too, just no room in my mouth for them to be able to come in so out they went.