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When the facts change – change your mind
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When the facts change – change your mind

by ScottOctober 4, 2013

The general retardedness in the comment section over the last few days has been out of control. That has to stop, let’s get back to observing what is really happening and trading the tape we have, not the one we want. We had early notice of the trend day thanks to Mole’s email warning, but I bet none of you actually took advantage. That people, is some shameful shit. That email notification WORKS, and I know because I traded it for years before we put it into an auto notification. You can make your whole month’s profit in one decent trend day. Here is how I see the day unfolding. Early recognition is key.

After the first few bear bars of the day you should ASSUME that the market wants to go down, and start examining it with an eye to getting short. You should become more bearish if you see any of the following: long unbroken series of bear bars, microgaps where the open is below the close, closes near the bottom of the range, small pullbacks or no pullbacks for the first 6 bars. The character of a strong bear move is one where you want to get short on a pullback, but that pullback doesn’t come, and the pullbacks are shallow and emotionally difficult to take. Counter trend plays will look subjectively good.

Trend days are DIFFERENT from other days, on those days mean reversion plays, oversold and overbought (including the zero) indicators and oscillators of all kinds are going to get you slaughtered. If whatever system you have devised for intraday trading does not appreciate that trend days are as different from normal days as night and day…. you are going to get hurt when they happen. This is why MACD, RSI, Stochastics, etc are a negative edge (if you don’t believe me do some actual testing).

So first let’s examine what is actually happening, not our dumbass opinions. There is EXTREME confusion, this is treacherous tape. Personally I’ve stood aside and banked coin like an ATM from crazy ivan and my other systems, but I appreciate some of you want to do it the hard way. Yesterday we failed to go up despite the retest of the lows 2 days ago (the hammer candle second from the right) and instead attempted to pull a bearish trend day. We closed off the lows and into some choppy tape, and that is a message of it’s own kind, if you are listening hard enough.

We have a support zone a little down from here, and the bears in context could not finish the day as strongly as they started. Given that the odds of consecutive trend days are extremely small, I suggest you plan for a low volatility range traded market today.

In context the bears were stronger than they should have been (or the bulls weaker) that means the highest probability is for either a sideways chop into the support trendline OR another thrust down to touch it.

This does not look like tape that is in the direction of the larger trend. This move is clearly closer to the end than the beginning. I think the odds of it having another thrust down are about 55/45 here, but that thrust should be relatively small and constrained. If we paint another trend day today which is highly unlikely that would be a game changer and cause me to change my opinion. Your opinion should ALWAYS be open to change. If the facts change – change your mind.

This is a 1 tick chart of the NYSE TICK. This is what a trend day looks like in the first half hour. Study that. You need to know it. Early recognition is key.

Now for today. The day after a trend day is nearly always a low volatility range traded day. Given that the 60m looks like we are already in a range….Things which I absolutely guarantee will work today.

1) Bollinger bands selling at the highs and buying at the lows, scalping

2) Buying at higher timeframe support, selling at higher timeframe resistance, scalping

3) Whatever dumbass oscillator you are in love with will probably work today for once

4) The “mole signals” (little arrows) on the zero are absolutely gold on a day like today promises to be.

Now I can suggest if you are trading 5min charts on the emini that 4 tick stops and 4-6 tick targets are what you should be aiming for today. Scalping is the order of the day, do NOT try and swing (hold) any of your position. Remember dumbasses will remember yesterday and try and do what worked then. Do the opposite.

Scott

 


About The Author
Scott
  • newbfxtrader

    If you dont change our mind you wont have any change left…. BTW who took any GBP shorts on my call?

    https://www.tradingview.com/x/QJTXUbok/

    AHA. Now we are talking.

  • newbfxtrader
  • newbfxtrader
  • Talon_III

    Thanks Scott,
    Simply an excellent post! Thanks for keeping us focused and for the guidance.

  • AcoBrasil

    Great post Scott. Thanks!

  • saltwaterdog

    Still learning some of these setups, so could be wrong, but looks as though SI inside period is also the RTV-B setup on the daily which just triggered long

  • Ronebadger

    Thanks Mr. Convict!

  • http://dartht.blogspot.com/ Heisen_Gerb

    Word
    let’s cook.

  • Sean

    I’ve had concerns about the tradability of the 90%+ TrendDay of late as they seemed to indicate that the pressure in that direction was exhausted more often than that the trend would continue… But yesterday seemed to be different in that the ticks got more negative into the first 30 minutes as opposed to strongly negative at first then trending back up… I don’t currently have the ability to back test this hypothesis, but it might be something interesting to keep an eye on going forward.

  • BobbyLow

    Great Post Scott!

    Just got stopped out at BE on Short CAD/JPY. Currently Short EUR/USD and Long Oil.

  • Skynard

    Should speak for itself. Good day:)

  • SS_JJ

    looks like we have some way to go before we reach capitulation. Half of my account is short the tape now, 1/4 cash and 1/4 silver PM.

  • Sean

    Although I love to see data that confirms my biases and I am slightly delta negative over the medium-term, a longer-term chart of the data above suggests we could get a lot more complacent before we see a meaningful correction… I don’t think the data is supporting strong conviction in either direction over the near/medium term just yet (though, like I said, I do believe the downside has a slight edge for now)…

  • http://dartht.blogspot.com/ Heisen_Gerb

    approaching Spoos hourly 200, haven’t done that in a while.

    http://s17.postimg.org/sih6hyvqn/heisenbird.png

  • http://evilspeculator.com molecool

    14 comments – pitiful…

  • http://evilspeculator.com molecool

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  • http://www.parafriv.net/ Para Friv

    Thanks Mr. Convict! Simply an excellent post! Thanks for keeping us focused and for the guidance.