Discretionary Trading
Now Reading
Vertigo
25

Vertigo

by The MoleMay 12, 2017

We’ve been seeing a lot of whipsaw as of late but apparently the respective dominant trends appear to always assert themselves. Which continues to be manna from heaven for dedicated mean reversion traders and habitual dip mongers. If you remember my posts earlier in the week, we were waiting for a few promising looking entries. So let’s see where we are today and if it’s time to pull those triggers:

2017-05-12_ES_update

I know what you’re thinking: ‘Why didn’t I go long the NQ instead’? Can’t really blame you there but unless you like chasing price it’s not been as easy as it may look in hindsight. The ES on the other hand seems to be stuck in the rut for now and I barely escape a shake out attempt yesterday.

2017-05-11_Zerp

Which incidentally was rather transparent as I pointed out several times in the comment section. Once again a textbook example of how the Zero can serve as a market lie detector in that it shows you real participation/momentum in contrast with price. If you’re not a subscriber yet then don’t lose time and sign up now.

2017-05-12_crude

I’m rather miffed about missing that crude long entry but it isn’t really very surprising. After all the rubber band had clearly snapped back after massive selling exhaustion. This happens regularly on crude and can actually be rather turbulent as it’s a large contract.

If went long two days ago then you’re smiling all the way to the bank right now. But given the large stop you either had to reduce your position sizing quite a bit or get over exposed (i.e. > 1%) which is exactly what often kills retail traders. They get away with grabbing the tiger’s tail a few times and then one big inverse move cuts their trading account in half. I have seen it happen which is why I usually post crude setups with a warning. Alternatively you can trade popular ETFs like USO, UCO, or OIL.

Campaign Updates

2017-05-12_copper_update

Copper completed a more extended floor pattern which was my signal to grab a few long positions That hourly BB is pretty tight so we may just see a big move here and that soon.

2017-05-12_ZM_soybean_meal

I guess I’m holding soybean meal solely for the entertainment factor at this point. Well, seriously speaking it hasn’t given me a reason to get out but those gyrations sure are vertigo inducing. On the positive side of things it’s establishing a heck of a lot of context here – if it manages to finally get out of the gate this would come very handy for advancing our trailing stop.

Entries

2017-05-12_ZB_entry

Bonds are definitely a go here and I’m already long the ZB with a stop below 150.06. It’s make or break time for the bonds as the never ending sideways formation has squeezed those Bollingers pretty tightly and if it can’t resolve to the upside it will pick an easier direction (i.e. down).

evil_separator

It's not too late - learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don't waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Please login or subscribe here to see the remainder of this post.

austrian_beer

It’s been a rough week but we made it through in one piece. Here’s me wishing you another glorious spring weekend! See you all on Monday morning. Prost!!


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.
  • BTrader

    NQ on its own planet…thanks for the post Mole.

  • http://evilspeculator.com Sir Mole III

    I looked at that monthly chart today and quite frankly has to pause in awe for a moment.

  • Yoda

    Personally I find it difficult to enter into a long risk position ahead of the summer doldrums. I like to go with the old adage “sell in May and go away”. Whilst I am not in any short position ATM, I would love to see a proper sell-off before considering a long position again. New highs are certainly a possibility over the next few weeks but for the time being I just don’t see the buying momentum on dips as they use to be, the last significant one being after the election.

  • OJuice

    The end goal is to make money. The trend is up and complacency is high. You may not be looking for advice, but, here is my two cents anyways. Don’t let your expectations get in the way of you realizing the opportunity that is right before you. If you are concerned about risk, adjust position size or look for entries with tighter stops.

    I bought yesterdays dip. Because it was a retest of the bottom of the post-election range. I have no expectations of what the market can cook up in the next couple weeks, but, I do know this was a good risk/reward entry with a clear stop. I want/need to make money and the only thing I can say right now is higher prices have better odds than lower prices.

  • OJuice

    It is glorious. A literal money printing machine. I had to smack myself in the face the other day for continuing to trade /ES and not /NQ.

  • jmoney3000

    The past month has been the worst intra day trade I’ve seen in 8 years. Going on vacation. Good luck all

  • http://evilspeculator.com Sir Mole III

    Enjoy!

  • randomuser6789

    Word

  • Yoda

    Hi, OJ thanks for your reply. I agree with what you said. However, in my trading system I also pay attention to momentum, sentiment, seasonality, and of course Gartman, before venturing into a trade, as a price only focus can sometimes lead to deceit (e.g fake out breaches followed by reversal). I just try to minimize the number of times I get stopped out of a trade. The current whipsaw in equities does not appeal to me at all as I am more of a medium term trader trying to catch trend moves. Anyway, for the time being, I believe there are juicer trades right now than being long the spoos, nasdaq, russels or industrials. Just my 2c.

  • OJuice

    Yoda. I love your Gartman system for the record.

    With respect to momentum, sentiment, seasonality, I also use all those tools. I’m not saying to ignore them completely, I’m just saying be cautious of them becoming blinders that prevent you from making money. In this case, in my opinion, momentum and sentiment point up and seasonality is essentially neutral. So that is decent alignment.

    On stops, when I get stopped out of trades consecutively its usually because I am not aligned with the direction of the market or I haven’t decreased exposure and widened stops sufficiently for volatility.

    The reason I replied in the first place was because I could relate to your first comment. Specifically “New highs are definitely a possibility over the next few weeks”. If you change “possibility” to “probability”, then with your system and understanding of the market you can make an estimate of what that probability is. In this case there is nothing but air above so it is possible we visit new highs and fall back into an old range or we visit new highs and continue to surge upwards (P&F target for $SPX was 2550 last time I checked for reference). In my opinion, if you really want to make money, this evidence would suggest that you must find a way to manage your capital to create the opportunity for returns.

    But of course looking for opportunity in another market is fine as well.
    So long as you can find a clearer advantage there and aren’t just avoiding a market because your narrative is out of alignment with the market. I say this because I have beat myself up a lot on this subject.

  • Mark Shinnick

    What I do is simply keep widening the range into more credible breakout areas, whereby the trend following models “vacation” begins and the range training “vacation” ends. That way I can keep my fulltime job with this stuff ;/

  • Mark Shinnick

    Yeah…pretty rough too on VRX shorts, some of us ripped them a new one very nicely this week :)
    Also, Exited miners from other day.

  • Mark Shinnick

    Yeah…as soon as that gets executed…well, you know.

  • Yoda

    I appreciate you taking the time for replying to me and for sharing your experience. This is a great discussion.

  • BobbyLow

    Good stuff. I might add that because of the different time frames people are trading, there can be good times going on for some and bad times going on for others all at the same time depending on what trigger points and the criteria thats’ being used for entries and exits. As long as clearly defined entries and exits are part of a system, I believe that there’s no one system that’s going to out perform another all of the time.

    Some bring all the touchy feely stuff like seasonality and sentiment and even Fading Gartman to their systems. Others only use price. I prefer to keep things simple as possible because if I get too many things working in my head, I tend to make more errors. But that’s just me – different strokes etc.

    Another difference is what can be considered a trend. I think a trend can be any determination of time that a trader wants it to be. This trend might be a period of months, weeks or days. It could even be a 35 Minute Trend on Mark’s One Minute Charts. :)

    Just another 2c worth. . .

  • BTrader

    totally in awe and bullish as can be…..

  • OJuice

    With all these two cents piling up we might have a system on our hands…

    The only point I disagree with you is on what is considered a trend. A system trading with a trend or a well defined range will outperform a system that engages in counter trend trading, no matter what the time frame. An example would be any system that looks to short /NQ at any point in 2017. I’m sure it could be justified with any number of narratives on time frame etc, but, the reality is its just a shit system.

  • BobbyLow

    We really don’t have a disagreement here and in particular on the /NQ because no matter how hard I’ve tried to tweak it, my system Sucks with Equities. So I don’t care about Equities anymore. I don’t have to trade them to make money so I don’t.

    Not that it’s important, but you didn’t define the range and or time frame of a counter trend. For example, I just closed a Long Crude Trade for a +.5 R Profit at 3:55 PM today that has only been in play since the close of my 10:30 AM Hourly Candle on Weds. That’s a 20 Hour Trend /Counter Trend Play. However, I prefer to call it a 20 Hour “Soak” as they would say on the “Deadliest Catch”. I don’t care that the Daily Trend is still considered a short by my lens. So it’s my rules and my system and I guess I can call things whatever I want. :) I also don’t care what happens over the weekend either because I’m in 100% Cash right now. With all the shit that’s going on here and all around the world, I don’t trust leaving my money in the market over weekends at least for the near future if not permanently. So when Monday morning comes around, I’ll look at what has the highest probability of working within my system and react to their prices and my charts. In the mean time, I don’t have to think about the market and all the bullshit that comes with it until then. :)

    Have a great weekend. . .

  • OJuice

    Nice work on crude. I had considered a similar trade but opted for something else. By my lens this wouldn’t be counter trend trade. Hourly trade, hourly trend flattish (100 period ma). Had you said a long off an hourly trend last Wed I would have said counter trend. I agree everyone is using different lenses with respect to time frames, but ultimately maybe a more effective measure of whether a system is trading with or against a trend would be the percentage of the time it is being stopped out…

    Thanks. Enjoy your weekend as well.

  • Scott Phillips

    Bobby,

    There is some strong evidence that equity markets exhibit profoundly different characteristics than other markets. Most trend following firms do NOT trade equities at all, and almost none of them trade equities to the shortside.

    My first profitable year of trading came about noticing and building a system around the differences between the SP500 cash index and the ES futures.

    There are obvious reasons for this. The idea of a market index with the top 500 (or whatever) firms in it is the very definition of survivorship bias. In effect an index is a kind of momentum system, buying only the strongest stocks, where the weak fall out of the SP500 (or whatever).

    That old idea that it doesn’t matter what the instrument is and that a chart is a chart – plainly untrue.

  • BobbyLow

    Thanks Scott.

    I banged my head against the wall for years trying to swing trade Equity Index ETF’s including the 3 Majors, SP500, NDX, and RUT. They were not a good fit for me both mechanically and psychologically. (Buy and hold long from March 2009 would have been pretty good but who knew? :) )

    When talking about the /NQ, NDX in particular, there was a trader here last year (name is not important but the message is) who seemed to have some trading experience but was very motivated by the movie “The Big Short”. He was also a big believer in the Zero Edge Blog. He was posting stuff from ZH here on almost a daily basis. I remember him saying that he took every bit of his capital (and some) and put it into the NDX 2X ETF QID at an average price of around $33.00. He said he was going to hold this until the NDX and the entire stock market crashed because it was so crooked. A lot of us tried to argue against him doing this but he got very angry and left. I just took a look at QID and it closed at $17.39 yesterday. So this means that if he did what he said he was going to do, he has lost apx 50% of his capital.

    I think this type of behavior goes hand in hand with what you said about “wanting to be or insisting that you’re right”, instead of recognizing that it’s the market that’s “right” and we’re only along for the ride.

  • Scott Phillips

    This type of idiocy only strikes a raw nerve in me because I USED TO BE THAT IDIOT.

    I did all the dumbass things all the dumbasses that ever turned up here did. I hurt my account badly being a dumbass.

    I try very hard to stop people doing what I did when I started, but it’s like fighting the tide.

  • Scott Phillips

    In breaking news in in Tuscany in a villa in the country, and Mole is gonna come visit.

    If I can I’ll convince him to make some video with me talking about trading and stuff. Maybe I’ll let him beat me up on camera too

  • BobbyLow

    I used to be that idiot too and I paid dearly for it.

    One of the cliche’s that I used to buy into was – “This isn’t going to end well”. That one strikes a raw nerve whenever I see or hear someone say it now.

  • kim

    “index is a kind of momentum system, buying only the strongest stocks, where the weak fall out of the SP500”, nice summary that explains why sp500 on long term goes only up with some small corrections we call market crash