Up Is Down

Clearly the tape is toying with us and the fact that it’s OPEX Friday ain’t helping our cause. When faced with excessive tapemockery™ my general advice is to simply stay back and hunker down in anticipation of better trading conditions. No occasional surprise move along your trading direction is worth the mental turmoil and slew of losses you will most definitely have to endure in between. And remember – it’s late summer and although the rumor mills are churning out hype and biased opinions at full blast actual market participation remains muted. Not exactly what I would call prime trading estate for banking coin. Remember: You can’t force the market to do what you want, but the market can’t force you to participate either.

Looking at the ES volatility profile I couldn’t help but make an interesting observation. It seems to me that in sideways conditions the initial rise in realized volatility (RV) usually is the fake out. If you look at the orange square you’ll see that after the blue candle (i.e. cross of signal below above the lower standard deviation) there was a quick spike higher but which was then followed by more downside as soon as the signal turned green (i.e. crossed above the upper std.dev). Most recently we observed the inverse – as RV started to rise there was a drop, a little swing higher but immediately more downside. Just as things looked bearish as heck we painted a spike low just when RV was kicking into 4th gear (i.e. green signal above).

It’ll be interesting to see what’ll happen this time around as RV is currently rising and what happens right now IMNSHO could once again be the setup for a quick reversal once it picks up the pace. Which would mean that a drop lower from here UNTIL RV kicks into high gear would most likely be trap. If we climb higher from here and once again retest the 2185 mark then I would be inclined to very carefully watch the Zero indicator for a potential divergent pattern.

I’m not saying this is going to be easy, especially on OPEX day. But it’s a much better play than attempting to interpret tea leafs here to guess which way it’ll ultimately swing. If in doubt wait for a visit of the outer ranges, i.e. 2185 or 2170ish – anywhere in between you may as well stick your tail into a wood chipper.

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FractalMonger (Again)

So I’ve got good news and not so good news on the FractalMonger front. Let’s start with the latter as I usually prefer to end the week with good news. The 20-min version does not seem to work as expected, which surprised me a little. I’m using the same settings as on the 60-min but apparently the noise factor does play a role here. Quantum effects? Electron entanglement? The hell I know why – but the results are currently 50/50 which ain’t going to work.

The good news is that the 60-min version is however performing exactly within specifications right now, which means a success rate of 65%+ and ideally 70%+. Admittedly the sample size thus far is only 62 campaigns (i.e. two weeks worth), so let’s see if it can keep this up over the long term. After a few hundred campaigns we’ll be able to better assess the probabilities and whether we should adjust the settings or not.

However as of now I’m turning the messaging off on the 20-min charts after having reverted to the original settings. I’ll keep it running silently for another week or two and then decide if it’s worth pursuing or if there’s simply too much noise on the very short term side. My cursory market research suggests that binary traders in the U.S. primarily trade the 60-min roll-overs followed by the recently introduced 20-min. I’d love to cater to both but settle for one solid interval which promises a long term edge.

If you want to follow FractalMonger’s performance without participating in the free beta trial then you can! Just point your browser here for up to date stats on every completed campaign.

We are now heading into the late summer season which hopefully will be followed by less erratic tape. Yeah, I know – who am I kidding? Either way, just for coming out this summer’s gyrations with our trading accounts intact I think we’ve earned ourselves an extra round of Hefeweizen. I suggest you join me in the evil lair’s beer garten to kick off the weekend:

Prosit!!