Account value down 1.17% on overnight move against my bearish position. My partial hedge reduced my loss by about 20% overall. I would have been better off to close the position earlier or not scale out of my hedge. Account is now flat. I was wrong in my thinking the market was going to stall at a resistance area identified on ES RTH charts. I can hold a position through an adverse overnight gap as long as prices don’t go beyond the RTH open by a threshold amount against my position. Unfortunately, ES did just that. Missed another long opportunity in silver by a few minutes. It seems the best opportunities give so little time for entry while the mundane or losing trades give you all day. Traded well in TAN today, not including missed trades, and was on the right side of the market on all my single name scalps, but not all scalps were profitable. I feel more work is needed in trade selection and timing. That’s all! (Eyeroll). It is almost certain a stock will have its normal daily range and I can feel reasonably confident in which direction the range will expand from early in the day, but I ended up taking a loss. However, using a wider stop on CAT would have made my R/R unappealing. More weekend work involving the now perfect knowledge of today’s action may give me an answer or perspective. On trades based on support and resistance levels, I will wait for more, or at least some indication prices have started to move away from the S/R before putting on full exposure.
Account down .74% fighting the big trend in ES. It is rare for the long term Moving average to exceed 4 standard deviations off VWAP. My stop loss on this directional put fly tomorrow if is if the RTH open threshold is reached against my position. Had 3 positive scalps on crude but lost on silver. Often a trade that seems too obvious does not work out. No single name trades today. Interestingly, most of the move in NQ and ES was in APPL, NVDA, AMZN, and GOOGL. A significant number of stocks on my watchlist closed below their open today. Not impressive market breath and the risk environment seems a bit skewed, but this is something we’ve seen before. US long term treasuries were up as well, perhaps an indication of accomodative Fed action. I’m letting the market be my Moby Dick. I could have received much better pricing on my bearish position by simply waiting for ES to close below a simple moving average. Or better yet, I could have gone long. I did say to myself when the market was not correcting the shorts were in trouble. Then I decided to join them. If the market continues its current trajectory for the next 12 months, it will more than double. If I keep my current trajectory fighting it, I blow up my account well before that. Again, don’t fight the Fed. “Safe” investments don’t pay anything and monetary debasement reduces their value. Further, there are some very strong pockets in the economy. I need to adjust accordingly and not get hung up on short term reversion ideas.
Account value up .57% on favorable ES movement for overnight position since closed. Now flat. Had a productive weekend in better defining my entries and exits according to market state and trade setups as generally defined below: Market state one - Trending market in longer term timeframe experiencing a correction or countertrend in short term timeframe. Looking for a reversal in short term timeframe and resumption of underlying longer time period trend. AKA “Enter on a correction”. Example, trend is up on the weekly charts as defined by the prior two weekly bars or the relationship of price versus average weekly price, and down on the daily. Market state two - Strongly trending market in both long and short term timeframes. Looking for signs of capitulation such as a volume spike for a short term trend reversal. AKA “Reversion to mean”. Market state three - Strongly trending market in both long and short term timeframes against solid fundamentals. Similar to market state two, except looking for a reversal on the longer term timeframe. AKA “Catching a knife”. Each one of these market states along with an appropriate strategy can reliably generate alpha as long as the necessary requirements are adhered to. Therefore, in future journal entries on overnight trades, I will explicitly state the strategy I’m using, the profit and stop areas, and the associated detailed reasons.
Account value up .03% on MES and JPM scalping. Initially was bullish and looking for some single names to buy early RTH. CAT jumped too fast for me to catch it, but NVDA was still in an area of interest. However, the market on NVDA moved immediately away from by limit order. I gave it a moment or two then cancelled my order. Good thing I did, because according to my one minute TWS charts, NVDA gapped down two points and sold off four points before consolodating. NVDA’s price action combined with the lack of follow through on most stocks on my board to index futures rallies put me in a bear mode. After watching MES start to sell off, but still well above VWAP, I decided to short with an early plan to add on substantially if there was follow through as this was a high confidence trade. MES paused a bit with MNQ underperforming. I added on another MES short while it still was above VWAP. Although I traded in an out several times and was up nicely early on and anticipated MES’s subsequent rally, I underestimated the size of the rally and ended up using money management. I debated whether to reenter on the next signal, but instead went for lunch. Got spaghetti, but as things turned out, no spicea meata ball for me! Returning from lunch saw a buy signal on JPM. With GS doing relatively well, but V and MA weak, I decided to take the long signal thinking there might be follow through from investors who liked JPM’s recent earnings report. While JPM did have some interest as it passed VWAP, it petered out fairly quickly, causing me to exit for a small gain. I liked my increased aggressiveness with trading MES and I’m ok with getting out where I did because MES was still in an uptrend as defined by rising weekly average prices. I wished I stuck around for a later sell signal because it would have put the bulls on the defensive with some of the laggards facing trouble. Thinking about it, the earlier MES rally that when beyond my expectations was aggressive short covering and some new buys, but as may have been indicated by NVDA, the buyers were already heavily committed, leaving stocks vulnerable to the downside.
Account value down 1.12% on partially hedges bearish otm ‘Fly. Did not watch the market today for the most part as I had a lot of overdue errands to get done. It seems like every single selloff of over 1% is a buying opportunity within minutes it seems. It probably wouldn’t matter if three hostile, asteroid flinging extraterrestial civilivations were gathering asteroids from the Asteroid Belt, Kuiper Belt, and the Oort Cloud, ES would still be a buy on any selloff! Money management will be used on tomorrow’s open if necessary. Long 1 Oct 23, 2020 2/3/1 3440/3340/3240 ES put ‘fly @ 46.50. Partially hedged with long 2 MES @3445.50. Net original delta exposure was .45. Theta was slightly negative, but with positive vega.
Account value down 1.48% on adverse move to my overnight position. Although scalping today was profitable and can accept my overnight trade not working out, my confidence is feeling low and I’m going to take a brake from trading to reset. After my break, I will focus in the area where I’ve been profitable.