tlow, GatlingGun, NoDoji, WentFishing: RE: 8/27/10 Friday's sudden drop on ES FWIW, here are my observations, and some suggestions. It might work out as a good trade if you are willing to take the risks. 1. On an intraday basis, a sudden huge drop in ES often trigger a big bounce. Very sharp reversal. Happens on a dime. The real tricky question is: how do you know where the bottom is? You are trying to catch a falling knife. The cut can be deep if you get in early! On 8/27/10, ES dropped about 12 points only. But on 5/6/10 (flash crash), ES dropped 40+ points before the bottom was reached! A gap down (cash index) doesn't count. A continuous, "in the middle of the day" kind of big drop would be a potential candidate. 2. The more severe the drop, the bounce can be just as big as a knee-jerk reaction. 3. The magic (from what I observed)... seems to be a "10 minute" mark. Very carefully ID the origin of the big drop. Mark the time. On 8/27/10: from 06:58 am (PDT) to 07:08 am - the bottom. On 5/6/10: from 11:35 am to 11:46 am. The bottom. Don't try to stand in front of the train before the 10 minute mark. If you don't want to take the risk, let other pioneers to do the work. But quickly measure from the bottom - a Fib... when it seems established. If the price bounces higher than the 23% mark... here is your cue to get in. Risk the amount between 23% and 0%. Or maybe risk 12%. As your stop. Buy the bounce. A bounce usually is good til at least 60%-70% of the drop. And on Friday 8/27/10, it went beyond the the origin of the drop. Very lucrative. This kind of opportunities doesn't come often enough. As a trader, we should take advantage of it. Another similar event that happens on a more regular basis is the FOMC Announcement day about the interest rate. 8 times a year. Around the announcement time, you typically see wild swings on the ES. And many times wild reversals. Look at some of those past cases and see. Sharp moves trigger sharp reversals.
tlow, NoDoji, et al... This is the guide with corrections from NoDoji... please let me know if you find errors or more omissions. Cheers, \gg
I found this to be true and in fact it's a key factor in how long to hold a breakout trade before taking profits as well as the 3-bar counter-trend fade. With a 5-min chart you most often get a minimum of 2 large breakout bars.
GG/NoD Thanks for all the work and putting this into a pretty sweet piece of learning material. Bol, You gave some great tips about the whole "knee-jerk"reaction deal...Im going to have to go and backtest/watch, how the market moves during those big jumpy days. Thanks to you guys for everything, I can't picture this journal going any better! On another note, We have had some gap fill/gap making the past couple of days. How do you guys feel about these situations when it happens overnight/afterhours? Do you put the same "weight" into a bias? Give it no credibility if it happens overnight? Im glad the gap discussion got brought up...seems like its been happening a lot lately
AHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH! EEEERRRRRRRRRRRRRRRRR! Seriously frustrated! T&S is completely frozen and bid/ask are jumping all over the place...dont even mention the chart. Im so sick of ToS....they fix, dont fix it, fix it, dont fix it. Got out of a trade b/c i had no idea what was going on...Im done till they fix this problem...probably moving over to IB. Any objections?
maybe I won't be going over to IB... you need 20K to open a futures margin account? Am I reading this correct? http://www.interactivebrokers.com/en/p.php?f=tradingConfiguration&p=a&ib_entity=llc ok...moving on to someone else....I run linux (ubuntu) another reason why I like(d) ToS. Any other futures platforms that run on linux and/or java? Also, I will get my charts up as soon as ToS decide to work...maybe today, maybe tomorrow, maybe never, who knows.
Hey, cool! Another linux-head like myself... Perhaps I'm baring my underlying disdain for java, but my experience has been: 1. I have got a ToS acct, and occasionally listen to their presentations on trading option spreads... In my opinion, ToS is more focused on marketing than engineering and quality code... when you listen to some of their presentations, you actually hear the guys hinting as much in the video... but they gloss it over as if it's a good thing. (from memory, probably not verbatim ->) "Some of you will need to download the latest version of ToS, we just released it last night to fix problems in XYZ... but don't let that bother you... ToS always stays on the front-edge of new features, and while we work hard to ensure bugs are worked out, we are more focused on time to market and getting cool toys in your hands. In the rare event that we do find problems, they are fixed very quickly". If you have ever been a software engineer, you know what that really means... "we spend 50% less time on quality assurance testing than a financial trading platform handing hundreds of thousands of dollars per customer transaction should. We are more interested in nifty-sounding technology than stability" 2. My experience with java is that questionable java software engineering practices make certain applications very sensitive to using their recommended version of java... which isn't always going to be what is auto-downloaded from sun. I'm not sure if this is the problem in your particular case, but when I worked for another large software shop, we had issues from time to time with jvm version incompatibilities.
Ya I have no idea...I've got JRE6.20 I havent upgraded to 6.21 (just checked today and noticed an upgrade). Im always a bit nervous to upgrade java, it tends to break stuff and/or I have to reinstall a bunch of things. I would think it would be ok since its just a maintenance upgrade. Its definitely not a java problem on my computer because a bunch of people are having the same problem and I contacted customer support (for like the 5th time) and they said they are having problems with their server. Im not a software geek so I know next to nothing about code and compatibily and whatnot. But since they upgraded this past weekend, its all screwy. They said they were speeding everything up with the platform in the prerelease so maybe the servers are now overloaded? Anyway, I may wind up sticking it out with ToS because I can't find any good java based platforms other than TWS on IB and I really don't want to start using windoze full time. Are you trading on linux? What flavor? What platform?
Actually I trade on WinXP... I get my linux fix operating a debian file and web server next to my TV... I used to try to do everything in linux back when win95 pretty much crashed every 4 hours, but honestly XP is good enough for me... mostly runs for days and I don't have to think about it much... I am pretty particular about stability / compatibility issues so I stick with windows... besides my broker only offers a windows client... if you're still interested in my specific broker, PM me, but they don't offer futures.
GG, Most newbies in these forums come here with an attitude and an expectation of being spoon-fed. Most disappear in the ether (with their accounts). A few realize that there is no free lunch and change. You, on the other hand, come here, ask, listen, study and put in the work from the get-go... If you were an instrument, I'd buy calls. Good trading to you. Oh, and you can't go wrong learning from the reigning Queen of Price Action, who happens to be consistent to the point of boredom... Seriously: trend day, Nod is profitable; range day, Nod in the green; reversal day, guess who made money?; choppy morning, followed by a killer breakout, a 70% retracement and then a crash after Martians land in the White House lawn? Yep, Nod in positive numbers. (I hate her, she makes it look so damn easy )