Monday, 4 May 2015

Follow-up to Friday's T-Bond Post. Great Trade!

Friday's post showed what was possible in the T-Bonds. As it turned out, price went lower after my post so the market opened inside the VA.  My bias, of course, was down so I was looking for a sell. Although it opened at the POC I didn't take a LONG because of my envisioning but I was ready to sell at the VAH. The pic tells the rest of the story. The level of profits on this trade were very dependent on what the trade management strategy was in my trading plan. Scaling out allowed for better profitability although the bulk of my profits were taken at the VAL with a trailing stop after that.

I plan on adding Part 1 of the eBook to this blog soon. Look for a separate TAB when you arrive at the blog.

Friday, 1 May 2015

No Substitute for Preparation

I've often said in this blog: "The harder I work the luckier I get". Its Mayday and Mrs EL's birthday holiday here in Europe so I thought I'd share a part of my daily prep on the T-Bonds. As I write the 30 Years Bonds are trading around  159 12/32nds, above yesterday's value. The picture speaks for itself and lays out my trading plan for today's trade of ZB. The horizontal lines are support and resistance areas.

The Profile give me the "where" and I look to my bar charts with the usual indicators (for context) that I use and of course, with the order flow volume bid and ask information for making a decision about the "when".

Wednesday, 29 April 2015

Lots of Action on FED Day

I didn't know where to look first today. Everything was moving: DAX, ES, ZB Euro and, of course the BUND.

I spent most of my time on the floor in the Bunds from  the day they were first traded on LIFFE, before the DTB existed. The Bund contract was taken from LIFFE by the DTB by making it cheaper to trade electronically That was the beginning of the end of pit trading for LIFFE. I was an early user of the DTB terminal that I had to use from my clearer's office - there was no PATS yet. PATS was started by an American LIFFE Local who saw the future of trading.

Anyway, the BUND was a great market on LIFFE, especially during the years of German unification after the Wall came down.

Today the Bund is still a great market. It has gone through a quieter period but its really worth trading now. If you are in a different time zone and looking to trade something in your ETH then maybe the Bund is for you. The cream coloured buttons on the order flow chart are algos that I can arm with a single click when the context is right. Trigger is the order flow. The indicators and MP are the context. As you can see, the indicators are the same ones I've used since forever and can be seen in this blog since 2010. They now are part of the context that makes understanding the order flow much easier.

Monday, 20 April 2015

Why Does a Support or Resistance Break?

Most traders look at some form of support and resistance. Lets ignore the fact that some so-called support and resistance is neither support nor resistance and talk about why a real support or resistance does not hold.

With the evolution of electronic trading, more information is available. In earlier times, the retail trader was at a great disadvantage to the institutions and the so-called smart money. Now, we can all be smart money albeit that we may trade smaller size than the banks and hedge funds, not to mention the HFTs. Technology has become cheaper and accessible to us all.

So the answer to the question that I posted in the heading to this post and which was asked by a blog reader in an email:
I had a challenge figuring out these longs today in ES, because market was trading right into resistance, and the risk / reward that i was measuring didn't favor the longs at those points.

I'm wondering how I misread the situation.  (Please see attached)

The answer is very clear both to the topic post and to the email: Its what is happening with the order flow that breaks support and resistance and also what tells me when the support or resistance is likely to hold. One of the tools I use is the volume imbalance between the BID and ASK deltas. I use a number of other order flow tools.

Tuesday, 7 April 2015

Zipper Follow Up

The T-Bond trade from yesterday turned out to be much better than expected. I say "expected" although I can never tell how a trade will evolve. All I can do is enter based on my trading picture that has probabilities highly on my side. The rub is then to try and manage the trade to get the most out of it. Not easy to hold a trade for so long when most trades don't go that distance. It's only possible if you trade multiple contracts and take enough profit as the trade progresses that allows the "luxury" of holding a runner(s) that you are prepared to exit at Break Even if the trade reverses before you can exit this last scale. I must confess that I was not still short at the bottom. The point just below the zipper was the logical exit point for me but there was a re-entry picture to go short again into the gap using that context plus the order flow chart.

This management style is not for everyone. A style where you are all in and all out can be just as valid with the right back tested management rules. The math has to work.

Monday, 6 April 2015


Just returned from 8 days in Dubai. Its an amazing place. The skyscrapers there dwarf what you see in New York or anywhere else. Everything old becomes new again. Hard to find a building older than 10 years or even 5. 90% of the people there are expatriates working tax free.

Today's chart is the 30 Year T-Bond. I've traded Bonds since 1982 when I met the father of financial futures, Richard Sandor. He was working for Drexel Lambert. Another broker that I had met brought Richard to my office in London to get my business. Needless to say, he did. Richard is a very remarkable man.

Anyway, the chart shows a nice zipper. Most zippers get run sooner rather than later. But to ve sure, my order flow chart will tell me when. In this case I'm happy to sell the VAL of the distribution above the zipper and sit till either "ching ching" or price is accepted inside value. Or, my order flow chart tells me that I need to exit.