Thursday, 12 August 2010

The Wind Changed

We've had a lot of action the last few days in just about everything I trade: indices, currencies, interest rates and oil. We have been spoiled for choice.

Back on May 5th when I wrote a post: Volatility is Back!, it was a real understatement. These times are giving us great opportunities to make money and they should not be squandered. When I was on the floor, we used to joke that the business was 75% boredom (grinding it out) and 25% terror.  There have been a couple of days in the last week or so when we had very quiet days, days when we should really not trade. Trading the quiet days has a number of bad consequences from my point of view: when there is no momentum you can't rely on anything. It's like trying to steer a car with skinny summer tyres in deep snow. Also, if there is no volatility, the day's range will usually be small - no money to be made. As soon as you recognise this type of day, go to the beach. Or have an expensive lobster lunch - it will be a lot easier on your pocket than the cost of trading.

On the other hand, when you get days like yesterday, traders should really take advantage of them. Trend days are easier to trade once you recognise that there is little or no rotation. You only have to trade in one direction.

There are lots of signs of a dead day: horizontal EMAs, 45CCI chopping around the zero line, range bars taking 5 times as long or more to complete than normal and so on. Trend days are featured by steep EMAs and single and double prints on the profile.


  1. EL, what do the green and red 'support and resistance lines' signify on the today's chart?

  2. Gary, just the VAH, VAL & POC. I don't like them there so have now taken them off. Too many lines.