Monday, 21 March 2011

Ping Pong

Most new traders try and fade the market, trying to pick tops and bottoms without really having anything to use as a yardstick to make their decisions. They put the position on and then if the markets tick against them, they panic and run for cover.

On the floor, our job was to fade the market most of the time. We provided the liquidity to take the other side of peoples' trades. But to survive, I had to learn to pick my trades.

Once I can see that the market is in a tight range, I play what I call ping Pong. I fade the price by buying and selling the extremes of the "waves". Market Profile can help a lot, as does reading the order flow through volume delta and momentum. Additionally, I have used the keltners and even VWAP bands. If I'm too early, I can either let the market move against me within my stop out point or in some instances, I double down. Of course when the market finally breaks, and it always does in one direction or another, I have a losing trade and being able to recognise that loser early enough is useful.

Today was Ping Pong day in the ES RTH.

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