Thursday, 7 April 2011

Times They are a Changing, Always

As the markets lose volatility, I've started dropping range bar size. This provides more trades, tighter stops but closer targets. The methodologies remain the same.

It seems that the mixture of HFT activities and the reduction in volume have resulted in lower volatility. I would have thought that the lower volume would have made the markets more volatile, but that does not seem to be the case. The withdrawal of market participants from the fray and the more immediacy of the markets has needed another adaptation. However, the basis of my trading - inside out trades (join the trend on a pull back) and outside in trades (find tops and bottoms when S or R has been hit with order flow reversal identified) has not changed and I can't see how it ever could.

The basis of markets are written in stone. Techniques to identify and take advantage of the order flow will and do evolve slowly as technology advances to give us that information faster and more clearly. I still spend about 15% of my week learning and researching. This has to be an ongoing process until my last trade.

Today is Interest Day in Europe. Today could turn out to be an own goal by the ECB and/or Bank of England. Are we inflating or is the recovery too fragile for interest rate increases? I somehow think that the need for people to eat and for governments to rebuild are not impacted by interest rates. However, businesses ability to expand and hold inventory is impacted by rates.

Today I continues my scalping in the ES. Chart shows the trades. The sequences you can see are all outside in trades with scaling out. Sometimes I can only get one scale in and then have to exit and reverse. It's still an outside in trade when that happens, but a late entry because of the previous position. I give the market a chance to make me money.

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