Thursday, 17 November 2011

Grand Old Duke of York

There is a children's nursery rhyme called the Grand Old Duke of York that comes to mind when looking at the stock indices price action over the last few months, both inter day and intra day. The lines from the rhyme I'm referring to are:
Oh, The grand old Duke of York,
He had ten thousand men;
He marched them up to the top of the hill,
And he marched them down again.

And when they were up, they were up,
And when they were down, they were down,
And when they were only half-way up,
They were neither up nor down.

If you grew up in the U.K. or Australia you probably remember the rhyme. Our markets have been marching to the instructions of the Grand Old Duke of York. There seems no real reason for the volatility except perhaps fear, greed (the usual two suspects) and the need for many funds not to miss the boat. And, of course, the algos.

I'm seeing this after I wake up at 4 am London time as the days unfold, as well as from day to day as the market digests news and rumours. It's important to only trade the trend of the chart you are trading from, not any ideas of what you may think is happening as your inspiration is probably not in synch with the trading chart. Having no outside bias is important, although a vision about the way the market might unfold for the next few hours can be useful.

The effect of the intra day volatility is "opportunity". This can be seen if you untoggle a Market Profile for any day and watch the rotations of the TPOs. A goal of earning the day's range in points, while quite ambitious, is doable. So if someone's ambition is to take only a few points out of all that rotation, making a plan to do just that and achieving it must be even more doable. The way to achieve a goal is to set one and then design your trading campaign to hit it.

The chart below shows two trades. The first one is at 8.34 am NY time and the second is at 8.41 am. Both lasted only minutes and each made the 1.5 ES points target of the TP. Someone not yet trading full time can find trades like this outside RTH, make the trades and then go to their regular job. $300 with 2 contracts. A great way to get to CP.


  1. I took 26 handles on 1 Contract Yesterday! Thanks to the Duke. I left a lot on the table too. EL What would you say the percentage for the outside in trade when the "Context" is right In balance?

  2. Anon 16:19, I only do them if it's better than 80%

  3. Hey EL,

    Do you still use the momdots? Do you use them in your algos?


  4. Anon 23:45, Yes, MomDots are a good way of seeing how fast the market is moving and signals the possible end of the trend.