July 20 2010 Overlay and Trades

I had another day with interesting divergence between my ES trading and TF trading.

I was down 2.75 points on the ES and up 3.8 points (38 ticks) on the TF. For those not familiar with the TF the net gain on the day is equivalent to a approx. a 5 point gain on the ES.

TF = 1 point = 10 ticks. Each tick = $10.00 per contract.

The overall direction and macro structure of the indexes is generally the same but I am finding significantly better setups as well as intra trade action on the TF.

I speculate that there are less games being played on the TF thus less fake outs. My first trade today on the ES was my only loss and it was a total fake out. Not a bad bad bet though.

I have revised my trading down to a game of trying to exploit short term opportunities and avoiding getting squeezed. Even trying to ride the squeezes.

I am still visualizing and watching my zones but it is more important to me to consider what others are doing and where they are getting trapped regardless of bias or direction.

I told another trader yesterday that my TF trades look sloppy but produce a constant edge and a majority of my ES trades look very well executed but frankly suck when it comes to production.

I can win playing the ES but have not come close to hitting my goals do to conflicting strategies and mental issues.

It is my opinion that the intra day opportunities on the ES for those who want to trade small size and risk less than 5 points per trade are frequent small scalps (3-10 ticks) that take extreme skill to consistently book.

This is after months of awesome preps and spot on visualization resulting in virtual equity gridlock.

I think that for some reason, the ES right now is a tough mountain to climb in an already extremely tough line of work. I would probably do much better swing trading it with big risk and big reward but that is not a game I can play right now.

So am I divorcing the ES? Right now I am trading both but there will be a separation until I start holding positions overnight.

Today

I had 3 long attempt on the ES after getting stopped out on a lower probability short. That is 3 long attempts in front of a 20 point run up.

I was waiting for a more structured pull back. This is the issue I have been having lately on entries and exits. If I wanted to catch the ES move, I needed to hold and risk 5-7 points with no anchor other than the extension bottom.

Realistically, the best ES long was my short stop out exit price.

The TF provided no clear entry off the lows but offered several good inside support trades and continuations on the way up. The trades tend to work or quickly fail and there are far less fake flash orders and depth stacking which is a nuisance to an observer of details like me.

Keep in mind however that the TF is not for timid traders or those who do not understand where the price is prone to squeeze. It can stomp you quickly if you stay on the wrong side for too long.

For some reason, that type of action better suits my trading style. All this analysis just after a couple days.

We will have to see what happens when things get ugly. It is certain that they will.