Monday, May 21, 2007

May 21 morning trading




I'm short YM at 13580. There is a big bearish divergence on YM compared to ER2.(the reverse of what we saw last week). Profit target is 20-50pts to the downside. I'm waiting for an afternoon breakdown. ER2 is making new highs, but YM is still near its opening price. I'm taking some heat on this trade, but it looks like there is strong resistance at 13590 and that traders are buying ER2 instead. I bet this divergence is really messing with traders heads that have been trading YM for the last few weeks.

8 comments:

F. on 7:59 AM said...

How do you decide what size trades consititute "large traders" in the different indexes and contracts that you monitor? For example, do you filter for only trades of size that are 2 standard deviations away from the mean trade size?

F. on 3:10 PM said...

I just wanted to say that I employed one of your signature ideas very profitably today.

I shorted NQ a little before 3:00pm EST because oil had closed so strong and XLE was finally beginning to roll over. I had noticed a strong divergence in VXN (NDX volatility) telling me that the tech options players were skeptical of the lofty prices. I know that recently you began to examine index options volumes for clues on future index direction, but I highly suggest that you monitor divergences between NQ and VXN. It's just a theory of mine that because Nasdaq stocks tend to be more volatile, these options market makers tend to be very sharp and offer good clues as to the market's next big swing. Just a thought.

Jeff on 12:09 PM said...

Great Post! BTW, may I ask what version of TWS you are using?

High Probability Trader on 1:46 PM said...

Jeff, I'm using the most current version of TWS, whatever that is.

Jeff on 8:08 PM said...

I asked because my booktrader has a nice price-by-volume histogram in one of it's columns (settings/show price histogram). I thought you might like it. Don't know if you chose removed it or just don't know about it. I'm using TWS v. 872.6. (FYI).
Also, you might want to check out Bracket Trader, if you're not familiar with it. It's a TWS front-end.

High Probability Trader on 8:26 PM said...

jeff,

Yeah, I've seen videos on BT and ninja trader, I think the bid/ask size ratio are more important.

Jeff on 9:01 AM said...

I'd be very interested to read if you'd feel like expanding a bit more on who you use the bid/ask size ratio info in your trading... btw, Bracket Trader shows that too.

High Probability Trader on 9:56 AM said...

Jeff,
I don't really use it that often, I've just noticed that if the ask size is greater then the bid size on the DOM that price tends to gravitate towards the larger size. Send me an email if you want a more detailed explanation.

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