Tuesday, May 22, 2007

May 22 Trade Summary $1,166










Well if you didn't see it yesterday, then you must have seen it today. Huge divergence between big caps and small/mid caps. With every low on YM you should have bought ER2, and with every High on ER2 you should have shorted YM. I didn't see this change between the indices until yesterday afternoon, and as a result there was a fatal impact on my trading results yesterday. YM is lower then it was yesterday and ER2 is higher than it was yesterday.

P/L= $1,166

I actually messed up first thing in the morning because I saw a short setup form. Unfortunately I went short ER2 (should have shorted YM instead), and I ended up letting a $500 winner turn into 3k worth of heat. Absolutely ridiculous, I know, it looked like it was going to be another blow up day. But I held the short, Vowing not to go short ER2 again, and finally covered ER2 around the 9am lows for a small profit. I then made a cool scalp trade with 8 cards for a few ticks based on something I've been noticing, and then I had my computer freeze up while it processed this mornings recording, and as a result I missed the afternoon breakout. I later tried going long ER2 at 841, got stopped out, went short and got stopped out, and then noticed a similiar pattern that we had yesterday (a price and volume peak), so I went short and made about 1/3 my profits.(Again, I never should have been looking to short ER2, but I saw the trade and took it, again I would have been better off shorting YM). I then later did some stock trades, covering my short on SMH and XLE too soon, and then near the close I shorted YM, and that trade was a piece of cake.

So until I see things change, if I want to go short ER2 I will short YM instead, and if I want to go long, I will go long ER2 over YM. Another thing I made a mistake on and failed to notice was that the Nasdaq advance decline line is a much better gauge to use when trading ER2 and NQ, where as NYSE A/D is better used on YM and ES. I'm still using NYSE TICK, but I will look into seeing if NASDAQ TICK is any better to use.

3 comments:

F. on 3:11 PM said...

I use all 4 (NAZ A/D, NAZ TICK, NYSE A/D, and NYSE TICK). NAZ A/D and TICK are obviously better for NQ, but only sometimes for ER2. It depends on the underlying theme in the markets --growth versus value. I have seen ER2 respond very well to NYSE TICK when value stocks are the leaders and NAZ TICK when growth stocks are the leaders. Remember that the Russell 2000 is made up of both growth and value stocks. SPX and DJI are more weighted towards value.

TMK500 said...

The Good:
Great recovery action and some very insightful observations on the efficiency of Long ER and Short YM -- that's clever. A lot of folks would still be sobbing in their pillow and blaming Bush for their lot in life ... really glad ya fought back .. Good for you!

The Bad:
Seems that you had a plan before the day started to stay on the Long side of ER .. did the "Devil make ya do it?" - short in the morning after the break/probe?

The Ugly:
3K of heat on the first short ... C'mon, you just went through this crap yesterday. How big does the nail in the board have to be, hoss?

If your Mom was a trader and was standing behind you this morning ... she would have slapped you upside your head .... of course, that's just my opinion. -said like Dennis Miller-.

Overall ... a good day and thanks for sharing the divergence insights ... -whack-

High Probability Trader on 6:25 PM said...

Thanks for the info F.

TMK,
I F'ed up, Why in the hell I went short ER2, ARGHH, I don't know. It's ridiculous seeing the bullishness in ER2. I'm so use to shorting ER2, so much that it's hard not to. But I will remember from now on until things change, long ER2, short YM.

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