As for the july 2010 minus 9 percent.
29/07/10
The short position's reasons of entry were:
1) bearish divergence on 5 minutes and minute charts, respectively;
2) there was faulty 'VWAP rule' execution hour before the trade open. Mean, there was no $tick session high, when ES have break out VWAP.
Take profit order was near 1095.50 - 2009's one VPOC, session's S1 and previous day lower low. But after yesterdays faulty take profit policy, I thought better small profit versus no profit at all. Time have showed I really had to wait.
28/07/10
Entered short position on:
1) $add have posted lower low unlike ES;
2) $vold have posted lower low unlike ES;
3) overall bearish internals (1 $tick above 1k vs 1 $tick below 1.2k).
Take profit order was placed one tick above 1099.00 - 11th december '09, 2nd february '10 VPOCs. But ES twice failed to touch this level. It was not a secret, that the trade reasons of entry were rather poor, so after 1st 1099.25 points touch I have to push take profit order one tick to the upside.
27/07/10
Today was revealed one more add to the VWAP rule. The market, that have breakout VWAP w/ new $tick day high, will not continue upside momentum, if there was a version of the rule before during the session.
14/07/10
For the first time since VWAP rule was conceived, I have seen at ones two rule's patterns during single session. It occurred yesterday, on wednesday. Primarily there was VWAP downside breakout w/ new $tick day low. And then, in 35 minutes dead before the closing bell, there was upside VWAP breakout w/ fresh $tick session high, respectively. And the market performance in this situation did provide worthless data how to make profit while such pattern would took a place in future.
Downside VWAP breakout, that was the first, indeed was not strong and did not look like usual rule's pattern. When ES did break below VWAP, $tick have posted minus 938. That was not enough to confirm VWAP rule at a place, cause previous $tick day low was minus 999. But three minutes later $tick have refreshed its day minimum to minus 1013. That was already 14 point more than previous sessions low.
Moreover, there was no appropriate pullback. As u can see below, typically on the VWAP downside breakout pattern there is always a pullback - point two - at least to the VWAP level.
But in that time there was no pullback to the VWAP, and the market was trending lower w/ no pauses during first half an hour after the breakout.
In comparison, upside VWAP breakout at the very beginning looked more appropriately. When there was the breakout of the resistance level, $tick have posted plus 1186. That was 158 points higher than previous $tick session high.
In anticipation of a bulls coming superiority I have entered long position. But there was no upside move continuation. The market have pooled back far below VWAP. Nevertheless, up to the closing bell the market have surged sharply, breaking VWAP to an upside ones again.
All at all, consumptions I have to conclude are:
1) 14 $tick points spread is OK. Back to my post on 8th july of the current year I have said: "the market will continue to move in a direction of the VWAP breakout only when $tick higher high is more than 15-20 points higher than $tick lower high". Today was the second occasion when the spread between $tick higher high and lower high (and vice versa) was comparably small. In previous occasion the spread was only two point and the VWAP pattern rule was not materialized. And yesterday it was 14 points and the rule was in action.
That's why when the spread between $tick higher high and lower high, while VWAP rule potentially at a place, is lees than 10 points - no upside momentum continuation will be. Between 10 to 20 points - I can enter w/ usual trade risk limit. If more than 20 points - trade risk limit could be doubled.
2) For now, seems like second VWAP rule's pattern during single session will likely not realize. But to know better typical market execution during such occasions I have to meet mote situation like that.
Downside VWAP breakout, that was the first, indeed was not strong and did not look like usual rule's pattern. When ES did break below VWAP, $tick have posted minus 938. That was not enough to confirm VWAP rule at a place, cause previous $tick day low was minus 999. But three minutes later $tick have refreshed its day minimum to minus 1013. That was already 14 point more than previous sessions low.
Moreover, there was no appropriate pullback. As u can see below, typically on the VWAP downside breakout pattern there is always a pullback - point two - at least to the VWAP level.
But in that time there was no pullback to the VWAP, and the market was trending lower w/ no pauses during first half an hour after the breakout.
In comparison, upside VWAP breakout at the very beginning looked more appropriately. When there was the breakout of the resistance level, $tick have posted plus 1186. That was 158 points higher than previous $tick session high.
In anticipation of a bulls coming superiority I have entered long position. But there was no upside move continuation. The market have pooled back far below VWAP. Nevertheless, up to the closing bell the market have surged sharply, breaking VWAP to an upside ones again.
All at all, consumptions I have to conclude are:
1) 14 $tick points spread is OK. Back to my post on 8th july of the current year I have said: "the market will continue to move in a direction of the VWAP breakout only when $tick higher high is more than 15-20 points higher than $tick lower high". Today was the second occasion when the spread between $tick higher high and lower high (and vice versa) was comparably small. In previous occasion the spread was only two point and the VWAP pattern rule was not materialized. And yesterday it was 14 points and the rule was in action.
That's why when the spread between $tick higher high and lower high, while VWAP rule potentially at a place, is lees than 10 points - no upside momentum continuation will be. Between 10 to 20 points - I can enter w/ usual trade risk limit. If more than 20 points - trade risk limit could be doubled.
2) For now, seems like second VWAP rule's pattern during single session will likely not realize. But to know better typical market execution during such occasions I have to meet mote situation like that.
13/07/10
The closing bell has rang and here goes one million bucks new add to the VWAP rule. As I have said in my previous post, equal $tick highs do signify no continuing momentum after VWAP breakout. Equal highs means the difference between previous $tick maximum level during the session (lower high) does not exceed 15-20 points w/ new $tick high (higher high) posted while the market was breaching VWAP level.
But now it appears, that equal $tick highs do not necessarily signify bulls coming superiority, as it was considered before. Indeed, while equal $tick highs were posted, the market is likely to breakout VWAP to an upside ones before the session finish. Still, there is possibility of no bulls win. And vice versa.
That conclusion is based on the second out of two trades I made during the past tuesday session. The first position was hugely based on false VWAP breakout. According to VWAP rule that was obvious, cause there was no new session $tick low during the market VWAP breach.
As u can see on the chart below there was fresh session $tick low - minus 1126. But it was posted when SPX was only close to touch VWAP. And when the market slided below VWAP there was no new $tick low - only minus 1091.
It means there was kind of equal $tick lows under VWAP rule. In fact, the spread here is 35. But here goes some discount, cause both $ticks were placed over 5 minutes distance.
And the reason of the second trade was expectation of bears coming superiority and VWAP downside breakout, respectively. That anticipation was based exactly on previous equal $tick lows from the VWAP rule pattern, I have said before. I thought, that such kind of the pattern is a nice forerunner of coming downside leg. I have entered short position, but the market continued to climb higher.
All at all, have to say, that during the last 10 minutes of the session the market have slided sharply and during afterhours finally there was downside VWAP breakout.
But now it appears, that equal $tick highs do not necessarily signify bulls coming superiority, as it was considered before. Indeed, while equal $tick highs were posted, the market is likely to breakout VWAP to an upside ones before the session finish. Still, there is possibility of no bulls win. And vice versa.
That conclusion is based on the second out of two trades I made during the past tuesday session. The first position was hugely based on false VWAP breakout. According to VWAP rule that was obvious, cause there was no new session $tick low during the market VWAP breach.
As u can see on the chart below there was fresh session $tick low - minus 1126. But it was posted when SPX was only close to touch VWAP. And when the market slided below VWAP there was no new $tick low - only minus 1091.
It means there was kind of equal $tick lows under VWAP rule. In fact, the spread here is 35. But here goes some discount, cause both $ticks were placed over 5 minutes distance.
And the reason of the second trade was expectation of bears coming superiority and VWAP downside breakout, respectively. That anticipation was based exactly on previous equal $tick lows from the VWAP rule pattern, I have said before. I thought, that such kind of the pattern is a nice forerunner of coming downside leg. I have entered short position, but the market continued to climb higher.
All at all, have to say, that during the last 10 minutes of the session the market have slided sharply and during afterhours finally there was downside VWAP breakout.
08/07/10
From theory to numbers. Last session was coupled w/ the loss of 2 percent. The only to blame is the solid trade. The position that was opened on one key reason – VWAP rule.
Along w/ that, today I have extended the risk limit exactly on "VWAP rule" trades. Instead of receiving 2.5 percent maximum loss, now its possible to fix minus 5 percent on such positions. The possibility of huge drowndown have persisted already today, but I have managed to close the trade in time, so no major fund damages occurred.
Back on track, the reasons of loss are in my core approach in opening trades on the issue of "VWAP rule". It's when the market, for example, do breakout VWAP to the upside w/ new session $tick high that represents like a true confirmation of bulls superiority.
The first issue is that my $tick provider did show me different data reading. Firstly, lower high was plus 1029 and higher high was plus 1031. But then lower high was plus 1059 and higher high was plus 1054, that means no VWAP rule pattern at a place.
And the second is a $tick numbers valuation. Now, as the closing bell has rung, it's clear that lower high was plus 1029 and higher high was plus 1031, like it was initially said. But seems like it is time to correct the VWAP rule. Since now it is obvious, that:
1) I should not enter while it's VWAP rule pattern and two highs are almost equal. The market will continue to move in a direction of the VWAP breakout only when $tick higher high is more than 15-20 points higher than $tick lower high.
2) And as the session have showed up, equal $tick highs in the VWAP rule could be a nice forerunner of the bulls coming superiority and VWAP breakout to an upside, respectively.
Hour before the day finish the market again have posted VWAP rule pattern. But now $tick higher high was 1074. And previous session highest point – lower high – was only 1031 (43 points lower). And as u can see from the chart above, the rule pattern excellently realized.
Along w/ that, today I have extended the risk limit exactly on "VWAP rule" trades. Instead of receiving 2.5 percent maximum loss, now its possible to fix minus 5 percent on such positions. The possibility of huge drowndown have persisted already today, but I have managed to close the trade in time, so no major fund damages occurred.
Back on track, the reasons of loss are in my core approach in opening trades on the issue of "VWAP rule". It's when the market, for example, do breakout VWAP to the upside w/ new session $tick high that represents like a true confirmation of bulls superiority.
The first issue is that my $tick provider did show me different data reading. Firstly, lower high was plus 1029 and higher high was plus 1031. But then lower high was plus 1059 and higher high was plus 1054, that means no VWAP rule pattern at a place.
And the second is a $tick numbers valuation. Now, as the closing bell has rung, it's clear that lower high was plus 1029 and higher high was plus 1031, like it was initially said. But seems like it is time to correct the VWAP rule. Since now it is obvious, that:
1) I should not enter while it's VWAP rule pattern and two highs are almost equal. The market will continue to move in a direction of the VWAP breakout only when $tick higher high is more than 15-20 points higher than $tick lower high.
2) And as the session have showed up, equal $tick highs in the VWAP rule could be a nice forerunner of the bulls coming superiority and VWAP breakout to an upside, respectively.
Hour before the day finish the market again have posted VWAP rule pattern. But now $tick higher high was 1074. And previous session highest point – lower high – was only 1031 (43 points lower). And as u can see from the chart above, the rule pattern excellently realized.
07/07/10
While inarguable bull markets goes on it's a buy time w/ no need of an entry reasons. That is the key conclusion from the past wednesday session.
No trades were done. But there could be one. Long position hour before the closing bell. And the main issue of the trade open could be strong bullish internals. Market environment indeed was so:
1) no $ticks below minus one thousand and three $ticks above one thousand and two hundred hour before the day finish;
2) while $spy was adding some 2 percent in the second half of the session $add have surged on two thousand points w/ nice market higher high confirmation;
3) $vold looked like crude on the daily chart at the first half of '08 - no drawdowns w/ gradual and stable pushing higher. The only difference - no huge and record, respectively, numbers;
4) and finally $trin was near zero dot three at the second half of the session.
Match this w/ leading 8 sectors of the US economy that statedly confirmed almost each market higher highs and u'll get exactly true bullish internals. On the back of this, seems that is OK to rush into a long position while it is clear that all bears attempts to strike market down were broken up.
No trades were done. But there could be one. Long position hour before the closing bell. And the main issue of the trade open could be strong bullish internals. Market environment indeed was so:
1) no $ticks below minus one thousand and three $ticks above one thousand and two hundred hour before the day finish;
2) while $spy was adding some 2 percent in the second half of the session $add have surged on two thousand points w/ nice market higher high confirmation;
3) $vold looked like crude on the daily chart at the first half of '08 - no drawdowns w/ gradual and stable pushing higher. The only difference - no huge and record, respectively, numbers;
4) and finally $trin was near zero dot three at the second half of the session.
Match this w/ leading 8 sectors of the US economy that statedly confirmed almost each market higher highs and u'll get exactly true bullish internals. On the back of this, seems that is OK to rush into a long position while it is clear that all bears attempts to strike market down were broken up.
06/07/10
Today was a good trading day. The fund have lost some 2 and a half percent, but on perception that was still nice session in term of my analysis.
In short, I have entered short position w/ the bet of the market downside move on some 6 points from the level of my entry. In fact, the market exactly have dipped like I was forecasting. But before, there was the pullback, when my trade was fixed by stop loss order. And instead of fixing plus 6 percent, the fund get minus 2 and a half percent as of this trade. So what the hell was wrong?
Now probable answers are:
1) poor spread policy between stop loss order level and open price level;
2) poor issues of entry - I should wait for more valid reasons;
3) everything was OK - blame a hedge fund or a tough guy on a floor that have sparked that sudden upside move.
The reasons of the short position were:
1) $add was making lower low - but only one minute before ES have made this - poor forerunner, but here OK;
2) $vold have posted sharp downside move. Here it's not OK. Huge draw dawn was on 13:18 ET and the moment of the trade entry was 13:19 ET. Lets be honest, yes $vold weakness good reason but a trading is not watching in a crystal ball;
3) internals were in the trade favor - bearish according to $tick and $vold stats;
4) no recovery in the weakest sectors - not appropriate.
So lets go back to my proposed answers on the question about what have exactly caused the trade to bring the loss to the fund.
1) Spread policy between stop loss order level and open price level was not poor at all. The trade could avoid stop loss if that order would be placed 3.75 points above open price. That is tremendously huge spread in my supposition that can't allow the fund to have solid profits.
2) The reasons of the entry were not appropriate. That's the answer that is more closer to the truth than any one else. About $vold I have said already and $add was also not a valid reason. Internals issue, the only that have left, is a single matter of the entry, that can not be a worthy reason.
Want to emphasize, that on 13:19 ET - the time of the trade open and ES making lower low, respectively - the two weakest sectors during the session, materials (#XLB) and consumer discretionary (#XLY), were not making lower lows. That's the key point. Thats why there was a rebound, not cause of tough hedge fund. Weakest sectors just stop to be weak.
If I just wait for a while, it will be obvious, according to $add dynamic, that bulls were loosing ground. And what is more necessary, is that there was no rapid recovery in the weak sectors that have to be, if the market reversing to an upside.
All at all, the reason of today's loss is 2) poor issues of entry - I should wait for more valid reasons.
In short, I have entered short position w/ the bet of the market downside move on some 6 points from the level of my entry. In fact, the market exactly have dipped like I was forecasting. But before, there was the pullback, when my trade was fixed by stop loss order. And instead of fixing plus 6 percent, the fund get minus 2 and a half percent as of this trade. So what the hell was wrong?
Now probable answers are:
1) poor spread policy between stop loss order level and open price level;
2) poor issues of entry - I should wait for more valid reasons;
3) everything was OK - blame a hedge fund or a tough guy on a floor that have sparked that sudden upside move.
The reasons of the short position were:
1) $add was making lower low - but only one minute before ES have made this - poor forerunner, but here OK;
2) $vold have posted sharp downside move. Here it's not OK. Huge draw dawn was on 13:18 ET and the moment of the trade entry was 13:19 ET. Lets be honest, yes $vold weakness good reason but a trading is not watching in a crystal ball;
3) internals were in the trade favor - bearish according to $tick and $vold stats;
4) no recovery in the weakest sectors - not appropriate.
So lets go back to my proposed answers on the question about what have exactly caused the trade to bring the loss to the fund.
1) Spread policy between stop loss order level and open price level was not poor at all. The trade could avoid stop loss if that order would be placed 3.75 points above open price. That is tremendously huge spread in my supposition that can't allow the fund to have solid profits.
2) The reasons of the entry were not appropriate. That's the answer that is more closer to the truth than any one else. About $vold I have said already and $add was also not a valid reason. Internals issue, the only that have left, is a single matter of the entry, that can not be a worthy reason.
Want to emphasize, that on 13:19 ET - the time of the trade open and ES making lower low, respectively - the two weakest sectors during the session, materials (#XLB) and consumer discretionary (#XLY), were not making lower lows. That's the key point. Thats why there was a rebound, not cause of tough hedge fund. Weakest sectors just stop to be weak.
If I just wait for a while, it will be obvious, according to $add dynamic, that bulls were loosing ground. And what is more necessary, is that there was no rapid recovery in the weak sectors that have to be, if the market reversing to an upside.
All at all, the reason of today's loss is 2) poor issues of entry - I should wait for more valid reasons.
02/07/10
Rushed into the long position cause VWAP rule pattern have appeared. Fixed the trade as the market have approached strong resistance level, which have consisted from 3 VPOCs:
1) 1025.50 - 24 august '09;
2) 1025.00 - 26 august '09;
3) 1024.50 - 9 september '09
Have to say, that it was really lucky exit, cause soon the market have pulled back sharply. And should emphasize, that the only forerunner of such possible move was exactly VPOCs data, cause there was no sluggishness in sectors, $tick, $add and etc.
ES (S&P 500 E-mini futures) trading
by Meques Moscow Finacial
by Meques Moscow Finacial