ES Switches Between Calm and Volatility

Monday’s end-month emini session was as sideways dead as any trader could possibly fathom. From open range zone to CM RoadMap tagged was roughly five points width…which was pretty much the true range for that day.

5/03/2012

It also took almost all day to fuzz-chop its way thru that micro-span too. Such no-volatility, comatose market days usually lead to range expansion soon.

5/03/2012

Tuesday’s 10am econ -news explosion was much less about the magnitude of said news and more about a full session of dead-chop coiling action the day before. Regardless how good that “news” was… it was not +20 points ES worth.

Fifteen of those twenty points up happened inside of 20 minutes past the news release. The lone 5min bar from 10:00am – 10:05am exceeded the prior day’s entire 6.75 hours of pit session trading, bell to bell. That’s what happens when volume is nil, volatility is dead and the market is overall one big air pocket every day. Price movement is not evenly distributed thru multiple oscillations daily: it is hours of consolidation and minutes of algo-driven spikes or slams.

I cannot aptly say how I’d have fared Tuesday morning in trades executed during the programs squeeze, because I was some forty miles away from my screens at the time. May 1st is opening day of spring turkey hunting season here in NY, and it’s almost a religious holiday in my circles of influence.

Up at 3am, in the truck at 4am, out of the truck at 5am, in the field and on location before 5:30am. If someone promised me the ES would stage a 50 point price swing this morning, it wouldn’t affect my schedule one iota. Why would it? Our priorities are what they are.

In any event, I was back home in time to catch the CM Pattern sell sequence just off session highs as noted above. Watched it long enough to pull stop-loss down to initial entry for a free trade. Laid down on the sofa, turned on CNBC and passed out for nearly two hours. Woke up, noted on the tv ticker that S&P was down several points from when I dozed off. Got up, walked thru the house and into office, trailed stop down to +5 points in favor as price traded +5.50 points to the good and summarily stopped out for another victorious day.

By random chance that +5pt stop got clipped on the last reflex high to price, then soon worked its way another +4pts in favor beyond exit. At times those type of trades will hold the stop and keep working for +6pts, +8pts, +10pts and +20pts out instead.

The daily “Take Five” approach is designed to work roughly ten out of twenty sessions per month, with remaining sessions expected to wash each other out with wins and losses combined. I’m personally content with +20 ES index points per month and keep adding size. I believe it’s realistic to expect +40 points or better at times.

We all know for a fact that most ES traders are net losers who actually make less than 0 points each month. Our style of trading suites them extremely well… considering they have no style of profitable trading at all.

For more daily updates from Austin, visit his blog at Coiled Markets.