Info!! Trading Performance: Getting To That Adjacent Level

I late spoke amongst the traders at SMB together with shared a few best practices that had benefited my trading over the past times several months.  The persuasion is non that whatsoever traders should mimic my trading; rather, traders postulate to larn from their successes, seat what they are doing well, together with and hence acquire to a greater extent than consistent inwards implementing those strengths.

Here are a few of my trading surgical procedure observations that mightiness spark about persuasion for your trading:

1)  My profitability has improved since I've focused on consistency rather than profitability.  I've honed inwards on what are practiced trades for me together with where my profits get got come upwardly from.  I simply desire to last consistent inwards trading those practiced trades.  If I tin terminate do that, the profitability volition come.  And if I desire greater profitability, I should size upwardly the practiced trades, non accept other, to a greater extent than marginal trades.

2)  A corollary of the inwards a higher house is that my best trading has been highly selective trading.  There are days together with serial of days when I don't house a trade.  I'm fine amongst that.  My aim is non to trade; my aim is to brand money.

3)  The sum of fourth dimension I pass staring at screens is non correlated amongst my profitability.  If you're a high frequency trader, you lot postulate to rail each tick inwards the market.  If you're non a high frequency trader together with you're staring at each tick inwards the market, you're either lacking confidence inwards your merchandise or you're sized also large together with taking also much risk.  When I'm inwards a practiced trade, I tin terminate walk away for a while.

4)  I've industrial plant life my ain means of making feel of markets.  I intend inwards terms of cycles, non trends.  (See above). When I assess shorter-term cycles, it's over event time, non chronological time.  When I human face at volatility, it's past times comparison the volatility priced into options versus the volatility late realized inwards cost action.  All of these are ways of thinking nearly markets that I've studied together with that brand feel to me.  I don't know how to get got staying powerfulness inwards a merchandise if it's non an persuasion that makes deep sense.

5)  I've studied the trajectory of my profitable together with unprofitable trades.  Many of the trades I travel inwards volition anticipate a marketplace seat movement next a catamenia of compressed volatility.  I to a greater extent than oft than non anticipate the ramping upwardly of volatility pretty well.  If it ramps inwards the incorrect direction, my merchandise goes incorrect relatively quickly.  By entering the merchandise amongst a modest substance position, I ensure that a losing merchandise won't last a large trade.  If the volatility moves inwards my expected direction, I tin terminate role bounces against the movement to add together to the position.  I don't add together to losing trades together with I'm quick to accept profits opportunistically on added pieces of trades.  Sound coin management has been the best cast of psychological management.

6)  One of my best predictors of making coin is having fun amongst markets.  I get got fun when I develop novel tools, generate novel ideas, together with run into them travel inwards practice.  If I focus also much on making coin or non losing money, all the fun goes away from trading.  That's when I'm probable to brand bad decisions.  If I'm having fun amongst markets, I don't postulate to trade.  If I postulate to trade, I don't get got fun amongst markets.  

7)  I'm best when I specialize.  I merchandise i affair together with i affair only, the ES futures.  I written report high frequency information on stocks (upticks/downticks, patterns of really short-term cost together with book behavior); I written report odd measures of marketplace seat breadth; I written report cycles of diverse marketplace seat sectors; etc.  I don't merchandise unlike private stocks together with I don't merchandise other property classes.  My finish is to last a production specialist, non a trading generalist.  That has helped greatly inwards my blueprint recognition.  If I were to human face at unlike stocks together with markets each day, I would non construct upwardly the database of patterns I would postulate to recognize opportunities.    

The large persuasion hither is that getting to that side past times side grade of trading surgical procedure requires self-awareness.  You postulate to know what you're practiced at, what speaks to you, together with where your successes come upwardly from.  You acquire to the side past times side level, non past times changing who you lot are, but past times distilling the essence of who you lot are together with becoming e'er amend inwards leveraging that.  

Further Reading:  Our Struggles Develop Our Strengths
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Info!! Trading Psychology Diagnosis: Identifying The Beginning Of Trading Problems

Every trained medico knows that diagnosis precedes treatment.  We receive got to sympathise what is going incorrect earlier nosotros attempt whatsoever sort of solution.  Auto mechanics engage inwards the same process: they remove heed to the engine, human face nether the hood, as well as run tests earlier they seat problems as well as laid out to create them.  

Too often, traders attempt solutions for their trading problems earlier they've really understood the sources of those problems.  Equally often, mentors as well as coaches of traders offering their solutions without really going through a thorough diagnostic process.  In this post, I volition model for yous a way of thinking that tin give the axe attention yous seat what mightiness survive going incorrect with your trading.  This way of thinking is anchored yesteryear several of import questions.

Question #1:  Is in that location really a work here?

This may appear similar a foreign question.  You've exactly drawn down; you've been frustrated inwards your trading.  Of course of report there's a problem!  The issue, however, is a flake to a greater extent than subtle.  Any successful trading is soundless a probabilistic enterprise.  Hit rates as well as Sharpe Ratios don't grow to the sky; people are fallible as well as markets embed a fair amount of uncertainty.  As a result, losing periods are inevitable as well as frustrations volition survive encountered.  Just equally nosotros human face baseball game hitters to strike out every thence frequently as well as football game quarterbacks to throw incomplete passes on occasion, nosotros tin give the axe human face losing trades.  H5N1 trading approach with a 60% hitting charge per unit of measurement could survive phenomenally profitable, but it volition soundless run across strings of losing trades with regularity.

What this agency is that nosotros laid out the diagnosis yesteryear examining a meaningful sample of yesteryear trading, non exactly the final few days or trades.  H5N1 frequent solar daytime trader making many trades a solar daytime mightiness human face at the month's results as well as compare with results from the yesteryear year.  H5N1 longer term trader mightiness demand to get together information over a twelvemonth or to a greater extent than earlier confidently identifying a problem.  In other words, to seat a problem, it's necessary to regard that recent results autumn curt of yesteryear ones as well as that recent drawdowns are non similar to yesteryear ones.  That requires a proper historical view.

When traders assume that a work exists without a sufficient historical analysis, they run the adventure of tinkering with methods that operate as well as making those methods worse.  This is really truthful when traders laid out to merchandise systems.  They acquire discouraged when the arrangement has a (normal as well as expectable) drawdown, thence they laid out to alter the system, front end run the system, etc.--only to plow the setbacks into protracted slumps.

Sometimes traders are taking likewise much risk--trading seat sizes likewise large for their actual loss tolerance--and those strings of expectable losing trades create a "risk of ruin" situation.  In such a case, the trader tin give the axe human face at hitting rates as well as average win/loss statistics as well as create upward one's heed whether the work is inwards adventure taking or if the actual surgery of the trading methods has changed.

All of this is a rigid declaration for keeping detailed surgery metrics on your trading.  Only yesteryear comparison recent surgery to yesteryear surgery tin give the axe yous sympathise if yous really are improving inwards your trading or having an actual problem.  If you're a commencement trader, as well as then yous would compare your recent returns to the returns yous achieved inwards simulation mode.  (For to a greater extent than on trading metrics, regard this post; also this post.  H5N1 detailed handling of trading metrics tin give the axe survive flora inwards Chapter 8 of The Daily Trading Coach). 

Question #2:  If in that location is a work present, is it associated with a alter inwards the market(s) you're trading?

My firstly hypothesis when I run across a trading work (my ain or that of an experienced trader) is that the work has occurred for a reason, as well as that argue is related to a alter inwards how markets receive got been trading.  Because of those changes, the methods that had been working no longer ascendance the same edge.  

A swell instance of this has been the recent turn down of volatility inwards the stock market.  Many, many traders who made coin from momentum as well as tendency trading receive got suffered during this depression volatility menstruum because moves no longer extend and, indeed, tend to reverse.  That, inwards turn, leads to frustration as well as discouragement.

The key tell for when trading problems are related to changes inwards markets is that people trading similar strategies are also experiencing surgery difficulties.  This is ane argue it's of import to receive got a broad network of trading colleagues, fifty-fifty if yous merchandise independently.  If the swell bulk of traders trading similar styles are also experiencing drawdowns, yous tin give the axe safely assume that non everyone has turned into an emotional handbasket instance at the same time.  

Performance indexes for diverse hedge fund as well as CTA strategies are available from manufacture sources as well as tin give the axe attention seat when certainly approaches are winning as well as losing.  For example, the Barclay's curt term trading index (STTI on Bloomberg) tracks the returns of professional person coin managers trading curt term momentum as well as trends.  The surgery of those managers over the yesteryear twelvemonth or 2 has been dismal, ane time again related to the collapsed volatility of markets inwards the wake of depression involvement rates approximately the globe.  

If your trading problems are widely shared as well as tin give the axe survive linked to shifts inwards how your markets receive got been trading, no psychological exercises inwards as well as of themselves volition solve the problem.  Nor is it a solution to seat one's caput inwards the sand as well as promise that markets volition "turn around".  Rather, the respond to the trading problems is to adapt to the novel surround as well as search for fresh sources of border that tin give the axe complement one's traditional trading.  For example, ane mightiness detect hateful reversion or relative value strategies that nicely complement one's directional/trend/momentum trading.  The combination of trading approaches really diversifies returns as well as produces a smoother P/L curve.  (See Trading Psychology 2.0 for a detailed presentation of adapting to changing markets).

Question #3:  If in that location is a personal work present, is it--or has it been--present inwards non-trading parts of your life?

Here is a very, really of import issue.  Many personal issues, such equally anxiety, anger, depression, attending deficits, as well as impulsivity, exhibit upward inwards trading, but non solely inside trading.  For example, a mortal mightiness receive got problem with patience as well as frustration inwards personal relationships, as well as those same problems crop upward inwards his human relationship with markets.  Similarly, a mortal mightiness receive got self-esteem problems inwards life that as well as then exhibit upward equally negative thinking patterns during periods of marketplace losses.  When the emotional patterns, thought patterns, as well as behaviour patterns that interfere with trading are also occurring as well as interfering with other aspects of life, that is a rigid indication that exactly working on trading volition non survive sufficient.  It makes feel to seek professional person help.

The swell bulk of psychological challenges tin give the axe survive dealt with via short-term approaches to counseling as well as therapy.  Research suggests that problems such equally human relationship difficulties, depression, anxiety, as well as anger tin give the axe do goodness significantly from cognitive, behavioral, psychodynamic, interpersonal, as well as solution-focused approaches. (A thorough review of enquiry as well as do inwards this expanse tin give the axe survive flora in the textbook that I receive got co-edited.  H5N1 novel edition volition survive coming out belatedly this year).  The key to brief approaches to therapy is that they are highly targeted as well as brand active usage of exercises as well as experiences during as well as betwixt sessions.  

In situations inwards which the psychological problems receive got been longstanding, when in that location has been a seat unit of measurement history of similar problems, when those problems receive got been severe (significantly impairing of import areas of life), as well as when those problems receive got been complex (impacting many areas of life, equally inwards drug or alcohol abuse), longer-term approaches to helping are mostly indicated.  Attempting short-term approaches to attention for to a greater extent than important problems runs the adventure of relapse.  When problems receive got been longer standing, severe, as well as complex, it frequently is the instance that to a greater extent than than ane shape of attention is required, such equally medication attention inwards improver to therapy or grouping sessions (as inwards A.A.) inwards improver to counseling.  In such instances, it is really helpful to receive got a thorough assessment from a qualified mental wellness professional.  If in that location is meaningful depression and/or anxiety, a workup from an experienced psychiatrist is helpful, equally rubber as well as non-habit forming medications frequently tin give the axe play an of import usage inwards addressing the problems.

Depression, anxiety, attending deficits, addictions, bipolar disorder, human relationship problems--these impact a high percent of people inwards the full general population.  Traders are non exempt from these full general problems.  Assuming that an emotional number impacting trading is necessarily a trading number may forbid yous from getting the right sort of help.  No amount of writing inwards a trading periodical volition rebalance neurotransmitters inwards your encephalon or solve the conflicts yous pick out to your marriage.  When yous regard the problems affecting your trading also affecting other areas of your life, it's a rigid indication that a to a greater extent than full general approach to alter volition survive needed.

Question #4:  If the work you're facing occurs uniquely inwards trading settings, do yous demand psychological coaching or do yous demand farther mentoring of your trading?

Here ane time again is an of import distinction.  Especially for newer traders, frustrations as well as other emotional problems arise inwards trading exactly because they are soundless immature on their learning curves.  What they demand is non exactly emotional coaching, but guidance from experienced mentors who tin give the axe attention them right trading errors as well as to a greater extent than consistently apply trading skills.  Even experienced traders tin give the axe run across drawdowns as well as frustrations because they are making trading mistakes that a mentor tin give the axe choice up.  I late worked with a trader who was really discouraged because of a drawdown that occurred exactly because he was non closely monitoring correlations with his positions.  What he thought were several independent trades turned out to survive versions of the same merchandise ane time the primal banking concern indicated a possible policy shift.  He lost coin because he was likewise concentrated inwards that one, converged trade.

This is yet some other argue why it's really helpful to survive connected to networks of peer traders.  Many times such relationships offering usual mentoring that tin give the axe address situational problems as well as mistakes inwards trading. 

When drawdowns as well as disruptions of trading are to a greater extent than psychological as well as situational, several psychological approaches tin give the axe survive helpful, including behavioral methods (exposure therapy) for anxiety as well as surgery pressure; cognitive restructuring techniques for perfectionism, overconfidence, as well as negative thought patterns; as well as solution-focused approaches to seat as well as expand one's ain best practices.  (Specific applications of these methods tin give the axe survive flora inwards The Daily Trading Coach; the creation of best practices is a major theme inside Trading Psychology 2.0; an overview of cognitive as well as behavioral techniques for improving trading surgery tin give the axe survive flora inwards Enhancing Trader Performance).

Behavioral techniques are skills-building methods that yous do inwards existent time, during work situations.  You literally are didactics yourself novel skills as well as novel habit patterns.  For example, a really unproblematic behavioral technique would survive to accept a interruption during trading whenever yous experience anxious, frustrated, bored, or discouraged.  You rapidly recognize that you're non inwards the right mindset for trading as well as yous accept a interruption from the screens.  During that break, yous mightiness engage inwards other skills-building activities, such equally relaxation preparation to irksome oneself downwards as well as cut tension.  Behavioral methods are typically skillful exterior of trading hours thence that the skills acquire automatic inwards existent time, when problems crop up.  

Cognitive restructuring methods are techniques that yous usage to seat as well as challenge patterns of negative thinking that tin give the axe distort your emotions as well as interfere with audio conclusion making.  Many traders, for example, acquire highly self-critical when they lady friend a merchandise or when they accept a loss.  This tin give the axe interfere with their focus on the adjacent opportunities.  In cognitive restructuring, keeping a periodical helps the trader acquire to a greater extent than aware of his or her thinking as well as challenge that thinking when it's harsh as well as negative--or when it's overconfident!  

Solution focused techniques are ones that examine what yous are doing during your best trading, both inwards price of trading practices/processes as well as psychological self-management.  The finish of solution focused operate is to "do to a greater extent than of what works" as well as acquire to a greater extent than consistent thence that best practices tin give the axe plow into repeatable best processes.  Trading Psychology 2.0 contains 57 best practices contributed yesteryear myself as well as other traders; the chapter on Building Strengths also embraces a solution-focused approach to identifying what yous do best as well as edifice your trading approximately it.

The bottom work is that how yous operate on your trading should reverberate the diagnosis yous brand of your trading challenges.  Sometimes nosotros run across challenges because of tricky markets; sometimes because of our psychology; as well as sometimes those challenges are exactly a normal business office of adventure as well as dubiety inwards markets.  In this post, in that location are quite a few ideas tossed out.  For to a greater extent than information on those, yous tin give the axe exactly Google the relevant theme yesteryear entering "Traderfeed" as well as the theme of interest.  Thus, locomote inwards into the search engine "Traderfeed solution focused" as well as you'll regard quite a few posts relevant to that topic.  If yous desire fifty-fifty to a greater extent than depth as well as detail, the to a higher seat bulk references volition survive useful.

In an upcoming serial of posts, I volition seat xx top challenges that traders confront as well as highlight specific approaches to operate on each of those.  Yet some other serial volition human face to a greater extent than into exceptional into evidence-based techniques that attention traders as well as when to usage those.  All of this is business office of a grander conception to eventually link all the posts into a free, user-friendly, comprehensive online encyclopedia of trading psychology.  

Thanks, equally always, for your involvement as well as support--

Brett

Info!! Trading Notes: Calendar Week Of October 19Th

Friday, Oct 23rd

*  The combination of prospects of farther QE from the ECB as well as positive turn a profit tidings breathed fresh life into the market, equally nosotros rose on substantially increased volume.  The increased book told us that fresh participants were coming into the market; the positive skew of the NYSE TICK told us that the participation was dominantly to the purchase side.  Picking upwardly those cues early on inwards the trading hateful solar daytime is an essential job of short-term trading.  Thursday's activeness was farther confirmation of the base of operations representative outlined yesterday, though I'm for certain opened upwardly to the possibility that, amongst the renewed buying, a momentum peak lies ahead of us.

*   Below is an interesting nautical chart that tracks "relative volume":  how book at each infinitesimal of the hateful solar daytime compares amongst the average book for that infinitesimal inwards SPY.  Influenza A virus subtype H5N1 value of 1.0 way that book is average for that fourth dimension of day.  Influenza A virus subtype H5N1 value of 2.0 is a total criterion difference inwards a higher house average; 3.0 is 2 criterion deviations inwards a higher house average; etc.  Note inwards the nautical chart how book yesterday was good inwards a higher house average, especially when the marketplace seat was rising.  Great tell.

*  Interestingly, novel highs *and* novel lows expanded inwards yesterday's trade, as well as modest caps cash inwards one's chips along to lag large caps.  I'm watching that human relationship closely, equally good equally the novel highs/lows.

Thursday, Oct 22nd

*  Weakness inwards modest caps noted before contributed to a sell off inwards stocks through much of the hateful solar daytime Wednesday.  My mensurate of buying vs. selling pressure, interestingly, did non present a bully surplus of selling.  This continues to facial expression to me similar a correction of the recent strength, non acquit marketplace seat behavior.  With fewer than one-half of stocks forthwith trading inwards a higher house their 3 as well as five-day moving averages, the risk/reward looks a flake ameliorate as well as I am opened upwardly to buying weakness that holds inwards a higher house the overnight lows.  I practise note, however, that the number of stocks making fresh monthly lows has expanded beyond the degree seen final week.  Continued expansion of that number would brand me to a greater extent than concerned regarding the market's downside.  

*  In short, my base of operations representative is that the August/September lows were meaning ones; that nosotros began a novel marketplace seat wheel off those September lows; as well as that the wheel has hitting a potential momentum peak simply has farther to run on the upside.  Waning breadth, especially amid modest cap stocks, as well as waning relative push clit amid EM shares concerns me nearly this base of operations case, however, as well as thus I'm cautious as well as updating views hateful solar daytime past times day.

*  Influenza A virus subtype H5N1 say for marketplace seat weakness prior to the August driblet was that nosotros were persistently seeing to a greater extent than shares trading below their lower Bollinger Bands than inwards a higher house their higher bands.  At present, we've been seeing the opposite: to a greater extent than stocks trading inwards a higher house their upper bands (see nautical chart below).  I'm watching that residuum closely equally yet a unlike sort of breadth mensurate that captures the relative breadth of push clit vs. weakness.

    


Wednesday, Oct 21st

*  Stocks showed continued resilience on Tuesday, amongst pullbacks limited, ultimately leading to higher daily lows as well as higher highs.  We likewise expanded the number of stocks making fresh monthly highs, ascent to 812 from 698.  Interestingly, VIX rose, simply realized volatility as well as book continued low.  We're seeing push clit inwards overnight trade, afterwards belatedly hateful solar daytime weakness yesterday--that continues the grind higher.

*  We've seen a driblet inwards 1 of my measures of breadth volatility, which tracks the variation inwards the number of stocks making novel highs as well as lows.  Going dorsum to 2010, when breadth volatility has been high, the adjacent v days inwards SPX induce got averaged a gain of +.52%.  When breadth volatility has been low, equally at present, the adjacent v days inwards SPX induce got averaged a gain of exclusively +.03%.  I cash inwards one's chips along to stance the risk/reward inwards the marketplace seat equally non especially appealing for multi-day positions as well as instead lean toward shorter-term tactical trading of intraday swings.

*  I am continuing to sentinel modest cap as well as mid cap issues to encounter if nosotros tin expand breadth or whether relative weakness inwards those groups tin expand to other segments of the market.  The Cumulative NYSE TICK has been ascent inwards recent sessions; buying push clit has been moderate, simply selling push clit has been low.  I don't await a major marketplace seat turn down until nosotros encounter a reemergence of sellers, as well as that's non occurring as well as thus far.

Tuesday, Oct 20th

*  The topping conduct referenced yesterday was evident inwards Monday's trade, equally nosotros terra firma higher inwards SPX.  I cash inwards one's chips along to banker's complaint relative weakness amid modest caps, which is contributing to breadth divergences.  We saw 698 novel monthly highs on Mon against 166 lows.  That is against over K novel highs on the seventh through the 9th.  That beingness said, breadth divergences inwards ascent markets unremarkably don't dot major reversals until nosotros encounter expanding numbers of shares making fresh lows as well as overtaking novel highs.  During topping processes, it's to a greater extent than of a rotation merchandise than a trending one, amongst volatility, volume, as well as momentum coming down.  That makes it an opportunistic trading environment, equally the lower volatility way that moves extend far less than they had when VIX exceeded 20.

*  One of the large mistakes traders brand inwards depression volume/low volatility environments is looking for the adjacent large move, rather than planning for the lack of movement.  To attain that planning, traders either require to merchandise brusk term swings opportunistically (intraday swings) or extend their asset periods to essay larger moves that ride out the shorter swings.  I discovery that pullbacks as well as bounces inwards NYSE TICK intraday assist to seat those shorter-term swings.

*  Should nosotros encounter modest caps as well as midcaps grab upwardly to the large caps inwards performance as well as displace to fresh highs, that would live on a worthwhile clue that the upside has farther to go.  I'd desire to encounter other marketplace seat sectors underperform before taking a longer-term bearish stance.

Monday, Oct 19th

*  I'll live on tweeting from Stocktoberfest the adjacent duet of days.  My latest Forbes article highlights a topic I'll live on addressing inwards my Stocktoberfest presentation:  how nosotros tin brand the transition from beingness goodness traders to becoming bully ones.  That way that repeated sense is non enough; nosotros really induce got to undertake directed training.  The Forbes piece describes how nosotros tin job psychology to sustain preparation efforts.

*  Here's a unproblematic way y'all tin know if you're genuinely engaged inwards a procedure of expertise development:  Are in that location *specific* things you're working on inwards today's trading; are y'all keeping score to encounter if y'all are genuinely making progress; as well as are y'all making ongoing corrective efforts amongst continued scorekeeping if you're non making progress?  If you're non intensively engaged inwards the above, y'all are non on a course of teaching of peak performance development.

*  Friday's trading continued the bounce from the short-term oversold province of affairs noted final week.  We 1 time once again are at a juncture where I'm non enamored of the risk/reward province of affairs here.  Intermediate-term measures are stretched to the upside; put/call ratios induce got come upwardly down; as well as nosotros cash inwards one's chips along to encounter fewer stocks brand fresh novel highs despite novel highs for this displace inwards the wide indices.  My pure volatility mensurate is at levels associated amongst subnormal forrad returns over a several hateful solar daytime basis.  All this is consistent amongst my overall perspective that we've seen a momentum peak for this marketplace seat wheel as well as are forthwith involved inwards a topping process.  That procedure tin extend for a spell before nosotros encounter an ultimate cost peak as well as eventual acquit phase. 

*  An uptrend is sustained when nosotros are able to register higher cost highs as well as higher cost lows across multiple short-term cycles.  So far, that is what we've been doing.  Until that blueprint changes, I'm reluctant to induce got brusk positions for anything to a greater extent than than short-term trades.
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Info!! Trading Notes: Calendar Week Of 8/17/2015

Friday, August 21st

*  It was a 2d right away twenty-four hr menses of real weak book flows; the failure to sustain bounces was evident relatively early on inwards the twenty-four hr menses in addition to quite telling, every bit the gain marketplace gave way to a trending trade.  Stocks making fresh novel lows expanded in addition to almost 600 NYSE issues unopen below their lower Bollinger Bands.  Interestingly, when that has happened inwards the past times year, at that topographic point has tended to move farther downside over the adjacent v trading days.  We are real stretched to the downside short-term, with fewer than 10% of SPX stocks trading higher upward their 3 in addition to five-day moving averages.  With VIX at 19, I await to a greater extent than volatile moves in addition to the possibility of strong short-covering moves.

*  My adjacent twenty-four hr menses in addition to 3-5 twenty-four hr menses models cause got turned moderately bullish, reflecting the short-term oversold condition.  Intermediate term measures are non at levels that we've late seen at intermediate-term lows.  I volition move watching the lineament of bounces from the oversold degree closely; if weak, I would await farther downside.  My game programme is to hold off for those bounces earlier reinstituting shorts.  I'm also opened upward to short-term buying of weakness that fails to brand fresh toll lows.

*  Pure volatility is quite high, which agency that each unit of measurement of book produces significantly to a greater extent than toll campaign than it did at recent marketplace peaks.  With expanded volatility, moves tin extend farther than nosotros would expect--very relevant to run a jeopardy management.

Thursday, August 20th

*  Volume flows were weak through the day, confirming the bearish expectations of the models in addition to the downside stock merchandise inwards the wake of commodity/China weakness.  This weakness has carried forrad to premarket trade.  Short term indicators are at levels stretched to the downside, but intermediate-term ones are not.  For example, nearly 17% of SPX shares are trading higher upward their 3-day moving averages.  That creates an surroundings ripe for a counter-trend bounce.

*  The possibility of counter-trend bounce is also heightened past times the fact that 1 of my 3-5 twenty-four hr menses models is flashing a bullish signal, the showtime inwards quite a few days.  Should nosotros run into weakness inwards today's session non confirmed past times book flows in addition to breadth, I would move willing to participate on the long side for a short-term trade.  

*  Pure volatility mensurate is elevated, also highlighting possibility of near-term bounce in addition to VIX unopen higher upward 15.  Neither are at levels associated with intermediate-term bottoms, but I make await to run into to a greater extent than volatile merchandise going forward, which has implications for sizing, stops, in addition to targets.

Wednesday, August 19th

*  Whereas Monday's marketplace could non sustain selling pressure--the number of downticks across stocks was modest--Tuesday was the reverse, with express buying.  The book current mensurate was solidly negative on the day, in addition to nosotros could non cause got out the overnight highs.  This record activity fit good with the bearish model signals from yesterday, in addition to we're seeing farther toll weakness inwards premarket today.  I croak along to doubtfulness a sustained upside for stocks every bit long every bit nosotros run into continued commodity weakness, which speaks to global economical weakness, especially inwards EM.

*  We tin run into breadth weakness inwards the number of stocks persistently trading nether their lower Bollinger Bands versus those trading higher upward (see below; raw information via Stock Charts).  Note how the difference inwards the cumulative Bollinger residue preceded the drib inwards Oct of 2014.  We are currently seeing quite a massive divergence; at that topographic point are exactly to a greater extent than stocks across the NYSE universe trading with important weakness than with important strength.

*  Next twenty-four hr menses in addition to 3-5 twenty-four hr menses models are neutral, in addition to nosotros croak along to function on the bearish swing dot from yesterday.  Game programme is to croak along to sell bounces that cannot move past times the overnight highs in addition to monitor book flows, specially should nosotros essay out back upward inwards the ES 2070s area.  Downside activity without expansion of downside record activity has been a adept brusque term dot for net turn a profit taking on the brusque side. 

Tuesday, August 18th

*  We had an impressive rally 1 time nosotros held Friday's lows inwards the ES.  My book current mensurate entirely got every bit depression every bit -250 early on inwards the morning, compared with values good below -1000 when we've hitting genuinely oversold levels.  That was a sign that, similar Friday, nosotros exactly were non seeing aggressiveness alongside sellers.  The ensuing rally has turned my adjacent twenty-four hr menses model real modestly bearish in addition to the 3-5 twenty-four hr menses models cause got turned bearish.  We are at levels of pure volatility that cause got been associated with weak adjacent 3-5 twenty-four hr menses returns.  My game programme is to brusque bounces that remain below the recent highs.  On a swing basis, I am warning for indications of to a greater extent than aggressive selling that would cause got us below the recent back upward inwards the 2070s.  That existence said, I'm also watching XLE in addition to XLB carefully for whatsoever indications nosotros could move bottoming inwards the commodity-related sectors.  That would offering of import back upward to stocks on whatsoever push clit back.

*  My adjacent query projection volition move to runway book flows inwards the premarket in addition to also at terminate of day, including the afterward market.  It is non clear to me how the flows inwards these fourth dimension periods mightiness move related to those inwards the adjacent period, but at that topographic point are meaningful flows, especially terminate of day, that could offering clues every bit to the adjacent day's trade.

Monday, August 17th

*  This article goes into depth nearly what I believe to move the greatest surgery work affecting traders. I run into a existent mismatch betwixt how traders recollect nearly chance in addition to how they really larn by their positions. It's also glib to exactly attribute this to "lack of discipline" or failure to follow plans/process.  Quite literally, traders croak caught betwixt 2 imperatives in addition to the inability to reconcile those results inwards the quandary where nosotros programme trades but don't merchandise those plans.

*  We've been seeing a reject inwards stocks making fresh novel highs for the past times several months (see nautical chart above), but we've also seen a drying upward of novel lows during the rangebound trade.  My adjacent twenty-four hr menses in addition to 3-5 twenty-four hr menses models are real modestly bearish in addition to several of my measures are moderately overbought in addition to inwards ranges where nosotros typically run into weakness.  My game programme is selling forcefulness that fails to cause got out overnight highs.

*  Friday's merchandise saw a distinct drying upward of downside volume flows, followed past times consistent though moderate buying flows.  Flows exceeding Fri levels on either side would strike me every bit important inwards establishing administration for early on merchandise this week.  When you lot run into concerted hitting of bids or lifting of offers across the stocks trading the highest volume, you lot know that major marketplace participants are putting uppercase to work.  That wasn't happening on Friday, every bit SPY book was at real depression levels.  Need to run into bear witness of meaningful book flows earlier assuming whatsoever breakout from the recent designing of declining novel lows in addition to novel highs.
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