Daily Recap 7-31-2013: Volatility is King

Daily Recap: It seems volatility is king these days, the morning started with a triggering and confirmation of the long signals only to turn back down and signal a close of the 60 min long with minimal profit, just to turn back up and make a new high (which I twitted about), and afterwards to dive back down into the close, crazy day with high volatility.

In the last 5 days SPY has moved sideways with high volatility intra-day but on a daily basis there was very little movement. The system performs less than expected in this kind of circumstances mainly because it is tuned to 60 and 120 min intervals in a trending market while in the last days the change time frame is higher while the overall movement is minimal. The market should be exiting this phase soon and profits should sore back. In any case this situation leads to a high number of trades, I counted 6 trades in the last 6 days, a high number for a swing based system which leads me to:

mantra #3 – Do not Over Trade

Despite what you read or feel, the world is not going to end tomorrow, you do not have to take every trade, you can pick and choose your trades. Too many trades will just make your broker richer, but will not help you. Choose the best trades. The odds that the market is going to crash are minimal, the odds that the market is going to make an 60+ points move in a day are a little better but still slim, there will always be another good trade around the corner, do not feel pressured to take every trade.

The strong movement downwards at the close has triggered a short signal on the 60 min interval, with the high volatility there is an increase of “fake” triggers or of reversal patterns (depends how you look at it) so you may want to wait for a confirmation before trading it (up to you).

Battle Plan for the 8/1/2013

2013-07-31-End of day

60 min interval short below 168.56 on SPY

120 min Stop Loss below 167.95 on SPY

* Stop loss lines should be triggered if there is an interval close above them (i.e. 60 min or 120 min ), they are published in the daily blog and updated during trading hours on twitter.

* Take profit lines should be triggered immediately when crossed, they are usually issued during the trading day on twitter.

* Entry signals should be triggered when crossed, but take into account that until there is a confirmation (i.e. close of the interval across the entry signal) , the signal can become a reversal signal.

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