Monday, March 26, 2012


                                       Thank You Weimar Ben

After a relaxing weekend of pulling the wings off insects and settling down from my dealer induced frenzy of last week, I came into today’s trade bullish as the algorithm was in “buy mode”.

These last couple of months the U.S. session of trading has been almost demonic in its moves. We have gotten some of the most violent spikes/drops the market has seen since electronic trading began about a decade ago. Today was no different.

Ok, Weimar Ben did his part by promising to continue to print money ad infinitum nauseum, but who didn’t already know this? What choice does he have? Let’s face it; the guy is desperate to get Chalky Soetero reelected, because if he isn’t, the Bernank might have some career problems.

“Hey, who’s up for printing more money??”

“RISK ON!!!!!!!”

There just isn’t anything you can do, from a trading standpoint, to accurately assess $20 + moves within a matter of minutes. Sometimes you get a part of it, most of the time you don’t. Try making a career out of buying rallies and selling breaks and let me know how that turns out.

What the algorithm attempts to do is fade the minor trend inside the bigger intermediate trend.

It’s not that the algorithm can’t deal with spikes/drops; it can and does very effectively. The problem comes from extremely fast and large spikes/drops, which skew the momentum data.

As a professional trader, there are a number of factors that always have to be at the forefront of your mind during the day; the range and where we are at in it, and the possibility of reversal and double reversal days. Add to this the algorithm and you have a very effective trading method.

When market spikes/drops go through the algorithm exhaustion levels and exceed daily range expectations, you have to be extremely careful in your approach. What we have seen today is typical of the last couple of months of trading.

Sure, just looking at the range of the day and you would think it was pretty easy being long today and making money. A closer look at the action tells a different story. I still made a few pennies today, but again the very fast and large spikes/drops play havoc with the algorithm.

Add to this the sheer panic of those caught on the other side [today the shorts] and you are dealing with “the crazy people”; and for my money the dealers look good next to them.

Have a good day everyone.


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