Trading: Choppiest environment in 50 years !

So trade it through options. 25d riskies delta hedged maybe? And you hopefully get to lean on a nice axe into the process.

Thoughts? Am I being an idiot? If the relationship Steenbarger saw is really that consistent there's always a way to play the edge. If I were starting out on my own now I'd be looking at end of day type data mining and would probably combine trading spot fx with trading binaries and vanilla options. But I'm not

GJ

Sounds sensible and is definitely sthg that should work quite well, just afraid that I'd need to hire some quants to get that kind of stuff up and running.

;-)

But what also works is just going down to a lower time frame, eg EUR/USD has had some picture book perfect trends as per Technical Analysis 101 today on a 1 minute chart, first a classic shake-out promptly followed by a charming fake-out, but that initial twitchiness was then followed quite decently by a downtrend of lower lows / lower highs, again followed in the afternoon by the reverse at ca 14:00 CET, quite doable provided one doesn't get greedy or stubborn or fall in love with one direction and start wishing for things that aren't there.

In this market you know even less than usually whats going to happen next, but provided one doesn't mind being stopped out a bit and quite regularly at that, but manages to hang on to a trend when you do get one, is quite doable.

Thing I always have to remember is that doing this type of trading you're not looking to make money every day or even every week, but you still have to keep trading to catch those opportunities that do present themselves and that then more than make up for the losses.

But for anyone struggling, either do what GJ says which makes sense, or scroll all the way down to tick or 1 minute charts.

My opinion is that too many people trade and the law of large numbers applies very short-term. The random moves are due to long and shorts split equally in half. This will change when one side drops out broke and the other prevails. Then you get momentum that feeds itself.

Sorry to be so simplistic but I do not need backtests to figure out that 20 year old chaps with fast computers around the world try to become rich trading.

The answer is there are too many players using sophisticated tools. Just wait a few months. Smart money will come in after things calm down.

Ron

Really? I would have thought just get yourself a bloomberg or maybe a bank's pricer if you're not feeling so flush. There's probably even a decent free package out there that can do most of what you'd need I'd guess.

GJ

GJ, I suppose I'm just a big friend of KISS, of keeping it as simple as possible while still getting the desired results.

I think in a way that simple charting - or tape reading as say Livermore called it, only difference being ones depiction of price was numerical while mine is visual - has the advantage that it basically always has and always will work on a net profitable basis as long as there is sufficient movement in markets.

And, on top of that, it's an area where I think you don't have all that much competition, I'd presume that these days not all but definitely most hedge funds for example use some form of data mined correlations and computer driven models they base their trading on.

Another detriment down that road is that you'd be competing with them in an area where their success is already diminishing as too many of them are all doing the same thing largely, and at the same time, and in the same markets.

I think Renaissance Technologies, who definitely showed that mathematical computer driven models can be very successful, started a real catch-me-if-you-can race in the latest big thing, but as always too much competition offering the same gizmo is not good for business.

Finally, those people may exist, but on all these mechanical systems sites like wealthlab or tradestation etc etc, when I was starting out fishing for answers there, I have never seen or heard of a programmer who was able to get a programme to do the same very simple stuff I do visually on a chart...

It was always, well, patterns may look easy, but easy to programme they are not.

So using simple price patterns that worked a hundred years ago and still work today would seem to be an advantage I believe.

But then I must admit that it is years ago that I went looking for answers there.

Are you and your group mainly mining data for inter / intra market relationships etc and using mathematical models in your proprietary trading ?

Or do you also have people just doing basic charting ?

"Five Trading Behaviors I'm Seeing Among Traders Making Money Now

TraderFeed
FRIDAY, OCTOBER 24, 2008

As I'm writing this, the ES futures are lock limit down and my email count is off the charts. Lots of fear, not much greed: fear, not only for one's trading, but for retirement savings and the economy. Most of people's money is tied up in some combination of stocks, bonds, and residential real estate. That means that many, many people are worth 25+% less than they had been just a year or so ago.

It is difficult to insulate those fears and concerns from one's trading. And yet, I do hear from traders who are making money in these markets. There *is* volatility, and there can be opportunity. Here are ten factors that stand out among the traders I talk with who are making money in the current environment:

1) Patience - The ones who are afraid of missing moves, who chase moves as a result, are getting hurt. The ones who wait for clear signals and good reward-to-risk opportunities can take advantage of the volatility. The successful traders aren't afraid of missing a move; they know, in this volatile environment, other opportunities will arise.

2) Position Sizing - Trading smaller when markets are moving more means that one or two losing trades won't knock you out for the day or the week. The successful traders tell me they're making plenty of money with smaller size simply because we're moving triple digits in the Dow just about every day.

3) Resilience - When you're wrong in these markets, you can really be wrong. My first trade yesterday lost over 20 S&P points; I wound up the day solidly in the green. By managing risk, you also manage emotions and can stay in the game. The successful traders are in there, making trades. They get off the canvas when they're wrong and they play defense, even as they look for opportunity.

4) Minimizing Distractions - One thing I noticed is that the successful traders in this environment have taken active measures to protect their personal finances. The less successful ones have been distracted by losses they're incurring outside of trading. It is difficult to focus on trading if you're worried about unemployment or loss of savings; addressing personal security helps maximize focus during trading.

5) Self-Maintenance - It's easy to get run down following markets through the day, every day, and then tracking them overnight and overseas. One troubled trader told me he was living, eating, and breathing trading. That is a risk factor for burnout, lessened concentration, and bad decision making. The successful traders aren't afraid to step away from the screens; once again, they know opportunity is not going to go away.

I'm finding that execution is the better part of success in these times. If you have a good idea, but the timing of your entry is wrong or your position is too large, you're likely to get stopped out at the worst conceivable time. By waiting for markets to put in a seeming high or low, waiting for a bounce or pullback that can't make a new price extreme, and *then* getting into a position, you can minimize the heat you take on trades. That, I'm finding, is half the battle."

LINK:
TraderFeed: Five Trading Behaviors I'm Seeing Among Traders Making Money Now

"Rockier Than 1929

BARRON'S

By STEVEN M. SEARS

Market volatility has outpaced 1987's, and is set to surpass 1929's.

TODAY'S STOCK MARKET IS POISED to surpass 1929's as the most volatile ever.

Goldman Sachs derivatives strategists told clients on Friday that Standard & Poor's 500 three-month realized volatility is now 66%, surpassing levels of the 1987 crash and the economic malaise of the 1930s. Volatility now rests within striking distance of a moment in stock-market history that has defined financial crisis for almost 100 years.

"During 1929, realized volatility peaked at 68%. We will likely pass that number in short order. That will make the current market the highest sustained volatility environment in S&P 500 history," says Goldman's Krag "Buzz" Gregory, an options strategist.



Current options volatility exceeds the experience of everyone trading options. The average peak in volatility during the last nine bear markets since 1950 was 30%, with a high of 64% in 1987. The persistent increase in options volatility is causing havoc for traders taught to believe that options volatility behaves like a rubber band. When stretched to an extreme, volatility snaps back. In this market, the rubber band keeps stretching.

The options market's fear gauge, the Chicago Board Options Exchange's Market Volatility Index (VIX), which is calculated by measuring the implied volatility of certain Standard & Poor's 500 index options expiring in 30 days, set a new all-time closing high of 80.90 on Thursday. This spells trouble for stocks.

VIX at 80 implies a Standard & Poor's 500 average daily move of about 5%.

SOPHISTICATED INVESTORS CAN TRADE INDEX VOLATILITY, but most investors are better served by focusing on a single stock. Best Buy (ticker: BBY), a big electronics retailer, is likely to struggle as consumers curb their purchases of expensive flat-screen televisions, computers and video games.

With the stock at about $17, Best Buy's implied volatility is about 136%, compared with realized volatility of about 101%. Even at such high levels, volatility can still increase, particularly as sales data prompt investors to focus on consumer-discretionary spending, holiday sales and the state of the U.S. economy.

A Goldman Sachs study of 10 years of monthly realized volatility found that electronics retailers are some of the most volatile retail companies in November and December. Average retailers experience high volatility in August and September, a November ebb, and a modest increase for the holidays.

Best Buy recently lowered sales and financial guidance. Circuit City, another big electronic retailer, has sought bankruptcy protection.

Credit analysts are worried about Best Buy's balance sheet. Fitch Ratings revised Best Buy's outlook to negative. Standard & Poor's just lowered the electronic retailer's credit rating to BBB-minus, from BBB, one step above junk-bond status.

Best Buy's stock is down 67% this year, and it could go lower yet."

LINK:
Rockier Than 1929 - Barrons.com

Some very interesting reads.

Aside from the few good Daytraders, Anyone else winning??? And if so, what (basic overview)strategies are working IN THIS environment???