No trading today but I'm still keeping an eye on ES. Price is being accepted below 4000 area now and tempting to short but after yesterday's V shaped run and the unusual daily price action, I decided that it's best to wait. There is another reason and that's transition of Market condition.

For me, the line in the sand is 200 DMA. If we close below that level, then my strategy and mindset changes from tomorrow. Infact, THE core foundation of my trading philosophy is based on this pricinciple of 'seasons'. When the market condition or 'season' changes, the market participant's behaviour changes. (Season is defined by MA, VIX and ATR). My position size will adjust (usually reduce) to accomodate elevated VIX and increased price range and volatility. Hence I sometimes skip during this transition days to get more clarity.

Short week made shorter by decision to stay out on Friday.

Nothing spectacular. Just keeping my winners larger than my losers. That's all.


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2023 is so far choppy for me but at-least in green now.
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Monday Feb 27, 2023 Prep.

Price closed BELOW 20 and 200 DMA last friday in a high VIX and ATR regime. That is officially 'winter' season' in my trading strategy.

My signals are overwhelmingly bullish, IF we open above 4000 @ RTH.

I'm tweaking my execution process a little bit in March. All my RTH open entries will be 100 SPY and I will go flat with End of Day Order. All scale-in and scale-out will be in MES.

The SPY trades will test the robustness of my signals. MES trades will test my timing and execution skills as a trader. Will reveiw the results after 50 days.

Long SPY 100 @ RTH open.

However, my limit buy for MES just below 4000 was not filled. Came pretty close to 3998. Another reminder of the difficulty in timing the market for better entry.

Currently the trade is looking good. Price hovering around 4020 with the potential for another 20 pts, perhaps upto 4045.

If we go south and revisit 4000, then we may be looking at gap closure upto 3975.

My long signal did not work out. Small loss but it's not my fault

Early on after RTH open, it seemed like the bullish opening would continue and we had a 20 pts run up to 4025. But sellers had other plans and they managed to close the gap down to 3975.

I did buy MES below 4000 but got out breakeven. SPY stayed till EOD and hence a loss. Overall, I like this twin trading style. Fixed SPY from open to close and then discretionary MES trading.

Tuesday Feb 28 2023 prep.

My usual signals are mixed today with no clear edge.

However, the data for 200 DMA crossover days to the upside is bearish. Hence, I'm leaning towards shorts today. Options data suggest 4000 is a strong magnet and hence I may have to face a choppy day. That's ok as I'm not planning to dance around ES today. Just get in @RTH open and watch. till the end.

Short 100 SPY from RTH open.

As expected, price action has been choppy for the 1st hour of trading so far.

I added MES short @ 3983. Not a great location as it's bang in the middle of the thick volume profile and close to vpoc. However, I felt the risk reward is skewed towards short. If we make new HOD, then I'm out @ 93 for 10 pts loss. If we make new LOD, then I will hang on to it for as long as I can. Ideally, until 53 for 30 pts. Let's see.

Stop limit Orders.

Sometimes I think they are the best thing since sliced bread. Other times, I am worried that they are deadly and I am playing with fire.

After a day like today, I think I will vote for the former.

I know stop orders are quite popular and sometimes controversial but I'm not sure how often other traders use stop limit SL order. I may be wrong but assume that most traders use it reduce the slippage in a fast or illiquid market. However, I use it to reduce my loss. An example may explain it better.

I was short early @ 3983. My mental stop level was 3993 i.e 10 pts away. However, instead of stopping out and taking the loss, I used a SL order where my stop was 3993 limit price was 3885. Once stop price is reached my limit order will be triggered . Today it worked well and I got out @ 3885, during the retrace, and lost 2 pts instead of 10.

Obviously the danger is that price may NOT retreat to my limit level and I may end up with a much bigger loss than 10 pts. However, if I use it appropriately on a low range choppy day like today, where stop hunting is more obvious, this strategy works really well in harm reduction.

Not a recommondation but an encouragment to think out of the box.

Narcissus 

Not a recommondation but an encouragment to think out of the box.

Very interesting post - thanks. Something I need to think more about, too.

After sizeable MAE, I ended up in green.

Miraculous? Perhaps not, when I stay disciplined.