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Michael Filighera
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Michael's history with financial markets dates back to 1979 on the Pacific Stock Exchange Options trading floor. Michael has traded in the US, UK (London Traded Options Market), Netherlands (Amsterdam's European Options Exchange), and Germany (DTB). He is also an internationally published... More
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Logical Signals
  • Nothing Goes Straight Up Or Down, Following The Bouncing $NQ 0 comments
    Apr 14, 2014 11:23 PM

    The bulls and the bears went at it again on Monday, with the media giving today's fight over to the bulls. I dare say that the reality of today's trading was more a function of running algorithms than someone being bullish or bearish. Don't get me wrong I still believe there is a certain amount of bullish or bearish opinion that helps or hinders a move, but the main driving force behind the moves remains algorithms. Algorithmic traders number in the thousands and are often day traders, options traders, arbitrage traders, or futures traders. Scattered around the global financial centers the ball gets tossed around the world by the biggest players in a myriad of markets. Traders react to signals generated by a growing list of indicators such as momentum and moving average oscillators, large options trades, or if the bonds are higher, if the dollar is lower, if gold is up or down and so forth. There are so many variations of and on signals in force at any given moment that it is simply not accurate to say that the market is bullish or bearish.

    It felt on Monday that the traders may have come out of Friday's options expiration shorter than when they went in and expected, (hoped, prayed) for a "crash" like downslide. It got tiresome listening to all the moaning and complaining from the shorts, but eventually they get a breath of air just before the next whine-fest began as prices got 'goosed' higher into the closing bell. As a suggestion in avoiding missing some solid winners, (the NQ popped $30 in the last 30 minutes on Monday), when the whine-fest begins either hit mute, hang-up or turn off the live feed.

    As a position trader I feel their pain. Becoming fixated on a fast sinking PnL leaves a very negative pall over oneself. I've been there and done that! And don't be fooled even the deepest pockets get noticed when a position is going against them. As an ex-market maker I can attest to the "jonesing" like feeling that comes up when you don't have several options positions in play. That quick jump to the scan tab on your TOS platform sends a quick jolt of endorphins to your brain, but then you hear an audible from the Eagle - 'long set up NQ' and noticing that the ATR trail indicator has confirmed it as you hear 'long NQ'. You take the offer buying a two lot as Trade Manager takes over the trade's risk management as the ATR guides it to a $22 winner. Now for the honest part - the Eagle and the ATR are a fine combination in capturing mega winners. In all fairness not every signal generated is a winner, but the winners dwarf the losing trades when the above combo is in sync. Ok, here's the challenge - if you want to become a successful trader you will have to become engaged and trade. This is one reason why I adhere to and have much success with 'trading often and trading small'. You don't need to have a pissing contest with the other traders behind the bid/ask on your screen. Everyone is anonymous and computers don't care why anybody is buying or selling. Here again don't get me wrong 'size is something' and egos can and often do expand and contract with how much you got and how long you can sustain a losing position. Trade will still go to volume more often than not so no need to play the 'tough buy' and get taken out of the game. I for one enjoy the game too much to risk that - I enjoy trading and following the markets. I totally enjoy the luxury of not having to get all maxed out because the market is sliding lower or surging higher. I enjoy having the ability to jump on board and either trade it for the intraday trend (several minutes to an hour or more) or the intraday trend swing (several seconds to several minutes).

    Having the right tools does make all the difference in achieving that. I will continue to say ' if you can't beat them - join them' - and I don't want anybody else to beat them either. Let's face it whether or not the broader indexes belong trading at the levels they are just doesn't factor into my equation from the opening bell to the closing bell. Having said that please don't play the fool and not believe you don't need to pay attention - there are always binary events lurking and some build up much more anticipatory momentum than others and produce serious explosions of volume and direction. Not having to defend a position and having the correct signal generator and risk management tools in place is awesome - and that you can take to the bank.

    Check out today's chart of the $NQ_F through the eye of the Eagle for Monday, April 14, 2014.

    (click to enlarge)

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: Index futures
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