Any Believers In The House Yet?

We’ve
got tight ranges and miniscule volume so far on this
summer Monday morning, so scalps thus far have been the theme for
the day. The three-minute 15-period Moving Average (MA) thus far
has been critical support and a minor breakdown at 10:30 a.m. as
mentioned live on TradersWire Interactive provided $0.40 potential
on the MA crossover short. In light of the very low liquidity, it
is imperative for the intraday short-term trader to be locking in
profits before the supply dries up (longs exiting into
buyers, shorts exiting into sellers), unless one has a longer time
horizon.

I’m expecting relatively tight ranges today and as we head into
Wednesday’s FOMC meeting, and will be trading cautiously with
light shares using the three-minute
MA as my immediate guide and
support for whatever trend is in place.

Why
the Qs?

I mentioned last week that I recently migrated from trading stocks
intraday to trading the Qs, largely as the result of stock
decimalization that reduced spreads to virtually nothing. The
decision to switch was driven by both a personal “earnings
warning” (more on that in a bit) and recognition that I
needed to now use time as more of an ally in the new “penny
for your thoughts” world, which I felt could be better done
with acceptable risk by trading an overall market. While both the
Qs and stocks now trade in decimals, general markets tend to move
more fluidly, unencumbered by obstacles such as hidden market
maker (and dreaded INCA) supply and demand. What that basically
means is no more screaming “Move
it GSCO!” at your monitor
when you correctly position for a futures spike and your stock
just sits there. Add growing liquidity via Island and being able
to legally short on downticks, and you have an appetizing recipe.

Now about that earnings warning. With all of the recent market
maker earnings warnings, layoffs, and downgrades resulting from
disappearing spreads, it’s no surprise that this intraday trader
and many of my professional peers also experienced a drop in
performance this spring. As I continually gauge my own performance
using consistency and net profitability measures, both indicators
raised a red
flag earlier this year:

This
one was even more glaring …

That
spring drop makes a Red Sox August swoon look like a rally (BoSox
fans do tend to get a bit sarcastic).  Yet the more one
trades, the more one realizes trading is a never-ending
reinvention of one’s self as we’re continually tested with
changing market conditions and rules.  As is said, “Fool
me once, shame on you … fool me twice, shame on me.” 
We can wither, or we can adapt.

P.S. Thanks
for all of the positive feedback to the new Q series.  I am
humbled and overwhelmed by the initial reaction, and will do all I
can to keep the content educational and enjoyable. Thanks again.