Enough Already!

January 9, 2002
Dave Floyd

Nothing is
more frustrating to a daytrader than narrow, trendless days. We had
our second consecutive one yesterday. Two days and I am already complaining.
However, judging by the emails I received and some of the comments I saw in TradersWire,
I am not alone. But not to worry, narrow ranges are typically followed by
truly spectacular volatility, a dream for intraday traders. The job now is to be
incredible patient and wait for only the best of setups, a sharpshooter if you
will.

To give you an indication just how
much the market has forced me and the other traders in my office to be more
selective, the table below will illustrate:

Number of Trades I make on a typical
day: 30-50

Number of trades I make on a very
volatile day: 50-100+

Number of trades per day recently:
<20

In
yesterday’s piece I had mentioned that I need to see a minimum of at least a
3-point move in the S&P futures in order to execute a good trade. While
there is no way to know whether or not the move will be 3 points or not, the
previous moves will at least give you an indication. But what do I mean by a 3-point
move? If you look at the chart below, specifically Point A
– B, the distance between those lines is roughly 2.5 points. What is
important here is how I measure the move, it is from an area that I consider a
reasonable entry and exit point. The same can be said for Points C
– D. The 3-point range I refer to is simply
the range between the entry and exit points.