Archive | January, 2011

Day’s You Should NOT be Trading

5 Jan

Being a trader doesn’t mean you MUST trade every single day. You’ll probably find the bulk of your trades take places on Tuesday, Wednesday, and Thursday and that when you enter your first trade late in the day it tends to not go so well. There is a reason for this. Look to the first 30-min bar of the ES for clues.

Below is a list of day’s to watch out for when trading. You’re better off taking the day off and doing something more enjoyable than watching the market go nowhere.

Day’s NOT to trade:

Future’s Rollover Thursday (primarily if you’re trading futures)

Future’s rollover takes place on the second Thursday of every third month (March, June, September, & December). This day is dangerous because volume moves from the current contract month to the next month (new front month) So, for example, Dec. 9, 2010 was our last futures rollover. Volume transferred from the December contract to the March contract, thus allowing for a less liquid market in both contracts. The days between rollover Thursday and options X (the following Friday) we see two different sets of prices making it harder for technical traders to trade. Typically moving to the new current month is the safest way to trade during this time (i.e. on Dec 10th move to the March contract).

Half Day Holiday’s

This includes day’s such as Black Friday. These day’s will be low volume and the pit will be extremely thin, very low liquidity.

Bank Holiday’s

A couple times during the year we have a bank holiday and the markets are open. As you can probably tell the them to day’s to stay away from, this is another low liquidity trading day and should be avoided.

Back in the Saddle Again

4 Jan

SPY Monthly

Today kicked off a great start to 2011. Typically we don’t see the majority of volume return until after the MJK Jr. holiday, but a good way to gauge the day ahead is to look at the first 30-min bar of the S&P Cash Session (9:30-10:30 AM EST). Over 150,000 contracts traded is a signal of good participation, 200,000+ is great participation and a very liquid market, anything below 150,000 is cautionary and below 100,000 is a no trade day.

For those who feel they missed the bullish move of fall 2010, no need to rush into loading up here. As the saying goes, “When the VIX is low, lookout below.” Let the market retrace before contributing to new long term positions. This was a pretty interesting article on the current economic state and the fact that we may be in the Eye of the Storm, so to speak.