Friday, August 5, 2011

Other options on wide range days

On days when many bars are the size of a normal day, I look to other options than the five minute chart for trading. I have used 1 minute chart, 4500 tick chart and recently, 20K and 10K volume chart. The 1 minute chart has the advantage of a fixed time before the print of the next bar but often gives poor signals, especially reversal signals. Tick charts have lost some of their relevance since the exchanges changed how they reported tick data and are now similar to volume charts. Although I do not have sufficient experience with any of these, I prefer volume charts slightly over the other two because of fewer bad signals. Today's entries have been off 10K and 20K volume charts and the markers on the charts represent the canonical entries rather than actual entries. (To some extent this is true of every day).

The advantage of volume charts and tick charts is that you can adjust the count to whatever gives you a bar size that you deem acceptable risk. The disadvantage is that bars can print very quickly. During b5 today, some bars on the 4500t and 20K volume chart printed in under a minute, so you have very little time to act and the pressure may force errors.

The second option is to actually trade options on the underlying -- SPY in this case. Option positions do not move as quickly with the underlying as futures do and are best used for swinging positions over a few days, but on large days like today, they become very viable. I personally only trade options after the day has proven to be a large day and shows the signs of a strong reversal. If the close is strong (unlike today where it pulled back before closing) its often a good idea to carry it to the next day except on Fridays since the option loses 2 extra days of time value.


  1. You are ridiculous. ~50 points of profit in one day?! Would it be possible to post up your 10k and 20k charts so we can see what you saw since this is a chart related post?

  2. What do the numbers next to each entry point mean and how are they calculated? Thanks!

  3. What's wrong with 1PB? First pullback, nice reversal bar, and turned out to be a great trade with better than 1 to 1 RR. The odds strongly favored b13 to be a bearish bar.

  4. I am enjoying your analysis each day keep it up. Are you going to the Los Vegas traders expo in November?

  5. Radek,

    1PB was a great trade, I just wasn't able to take it.

  6. Donn,

    I wont be in Las Vegas this year.

  7. Another good post......

    If the bar was of normal size,
    1. Would you consider b7 as 1Rev and buy above it?
    2. would you have bought above the high of the b23 hammer?
    3. b24 is H2. Does a H2 fail in b26 (when low of the b25 bar is taken out) or b29 (when the low of the signal bar is taken out) to take a fH2 trade?