Take The Easy Trades

market regime strategy Feb 15, 2021

In yesterday's email we talked about the price action on S&P500 Emini daily chart and contextualized it by the market regime and the likely scenarios. 

The Double Top setup in a Bear Quiet market regime is a higher probability setup than a double bottom in a Bear Quiet market regime and Bear Volatile regime for that matter. 

The risk range was the best we've seen in weeks and it was a natural place to pull back some, which it did. 

What's great about this trade is that tight risk range allowed for very nice position sizing. Once of the few setups in a while where that was the case, making it quick and easy. Not exactly a common occurrence since this bear vol regime kicked off. 

Now this is where it gets annoying.

Even though it was the smallest risk range trade on that chart in over a month, using our 1% risk model, you could've traded 1 ES Emini contract per every $500,000 in your account. 

Or you could've traded the E-Micro S&P 500 contract and that means that you'd have sold 12 contracts for every $500,000. 

Think about that, 12 EMicros is the equivalent of 1.2 Emini's for every $500,000

So if you took the trade with Emini vs Emicro you'd have left 2/10's or 1/5th of profit on the table. 

Another way to look at it is that if you had a $100k account you wouldn't have been able to take that trade with Emini's but you could've traded 2 EMicros for every $100k in your account at 1% risk.

If you did do 1 EMini contract on a $100k account, you were actually risking 4% on that trade.

The risk reward is outrageously dangerous. 

As for market regimes, we are bouncing around bear volatile and bear quiet, and there is a lot of room to travel in either direction.

Yesterdays easy trade is gone. We are in a world of low probability outcomes, and there's no easy trade. 

This is a great spot to run higher causing a face ripping rally that will make very bear cover their shorts in fear, and every bull jump in with both feet long.

It's also a great spot to punish all the "buy the dippers" who were running victory laps yesterday saying "see I told ya, I'm a genius!"

That's an outcome where we keep punishing dip buyers until they can't handle losing any more, walk away and give up. 

Both equally likely here, neither of which I'm willing to participate in. 

Bitcoin is the only thing I'm looking at trading right now. 

The Weekly chart has put in a nice bottom after dealing with the 10k level price drama and reacting within its appropriate, AND EXPECTED range. I covered this extensively on a video on a pure price action analysis, and we knew exactly what to expect in range whenever 10k is breached with BTC

And finally, the ETF monthly macro rotation strategy exited SPY EWL and XLP longs this month at about break even, after collecting some decent dividends. We'll be rolling that strategy out in the future, still unsure what that will look like, but for now it is the best thing I've built!


PS - I got some more questions on Prop. Yes you can swing trade, day trade, run complex algos, pretty much trade any way you like. 


Stay connected with news and updates!

Join our mailing list to receive the latest news and updates from our team.
Don't worry, your information will not be shared.

We hate SPAM. We will never sell your information, for any reason.