Monday, October 29, 2012


We ran into something in the trading service today that is a lesson on several fronts. To protect those that are paying for this I am going to leave the exact market and entry out of the discussion. It is not necessary to make the points that need to be made.

1) Trading thin ( light volume ) markets is dangerous.
2) Your broker matters a great deal
3) When there are a lot of orders in one place shenanigans can happen
4) There are things that can be done to deal with these problems

First, trading thin markets is attractive to some people because they generally have smaller stops in terms of dollars at risk. Many people just getting started get lured into thinking they are less dangerous. They are more dangerous due to this problem. When you study charts you look at where you would have bought or sold and assume in real time you will get those same prices. In most cases that is true but there are exceptions. There is no way of knowing when doing research when or where slippage will occur. One of the aspects of having a trading service is that at times you have to have the orders a little different than is ideal because you don't want to be the market.

Our group should not be large enough to have a significant impact but there is always the possibility of a traitor. Please if you are paying for this service do not give it away or resell it to someone else. This is strictly prohibited and if we find out we will cancel your access. You have gotten such incredible value for the money you are spending I would hope that would be enough. Please be good to your fellow man, doing this type of thing is hurting others. I am suspicious that this has happened because I can't recall the last time on a regular day in this market I saw opening action like this. It appears to me that our orders created this.

Second, the broker you use matters a great deal in fast market conditions. The large majority of us got 35 ticks slippage which is manageable. There are a couple that received much worse fills and it was caused by the broker they use. If you are using a broker that holds stop orders on their servers and submits them as market orders once the price is hit, you are going to get clobbered in situations like this. Make sure the broker you use submits the orders to the exchange when you submit them and does not hold them. The firm who gave the bad fills today holds them and that is why I left them many years ago vowing never to return. They screwed me on a few fills and I felt it was very dangerous to stay with them. I have to be careful about saying things on the web so I am leaving the name of this firm out of the text. I am using TD Ameritrade and they are just great and gave me the fill with 35 ticks of slippage

If anyone has any questions about their broker call them and ask how the stops are submitted. If you get an answer that is not satisfactory leave. If you are with this one brokerage I would suggest leaving they will never get this right if they haven't after all the years since I left. In addition to this their customer service is basically Helen with in beard in the Ukraine like the Mastercard commercials.

Third, having a batch of orders in one place is asking for some trouble in these thin markets so we are going to change how we place them going forward when we trade a light volume market. This leads to the fourth topic above. We are going to be using stop limits. In that case today we would have been filled but at our price and not with the slippage. I think this fill was very suspicious in many ways but we can avoid this with stop limits so that is what we are going to do.

Here is an actual trade we just closed out in the Swing Service, Cattle. This was not a great trade by any stretch of the imagination but I wanted to show it to make a couple of points.

We got short on the break where indicated and wound up exiting today on the open. This is kind of a schizo market to begin with and we noticed we were getting into a support level. We also were confronted with the weird market condition of the weather and were not quite sure what effect that was going to have, so we wanted to get out of some of the trades to reduce our risk a little. We got a profit of a smidge over $400 per contract here so it was better than nothing.

The point to be made here is basically we got a resumption of a down trend here after a fairly big pullback against the down trend. You can also see one of our indicators was going down supporting the trade. I have always felt that when confronted with something like this storm where it is almost unprecedented it is best to reduce your risk until things get back to normal. We still have some other trades on but we are less this one and decided not to do any new ones until things return to normal.

The Buy setup in the Vix still has not been confirmed by my second filter and also no prior days high has been taken out. As a result it is nothing other than a VIX buy setup at this point with no trigger for an entry.

Here we have the setup again with a close above the upper Bollinger Band and then followed by a close in the Vix below the open. Of the last 20 of these setups 12 have been winners and 9 losers so this is nothing to set the world on fire but it is an edge. I like to buy on strength and sell on weakness so I would not go long until a prior high in the price went which has not happened yet. Due to our unique situation with just electronic trading only I would be hesitant to take a trade here. However, the setup is here and if today's high were taken out tomorrow it would represent a pretty good reversal since we are sharply down as I type this. It might be worth a shot.


Things are pretty backed up with this situation. I could not get anyone on the phone today until I went through Robbins trading. I think you will be getting called by brokers to be hit up for your business. So far I have been impressed with what they have to offer technology wise but beyond that the jury is still out. I think the money will be available to withdraw or trade within a few days so be patient.

There are no new updates that I have found on anything else. I did hear a rumor that a second distribution might be coming in 3 weeks but I highly doubt that. I think the next step is what the judge rules on Forex and have no idea when that will be.

If you are in the trading service sign up to follow my Twitter so you can get updates during the day. I have to be somewhat non-specific because anyone can read it and I can't give away the trades there but I am twitting when we are filled on things just saying filled on a new trade etc.. It is up to you.

It has been recommended to us that we do a web site redesign by a consultant so look for that coming soon. Keep in mind when viewing our web site that it was created by yours truly for free due to the shortage of money from the PFG theft. As a result it is not exactly what I would like it to be but is serviceable.

Lets look to pick it back up after the storms and wish everyone well on the East Coast.

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