Change is the Only Constant

If you like day trading the rush of volatility and reversals in the first and last 15 minutes of each day, then by all means surf that tsunami. For the most part, we prefer to sit on the shore and watch.

Since the death of Lehman last year, the market has shown increased volume and volatility in the first and last half hour of trading. It seems there is no longer a major appetite to hold positions over night. Also contributing to the increased open/close volatility is the volume of HFT (High Frequency Trading) algos being discussed as of late.

Being slow to adapt to market changes can be one of the biggest hurdles we face as a trader.

Looking back the last two months, it became obvious that the first 30 minutes were hurting our end of day performance. Most of the big losers were trades bought or shorted in the first 15 minutes of our live service. The tremendous whipsaw action in this time frame was not only costing us money, but also the opportunity cost of nursing losing positions instead of hunting for better setups. Having to play catchup all day and churn more commissions has been the result of starting too early in this market.

It's been 8 days in a row of starting green and remaining green since making a conscious effort to not trade in the first 25-30 minutes each day. With the exception of one small position here and there, the first 30 minutes have become the "observation" period and avoiding that period has helped the bottom line tremendously. This example is subjective and the point is to look within your own performance to find areas that need improvement or tweaking. Maybe it's the lunch hour that is killing your method?

500 Prop Traders in China.

last year Andy and I were contracted to travel to China and train a small group of traders once a month. They only trade US markets so they are all night dwellers. This is a video clip taken from my first visit in March 08. For those that like to scalp stocks with low liquidity, these are many of the traders you are competing against. They are mostly Econ majors chosen from local universities. Foreign prop shops are increasingly sprouting up across the globe.

Live Trading in UNG DYN and DRYS

Don't forget to watch in HQ video

3 Stocks to watch

CELG is defending that 44.00 pivot level going back 3 months. A break above today's high of 44.68 on good volume may have legs.

Like the big volume today in LBTYA. A "Hammer" candle with a close above the 10 DMA is worth watching above 14.25

EBAY was looking like a nice wedge setting up for another burst to the upside. A move above 18.00 on volume would be ideal. However, Cramer has mentioned this stock and it will most likely gap up tomorrow. Still watching..

3 Software Stocks on the Radar

Here are 3 software companies looking to make a move above some key resistance levels, The charts should speak for themselves. For a swing trade idea, look for a close above the yellow line to confirm the move. INTU SYMC CHKP

"Happy Hour" Trading

In case you haven't noticed, the last 30 minutes of the day lately has been almost a joke in terms of volatility. As a day trader, you have to be on your toes in periods like this. Take your profits quick before they reverse the truck and back up over you.

I have to believe after reading a few smart blogs that the 3x ETF's are mostly to blame as intraday vehicles. The sudden increase in volume over the last 6 months in these triples also coincides with the super volatility in the last hour. As traders use the clock to get out of these 3x positions, it wreaks havoc on the programs trying to keep up. Second only to the last half hour in volatility is the first half hour. Take a look at the 5 minute SPY bars during the first 30 minutes, they are wild and wick-ed.

These 3x ETFs must really be pushing the arbitrage algorithms around as big orders are trying to get the best fills. Rather than trying to make sense of this "Battle of the Bots and Arbs" period each day, we have been doing much more hand sitting during the 9:30-9:50 time and the 3:30-4:00 time. Standing aside has paid off during this period of the day. Just going back and looking at the worst trade of the day, many times it is the first trade of the day; bought too soon and a heavy reversal bar shakes us out. So avoiding that head fake period has helped the bottom line last 2 months.

These crazy periods of the trading day remind me of when I tried to cross a busy intersection in Shen Yang China.