"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.