The prediction is that I’ll get a large number of emails by EOD and later tonight after traders survey the damage.
Yes, some things never change. Fighting a strong tape is a time honored tradition among many intra-day traders. Unfortunately.
A few reasons:
Many intra-day traders tend to have a short bias….you know, ‘elevator down and stairs up’…’make more faster on the down moves’.
The fading mind-set….or regression to the mean type thinking.
Probabilities. As someone who uses Market Profile and volume profiling, I’m well aware that the market tends to be rotational about 80% of the time, and makes directional moves about 20% of the time. The traders that cling to probabilities often do really well for a period of time…during rotational times…and when the directional day comes…BAM…all those rotational profits are gone in a heartbeat. This scenario plays itself out ALL the time. Especially when the market makes nice reversals such as today.
The moral of the story here is that one can not trade by probabilities alone. This is one of the reasons why I’ve been invited to speak at an institutional investing/trading conference in Japan in June.
Also, trend days clump together. Three out of the last sessions objectively trended most of the session. Where’s that stat?
Exactly.
“The moral of the story here is that one can not trade by probabilities alone”…unless one is extremely disciplined with stops so as to automatically get out when the 20% directional moves take place? (question not a statement). (excellent post by the way.)
Yes, getting out when wrong is key. My point was that it is easy to wipe out gains quickly when fighting a trend.
Having looked at the market profile for a number of years and participating in various “trading rooms” that preach the profile, I personally believe it is a bunch of crap. Using the market profile will not get you into a good trend trade and quite honestly, I don’t care to burn myself out hitting singles. I want to be on the trend moves and keep my powder dry for the next one. Good luck watching those bell curves.
Well, there is a lot more to MP than the bell curve. But I agree, MP, as all things, have their limitations.
That’s why I also incorporate volume profiling…using volume at price charts.