Disadvantage of Intra Day Trading

Wow, this morning was pretty rough to deal with. I got a couple of PM regarding this issue, so I think I should try to tackle it and explain what I am dealing with and apparently others as well.

The option prices are changing very quickly. It feels as if the marketmakers or whoever is changing the price to headfake everyone. Well, I fall for the headfake almost everytime.

This is what I am experiencing and have learned to deal with it........

This morning is a very good example. I bought Puts on CF at about 9:56 (off 13)-not a great candle, but I saw signs of continuation. The DOW seemed to have starting moving fairly well in my direction (going down). Well, as CF continued to drop a few pennies, the trade was going in my direction and my account started to reflect. I was starting to lose confidence in the trade because the market paused and started going against me. Well, I got a quick headfake when the painting of a white candle started to form. I weathered the storm, but my position was no longer green. I have not lost a trade in long time, so this was a little uncommon. Well, CF continued to go down for a couple of more bars, but the market fell within my 20 point rule. The issue is, after the headfake (white candle painted with the market movement), my option price had to change drastically because the stock started back to drop, but my account did not reflect the same level movement as it did before the "headfake".

I dealt with this in practice before, and I do not have a formal way of dealing with it, but I watch Money Flow very closely during this window of time. When MF starts to turn, you better watch your position carefully because I have noticed the value of the trade will usually change ( or option price). My approach is this, I dive in and catch the charge up or down shortly after amateur hour. When I see signs of the trade reversing (candles on small charts, MF, ADX, stalling in movement, forming of dojis), I get out quickly. This is the big point I am trying to make.... If you allow market makers or whoever detect that there is a strong possibility that this trend will soon head in the opposite direction, the option price changes, and you are on the otherside. I have seen my account reflect an additional $600, and the candles are stagnant, but all of a sudden, another sideways candle paint, and BAM! your account is not valued at $400 and the only thing you saw was a candle painted beside another one. If you continue to stay in the position, you will see your account drop again. I have seen my position change by nearly $200 before I could get to the keys to sell the position. Now, I see why Gary does not have pleasant things to say about market makers. As I stated earlier, I do not know all the ins an outs of why these things happen, but I know if I stay in 5 minutes too long, I can go from being solid in the green to being solid in the red. This is why sometimes I am in for 20 minutes and out.

I know that was a lot of mumbo jumbo, but I know what I was trying to say- ha ha! Others can problem present in a language that make more sense.

You make sense. Market Makers have been busy that is for sure.

I noted CF gapped down this morning. Now for something interesting about gaps....

Take your 10 "E" chart then mark the candle body bottom @ 15:50 on 5/14 with a line ray
On the same chart mark the top of the candle on the open 5/15 with a ray line
Using just the bodies mark the center distance from 5/14 - 5/15 with a ray line. IGNORE THE WICKS!!!

Now take the line on the other side of your ray and draw a line from the candle bottom from 5/14 to the candle top on 5/15. Clone that line and put the top of that cloned line next to the top of the candle open of 5/15. That cloned line should go all the way down to where the candles on the 10 chart bottomed. The distance of the gap is the distance of the reversal of the stock. It doesn't prove true on the 21 E chart. It is close but only measures the distance of the open candle on the 21.

I don't know what that means yet...but I know it means something. As I continue to study I hope I will learn. I just think it is very interesting.