This is a daily chart of Feb 13 Silver. 1703 was the high on 1/23/13 That’s the first part of the T-Line I am looking at. The second hit is the August high at 1428. We hit it 3 more times on October 28,29 and 30 right at the 1360 level.
Every rally has a short half-life. About a month ago, I wrote two or 3 entries about making a stand at 1200 we settled 4 times below that key in late December.
we were stopped out of longs several times. New years eve, we posted a record high in the Dow and co-incidentally, spike lower down to 1181. That was 19 bucks below the key 1200 level, and it looked like we were headed to 1150.
As what typically happens in volatile market turns, we spun around and began a 100 dollar rally up to 1280. We just gave back 50% of that with today’s low below 12.40.
Trading futures in this environment requires perfect timing, and with HFT out there pushing the markets around, we see daily ranges of 30 dollars . That 1000 bucks swing on one mini contract. A mini contract, lol.
Now, more than ever, I’d use options in this environment, because you won’t get stopped out on a violent move, which, in my opinion, has more to do with HFT shenanigans rather than price discovery.
Bottom line, to trade futures in this market, you need to keep your bets small and your stops wide. Assume that you are going to risk 2K on an idea. Also accept the fact that there is a good chance if you have resting stop orders on the screen, these worm programs will go seek you out.
Its just the way electronic trading has evolved in futures.
That’s why I like long options more and more as a spec strategy.