Introduction
Week 07 was a quiet one. While price action was there, low volume severely limited trading opportunities.
I took just two trades and scratched both of them for approximately -0.5R each. While these were losses, I followed the rules of the System, which is honestly, a very solid success metric and therefore a win in itself for me.
Speaking of the System, this week’s entry introduces a significant change to the structure of The Journal. It’s more systematic, more analytical, and I hope, more genuinely useful (otherwise, what’s the point me even doing this?).
To find out more, check out the READ ME.
I’m proud to share it, so please read on.
The Numbers
The scorecard has been updated so that moving forward, key metrics are compared against the System (all time). Read the...read me for an in-depth explainer.
Last Week → This Week
Week 06 saw no updates or changes being made to System 1.0.
The main thing I wanted to carry forward was the calm mindset, sense of consistency and adherence to the overall rules with clean trades continuing to build the sample size.
The market
Nice ranges, but low volume effectively made it untradable for the most part.
I was excited to trade this week because the economic calendar was completely clear.
No impactful figures being released, no FOMC announcements, no one ‘testifying’. Just the market doing its thing.
In theory, this should have meant clean-ish price action (well, as clean as it gets…) and tradable conditions.
Price established a few decent ranges throughout the week, which should have been great for my mean-reversion setups. The ranges were clean, with price touching and reacting from both the high and low ends of the range. But the key ingredient was always missing: volume.
The key ingredient was always missing: volume.
Volume was thin for the entire week. Whenever price tagged one of my levels of interest, I saw a reaction, but the moves were mostly on such low volume that my trade conditions weren’t met.
In the end I took just two trades, both of which occurred during the highest-volume periods for the week, but volume was still very low compared with previous trading weeks.
I scratched both of them for -0.5R as they failed to follow my expected trade timings. Once again, there simply wasn’t enough volume for anything meaningful to happen.
The biggest and most exciting opportunity came just before New York open on Friday which brought about…
The Trade Not Taken
The Setup
In the lead-up to New York open on Friday, price approached the lower boundary of my marked range. More importantly, volume started to increase and was showing levels which I am interested in trading (in the range of $100-200M).
As I watched price break through the range low, I began looking for a continuation short setup.
All the order-flow data was aligned:
| Data | Observation |
|---|---|
| Price | Decreasing + at key level |
| Delta | Very negative |
| Open Interest | Increasing |
| Liquidation | Spike observed |
These were signs of an A+ set continuation setup. So why didn’t I take the trade?
The Trading Number.
This week’s trading number was time.
No open positions 15 minutes before or after New York open.
System 1.0 states that there must be no open positions 15 minutes before or after New York open. Basically, I cannot hold a trading positions between 9:15am and 9:45am Eastern Time.
New York open It is a known known liquidity event. Price could dump hard(er) just as quickly and easily as it could rip straight up. In short, it introduces a level of randomness that currently removes any demonstrable edge the System has.
By not trading during this time, I remove the downside impact of randomness on the System’s expected value.
The Outcome
At New York open, BTC continued to drop. From the moment my alerts when off, price had fallen about 1.4% and swept the liquidity level I would have targeted.
At this point, the next step was to wait for range to form. Given it was late on a Friday night my time, I stepped away and called it week.
Sure I missed out on a potential 2R trade, but I followed the rules of the System.
And for now, that is what matters most.
The Audit + Next week
Right now the 30 minute trade embargo surrounding New York open is a hard rule.
But it doesn’t mean it has to stay that way, especially if trading during this period could increase the System’s overall expectancy (which is the goal).
So next week I am going to start recording set ups that occur during my no-trade windows to see what could be. I won’t trade them, but I’ll observe to see what could have been.
The objective is to determine whether my existing setups can continue working during this period.
Any who knows? Perhaps this will lead to a slightly more aggressive System 2.0, one that could produce a higher trade expectancy and trade during a time I once thought was untradable.
The possibilities…
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