Trading is adapting. With market conditions constantly changing, one must be able to adjust accordingly. From a sell the rip night and morning to a vicious rally, and we end up back where we closed the previous day.
Thanks Smash. Not sure what I like more... The design language or thorough analysis. One question about discipline Smash. Do you only wait for confluence/confirmation from VIX or any other indicators? Never price action only?
The ES/VIX correlation is a powerful concept that I use very often, but it's not the only one. Orderflow is my primary source of confirmation. For example, today's low in C-period had very visual aggressive buying which could have been a long setup despite VIX confirming weakness. I would maybe not count on a full on reversal, but just for a trade.
Having contextual awareness just adds another layer of confidence, which I find very useful. I have a few very simple rules for when not to engage in trades, which I've demonstrated with the yellow levels combined with VIX. This approach shuts down the emotional aspect and keeps me out of trouble most of the time.
Yellow levels cleared with VIX not confirming is an environment where I simply don't chase price, no matter the outcome. I know that reversals can emerge so I'm ready to take action on any potential failures.
Yellow levels cleared with VIX confirming is an environment where I can get away with chasing but more importantly, it signals that fading the move should be avoided.
As I've mentioned before, I'm always cautious outside of the yellow levels regardless of VIX.
There is a great satisfaction in recognizing a contextually unfavorable area to short, and observing shorts piling on without being able to push the price down, leading to a reversal. Today's session provided a good illustration of this. Initially, shorting was the correct strategy, but once the price rose above 3996 with the VIX dropping, that was no longer the case. The big selling effort at the gap-fill got heavily squeezed. I'm confident that many novice traders who initially had success on the short side today, lost it all during the afternoon session by using the same strategy that had worked before, without realizing the change in market conditions.
I have a few other concepts for tracking the correlation between ES and other indices, but that's a topic for another discussion.
Thanks for such a detailed response. Completely understand the idea of contextual awareness as you’ve explained. “Contextually unfavorable” will be a welcomed term for my journal entries now. 😆
Thanks for this detailed response Smash. Invaluable stuff. I like your concept of daily targets and not chasing outside of these. I'm curious about how you determine your daily ranges. I've tried to figure it out and simply can't. I know one method for daily ranges is previous day range +/- 10%, but you seem to be using another method. If you could share your thoughts on this it would be a great help. I need to add something like this to keep myself out of trouble as well. Thanks again!
I’ve learned more from you about market structure and VIX correlation in the last week than I’ve learned in 6 months from others. Really appreciate this smash!
Thanks Smash for your daily analysis and detailed inputs, learning a lot from you. Could I ask you about how you calculate the VIX, ES correlation levels? I used to trade VIX longs and shorts a lot last year, especially at the extremes, but with the influx of 0DTE options, VIX hasn't been moving much as it used to. It's all confusing now.
amazing work
Thanks Smash. Not sure what I like more... The design language or thorough analysis. One question about discipline Smash. Do you only wait for confluence/confirmation from VIX or any other indicators? Never price action only?
The ES/VIX correlation is a powerful concept that I use very often, but it's not the only one. Orderflow is my primary source of confirmation. For example, today's low in C-period had very visual aggressive buying which could have been a long setup despite VIX confirming weakness. I would maybe not count on a full on reversal, but just for a trade.
Having contextual awareness just adds another layer of confidence, which I find very useful. I have a few very simple rules for when not to engage in trades, which I've demonstrated with the yellow levels combined with VIX. This approach shuts down the emotional aspect and keeps me out of trouble most of the time.
Yellow levels cleared with VIX not confirming is an environment where I simply don't chase price, no matter the outcome. I know that reversals can emerge so I'm ready to take action on any potential failures.
Yellow levels cleared with VIX confirming is an environment where I can get away with chasing but more importantly, it signals that fading the move should be avoided.
As I've mentioned before, I'm always cautious outside of the yellow levels regardless of VIX.
There is a great satisfaction in recognizing a contextually unfavorable area to short, and observing shorts piling on without being able to push the price down, leading to a reversal. Today's session provided a good illustration of this. Initially, shorting was the correct strategy, but once the price rose above 3996 with the VIX dropping, that was no longer the case. The big selling effort at the gap-fill got heavily squeezed. I'm confident that many novice traders who initially had success on the short side today, lost it all during the afternoon session by using the same strategy that had worked before, without realizing the change in market conditions.
I have a few other concepts for tracking the correlation between ES and other indices, but that's a topic for another discussion.
Thanks for such a detailed response. Completely understand the idea of contextual awareness as you’ve explained. “Contextually unfavorable” will be a welcomed term for my journal entries now. 😆
Thanks Smash!
Thanks for this detailed response Smash. Invaluable stuff. I like your concept of daily targets and not chasing outside of these. I'm curious about how you determine your daily ranges. I've tried to figure it out and simply can't. I know one method for daily ranges is previous day range +/- 10%, but you seem to be using another method. If you could share your thoughts on this it would be a great help. I need to add something like this to keep myself out of trouble as well. Thanks again!
Great trade!
I’ve learned more from you about market structure and VIX correlation in the last week than I’ve learned in 6 months from others. Really appreciate this smash!
Thank you, Brandon! I'm glad to hear that you find my insights useful.
Thank you!
Masterful work as always Smash!
Thank you, Franky!
Thanks Smash for your daily analysis and detailed inputs, learning a lot from you. Could I ask you about how you calculate the VIX, ES correlation levels? I used to trade VIX longs and shorts a lot last year, especially at the extremes, but with the influx of 0DTE options, VIX hasn't been moving much as it used to. It's all confusing now.