Monday’s strength was surprising to some prop traders on the Street, after the huge down move Friday. Let me share some things heard on our prop desk, and then make a trading point.
Me: didnt expect today
Trader: it’s just so annoying
Me: yes yes yes. but good example of…..its our job to trade the market not expect the market to trade the way we want.
Trader: true
Me: I shorted this PII- so guilty as well
……………………………………………………………..
Trader B: After the sell off on Friday, and TICK below 1000 we expected a gap down Monday
Me: It is what it is
Trader B: It makes no sense to me
………………………………………………….
This chart shows that while many discretionary traders expected a large gap down Monday AM, with continued weakness, the odds of a decline were only 55 percent.
Let’s be honest, after the open of trading ended (defined as past 10:15AM) and we made a new high of the intraday, a short in SPY was not supported by price and time. Price and time read with an open mind should have dispelled any surprise on market strength for the rest of the trading session.
Trading point: It is our job as active traders to observe the market and listen to how it is trading. The market is not here to trade the way we want. Monday reminds us of this important trading principle.
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