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I had a nice intraday trade today also, but from a different perspective. Going into today, I was 100% long in my swing portfolio and own a few NQ’s from another system I run. I was late getting into work today because I had some errands to run. I got in about an hour into the trading day and saw everything up huge. Since we’re in a volatile environment and these morning rallies are prone to failing and we were near a “whoosh” point, I saw an opportunity to hedge a little of my profits. Therefore, I went short the S&P 500 (shown on chart). This was not a 10 minute trade, it was designed to protect some of my morning profits. With these type of trades, I hope they’re losers. I hope everything keeps going up and I cover it at a loss. I intentionally hedge for far less than I am long and of a less volatile instrument so if it turns into a +3% day, I’ll still be up 80% of that.
After a few hours when things did start to fall apart, I saw that same double tent stakes that Dave did and covered. Notice that I was nowhere near the low nor was I trying to be. The only way these hedge trades are profitable is to actually cover them at a profit. After my cover, we went lower and then rebounded strong in the afternoon leading to unrealized gains in my long positions as well as a realized gain in my short position.
I apologize for having to steal Dave’s chart, but mine are messed up from missing the first hour.
- John