Microtrading

Microtrading.  The bane of my existence.  Not talking about trading with a small amount of money or micro futures.  Talking about overtrading, trying to catch every little wiggle in the market.  Selling before your final price target, just because you "think" that there will be a pullback very soon.  Or because you "think" that the market has gone too far too quickly.  

Trying to catch the micro moves as well as the macro moves.  Sometimes it's successful, but often it takes you out of great trades with just small wins.   Is the market that inefficient in short time frames that a retail trader can beat the HFTs?  

I've been trying since I've become a trader and overall, I am a net loser when it comes to microtrading.  I haven't gone through the calculations, but just from memory, I can remember quite a few big moves that I've missed by selling too early (most recently in the SPX in early February).  

To think that one is able to beat the HFTs and institutions by trading index futures for scalps and day trades (not talking about retail dominated small cap daytrading plays, which is very doable) requires: 

1) a lot of ignorance

2) a lot of arrogance

3) being a trading genius

Most people would agree that there are way more ignorant and arrogant daytraders than there are genius daytraders.  

I often hear from futures traders that you only need to make 1 point per day trading ES (SPX) to make a living.  It sounds so easy, but I wonder how many futures daytraders average at least 1 SPX point per day in profits over their career.  

This trading game isn't easy.  It eats up ignorant and arrogant traders and spits them out after taking all their money.   Most of the time, is it is a negative expected value (EV) game, due to slippage, bid/ask spread, and commissions.  

Its just as important to avoid negative EV situations as it is to catch positive EV situations.  The more you know, the better you get at identifying negative EV and positive EV situations.

About the current market.  I underestimated the buying power in SPX.  I thought there was no edge buying the dips down into the 3800s in March, which ended up as great dip buying opportunities.  Instead, trading smaller and focusing on individual stocks where there are still decent opportunities.  Nothing great out there.

The reduced enthusiasm among the retail trader crowd has actually made shorting daytrading plays much safer.  All those losses in March on those retail momo favorites took the wind out of the sails of the retail trader.  They're not chasing small cap crap stocks like they used.  That makes these pumps much more fleeting and easier to short.  

I am sure the animal spirits among the retail favorites will return again, but the beating that they took over the past several weeks has left a mark.  Its going to take some time before the beatings fade away from memory and they chase random pumped up 4 letter symbols again.  

The SPX ripped through 4000 like a hot knife through butter.  A bit surprised how effortless it was for it to bust through that round number.  It feels like we will top this month, but have little confidence in attempting a short here, only a true blowoff top towards 4150 this month would entice me to put on a short.