S&P 500 Futures: #2016 #Truth

"economy", "markets", "news"


As you all know I am not one to hide or cower. That said this year has been a trying year for me both in my personal and professional life. Over the courses of my career on the trading floor I was able to ‘get in and get out and not fall in love with my positions.’ As the paper in the pit dried up I was forced to learn new tools and MrTopStep helped me achieve that in a ‘quid pro quo’ through all its partners. When I first started trading off floor it took me several months before I became comfortable with reading the charts, sometime after that I started trading. I won’t lie, it didn’t go all that well but I was trading small and using my 3 handle stops. After a few months I started to notice patterns that I felt were ‘tradeable’ and over the next few years I started making profits. While I preach patience I admit I have a hard time with that but I know where most of my mistakes came from. They came from violating my own trading rules. After making money in the first quarter I lost it all back in the second quarter. In the third quarter I was up and down but not really going anywhere so when Brexit and the election came along I decided to up my game and my size. Instead of losing $400.00 to $600.00 a day I started risking $2,000 to $4000.00 a day. And even on the days I did have a big winning position, I wanted more. I thought I knew better than the ES and it taught me a lesson.

Has my down year changed my opinion on trading? Absolutely and unequivocally, no! Once we got into the final week of November I made a conscious decision to either trade 1 lots or not trade at all. I think there is a gamblers mentality to trading and when that takes over the real reason for buying and selling its time to cut back and reassess. The PitBull told me a long time ago that when you start losing its ok to stop or go back to trading real small. While I talk a lot about how all the algorithmic and HFT programs supply liquidity I beg to offer. There was no way any of the high flying hft or algo systems were supplying liquidity in the flash crash and nor will they in the future crashes. People have short memories. They blamed the 1987 Crash on program trading so why would they not blame the bots when the markets go crashing down. No one and especially not the exchange would ever own up to the fact that the practice has killed the retail and that most on the floor know another flash crash could happen at any minute. I am sorry but that is not normal but as I have said in the past; these are anything but normal times.

That said I am going to be more of an observer in the final trading days of 2216 than a buyer and seller. All too many times throughout my career I saw big and small account get beat up trying to trade the ES into the end of the year. Yes we can’t forget about the Santa Claus rally next week but I plan on starting ‘anew’ in 2017. A clean slate and a refresher course on the MrTopStep Trading Rules 101. Give up? No way! Retool and come back fighting?  If there is anything I am 100% about its that. In the end it is what it is and I am who I am. A guy, like many just trying to pull a few bucks out of the markets without getting killed in the process.  I read a blog the other day about who has the best trading forums, I had never seen any of these people’s names before. That doesn’t mean they are not real or good traders it means I have never heard of them. That said the story went on to talk about forums where people pay and the guys trades don’t match is buying and selling. There is an old saying out there, if it looks like a duck, it walks like a duck and quacks like a duck it’s more than likely a duck. Well that how I see trading, everyone makes until you go with them or ask to see a trading statement. To all my fellow traders that made money this year you are part of the 3% and my hat is off to you. And for the majority or the other 97% that say they make… all I can say is show me your trading statement.

In the end I am really looking forward to 2017 and the volatility that Donald Trump is going to bear on the markets. Like him or not the markets were stuck in a low volume sideways to higher grind and I do not think it’s going to be that way anymore. I also do not think the S&P will just go straight up in 2017 as they have at the end of 2016. I am excited about the new year for many reasons but I am especially excited about getting back to developing a trading plan and executing it. It’s going to be a new year and a new way.

S&P Going Out Weak

Yesterday the ESH16 opened at 2258.50, down two handles, traded to a 2260.00 high print early after the open and then tracked lower making a 2251.50 low just after the Euro close and from there traded higher for much of the afternoon before retaking the open to settle at 2258.75, 7.5 handles off the low of day but down 1.75 handles on the session with volume below 900K once again but the MOC was $700 million to the buy side.

While You Were Sleeping

Overnight, equity markets in Asia were lower followed by a lower Europe as the S&P futures traded higher up to a 2261 high in globex and this morning has began to show weakness working down to 2255.50, the low of day down 3.25 handles on a globex range of 5.50 handles with volume at 45k at 6:55 am cst.

Asia and Europe

In Asia, 7 out of 10 open markets closed lower (Shanghai -0.94%), and in Europe 11 out of 11 markets are trading lower this morning (DAX -0.22%). Today’s economic calendar includes New Home Sales, Consumer Sentiment, Baker-Hughes Rig Count, Bond Market Close: 2:00 PM ET

Our View

It’s 7:15 and only 47,500 ESH16s have traded. All week the volume has been hovering around 800,000 contracts traded but I think today will be way lower. You could see less and less people on like throughout the week and my guess is very few people will be trading today. Our view; I said earlier in the week I thought we could see a down week and it’s heading toward that or at least it looks that way, buy the early weakness and sell the rallies if you are one of the die hards that are sticking around to trade today.

I want to wish everyone a very Merry Christmas and a very happy hoildays. The Christmas holiday is a time to reflect on the past years ups and downs. Its also a great time to do something nice for the needy and to remember how lucky we are. Its also a good time to thank the police and soldiers that are out defending our freedom and to not forget how they put their lives on the line everyday defending our freedom. And last but not least I want to thank all of the traders in the MrTopStep forum and all the MTS employees that help make MrTopStep the number one forum that it is.

As always, please use protective buy and sell stops when trading futures and options.

Danny Riley is a 34-year veteran of the trading floor. He has helped run one of the largest S&P desks on the floor of the CME Group since 1985.


    • In Asia 7 out of 10 open markets closed lower: Shanghai Comp -0.94%, Hang Seng -0.28%, Nikkei closed
    • In Europe 11 out of 11 markets are trading higher: CAC -0.06%, DAX -0.22%, FTSE +0.06% at 6:00am ET
    • Fair Value: S&P -3.99, NASDAQ +1.55, Dow -58.25
    • Total Volume: 847k ESH and 3.0k SPH traded
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  • Thank you for your honesty and thank you for all of your posts throughout the year. You and your minions provide s valuable service to those of us trying to get it.
    Wishing you and your family the best holiday season ever.
    I look forward to hearing more of your thoughts in the new year.

  • Thank you Danny, really enjoyed your periscopes, learnt, laughed and felt sad sometimes, Make 2017 special for as many people as you can because your a special person

  • Mr. Top Step: Bless you for being “Real”… “Vulnerable”… “Forthright”!!!!

    In a space that is filled with people who purport to both understand the markets at every junctions… and almost always “trade profitably”… your article is a truly welcomed demonstration of humility and integrity!

    May the Lord bless you for “being real”!!

    Your article above (despite the unintended typos) may be the very BEST piece I have read all year because it is a testimony regarding trading that I can truly BELIEVE… and from which I can LEARN!

    Best of wishes to you for your trading success in 2017!! And thank you for being YOU!!

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