The advantages of intra-day trading when global markets "puke"

And introducing the benefits of anchored VWAP

For context, global assets had all experienced above-average sell-offs. After a little over four hours of sleep and the US session still trading, I returned to my screens, looking for an uncrowded trade scenario for the Asian session.

I've made numerous long plays in prior weeks around an "in-play" theme, VWAP that I had anchored to the Feb 9 $AUD revaluation.

Having extended significantly above this level in the days prior, I was going to monitor this area "today" for evidence of automated buying.

During the break separating the 23-hour FX futures trading session, I participated in a conference call. One of the participants I know is exposed to longer-term plays, and that got me thinking.

Once the call ended, it dawned on me many participants would be entering the Asian market with increased anxiety and stress levels, both of which negatively impact decision making.

However, as an intraday trader, my anxiety and stress levels were not aroused. When formulating my trading blueprint for the day (I share this with a small group of traders); I included the following.

Early into the Asian session, the market continued where it left off during US trading hours.

I hadn't planned on taking any short trades; my focus was on a potential long trade from the pre-mentioned anchored VWAP.

However, I wanted to confirm my theory regarding poor decision making, and as experienced traders know, there is such a thing as a "low-hanging-fruit" market action.

It was evident when amateurs began bottom picking, creating a domino effect (pros are patient, amateurs jump in).

When traders add to losing positions, there is an eagerness to add because it reduces pain and discomfort. Despite the increased risk exposure, the market only has to move up by "x" to avoid a painful loss. That eagerness gets them in at abysmal levels.

I'm sure you already know what happens when this goes further pear-shaped. A low-hanging fruit short, ideal for scaling up the position, was there for the taking as longs start realising losses.

With a brutal outsized loss realised, in efforts to make back the loss, traders now pile into a short trade just as price approached the anchored VWAP.

Flat as price approached anchored VWAP, all that remained was waiting for the market to show me my hypothesis was working.

Equally sloppy to the move down, traders on the wrong side lacked execution skills, so no finessing was needed when adding size to the long play.

An impala chased down by a cheetah in the Savannah still puts up a fight. The same goes for traders on the wrong side of the market. However, the poor decision making affecting offside traders' execution was comparable to a maim impala hopelessly outmatched by a cheetah.

There were multiple factors at play in this trade, including:

1. the uncrowded trade advantage around the application of anchorwed VWAP

2. the awareness of the mental state of many other participants

3. the learned-skill recognising the difference between amateurs and professionals entering the market

4. the learned-skill recognising the difference between traders initiating positions versus covering positions

5. the learned-skill to anticipate the actions of others (in the context of the current environment)

These are just a few of what I consider the essential trading skills required to compete in today’s markets.