Using How To Eat An Elephant To Trade The Entire Move

Splitting trades into “bites” to capture all available payouts

Having made my last execution some twelve hours after prepping for it, I'll break down capturing a large move.

My niche is $AUD futures intraday, with my hypothesis being $AUD to trade higher than the prior session.

But before a trade is placed, using changes in relative value and inventory positioning (see essential trading skills), I have prices that should the market reach, I no longer wish to be long, or no longer wish to be short. And between such prices, I have bites of moves I can trade.

News of an Evergrande trading halt was the catalyst to take prices lower. However, in the short term, a move down of 130 points in the Dow was a case of "outcome is known". So looking to fade late sellers, I entered on a change in pace, direction and size in the tape.

Below is the intraday movement before the HKE opening.

You can see the "bites" of a move I will trade, and the ellipses (red for short, green for long) mark the areas where I put on risk/covered.

If I have a sufficient cushion in a trade, then I have the flexibility to take partial profits, which is my preference when in an aggressive offside covering phase.

Therefore, when I "start" the next bite, I'm adding back into the current position as per the example below.

Note: Charts are merely a visual representation of how price moved. They don't determine when and at what price I execute; I take my cues from order flow and the tape, and so there are periods where I won't be involved, such as the first opening drive down on the HKE open.

It's good practice to pay yourself continually, and as you can see from just a snippet displaying executions below, I stick to those pre-determined levels, removing unnecessary real-time decision making.

But how about adding size? Once a challenging aspect of trading, by using bites (determined by inventory and relative value), I now have a game plan to add "when there is room to do so".

Advantages trading in bites include:

1. You continually pay yourself

2. You participate in large moves (such as today's $AUD move)

3. You add size (where applicable!) using the market's money, skewing the risk to reward in your favour, leading to outlier outcomes.

4. You don't give back open equity for moves that don't continue.

5. Bite-sized focus is an affective way to manage your energy. You find yourself having adequate rest to give yourself a break from the screens.

How do you eat an elephant? One bite at a time.