Window dressing occurs when a trader is short and the market rallies and until recently was only limited to the end of month but it now can occur at any point.
See many trades tell themselves lies. For example, there is only one way to make money. That if you make money doing one thing you will always make money doing that one thing. That the market always moves with reason. That every move in the market is real and meaningful. That yesterday’s market is the same as today’s. All in the name of finding certainty and comfort. The comfort comes from having a foundation and process, NO OTHER PLACE.
Mechanics of window dressing
The idea behind window dressing in futures is that you continue to add to your position to extenuate the move. Normally it is seen as buying. If you believe that window dressing is a trading idea you have to believe the following:
- The biggest players collude to move in that direction.
- That they all have the same position.
- That other market participants don’t get there first.
- That the end of the month exist in a vacuum. IE that it is the most important thing to the market. Not newS, fundamentals, technicals, big picture, economy, etc.
- That transparency and flow of information has not changed the way the big firms do business.
- That Santa is real.
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