Getting undressed by window dressing…

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.
Cyclical
There will be a time when window dressing matters but I do not think that time is now. Window dressing is a great story and like any story there is some truth to it.  Is it tradeable?  Is it a reason for your losses? Can you learn from it?  I do not believe so.
The lies we tell ourselves
There are many ways to make money some that worked yesterday and some that worked last week some that didn’t work yesterday.  It is your job to be able to argue both sides of the trade at the same time and see which one the market agrees with and for how long all within your risk parameters.  The best traders make more money on the random moves than they lose.  They are forced to be creative, within their trading plan, because it is part of making trading a career.  It is about learning from every outcome not just the losses.  Understanding what is working and not relying on the past.
Conclusion
Context > stats as @benko left in the comments.  Execute trades that you can repeat, can learn from, and will take responsibility for.

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  • Dennis Parmelee

    Conquered territory must be retained.- Attila the Hun.  

    Sometimes news is already priced into the move, and profits are taken ahead of the news. Then markets react to news, finding logical support or resistance. Stepping back to see the bigger swings helps us see what the big players (who move the market) may be thinking.

    We believe there is always opportunity, and reacting to swings and capturing pieces of the moves is the best way to play, especially the es mini.  

    Arguing both sides of the trade like you suggest is a smart and mature approach to trading. Biased traders defend their ideas, winning traders try to see who is currently winning and ride that wave.

    Great post Eli.

One Response to Getting undressed by window dressing…

  1. Dennis Parmelee says:

    Conquered territory must be retained.- Attila the Hun.  

    Sometimes news is already priced into the move, and profits are taken ahead of the news. Then markets react to news, finding logical support or resistance. Stepping back to see the bigger swings helps us see what the big players (who move the market) may be thinking.

    We believe there is always opportunity, and reacting to swings and capturing pieces of the moves is the best way to play, especially the es mini.  

    Arguing both sides of the trade like you suggest is a smart and mature approach to trading. Biased traders defend their ideas, winning traders try to see who is currently winning and ride that wave.

    Great post Eli.

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