Debriefing of yesterday's FOMC IWM/TZA discretionary trade

[Billy]

I received the following message:
“Billy,
I think it would be hugely instructive to put the Cum Tick chart up from yesterday and tell us how you traded the Fed announcement, what you looked for, how tick influenced your trading decision(s), etc. Many thanks.”

Actually, it was a very simple and easy trade.
First, cumulative TICK kept making lower highs and lower lows after the announcement, so the program trading sell bias was pretty obvious.



Second, my setup for entry and stop was the most textbook one:
The announcement came when price was waiting on VWAP at 68.96.
The initial false move jumped as high as 69.25, instantly reverting and testing daily S1 (68.42). I was expecting a bounce from S1 and planning a short entry at a failure to regain VWAP. This happened with 3 consecutive minutes of testing, I then enter at market after the close of the first minute that doesn’t touch VWAP. This gave me an entry on TZA executed at 45.84 with a gain of 8.73% into the close.



I use a 1-minute bar close above the VWAP as my initial trailing stop and switch to a 5-minute bar close above the (65.5) volatility stop on a 5-min chart as soon as the volatility stop is below VWAP. The stop was at 67.71 at the close. From here, I’ll trail the stop with that 5-minutes volatility stop.
These setups and settings are my favorite ones for discretionary trades.
Billy