POWER TRADING AND ROLLER COASTERS
People feel dizzy -even with an upset stomach- because of motion sickness after riding roller coasters, and it’s pretty much the same as what an intraday trader feels at the end of a volatile trading day!
You have been buying and selling since the start of your trading day, making a good pile of profit, and reaching maximum joy. Then, it starts feeling dizzy - seeing that big pile started diminishing rapidly because you couldn’t keep up with the market dynamics (or it’s just bad luck!). After long hours of looking at the screens, you start hearing your stomach literally talking to you, losses at the limits with maximum fear.The vestibular system restores the balance, get back the money market owes, and brings back some calmness. This cycle is repeated several times in different orders during the trading day.
Second ride on the roller coaster: you have less joy and fear because you now have some expectations thanks to the first experience. But in intraday power trading, you almost never ride the same roller coaster again. Even though it’s the same time of the day, same product that’s been traded, same players in the market, every day is different. Lovely, isn’t it? Joy and fear are always at the limits.
Intraday power trading is definitely not like any other intraday trading of another product. In power, electricity is always generated and consumed instantly; the wind blows, the sun shines, rivers and power flow, and kettles are turned on and off, so you must trade all the time! Making decisions, instant glories, and defeats - you can’t say, “There is too much volatility today; better to stay calm and not trade” as in the other financial markets. So, “roller coaster” has been the best set of words to describe the intraday power market in all aspects.
It’s literally a train ride. There are some well-known sayings in trading, like “don’t miss the train” or “don’t be that last one to hop on the train” - not relevant for intraday power trading. There is no single truth that covers it all! It’s not about catching the train or being the first to get to it; it’s about choosing the right seat; it can be the first, middle, or the last row - you are still fine as long as you can steer. Let’s imagine: Two people are sitting on the first row of the roller coaster; one is vomiting and the other is feeling excitement and joy at the very limits in the same ride. Just as choosing the right seats is vitally important in a roller coaster, the level of volatility in intraday power markets can be enormously different within the day and between different days also, depending on the market, whether it’s a renewable-driven market, dual or single pricing mechanism, etc. Since trading is a must, the trader must have all the available trading skills in her arsenal; she should be able to steer at first, the middle, or the last row in the train. There is no “best working strategy” in intraday, one day you earn by losing big at first but winning bigger in the aggregate if you have the guts. On the other day, the last row is better because the market is suited better for small but continuous wins. Or choose the middle seat and navigate between the first and last rows. If you can’t select a seat, and you are randomly assigned to a seat by “the system” at “online check-in”, just recognize your seat number and
trade accordingly. As long as you have a strategy, consisting of lots of smaller strategies with clear “in” and “outs”, fast decision making, and a rock-solid stomach that can handle the fact that you are riding another train the next day, you can enjoy the ride wherever you are seated.
Power markets have always been volatile, and most probably, they will continue to be so when considering their nature. Also, it has become a political meta, affected highly by behavioral economics and other different drivers for different horizons - from meteorology in the short term to sustainability, supply security, public welfare, and P&L agendas in the long-term, melting in the same pot. Intraday trading has been at the core of the massive energy trading value chain. At Pure Energy, we love having a reserved seat on the roller coaster every day, 24/7, and 365 days a year, to manage a pure renewable portfolio of approximately 4000 megawatts in multiple markets, with the assistance of constantly evolving algorithms for constantly evolving market dynamics backed up with decades of trading experience and passion of helping the grids, and the integration of renewables.