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CL Light Crude Analysis TPO/MP/VWAP/VPOC
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CL Light Crude Analysis TPO/MP/VWAP/VPOC

  #861 (permalink)
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Traderwolf View Post
@Private Banker

The chart attached has a volume profile that has changed since the open.. but at the open it was a normal (bell shaped distribution) with the highest volume node(HVN) being almost equal to the VWAP.

Since VWAP is based on volume and the distribution of the volume is bell shaped(normal) with the HVN and VWAP equal, it is the environment ripe for Reversion to mean(RTM) trading statisticially. When the ON high was a FBO, it made sense to go short as a RTM trade.

This would be in contrast to where the VWAP and volume distribution did not match and the distribution was skewed(either a "P" or a "b").. This would be more indicative of a trend and not a RTM possibly.

Anyhow, I am really just new to this MP stuff and trying to understand how to incorporate VWAP and MP into my trading at the open. Some of what I have said is conjecture on my part based on limited understanding of VWAP , but some basic understanding of statistics... I have never traded VWAP at all, so I may have all of this improperly framed.

So I would appreciate any insight you may have as to the conditions as when you look to trade the extremes(RTM) using VWAP. I would take it you do not look at VPOC and its relation to to VWAP or the volume profile.

Thanks for you insights!

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OK, yeah. In terms of a bell curve distribution, yes, clearly that should be faded. But the bigger picture needs to be taken into consideration in this case as well. We ran up to yesterday's high right at the open (an extreme) and we had an ON high a few ticks above that, any where within that range would've made a great trade location clearly. This area was also the 2nd SD VWAP level, another potential extreme. Obviously there was a lot of confluence which made for a great trade.

I know many would disagree with this but I feel volume prints because of location not vice versa. I've been doing this long enough to see that to be true. Hopefully that helps.

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  #862 (permalink)
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simple question here.To consider a
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PB
thanks, but I am not clear about " volume prints because of location"

does that mean the area should have been recognized as a key level before the volume showed up there ?
Does it mean the confluence you mentioned was the important data even before the volume printed there ?

thanks

shane

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shanemcdonald28 View Post
PB
thanks, but I am not clear about " volume prints because of location"

does that mean the area should have been recognized as a key level before the volume showed up there ?
Does it mean the confluence you mentioned was the important data even before the volume printed there ?

thanks

shane

Your answers are correct there. Exactly.

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Similar concept as yesterday. Open out of balance, out of value but within yesterday's range/excess area. Responsive selling right at the open. Perfect immediate trade. There were then subsequent shorts down the line. You could've traded around a position or initiated multiple trades based on whatever trade style you employ.

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I traded around a position on this move. The market was staying within the IB range. Once again, the delta was deteriorating as traders were thinking that there would be support down there. This is why Market Profile (MP) is so powerful. One of the primary rules in MP is to establish a position from the previous day's extremes. You can buy/sell the previous POC but if it comes back to you later, its best to wait for... an extreme .

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So going back into today's trading, open out of balance, responsive selling, delta deterioration, false floor under the market. I call this the pulling away the rug move. It happens all the time in this market. From a psychological perspective, traders are thinking that level will hold but aside from the underlying delta deterioration, the market was quietly one time framing lower. If you bought yesterday's POC and we can't take out the opening drive, just exit. Don't stand in the way of the bulldozer. From a MP perspective however, we formed a poor low at that point. Being long against that is very dangerous. The market will most often come back and clean that up. There is a variation to that rule however in that, the market can form a poor low or high at a key reversal area. Today's poor low was right around yesterday's POC so, it could've happened. But again, if it comes back to you and you can't take out the day's high or previous 30 minute TPO bracket, watch out!

One of the reasons why CL will balance like this for a period of time and then spike higher or lower is simply the bigger players are trading around a position. They were selling the highs of the day and backing off as we got lower. This went on for the IB period and into the number. Once the number came out, you can see sellers starting to get more aggressive and really start hitting the bid. There were buyers at the lows once again but a struggle came in at RTH VWAP and price was able to drift back up to the upper 1st Sd/VAH level and volume dried up there. As we turned around sellers were becoming more aggressive. There was one last attempt at the IB low but someone stepped in and hit the bid hard totally crushing the longs and causing stops to fire off in addition to sellers continuing to hit the bid.

Price ran all the way down to the current bracket low which is a great area to look for a confluent exit area. The 2nd and 3rd IB extensions were in between this level and both would've served as a good exit.

I would think we just balance from here for the remainder of the day unless something changes. Its Friday and I would assume many traders will be content with what we've got on the day.

You have insight into price action that I admire. I would guess from years of watching, and from working in the industry, but since I possess neither background is only a guess. I watch only crude, and the things you just laid out I have an understanding of the movement itself, but with a mindset that includes a high degree of "self-taught" things, and so I may not group price behavior the same, or even understand the underlying mechanics.

I traded crude today, and defined the movement as typical, but typical in the sense that it caught me on the wrong side initially. And, as might be defined as amatuer, decided to play the same side, but in "defensive mode", but still the things you just described I was aware of in terms of behavior, just not the same background behind understanding the "why".

Very cool to read your post. Thanks, you are one of the reasons futures.io (formerly BMT) is what it is.



Reading a second time, you are into this for sure...


Last edited by GaryD; February 7th, 2013 at 11:21 PM. Reason: one more thought on how great this is
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  #866 (permalink)
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What i did today

We opened up in ETH value and inside yesterdays range

NO trade off the open

We saw GLOBEX highs get tested and the IB came in

cumulative delta started to fall as buyers started to back off of the ASK

We rotated out of yesterdays value area and i started to sell the IB highs and RTH developing Vwap highs

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Looking for price exploration to the down side into the lows of yesterdays range

We are currently at the IB lows and ETH value lows.....waiting to see if were going to break todays IB and ETH value area to the down side

Watching pice come back into RTH value now

IF we hold i will look to close my short out...want to see RTH value rejected

" I will follow my rules, I will take my stops, I will be disciplined and i will work with the market....NOT AGAINST IT! Professional mind control is the key"

Last edited by greenr; February 8th, 2013 at 12:21 PM.
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greenr View Post
What i did today

We opened up in ETH value and inside yesterdays range

NO trade off the open

We saw GLOBEX highs get tested and the IB came in

cumulative delta started to fall as buyers started to back off of the ASK

We rotated out of yesterdays value area and i started to sell the IB highs and RTH developing Vwap highs

Attachment 102083

Attachment 102084

Looking for price exploration to the down side into the lows of yesterdays range

We are currently at the IB lows and ETH value lows.....waiting to see if were going to break todays IB and ETH value area to the down side

Watching pice come back into RTH value now

IF we hold i will look to close my short out...want to see RTH value rejected

Still trying to hold this market short

Can see we are slowly 1 time framing down and rejecting RTH vwap

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  #868 (permalink)
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I had a question, regarding this short i took at 10:10am.My goal is to try to determine the extremes, where a rejection should happen.I shorted this at the
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But generally, after 10 am,should we be focussing on the rth levels?

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  #869 (permalink)
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greenr View Post
Still trying to hold this market short

Can see we are slowly 1 time framing down and rejecting RTH vwap

Attachment 102097

Just scaled out my runner in the excess lows from wednesday

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Went long at the 2ND IB extension

we are at the extremes of the last two days

Saw major cumulative delta rising and very posotive delt on my foot print

Going to see if we can come back into value now and target RTH Vwap

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Last edited by greenr; February 8th, 2013 at 08:34 PM.
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