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CL Market Profile Analysis
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CL Market Profile Analysis

  #81 (permalink)
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a mp motivated trade that palyed out nice. when market opend i was looking for a retest of ydays high but seeing no weakness and a buying range extension i bought 1173.50 for a nice run to 1176.50. my cut feeling was short but like i wrote the hard trade is the best trade

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  #82 (permalink)
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beeing home from work today i got to watch the market all day doing nothing to the point i even got a headache. but then the perfekt market profile set up appeared. it had everything so i started to take snapshots as it unfolded. the setup was best seen splitting the profile into distributions the way i do. i included pictures of the 24h profile and the rht profile to show u guys why i think its an edge splitting it that way.

this is right out of the steidlmayer/dalton handbook

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CL Market Profile Analysis-1.png   CL Market Profile Analysis-2.png   CL Market Profile Analysis-3.png   CL Market Profile Analysis-4.png   CL Market Profile Analysis-rht1.png   CL Market Profile Analysis-rht2.png   CL Market Profile Analysis-24h.png  
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  #83 (permalink)
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fiki View Post
this is right out of the steidlmayer/dalton handbook

Hey fiki I need to read up on MP some more. I just finished Tom Alexander's book, it was my first MP book. It was a good summary and gave some ideas on how to trade with it which sounds vaguely similar to what you're doing (I think).

I started reading Mind over Markets. Do you think I should finish that one? or is there another one I should read first?

Thanks for sharing your charts and ideas, it's very educational for me. I'm now trading ES so I'm very interested in your ideas.

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  #84 (permalink)
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cp, it´s educational for me to...

concering the book. i havn´t read alexanders book. mind over market is very good from a basic perspective. i started out reading steidlmayer on markets and almost skipped the whole mp thing. his books has a few gems but they are very theoretical. dalton explains it so its understandable. the other book markets in profile is a newer book and maybe a better read if you have the basics already. i read a lot of stuff mostly because i find it interesting. i think if you get the basic principle then its more important to practice it. the important thing is just remembering its not a system. its a way of viewing value. i thing many make the misstake of viewing poc, val, vah as floortraders pivots.

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  #85 (permalink)
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fiki View Post
David: I made this picture for u guys on the pullback data on Monday but for some reason i never got to post it. The second picture is from my journal on a entry i made that shows what i mean. The pullbackdata is the COT in OFA terms. But instead of a just the delta it shows a bar on the side of the developing bar. This is good because it gives u a glue on how the period will close. I trade from a 5tick rangebar chart and my trigger is usually the close of the bar. I define a momentumshift as a 5 tick reversal. By looking at the pullback i can hopefully get better trade location since i´m early.

First I´m no expert but I´ve watched a lot of stuff concerning orderflow and I’ve been very actively trading it for a while now starting with pure DOM-trading and now with the breakdown indicator/ladder. Many are very sure of their technique - at least in their material. I have a different opinion. I think there´s a lot of noise in the orderflow. Large trades are executed through algorithms and other size is based on calendar or inter-product spreads and so on. The markets purpose it to facilitate trade but the buyers/sellers are in the market for many different reasons, not just profiting from speculation. So for me value is the most important part of my trades. At least the successful ones. Intrabar orderflow comes second to me. I use the orderflow to help me handicap the odds in my trades.

Now concerning the bid/ask side. I think both ways u described are correct. If I go long I like to se a lot of trading at the ask because this evidence for buyers initiating trade. But there are 2 types of reversals: 1) sellers stops initiating/selling drys up. You se this in weak prints. Only a few contracts are traded at the bid at the pricelevel you are watching or if it is a retest less then on the previous test. 2)buyers start to respond (climax). This is the most common. Buyers start to accumulate and sellers over commit. You se this as a large volume node in the bar. If I se “big” volume at the bid after a rotation down and price reverses the sellers probably entered late and are wrong. So as long as price is over I view this as bullish. Many times the next bar makes a retest but its hard to get a fill at the vpoc since there is a lot of competition for contracts. A lot of short sellers will try to get out breakeven or with 1-2 tick loss. But if price goes under the node it the opposite. The knifecatchers, buyers, picked the wrong bottom and odds are it´s a continuation pattern. Now if your looking for long and price is over you don’t want to se a lot of volume at the levels above, especially at the bid because this shows that sellers are responding and initiating. U want to see just low volume and green flow when it clears the node. So it 2 different patterns: responsive and initiating.

Concerning the “bad” entry: it bad from a orderflow perspective. I got “lucky”. Now I would argue I made a good valuation and that’s why I made profit. Its bad out of orderflow perspective since price went under the high volume node and large traders wanted it to go down since they initiated large trades at the bid. So at the time of my fill I was opposite to the large orders. If I just went with the flow I should of sold. But probably other traders using algos made the same call as I since all that selling was absorbed in 2 ticks. The really bad call was entering on a limit at the vpoc. When u enter with a limit more often then not price will go through your order. The principle is most traders are wrong. So if you se a big number at the bid I DOM, they will be wrong either by not getting the fill and missing a great trade or by getting a fill and having price go against them. So if I believed I would get a fill at the vpoc using a limit order then logic dictates that I would get a print under vpoc witch would be bearish. Then it would be better to wait for the next bar to see what happens. Or if I belive this was the reversal I should have entered market 1 tick above the vpoc.

Don’t know if this clarifies it a bit. The thing is, it´s never easy or a sure bet. Like Steidlmayer expressed it : try to make the hardest trade rather than the easiest trade; if it's easier to sell, it's usually the wrong way to go, and vice versa.

This post was edited something like 5 times. Don´t know whats worong with me but i confused the words ask and bid all over. Sorry for this. Hopefully nobody read it yet.

Fiki,

Thanks for the additional info. It does clear it up a but, I'm still learning all of this.

So in the example we are discussing you were a responsive buyer, correct? Initiative selling would be sellers taking it lower past the level that is considered an "unfair low", corret? So how did you know or decide that the volume at the bid was responsive? You wanted to go long and did, but order flow didn't really confirm the trade, or did it? I certainly understand its not easy, but I think whatever we can do to put the probabilities in our favor add confidence in taking the trade. You have a lot of experience and can probably see things clearer than I can. If you were teaching someone would you tell them to wait until you see responsive buying come in to take the trade? Green flow:-)

So the high volume areas on the range bars are very important? That is what I gather from your comments.

Thanks again,

David

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  #86 (permalink)
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CL MP charts and some fun analysis.

Well, looks like we broke to the upside from the large balance area.
D

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  #87 (permalink)
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david.
y, i was a responsive buyer since i identified that other responsive buyers were active and i there for put a limit order at that level waiting for it to get hit. in the example seconds before it went against me orderflow was actually confirming the trade since the were som buers trying to initiate. this is why i write that orderflow is important but not crutial if youre not a scalper. recognizing value is more important. orderflow is a way of "looking inte the future" a few seconds but 1 big lot can change the direction. just don´t get caght up in it to much so y miss the big picture (like i did for a while).

i reconize responsive action: 1. it is at a level where i expect it (a area i expect to act as support/resistance) 2. i get relative big volume at the bid (looking for responsive buyers). it´s bigger than the other levels AND its bigger then the average size in the DOM.

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  #88 (permalink)
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fiki View Post
david.
y, i was a responsive buyer since i identified that other responsive buyers were active and i there for put a limit order at that level waiting for it to get hit. in the example seconds before it went against me orderflow was actually confirming the trade since the were som buers trying to initiate. this is why i write that orderflow is important but not crutial if youre not a scalper. recognizing value is more important. orderflow is a way of "looking inte the future" a few seconds but 1 big lot can change the direction. just don´t get caght up in it to much so y miss the big picture (like i did for a while).

i reconize responsive action: 1. it is at a level where i expect it (a area i expect to act as support/resistance) 2. i get relative big volume at the bid (looking for responsive buyers). it´s bigger than the other levels AND its bigger then the average size in the DOM.

Fiki,

I have heard that we can't trust the orders on the DOM because they can be added and pulled at will. What do you think about that?

How long in advance do you place your resting limit order?
D

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  #89 (permalink)
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David,
Concerning DOM: The pulling of bids and other games are real. Mostly its algos doing this. That and al the random noise makes the DOM not so usefull at least to me. I actually know a pro bonds trader. He trades mostly spreads and hedges but also daytrading (scalping). All e uses is a daily linebarchart, a DOM with 20 levels and a Bloomberg. His edge is in macro though. But he enters of the DOM. He once tried to explain what he was looking for and said that he was looking for strength as a indication of weaknes..

I put a example of this kind of “flashing” in cun paris thread :
https://futures.io/journals-daily-charts-tape-reading/2848-cunparis-journal-thoughts-more-22.html#post31932

I also posted a clip once of algo buying on youtube:
YouTube - Algos refilling ES

This is how i use the DOM today.

1. To confirm my analysis. Lets say you have a level where you expect responsive action. When price trades close to the level I look to se if there are many restig limit orders there. If so, I know others have recognized the level as sup/res.

2. Just as I enter I look for clues on strength or weakness. Like I wrote in that post in the CP thread. The DOM is the poker table. You look to se if someone is showing their hands. Is someone trying to buy without showing it (algo) or is someone showing their muscle (flashing) trying to act confident? I also look for a imbalance. If I buy I usually like to see more resting limit seller then buyers .

3. When trying to pick a top/bottom (it happens I try ) I look at the velocity. Lets say the release some macro and ES explodes 10p. Usually the DOM goes crazy (much to do with the lack of liquidity just before the release). At the top the order book goes thick. Lots of sellers AND buyers. Volume slows down price so when the liquidity kicks in it kills the volatility. Price starts to jump around 2-3 ticks but gets nowhere. As the action starts to slow down I enter.

4. I always look at the DOM before entering to access the risk. A thin orderbook is prone to more movement and carries more risk. Specially during overnight you see this. If the levels don’t have more contracts than a big player can absorb in 1 big lot i´m extra carefull. For example if there are 200 at the best bid and 150 at the level below I know a 400 lot will create momentum down maybe for a point or two…

All the above I get from a fast glance at the DOM just before I put my order in. I don’t analyze it to much and seldom take trade of the DOM alone. For a retail trader it is not profitable. This is hard core orderflow scalping. U play for a tick or two. With a fee of 4.4 usd roundtrip you´ll never make any money this way. The algos and some pros that do this only pay a few cents a trade. And they trade 1000nds of contracts a day and have many scratched trades.

How long in advance I place a resting limit order? Just a few seconds. I try not to sit in the book. If I do I just try to work a price for a tick or two. Not counting the manipulation there are 2 kinds of players in the orderbook (according to a research paper by a guy named Harris): pre-committed and value-motivated traders. The former submit limit orders to reduce trading costs, but will switch to using market orders if their orders remain unfilled for too long. The latter express their valuations of the asset through their choice of limit price. When I use limit order I´m a pre-committed trader.

A book imbalance caused by pre-committed traders may signal future price movements owing to these traders having to convert their unfilled limit orders into market orders. That’s why I don’t like to use the limit order. If it truly is a good price you won’t get the fill and if you do get the fill price will probably go against you a couple of tick. Always assume you´re last in line…

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  #90 (permalink)
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todays trade was just market profile... i didnt wait for confirmation in orderflow wich actually was down when i entered the first part of my long.

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