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
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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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.
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.
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.
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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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..
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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