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How do you decide WHEN you will trade?
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How do you decide WHEN you will trade?

  #1 (permalink)
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How do you decide WHEN you will trade?

I'd be interested to hear from YM / ES traders as to how you decide when to trade - the idea being to avoid low volatility days. When do you step aside, turn the computer off and walk away?

Do you look at:

- Open price (is there a large gap)
- Opening above (below) R1 (S1)
- Pre-market volume and range
- Only trade on days where there are economic announcements
- Only when price opens above the VAH / VAL for market profile traders

Any thoughts or suggestions would be most appreciated.

Thank-you.

Tom

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  #3 (permalink)
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Backtesting.......Backtesting.......Backtesting

I perform market replay every weekend of the hole week, it is time consuming but it is the only way you can identify the best timeframe to trade and what news can do to your trading. In the replay I will take every valid trade setup that I can find UK + US sessions, I then divide this into 2 sessions, the UK and the US session and highlight news events. The outcome of this replay backtesting gave me the best timeframe for me to trade with the best results and that is from 1 hour before cl open and until the UK close so I have a timeframe from about 4 hours trading to reach my daily profit objective.

Buy the way I only trade CL but I think you can implement this for whatever market you trade.

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  #4 (permalink)
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thomasblake View Post
I'd be interested to hear from YM / ES traders as to how you decide when to trade - the idea being to avoid low volatility days. When do you step aside, turn the computer off and walk away?
...
Any thoughts or suggestions would be most appreciated.

Thank-you.

Tom

One thing you might try is to put a VWAP (Volume Weighted Average Price) and its standard deviations on a chart.

If you take a look at the charts below, you can see that you can get a very quick and usually good reading on whether price is ranging (low variations, quick reversals) or trending, and when it transitions from one state to the other. I think it's obvious which is which.

I don't know that you can use the early morning picture to just "turn the computer off and walk away," although perhaps you often could, but it can keep you on the right side of the ranging/trending question pretty reliably.

You can also get a lot of information from the action of price as it enters the higher/lower bands and then turns.

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The version shown is @Fat Tails implementation, available here:

https://futures.io/download/ninjatrader-7/indicators/674-download.html?view

The bottom chart is today's action, snapshot taken about 15:19 Eastern; as I'm typing this, just after the close, price has come back up very close to the VWAP, which can be considered "value", in much the same sense as the market or volume profile POC, but with a different derivation.

There are many discussions/observations on futures.io (formerly BMT) about using the VWAP in different situations. Searching will turn up some good postings. @Fat Tails has very good VWAP discussions, I believe in one of his session indicator threads, and I have seen good posts on it by @Silvester17 , among others.

I hope this helps with your question.

Bob.

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thomasblake View Post
I'd be interested to hear from YM / ES traders as to how you decide when to trade - the idea being to avoid low volatility days. When do you step aside, turn the computer off and walk away?
...

Tom

Imagine you open a restaurant to make a living. Would you ever consider skipping a day just because you expect a quiet day in terms of customers? Go to work everyday and manage the opportutnies as they occur. There is no cristal ball that will tell you tomorrow will be a quiet day.

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trendisyourfriend View Post
Imagine you open a restaurant to make a living. Would you ever consider skipping a day just because you expect a quiet day in terms of customers? Go to work everyday and manage the opportutnies as they occur. There is no cristal ball that will tell you tomorrow will be a quiet day.

Also, accept that flat is sometimes the best position to have.

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That's literally the million dollar question and to put it simply there's no way to really know and there never will be. You can increase your chances by what you've mentioned crunching all the variables but it's just like the variance of weather forecasting being accurate. Even if news comes out it could be exactly the same numbers as the forecast and then you get just random volatility with no exact way of determining the direction for the immediate follow-through.


Last edited by Itchymoku; May 15th, 2014 at 09:24 PM.
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trendisyourfriend View Post
Imagine you open a restaurant to make a living. Would you ever consider skipping a day just because you expect a quiet day in terms of customers? Go to work everyday and manage the opportutnies as they occur. There is no cristal ball that will tell you tomorrow will be a quiet day.

That's not the best analogy. Many restaurants close on Mondays or Tuesday, or only open for lunch or dinner based on their market. It's an easy way to cut overhead and increase margins.

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thomasblake View Post
I'd be interested to hear from YM / ES traders as to how you decide when to trade - the idea being to avoid low volatility days. When do you step aside, turn the computer off and walk away?

Do you look at:

- Open price (is there a large gap)
- Opening above (below) R1 (S1)
- Pre-market volume and range
- Only trade on days where there are economic announcements
- Only when price opens above the VAH / VAL for market profile traders

Any thoughts or suggestions would be most appreciated.

Thank-you.

Tom

if you're talking about deciding when to trade day by day. Another method besides the above (alternately besides MP, VP , Va's etc. ) is to use a daily time frame and use price action analysis on it. (Or even if a major MA is crossed, or a trendline/fib is hit or approached etc. ) See if the daily is looking like close to a breakout pattern, or in the midst of a continuation pattern. Of course a single daily bar can contain a lot of ranging daytrading behavior. But one can see an inside daily bar or other such types and have an idea based on PA concepts what could be the next daily bar's possibilities which may in turn could mean more volatility and movement for daytrading the next day. An indicator that could be set is an ATR indicator on the daily chart. or on the 60 minute/4 hr chart; of course the indicator is always a "bar" lagging, so maybe a 60minute bar ATR indicator could at least tell when one has already had a 60 minute increase in range as a sign passing thru premarket or lunchtime lull prep/waiting.


(credit to Vikings and his old, closed thread, custom columns on Thinkorswim)

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Last edited by Cloudy; May 15th, 2014 at 10:36 PM.
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  #10 (permalink)
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trendisyourfriend View Post
Imagine you open a restaurant to make a living. Would you ever consider skipping a day just because you expect a quiet day in terms of customers? Go to work everyday and manage the opportutnies as they occur. There is no cristal ball that will tell you tomorrow will be a quiet day.


tturner86 View Post
Also, accept that flat is sometimes the best position to have.


tturner86 View Post
That's not the best analogy. Many restaurants close on Mondays or Tuesday, or only open for lunch or dinner based on their market. It's an easy way to cut overhead and increase margins.

These different points of view all make sense to me:

1. Every day has its own opportunities. If you are only looking for strong and long trends, you won't always get them. But if you can adapt to the shorter trends or trend legs of trading ranges, there are still good trading opportunities -- and there are a lot of trading ranges during most days, and there are also many non-trending, ranging days. Seeing what is going on at the time is the important thing.

2. There are good times to stand aside. It may be hard to see them, but they exist (it's hard to see the trends, too, when they are starting). Flat, when the situation is not clear, is a better position than committed and wrong. (Note to self: get this right more often. )

3. The times to stand aside or not will depend on conditions in a particular market. With restaurants it may be connected with particular days of the week or other seasonal factors. With other markets there may be other considerations. (Seasonality included....) In trading, these conditions may change during the day, or any other span of time.

The OP's question was about how you can know when to take a day as a good trading day and when you should shut off the computer and do something else. That's really a damn hard question. -- Even if you're only looking for big trends; how do you know what the market will serve you up?

I suggested the VWAP, above, because it has helped me with just that question. Certainly, there are many other ways to address it (price action, market/volume profile, etc.). You're looking for context, however it is determined. Once you're clear on that, you can make a trade decision based on what price is doing. Just looking at support and resistance may be enough. But you need to figure out context, and be willing to change your mind very quickly, before looking to trade.

Maybe you don't need to turn the computer off, although you needn't try to trade every second, either.

Bob.

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