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Trading When to call it quits? Oil Trader
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Trading When to call it quits? Oil Trader

  #21 (permalink)
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xylem View Post
With regards to my setups/EDGE. Trading order flow is quite subjective.

But trading outcomes are not: they're entirely objective and quantifiable.

Do you have - at least - the results (somewhere, for yourself - I'm not suggesting you should post them here) of 200 consecutive trades made on a sim, which show a clear net overall profit? (That's not too much to expect, after 6 years, is it?). If you don't, then clearly you're nowhere near ready to trade with real money.


xylem View Post
What is an easy trade?
A trade that I feel I have to take and has a lot of volume and excitement with it. A trade that is a good opportunity. Low hanging fruit.

Do you have actual, statistically significant evidence that "a lot of volume" is an outcome-determining factor, overall, or is that a guess/feeling/instinct?

If you do, then you'd presumably want to incorporate a volume requirement as a filter in your method/system?

If you don't, then it sounds like you need to research and test that, objectively, before deciding whether or not to continue?

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  #22 (permalink)
Trading for Fun
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RielA View Post
In regards to your setups I have a couple thoughts.

1) Trading Stops should not be measured in dollars. A $200 limit on a trade is a function of risk management and position sizing, both of which have no bearing on what prices are going to do. Our stops should be in accordance with our trades, so when an idea is not working we get out.
Determine how much points/time you have to risk to make that decision then size your positions to a $200 limit.

2) You have setups. Great. But what i am not seeing is a governing concept or principle that guides your strategy. By that I mean a way to read and analyze the markets where trading setups then fit into. As an example I subscribe to Market Auction Theory and that's how I see the market, I use Market Profile analysis and techniques to find opportunities. From there I use the Order Flow, like you, to work with setups that are all derived from those concepts.
Without a governing strategy we're just trading setups and we'll have no real idea of why something works or not. At that point we're just trading the probabilities of our setups with no real understanding of what/why those probabilities are.

IMO we all trade some form of momentum, fade, pullback, breakout setup. Its the specifics and the context that makes them all different. There is no edge in a setup without context. You get context by having a governing concept/strategy/principle (whatever you want to call it) that guides your trading.

Interesting ideas.
I believe in market auction and volume profile principles.
I like the trades best when the market is imo at an now or never area.

EG price has just broke down from that high value consolidation. Now it will either flush down for the forseeable future or this is a shakeout. SO a long position is gonna work now or never.

I like the way you talk about context but im not sure I fully understand it.
A setup has a million context factors to it.
I like opening drives, closing drives as I can predict there will be some momentum in them periods and when a setup occurs around these times I am more likely to take it.

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  #23 (permalink)
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xylem View Post
A setup has a million context factors to it.

Exactly why we need a strategy to determine what's relevant to our trades or not.

A setup should fit within the context that your analysis has defined for you. The more flexible and transparent the analysis the better we can adapt our setups to a changing market environment.

It sounds to me like you are doing to much at once. Refine your analysis, develop context and keep things simple. From there you can focus more on managing your money and your mindset.

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  #24 (permalink)
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So in your example, presuming you are a profitable trader can I ask what one of your setups is and how specific you have it?

My journalling process should start to smooth out my setup list as I describe each trade and break them down into categories that I can more clearly quantify

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  #25 (permalink)
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I have three general setups: a breakout trade, a pullback trade, and a fading trade. I determine a long/short bias using the VWAP and trade location using the current sessions' Developing Value Area + Volume Profile.

i have trades occurring when prices are above the DVA, prices inside the DVA and when prices are below the DVA. Depending on where there trade is in accordance with the VWAP determines the trade as trend or counter trend.

So when I record a trade..

a) Type of trade (Breakout, Pullback, Fade)
b) Location (DVA/Profile)
c) Directional Bias (VWAP)

This is how my setups are recorded and categorized. I also record and track the types of the exit strategies I use with each setup. This allows me to note any patterns of specific setups and exit combinations that can be particularly profitable.

This is not a trading system, only a portion of one. How I trade the setups, manage my positions and the context of the market at the time of trading is a big part of making it all work. I keep a handwritten journal that I can jot down notes about those concepts, there are too many variables to categorize that side of my trading as it is more subjective.

Some contextual concepts i use are: level 2 price action, cumulative delta, correlation with other markets, price as its trading to daily/weekly highs and lows, previous days' value area, price compared to the opening range as well as the first hours' high and low. These are all things that i've found important to follow that help me trade.

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  #26 (permalink)
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Hi, I've been using Pete's tools for three months, so I'm relatively new at this, but after having reviewed his materials a couple of times, here's my take on your setups.


xylem View Post
Setup 1. Exhaustion.

Price has overextended by a very large amount 50+ ticks. At the highs/lows I am looking for either 1. A low volume test of new top. 2. Heavy Iceberg absorbtion. 3. Strong capitulation move uncharacteristic from the previous momentum.
Entry should be at the moment of 1 2 or 3 but if they happen too quickly find a low risk momentum area to get into the move.

These are fast, hard to catch counter-trend moves, even seeing strong absorption & capitulation you're trying to catch a reversal. You'd be better off to wait for a LH/HL and take a continuation trade. Doesn't come from me, these tips are in the Jigsaw course.


xylem View Post
Setup 2. Level Bounce

Price has preferably extended into a strong level. At this point I am looking for 1. A low volume test of new hi/low. 2. Heavy Iceberg absorbtion. 3. Strong capitulation move uncharacteristic from the previous momentum. Furthermore given this is not always so volatile a shakeout entry is always preferable.

Another counter-trend setup.


xylem View Post
Setup 3. Momentum Continuation

Price has began moving with high volume or fast speed with higher timeframe alignment (not at resistance- with space above- With some reasoning behind the move).
Find an entry with low risk and take a fast 5+ ticks and let the rest ride to the next resistance area or until the momentum stays strong.
Entries will usually be a breakout with defined low risk <8 ticks. Or a pullback that has had either 1. A low volume test of new top. 2. Heavy Iceberg absorbtion.

These are my favourites. Look at cumulative delta to spot lack of urgency (market orders) in the pullback. More often than not you won't have icebergs, but tests of previous levels with sudden silence from the side pushing the pullback should be enough.
Also I don't see mentions of context, but I'm sure it's embedded in how you set your bias.


xylem View Post
Setup 4. OrderFlow Scalping

This setup requires VOLUME. Using either 1. A low volume test of new prices. 2. Heavy Iceberg absorbtion. 3. Strong capitulation move uncharacteristic from the previous momentum and 4. DOM sup/res IF!! The market is volatile and volumous we can trade using TIGHT stops and FAST targets. This is similar to momentum trading but usually happens on a news release or unexpected volatile moment where the direction is undecided. The key to this is using TIGHT stops and being Extremely Flexible in directional bias.

These are the set-ups where I personally have the worst W/L ratio. Because they happen in no man's land, where the market spends so much time, it's too easy to mistake HFT algos farting 500 lots on a 2 tick range for something meaningful. But hey, your mileage may vary.

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  #27 (permalink)
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RielA View Post
In regards to your setups I have a couple thoughts.

1) Trading Stops should not be measured in dollars. A $200 limit on a trade is a function of risk management and position sizing, both of which have no bearing on what prices are going to do. Our stops should be in accordance with our trades, so when an idea is not working we get out.
Determine how much points/time you have to risk to make that decision then size your positions to a $200 limit.

2) You have setups. Great. But what i am not seeing is a governing concept or principle that guides your strategy. By that I mean a way to read and analyze the markets where trading setups then fit into. As an example I subscribe to Market Auction Theory and that's how I see the market, I use Market Profile analysis and techniques to find opportunities. From there I use the Order Flow, like you, to work with setups that are all derived from those concepts.
Without a governing strategy we're just trading setups and we'll have no real idea of why something works or not. At that point we're just trading the probabilities of our setups with no real understanding of what/why those probabilities are.

IMO we all trade some form of momentum, fade, pullback, breakout setup. Its the specifics and the context that makes them all different. There is no edge in a setup without context. You get context by having a governing concept/strategy/principle (whatever you want to call it) that guides your trading.

That is a very good point that you mentioned. Context is a very important part of the setup.

I also use order flow to trade, and I don't really use charts any more, but I still pay attention to context. Just to give you a different perspective of how I use context within order flow itself.

I'll use one of your setups as an example. You mentioned that your first setup is exhaustion. So, you look for a few things, 1. low volume test or 2. Iceberg order. OK, that's perfectly fine. But, you have to also be aware that, seeing an iceberg alone, means nothing. It could simply be some guy that was long from the low and he's just liquidating. So now, you have to bring in some context. What was happening as the market was trading up into the iceberg order? Was it very strong, were buyers aggressively hitting into the offer, was they any selling as each price went from offer to bid? Are the bids stacking up? (showing a sign that buyers are still willing to support the market), when you see the iceberg order, are the bids pulling off? Is there any back ticking (sellers actively hitting back into the offer). These all fall under "context". Every time I trade, all of these are constantly being processed in my mind. I'm not just looking at what's happening at the individual price, I'm looking at how it's getting there.

I hope this makes a little bit of sense... if not, I'll be happy to clarify..

I also see that some of your favorite trading instruments are CL, YM and NQ... They certainly move very fast, but I find the order flow very difficult to read. I would stick to the Bund until you are profitable trading that. Reading order slow is also something that you need to acquire a very intimate relationship with that market you trade, so I would advice to just stick to thick markets like the Bund, or Treasury Notes.

Good luck with your journey

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  #28 (permalink)
Trading for Fun
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I started my DOM trading with the BUND and was fairly successful, IE I could trade it better than I can trade other instruments (ES, Forex etc)

Maybe I should revisit it.
I have however found CL to have a lot of oppurtunities in it.

Glad to hear some of your orderflow ideas.

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  #29 (permalink)
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xylem View Post
I started my DOM trading with the BUND and was fairly successful, IE I could trade it better than I can trade other instruments (ES, Forex etc)

Maybe I should revisit it.
I have however found CL to have a lot of oppurtunities in it.

Glad to hear some of your orderflow ideas.

Well, seems like there's your answer right there.

You knew you could make money trading the Bund, but then it was too slow and wasn't sexy enough. So you moved over to trade CL, which gave you tons of opportunities (i.e. reasons to fire off trades). But honestly, having traded CL for over a year myself, I have found that most 'opportunities' were nothing much than just 50/50. After that, I switched over to trading the 10yr notes, and have not looked back. Sure they are hell of a lot slower as well, but I could actually read the order flow and react to the price action.

Slow and steady is the name of this game. If you're profitable on the bund, trade that, and don't get distracted by all the glitz and glamour.

Gd luck!

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  #30 (permalink)
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On which markets do you trade?
If you are a flow trader, can you see the full book? I mean, do you have access to level2 that displays the full book. Eg. in the US markets, you are only shown a part of the book, there will be trades coming thru that you can recognize from the t&s, but you would not have seen the orders in level2. This is a huge disadvantage. On more illiquid markets, flow trading should be more profitable due to your ability to see the full level2 and lack of algos. Algos are also a big part of trading that are designed to make money from you. Eg. you try to put best bid, then they overbid you, you raise your bid until someone sells to you, only to find out that all the other bids were canceled and oops, your -500.

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