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Identifying the kind of day early on


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Identifying the kind of day early on

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  #1 (permalink)
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Hi all,

What are some of the techniques that you use to identify what kind of day you believe it is going to be. Im talking in terms of will it be a mostly choppy/range bound day, or will it be a trending day.

Obviously there's no method that will always be correct, but what are some of the things you look for in the first hour or so of the day to give you an idea of what kind of day it is going to be.

One of the techniques im aware of (which I haven't used or tested), is to determine the high/low range for the 1st hour or so and make assumptions based on that eg: opening range breakout.

cheers.

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Why do you need to identify what kind of day you believe it is going to be ahead of time? If you trade areas of demand and supply then all you need to care about is to not initiate a trade while price is in the middle.

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trendisyourfriend View Post
Why do you need to identify what kind of day you believe it is going to be ahead of time? If you trade areas of demand and supply then all you need to care about is to not initiate a trade while price is in the middle.

Hi,

Because as a system (algo) trader, knowing this kind of information early on is extremely useful.

cheers.

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DarkPoolTrading View Post
Hi all,

What are some of the techniques that you use to identify what kind of day you believe it is going to be. Im talking in terms of will it be a mostly choppy/range bound day, or will it be a trending day.

Obviously there's no method that will always be correct, but what are some of the things you look for in the first hour or so of the day to give you an idea of what kind of day it is going to be.

One of the techniques im aware of (which I haven't used or tested), is to determine the high/low range for the 1st hour or so and make assumptions based on that eg: opening range breakout.

cheers.

Get a good psychic

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  #6 (permalink)
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1. Tick levels
2. Strength of advance/decline line
3. What was character of previous day(s) trading range
i.e., small range vs large range
4. On a daily chart where is price relative to a trading band such as
a keltner channel or bollinger band
5. How deep are the pullbacks and how do indicators act during a
shallow pullback

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I think if you are overly concerned with chop, you are trading too small of a chart. You should trade bigger time frames (my smallest is 60 min), and then just reduce risk $$ by trading micro currencies with CME FX, spot forex, or ETF's.

I can't really remember the last time I was concerned about chop or range bound days. Well actually, yes I can. It was when I used to trade a small 6 range chart.

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I thought you might like to read this tutorial on the pivot range. It might help you form some hypotheses for the next day.

Pivot Width Analysis (Part 1 of 3) | PivotBoss

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Well - the 'type' of day can change but I use:

- average volume - cumulative volume for the time of day - average cumulative volume for past 60 days. Not so much the actual number but whether we are moving up - more than average volume coming in or moving down.
- shift in cumulative delta - look @ yesterday AM, 4k up, 4k down on the ES - nothing at all, then later it picked up and we saw a delta shift up

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Big Mike View Post
I think if you are overly concerned with chop, you are trading too small of a chart. You should trade bigger time frames (my smallest is 60 min), and then just reduce risk $$ by trading micro currencies with CME FX, spot forex, or ETF's.

I can't really remember the last time I was concerned about chop or range bound days. Well actually, yes I can. It was when I used to trade a small 6 range chart.

Mike

one mans chop is another mans trend...

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DarkPoolTrading View Post
Hi all,

What are some of the techniques that you use to identify what kind of day you believe it is going to be. Im talking in terms of will it be a mostly choppy/range bound day, or will it be a trending day.

Obviously there's no method that will always be correct, but what are some of the things you look for in the first hour or so of the day to give you an idea of what kind of day it is going to be.

One of the techniques im aware of (which I haven't used or tested), is to determine the high/low range for the 1st hour or so and make assumptions based on that eg: opening range breakout.

cheers.

I like to look for ID/NR4 bars on the daily chart. A breakout of an ID/NR4 often leads to a trend day.


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DionysusToast View Post
one mans chop is another mans trend...

Absolutely. Which is why a lot of things in trading are relative to the type of trader you are. I am not a scalper, and can't "understand" those that scalp for a couple of ticks. It doesn't make a lot of sense to me, unless you are a computer doing it with such speed and frequency that is impossible as a human.

But other traders do it and it works for them. That is all that matters. I don't understand how they can make it work, but if they do then that is all that matters.

But I always see people seeking "filters" to keep them out of "chop". I've been there. Years ago I was right with these guys. All I am trying to say is that I feel so much better these days, having left all that junk behind and moved on to bigger time frames. And I always have to say that bigger time frames does not equal bigger risk, because it seems most people can't understand this. Trade an appropriate instrument and market so that you can trade a big chart, with small risk.

For me, it's simply a matter of looking at the costs of a trade. Entering a trade usually means paying a spread. Exiting a trade often means paying a spread too. Then there are commission costs. You can give up 2-3 ticks for each new trade you put on, so if you are only scalping for 10 ticks, 20-30% is going to entry costs. Whereas if you trade for 50 ticks, you've now reduced that by a factor of five.

Anyway I apologize, I am far off-topic with this.

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Big Mike View Post
Absolutely. Which is why a lot of things in trading are relative to the type of trader you are. I am not a scalper, and can't "understand" those that scalp for a couple of ticks. It doesn't make a lot of sense to me, unless you are a computer doing it with such speed and frequency that is impossible as a human.

But other traders do it and it works for them. That is all that matters. I don't understand how they can make it work, but if they do then that is all that matters.

But I always see people seeking "filters" to keep them out of "chop". I've been there. Years ago I was right with these guys. All I am trying to say is that I feel so much better these days, having left all that junk behind and moved on to bigger time frames. And I always have to say that bigger time frames does not equal bigger risk, because it seems most people can't understand this. Trade an appropriate instrument and market so that you can trade a big chart, with small risk.

For me, it's simply a matter of looking at the costs of a trade. Entering a trade usually means paying a spread. Exiting a trade often means paying a spread too. Then there are commission costs. You can give up 2-3 ticks for each new trade you put on, so if you are only scalping for 10 ticks, 20-30% is going to entry costs. Whereas if you trade for 50 ticks, you've now reduced that by a factor of five.

Anyway I apologize, I am far off-topic with this.

Mike

Agreed

I scalp because I think the shorter horizons are the most predictable anf they are - for me.

Still - you do really need to be aware of when the market is directionless. It is quite tough for me to scalp when the market has no conviction one way or the other.

A couple of days ago, I decided to make a fairly major change to the way I look at price charts. It's early days but I think this also helps me to see when the market is directionless or moving with conviction.



What this is, is the PriceActionSwing indicator on a 900 tick chart with prices black on black. There's no price on the chart, just the swings.

Here's the IRT version



My entries are off the DOM, so in terms of more localized price action, there's no real need for me to see it on a chart. I just need to know where the swing highs & lows were. I can't use a line chart as that just shows me closing prices and not extremes.

Whilst my intention was to just plot the swings, I am beginning to think that the swing volumes may also be of interest. For instance, if you swing up & down on 4k volume, then you swing up on 40k, it might be worth considering that we are now long biased as opposed to looking for a complete retracement of the 40k swing.

Previously, I'd never even considered looking @ swing volumes, even though I do look @ delta shift for a swing. It strikes me as quite obvious now.

In any case, this is all variations on a theme.

- average volume compared to 60 day average for the time of day:



- Cumilative Delta shift sizes
- Swing Volume

It's all about commitment/volume thrown at the market.

Now - that doesn't work all the time, you do get days where the volume is high and it stays in a range. You also get low volume trend days. On balance, I still think this approach of using participation to guage strength of moves/follow through works more often than it doesn't.

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DionysusToast, what you're showing looks like a wave chart a la David Weis, a la Richard Wyckoff.


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I am trying to find a pdf of ES research on range vs trend days with interesting statistical charts. I remember seeing it posted here but can't for the life of me find it...anyone have any ideas?

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terminator8 View Post
I am trying to find a pdf of ES research on range vs trend days with interesting statistical charts. I remember seeing it posted here but can't for the life of me find it...anyone have any ideas?

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Wow this is pretty good, thanks for sharing!

There was another PDF I remember seeing. It had dot plots of ES ranges and was probably done by a mechanical/quant trader.

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terminator8 View Post
Wow this is pretty good, thanks for sharing!

There was another PDF I remember seeing. It had dot plots of ES ranges and was probably done by a mechanical/quant trader.

I was able to finally find it: https://verticalsolutions.com/download/Little%20Book%20of%20Trend%20Days.pdf

Hope some people find it helpful.

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