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I would like to consider more circumstances of the market context in my decision making process. I have two questions about this:
1. which factors of the market context can be used / do you find helpful?
Currently, I look at whether there is trading inside / outside the previous day's range (imbalanced / balanced market). In addition, I try to consider how other markets behave (e.g. other indices) and whether there is an underlying bias (long / short).
2. how can I determine volatility in real time?
I am aware of the Average True Range, but as far as I understand it, I can only use it to determine afterwards whether this was a volatile day or not. For example, what are some ways to judge an hour after the open if this day is unusually volatile (compared to the last seven days)?
Can you help answer these questions from other members on NexusFi?
Volume profile, specifically intraday, is IMO the single best way to gauge current market conditions.
It takes screen time, but in essence when the profile is skewed that is a massive indication that we need to probe further until responsive activity takes place. When this responsive activity takes place, the success or failure of said activity is yet another clue that is revealed in the volume profile. Of course, tools like footprint are very helpful to see specifically the interplay between supply and demand in the context of watching initiative vs responsive activity.
For volatility there are a few different metrics I look at, but it depends what you're looking to get out of it.
For example, I like the 5 day RTH ADR (average daily range not true range) for HoD/LoD forecasts that can be used as targets. I also am a big fan of ATR for stop size.
Depending on your personal entry tactics ATR can be helpful in a couple of different applications. One could be to look at the straight value it's printing, and use that to calculate a stop. For example current ATR = 1.6, maybe you double that, round to the nearest tick, and that's your stop. Another way to look at it is to zoom out so you can see several sessions. Note at what price it has been spiking, and use that as a reference point for stop size.
I completely agree with everything said above. I would just add a very small point....if you're day trading, you may notice that price will respect certain intra day levels from the current day, prior day, current week, prior week. For example, the IB hi/lo, prior close, today's open, prior day hi/lo, prior week hi/lo, yadda yadda yadda. Seeing how price respects these levels and using them to help elucidate whether the market is succeeding or failing at what its trying to accomplish, is something that I find also helps paint the current context. This is but a component part.
