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Trading the 6E Old School, With a Twist


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Trading the 6E Old School, With a Twist

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  #201 (permalink)
 eminitrdr 
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@MilesT,

It's also a 5 minute. All my charts are set up like the Master, Mr Cashish. He actually helped me set them up.

The only chart, to my knowledge, that is different is my personal buy/sell study which helps me with my entries.

emini

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  #202 (permalink)
 Cashish 
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To the Rescue

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  #203 (permalink)
 Cashish 
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When I see a Profile that looks like this I call it the 3am Bar (tavern) Trade.

You have to go somewhere because you can't stay here!





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  #204 (permalink)
 Cashish 
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There's no School like the Old School

You have to go somewhere because you can't stay here!






This is a follow up to the previously posted chart. It's easy to say price has to go somewhere from what I call a focused point on a chart, but where? Where will it go, and when will it go are (to me) the questions that hold potential for making profit. In public interviews over the last couple years J. Peter Steidlmayer himself said, (I'm paraphrasing) "Market Profile has lost it's objectivity and is now totally subjective due to extended trading hours." It's very easy for me (a small time trader) to say I agree, but I've been using MP and VP long enough to witness those changes and suffer through periods of adapting my trading style to fit the longer and faster moving trading sessions.

This 5m chart shows the price movements for the six hours after I posted the chart above. During this six hour period the range for the day expanded by 9 ticks, from 27 ticks to 36 ticks, 2 ticks on the down side and 7 ticks to the up side. Wow, the price rotation continued for another 6 hours and basically went nowhere, this is a scalper's dream. If you're into that type of trading (and good at it) you probably did very well.





As I add visualizations of the available data a more defined picture of the market emerges. This chart shows bar volume and the Globex VWAP with it's +1 and 2 and -1 and 2 SD bands. I find these two studies can provide great entry points for scalping when the market is rotating in a "go nowhere" consolidation period. These studies also provide areas of interest if I'm looking for a breakout in either direction. The obvious idea of a breakout is that a substantial move beyond the +/- 2 SD level will carry price to new "uncharted areas" of the session. If the distance between the SD bands aligns with your risk tolerance these levels can provide many areas to enter a breakout trade or a probe above the current range along with a predefined stop. A word of caution, I call the area between the -1 and +1 SD levels "the forbidden zone" trading in this area will keep you on your toes. Taking fewer trades outside the +/- 2 SD level in the direction (of your choosing) may be less exciting but (I believe) more rewarding.





As I add another visualization to the available data an even more defined picture of the market emerges, this is the value area of a Volume Profile study which began calculating at the Globex open. Similar to the standard deviation (SD) bands of the Bollinger Band study's 20 period moving average, This value area of a volume profile is (in theory) an area containing 70% of the session's volume. This parameter is user defined, I have experimented with different settings with some limited success but the "normal" setting is 70% and IMO, the notion of "Self-Fulfilling Prophecy" continues to haunt this study as well. I posted this study to show the correlation between the extremes of the value area and the +/-1SD VWAP bands. This correlation may offer savvy traders a more defined area to consider when the urge to enter a position presents it's self.





This chart is an attempt to show a possibility that there may be some legitimacy to the belief that volume often correlates to range expansion. IMO, this correlation theory is more obvious on a daily chart but I believe it holds true on much smaller time frames as well. I believe it holds true often enough to warrant further consideration and study if traders have an interest in finding a method of trading breakouts or a reversion to a mean method of trading.





Lastly and maybe most importantly is the topic of time, this topic has caused me more grief than any other element of my trading. Not so much the time frame I've traded but the time of day I've traded. Trading before, during and around an economic report keeps many traders on the sidelines during the most opportunistic moments of the trading session. Often the market will focus, focus, focus to what appears to be a laser point of price before a report (first chart) and give only one opportunity for traders to participate in the major portion of the move. Once price begins the rapid movement common in today's markets away from the current trading range traders are left behind looking at higher risk entries if they wish to join in on the move. I've found joining in on fast moving market action can be intimidating and leaves the door wide open for me to throw caution to the wind and fall victim to reckless trading behaviors, mostly rooted in managing my trades "on the fly" while processing the new data pouring in from the market. The speed of vertical price moves in today's markets are IMO best traded with well thought out predefined levels of entry, risk and targets/exits entered early in the consolidation. Many of these moves happen several minutes before the actual release and waiting for confirmation of the report leaves me standing on the sideline watching the opportunity slip away. I've learnt to control my risk by placing my entry orders deep in the anticipated price rotation and honoring my hard stops. J. Peter Steidlmayer (paraphrased) suggests entering trades "as close to your exit as possible" and "don't try to be perfect." He goes on to say, "take losses early and often." This sounded like a contradiction when I first thought about his words, but as I began to understand today's fast one directional moves I found my successful trades fit his criteria. Curiosity may have, "killed the cat," but I believe it has also made many traders a lot of money. Looking deeper and closer into fast market moves can be beneficial to understanding the concepts J. Peter Steidlmayer is advocating. In one of the books written by Robert Pardo he (Pardo) describes the purpose of a trading system (paraphrased), "is to identify non-random price movements and exploit them." I believe the fast one directional market moves (mini flashes) are the non-random price movements of today.

Food for thought, 55.9% (66 ticks) of Friday's range happened in a 16 minute period before 8:30 am. After the news at 8:30 am 37.2% (44 ticks) of Friday's range happened in one hour and six minutes, printing the high of the day. Within a half an hour (32 minutes) of printing the high of the day, the entire 44 tick move was re-traced.






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  #205 (permalink)
 josh 
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Thanks for the post Cashish. The last couple of charts also highlight the obvious, that when a breakout from a very balanced range occurs, unless it immediately is rejected, then there is often great opportunity to jump on board. Traders all the time say "I don't want to chase it" -- so instead they sit there and trade in crap for 5 hours and get chopped up after the market has made a sizable move. Just when the market is ready to pause and do some rotation for 2 hours, they decide to trade again. When the market makes a move OUT of balance, chase it! When it moves to the high or low of a range and has not demonstrated a desire to break out of that balance, then don't chase it (or fade it if so desired).

Also, I'd bet if you were to put 95% for the VA calculation on the profile study that it would pretty much be equal to the VWAP 2nd band, since 95% would represent the 2nd std dev for the profile.

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  #206 (permalink)
 Cashish 
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There's no School like the Old School

Trading in the Stratosphere





I've posted many times there are countless ways of profitably trading the markets, no matter which method an individual trader chooses, in the end he'll only trade according to his personal belief system. I'm no different than the next guy when it comes to trading my belief system. Give two traders a simple moving ave cross over system for a 15 minute chart and you'll probably get two different results. One trader might believe the signal needs to be taken after the close of a bar and the other trader might believe if the faster average line touches the slower while the bar is still painting that's the time to pull the trigger on the trade. Same system, different personal beliefs, different rules. I have rules, I have rules for rules. IMO, the less rules the better but when the time comes to implement one of those rules you better have a rule that says, I follow my rules! Markets change, and this can cause the systems rules to be changed but changing a belief system is much more difficult. "From my cold dead hands," that's what it will take for several of my beliefs.

Ask several VP traders about the nuts and bolts of their trading and the importance they place on the different values generated in a profile and the opinions will start to fly. Remember, different instruments have different characteristics and I personally cannot comment of a VP of the September Oat contract or May cattle. This difference in the instrument doesn't effect the theory behind the VP study but I believe the data set used to calculate the study is affected by the instrument. The "future" price of hogs for example is the price I can lock in today to sell hogs that I haven't bred yet!

Trading in the Stratosphere

What I mean by the Stratosphere is when the price on the VP chart enters an area where there is no data, unless I look back several months or years. This 4 hour chart shows Friday's price movement that took out the resent highs of December, that in turn took out the highs of September.




This next chart is a daily, if price peeks out over the top of 1.3488 I would have to look back to the December 2011 contract to find data to build a profile. Since price traded at the Dec 2011 contract levels price has moved down 1450 points and back up again! Thanks but no thanks, I just don't put any value in data generated that far back. I can look back and generate pretty profiles of the 2008 July highs and mark POCs on my chart all the way to 1.5900 but I believe it's total nonsense. The whole idea of trading is to trade the new orders coming into the market on the right edge of the chart, not the price level traded by some trader who died 3 years ago or a POC level that blew out newbie's all in all out trade a year ago.








To find levels to trade in the stratosphere I stick to the basics, yesterday's high, low and settlement prices, whole numbers (00's and 50's), the rotations around these numbers, the average daily range and the daily Buy, Sell and Pivot. All these numbers are known the night before and as price begins its normal rotations volume profiles begin to emerge, current profiles. I also look at a longer term charts and look for Fibonacci levels of major moves, there's always something. The price action of Friday revealed a common false belief about the buy, sell and pivot numbers. Although nothing works all the time, it is commonly thought that after a major expansion in the trading range like the one experienced on Thursday (234 points) the buy, sell and pivot numbers hold little validity. This chart shows having it on the chart 85 points above the prior day's settlement price did no harm. In fact I took profits on 1.3344, it played into my belief of taking profits "going to not going thru" whole numbers. On this 5m chart it appears price sliced thru this level when in fact from 8:23 am to 8:33 (10 minutes) the highs were 36,38, 38, 43 and 44. Things are not always as they seem, especially 3 minutes after a economic report. The fresh new profiles will come and new patterns and POCs will emerge and litter the wide open spaces of the stratosphere once again.



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  #207 (permalink)
 Cashish 
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There's no School like the Old School

My Old Trading System

I've mentioned earlier in this thread that a friend gave me a trading system when I first took an interest in trading. While cleaning out some old files I came across the original copy. I used this system to trade the Deutsche Mark, that will give an idea how old this is. I made money trading this system but as I've said before I'm impatient and my trading style evolved to much shorter time horizons. I know it was also used on the Yen, Franc and oil but I cannot report on the successes in those markets. Funny thing is, I still chart the 20 day highs and lows on my Euro chart and my curiosity intensifies when price peeks out above or below the averages. I have no idea how it will preform in today's markets but if your searching for something/anything on a longer time frame this simple system might just provide the catalyst to propel you to, The Land of Untold Riches. FWIW, here it is.





As I said, I haven't used this system in many years. I've decided to post it here but please don't derail this thread with questions or comments concerning it, PM me if you wish.
I would be very happy to respond to a new thread if someone was inclined to start one.
Thank You

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 Cashish 
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There's no School like the Old School

Major Tom


Same Situation Different Day












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 Cashish 
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Some Targets






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  #210 (permalink)
 Cashish 
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There's no School like the Old School

If it Works Don't Fix it




Somewhere I read, "Experience is the best teacher, however it's also the most expensive." When I was a boy (under 10) my Grandfather bought me a brand new handsaw during a visit to a hardware store. I used to spend weekends with my Gram and Gramp on their farm and I would spend time in his workshop cutting pieces of scrap wood and nailing things together. I can't remember anything of value I built but for some reason he felt I needed a new saw (I think He needed a new saw, since I "played" with his). I held the saw in my hands on the drive home and admired the smooth shiny finish of the blade, the grain of the wood in the handle and the sharpness of the teeth. He told me on the drive home if I took care of it it would last a very long time, like his old saw. When we got home I hit the ground running, straight to the rack of scrap wood in the shop. Gramp drug out a couple saw horses and set them out in the barnyard, he laid a stack boards on them, drew lines and said, "cut here." I sawed thru boards until the sun was going down and Gram, called me in for the night.

The next morning during breakfast Gramp asked if I finished my cuts, I told him I had a few more. When I made my way to the saw horses and my work for the day, my life changed. There on the last board I cut laid the brand new saw, I left it out, overnight. The dew from the night before settled on the blade and it was covered with rust! Gramp said, "your new saw doesn't look new anymore, does it?" Then he flipped it over and said, "but this side does." He grabbed a rag, some steel wool and an oil can and within a few minutes brought the rusty blade back to it's full luster, that was the last time I left a tool outside. The experience taught me, as a young boy, if I wanted my new saw to last as long as his old saw, it would solely depend on me.

What does all this nonsense have to do with trading? My answer is, I had similar learning experiences as a newbie trader. A memorable example was when I got caught unknowingly holding an open position during in a scheduled NFP report, I lost 3k in about 3 seconds! I learned if I wanted to keep my trading account shinny and new, it would solely depend on me. IMO, when it comes to trading, what we (I) don't know, can hurt us (Me).

I've said many times in this thread there are countless ways to successfully trade the markets. No matter the method or the tools you choose, whether it's the work of Fibonacci, Gann, Elliott, Arms, Steidlmeyer, Nisson, Wilder, Taylor (Raschke), Pring, Dalton or Al Brooks they all agree on one thing, the uncertainty of price behavior. IMO, the fact they all agree price behavior is uncertain tells me two things, (1) Nothing works all the time, and (2) It (the method/tool) works often enough (for them) to trade it profitably over time. Most of us would consider these men (and woman) experts in their method of trading the markets. The times have changed, the markets have changed, the players have changed, but these experts live on, trading the same core method year after year while subtly adjusting their methods to the advancements in the technologies effecting today's markets.

Big Mike's Trading Forum and Big Mike himself continues to offer traders from around the world a unique opportunity to peek into the minds of several active traders using many of the concepts of the experts mentioned above through the use of webinars. It is often said that Albert Einstein had an audience of only a handful of people in the entire world he could intellectually communicate with, clearly, his concepts were far beyond the understanding of the world's population. It is also often said, "trading isn't rocket science." IMO, traders don't need much education to enter buy or sell orders (I'm proof of that), but to be considered an expert of a market or method, that, takes education and experience.

So far this year life has thrown me a curve, my available time for trading is all over the map and I find myself trading the 6E during off hours and bits and pieces of different sessions. I'm finding a lot of uninterrupted free time and this week I watched the most recent Al Brooks webinar. As I recall Big Mike stated this was Al's fourth or fifth webinar for futures.io (formerly BMT), I confess, it's the first one I've watched. In this post I'm going to walk out on some very thin ice, with the sole intention of showing how two methods can achieve similar results. IMO, Al Brooks is probably considered the "Authority," on trading "Pure," Price Action. If anyone disagrees, take all rebuttals to another thread, this is only my opinion. As pretentious as this post may first appear, I'm willing to 'put it out there' to show in a very unsophisticated way how it is possible two completely different methods can achieve similar results. Furthermore, I ask readers to honor the the individual beliefs of both traders, in this case Me and Al Brooks. I told you this was very thin ice, and unsophisticated, so I ask readers who choose to proceed, do so with an open mind. To be absolutely clear, this is NOT an attack on Al Brooks or Price Action Trading, I respect him, his method and his opinions.

Differences in our Beliefs

I'll start by assuming this post is being read by, "the usual suspects," traders who know my trading style, method and the tools I use. I'll also assume these same readers are familiar with Al's style and method of trading price action.

First, the differences of our beliefs. I believe charting Volume and the use of studies based on volume is extremely important, I use Volume Profile (VP) and the Volume Weighted Average Price (VWAP) as the core of my trading. At the end of Al's presentation the first question Big Mike asked (from the viewers) was, "Why don't you use Volume?" Al's answer was, (paraphrasing),,,, "It (volume) was to misleading." Al went on further about the topic of volume, but the fact is, he doesn't use it, and that fact is very well known, IMO.

Now, when it comes to Price Action Trading (PA) the differences between Al and I become less clear. I do not believe in candlestick patterns of any kind, on charts of any time frame, because I believe today's market (6E) is a continuous timeless market that begins on Sunday evening and (excluding the reset times in the 6E) ends Friday afternoon. To avoid a longer drawn out conversation on this topic I will post a quote (albeit somewhat edited ((by me)) from Richard W. Arms, Jr., "If the market wore a wristwatch, it would be divided into shares (edit,,,, contracts) not hours." In an attempt to avoid further accusations of hypocrisy I'll say this, time is the only constant on a chart and through all my attempts of using ideas ranging from 1440 to 10,080 minute bars and volume bars from 100,000 to 500,000 I've found dividing up the life of the contract I'm trading into 5 minute intervals works best for two reasons, (1) This interval of time best correlates to the average time I spend in a trade and, (2) The notion I have of the market's self fulfilling prophecies. To be clear, I do not believe in or base my trades on bull bars, bear bars, inside bars, doji bars, hammers or hanging men. Lets move on.

Agreements in our Beliefs

There are many, but I'm only going to focus on two that Al covered in his futures.io (formerly BMT) Webinar, (1) Support and Resistance and (2) Self Fulfilling Prophecies. Al and I both agree on levels of support and resistance. I also consider it safe to say we both agree identifying these levels and trading them wisely accounts for the greatest amount of profitable trades. Al also made many references to the notion of the possibility of self fulfilling prophecies effecting price action during trading sessions. During the webinar Al went into great detail about risk and reward, IMO, if you haven't seen the webinar this section alone makes it a "must see." In a short (very short) overview of this section of the webinar I will report and conclude, he (Al), joins the masses with the common recommendation, suggestion and practice of entering trades with a reward to risk factor or 2 to 1. Risk 10 ticks with the expectation to be rewarded 20 ticks, risk 20 ticks with the expectation to be rewarded 40 ticks, this simple equation has been stated by legions of market gurus for decades. And in that lays a key. The continuous regurgitation of this simple 2 to 1 equation decade after decade combined with levels of support and resistance has made it one of, if not the most self fulfilling prophecy in today's electronic, computer augmented markets. But wait, there's more. In the webinar Al outlines and highlights areas in the market, specifically, in previous ranges where he suggests traders should avoid placing trades. That area is the "center" 33.3% of the prior trading range or consolidation area. His (Al's) theory is (and I agree with him) trades in this area have a very small chance of success due to the notion that if the market moves to the upper 33.3% of the previous range or lower 33.3% of the previous range trading will increase due to traders already in the market taking losses and profits correlated directly to the 2 to 1 equation which could expand the current trading range. Although it may not expand the previous range significantly it could expand the current rage far enough to exceed the predefined and suggested 2 to 1 reward to risk ratio, which in turn will stop out the entries in this area time after time after time.

Two Methods Can Achieve Similar Results

"In this post I'm going to walk out on some very thin ice, with the sole intention of showing how two methods can achieve similar results." I'm going to honor Al Brooks and post this chart first. The "hard right edge" of this chart is Thursday's London Open at 2:55 am est. (all times are est.) the vertical green line is the Globex open. I'm taking liberties here, forgive me but I doubt Al has time to play along. I took this 5m chart and divided what I will call the Asian Session into thirds, my understanding is Al would suggest that traders avoid placing trades inside the center 1/3 of this trading range. He suggests placing trades within the upper and lower thirds of the previous range. I know I'm not showing much historic content as to which direction a trader might place a trade in the outer thirds, but the "rule" is or "suggestion" is stay out of the center 1/3. Look closely at the yellow bars, they represent the hour of trading between 2 am and 3 am, I believe they quickly validate Al's beliefs.





This is my chart(s) of the same day, same time, and same range. I've posted before on this thread that I consider the area between the +1 and-1 Standard Deviation (SD) bands of the VWAP "the forbidden zone" and warn traders the chances of being chopped up in this area are high.





Here is another of my charts (it is my thread ) of the same day, same time, and same range. This chart shows the Value Area (VA) generated with a Volume Profile study calculating the volume on price. The idea is similar, trade only the extremes, but if your willing to take the risk of entering in the VA may the trading gods be with you.





This chart is charting the VA of a VP based on time on price the POC at the London Open is exactly the same and the VA compared to the previous chart is 'pretty damn close' but the "old skool" time on price charts can often give subtle clues to future price moves, a topic for another post but briefly, I watch for POC shifts on both charts. Same idea, stay out of the "center" if you do enter a trade, stay on your toes, and "keep your friends close and your stops closer."





Al was absolutely right, any long trades entered in the upper 1/3 of previous range with a stop equal to 1/3 of the previous range was probably taken out on that "Doji" or "long tailed hanging man" or whatever candle traders call them. Same for the any shorts taken in the lower 1/3 of the previous range. As I said, I respect Al Brooks, his method and his opinion. Take a look at this chart, when price sliced thru the "middle" and came out above the center 1/3 it appears it found a level of ROCK SOLID support, just LOOK at THAT VOLUME, sorry Al. I marked these levels to the tick, so the NEXT center should be 15 ticks above 1.3321 OR 1.3336 to 1.3351, the price action on this chart shows that is a pretty good "guess-timation" of what happened, the upper 1/3 OR using the Reward to Risk Ratio would have traders putting targets in at 1.3366,,,,,, that looks pretty accurate too, NICE call Al.





Okay, lets do it again and see if Al's method holds water. This time I'll use the entire range that was just put in, 108 ticks I'll be damn, look at that!





I saw the same thing, different tools, different beliefs, different looking glass but the view from the bridge was 'damn near the same.





The point I'm trying to make with all this is it doesn't matter what method traders choose, there are many profitable ways to make money trading. Here I compared myself (humbly) and my trading style based mainly on volume studies, to Al's style which he admittedly disregards volume stating volume is to misleading, in an unsophisticated comparison. I invite readers to take what they want and leave the rest, draw your own conclusions, do further tests and comparisons of methods you may have interests in. IMO what does matter is your commitment to the method you choose. Find something and stick to it, week after week, month after month and year after year. In the webinar Al Brooks was asked how long he traded before he became profitable, I'm not going to answer that, but I assure you he speaks of it in the webinar. IMO, Al Brooks is an Expert Price Action Trader I believe he will be know in the future (if not already) within the group of expert market technicians I listed near the beginning of this post. Experts have one thing in common, longevity. I believe they prove themselves and their methods by staying with it and staying with it and staying with it. They may look to improve it, but they never abandon it.

When I read threads on futures.io (formerly BMT) and I see traders changing their charts week after week, I think of "A kid in a candy store." futures.io (formerly BMT) has it all, every bell and whistle your heart could desire, and if you can't find it, the futures.io (formerly BMT) Indie Air Cavalry is strategically placed in every time zone around the globe, poised to swoop in and build it for you, all it takes is an @ sign in front of a user name and the launch operation code is activated. If you're a trader struggling to find a method, pick one designed by one of the experts that seems to speak to you and trade it. Commit to the method and commit to yourself to begin a journey of becoming an expert. And above all, don't forget to have fun.


Oh, I almost forgot, even the oldest systems have rules.
They were made by the ones who came before us, for reasons we may not completely understand, until we have more experience with the system.


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 josh 
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Thank you for taking the time to to post this Cashish, I know it takes a long time and I hope people appreciate that in an of itself.

Like so many things in life and trading, context is everything. For AB's style of trading, which is intraday 5 minute bar-by-bar, certainly volume is to be taken with a pinch of salt (dodging the VSA rotten tomatoes being hurled at me right now). In that way, volume can be quite misleading. Particularly the oft-cited nonsense about volume increasing or decreasing with breakouts, trends, etc. However, when used other ways as you mentioned, it can provide invaluable insight into the markets.

Regarding time frame--I do not have "5 minute" or "5000 volume" or "6 range" time frames in my workflow; rather, I think in terms of the day timeframe (which is the smallest that I operate on), the week timeframe, even the quarter timeframe, and then in terms of cycles independent of time. I don't use the notion of an intraday bar in my trading, because the market does not define intraday bars (though the tradition of 30 minute segments of time does hold some significance in my book). The day has a story, and the market closes, even if only briefly; same for the week, when the whole world takes two days off; and quarterly we have significant benchmarks for businesses (hence quarterly earnings). The story during the day can take twists and turns, but it's part of the same story, just like a movie may start one way and end another, but it's the same movie. Stories don't get any shorter than a day in the market, unless we look under the microscope at the HFT activity, but these don't really affect the plot, they are like extras in the background that have no real bearing on how the movie progresses or ends. Due to this belief (and that's all it is, others no doubt will disagree), the smallest bar that has any meaning is the daily bar, because there is a true settlement. Time is still important though IMO; else, we would not always see volume pick up and dry up at always predictable times. When the mall closes at 6pm, those with shopping to do hurry up, because an unstoppable event dependent on time is approaching, and it's either get their business done or go home empty-handed.

I do not subscribe to the "all methods are created equal" philosophy (some frankly suck and are not robust at all), but I do appreciate the fact that there are more ways than one to "skin a cat" and that two very different approaches can yield similar results. Thank you for highlighting an example of this.

Hope you are having a good weekend, and as always thanks for your posts!

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 Cashish 
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To my Dearest @josh

I believe our online relationship may be suffering irreconcilable differences and any further communication between the two of us may be unhealthy for both of us. I'm afraid if I continue to participate in a relationship with someone who's core beliefs are so counter to mine, I may end up backtesting a MACD trading system! I really DON'T want to go there!


Where to Start

I guess I can start wherever I want, so I'll share a story that is currently unfolding in my life. My son is a musician, he plays guitar, keyboards, writes his own music and sings. His music has been used in T.V. show themes, commercials and private corporate advertising, you may have heard some of it yourself, of course as a father (who has NO rhythm), I think he's pretty good. The other day he called me and said he wanted to build a shelf under his kitchen sink, I told him to take a few pictures and some measurements and come by my house and I would cut one out for him. A few days later he called me and announced, "I bought a circular saw." Needless to say, terror and fear ran through my entire body! Remember, I've been "screwing around" with saws since I was 5 or 6 years old. I told him to come by the house and I'd give him some 'tips.' In short, my tip was, DON'T DO IT, don't pursue a hobby of woodworking. Of course my intention was to suggest the risk of an injury to his hands (even a minor one) at this point in his life was far greater than the reward of building a shelf under a kitchen sink. This is still unfolding, but I hope readers can read between the lines and draw their own conclusions to the RISK vs REWARD in this real life situation.

Experiences are IMO, what we're made of, they're what makes us tick, they form our belief systems and we base our decisions on them. I smashed a thumb with a hammer, and on the same hand, cut my pointer finger on the spinning blade of a table saw. The nerves are gone in the tips of both of those fingers (Yes, I still have them). My wife told me to stop, but my Grandkids still ask once in awhile for me to pick a piece of bacon out of a bubbling frying pan. I only assume, "feeling" in your fingertips would be a good thing when playing a guitar or keyboard.


Back to Trading

In his post josh said, "I do not subscribe to the "all methods are created equal" philosophy (some frankly suck and are not robust at all), but I do appreciate the fact that there are more ways than one to "skin a cat" and that two very different approaches can yield similar results."

I've been thinking of this and want to respond, at length. I also want to clean up and make clear my intentions of this thread. When I started this thread my intention was to help traders find "Their Own" method/strategy for trading the 6E, I hope (FWIW) I'm still doing that. When I read posts in threads OR sentences in books that state things (ideas/theories) in "matter of factly" ways or ways that make the statements about (ideas/theories) sound like facts, I run the other way. I suggest others do the same. Writing is not my calling in life, neither is the proper use of the English language. I have tried to avoid at all cost, with great effort and consideration NOT to state any theory I have about markets, prices, methods, indicators or studies as facts. This is not easy to do, especially if I believe so strongly in the idea or theory that I have and continue to enter trades based on it at every opportunity. I'm sure I've crossed the line a time or two in this thread but with guys like josh holding my feet to the fire on every word I type, I think I've done OK.

As always, josh's latest post stimulates my thoughts. If I'm waffling or back peddling so be it, but the following is where I thought I was taking the suggestion of,,,,,,"If you're a trader struggling to find a method, pick one designed by one of the experts that seems to speak to you and trade it. Commit to the method and commit to yourself to begin a journey of becoming an expert.

From the first page of this thread I stated there's nothing new here, no fancy this or that and no secret sauce. There's no proprietary indicators and no hidden agendas. It is a collection of bits and pieces of many indicators and studies, some developed more than a half a century ago. My suggestion of "pick one" and run with it is based on my trading experience. For example, I picked Bollinger Bands and NEVER took them off my chart! I've looked at it and watched it respond to moves in the market for years. This is another point, I've traded the same market my whole trading career. Over a period of years I've found a couple signals that I take based on Bollinger Bands everytime, I trust the signal and usually put a thousand dollars of my trading capital at risk just to see, if it (the signal) will work this time. Now, another trader might put a Bollinger Band study on a Oat contract or the Mexican Peso and say Cashish doesn't know what the hell he's talking about! I agree, in those markets, I don't. I'll make another example with the use of the Trend Reaction Numbers I found in the Welles Wilder book that was copyrighted in 1978, thirty five years ago. When I first put these numbers on my 6E chart, I often said to myself, "price will NEVER go there," but time and again week after week and month after month these numbers appeared to play a significant roll in the days trading, today I won't trade the 6E without them. Again, another trader might calculate the same numbers for the beans or the S&P and cuss me for even suggesting such a meaningless set of numbers to highlight on his chart. Similar, to the previous examples I have beliefs strong enough to form 6E futures trading opinions regarding the rise and fall of Open Interest based on the L. Dee Belveal book first published in the late 1960's. Whether these beliefs are valid in the Bean Meal contract or Crude Oil contract I have no way of knowing. Lastly, and IMO, most importantly we have to throw all this into a hat, stir it up, and then,,,,,,,,,,,,,MOST of us add our Individual Discretion.

What I'm trying to say is, give your method a chance to grow. Pick one, understand what you're looking at, study it, watch it (in YOUR market) and give it a chance to show it's quality. IMO, We live in a "throw away society" and expect results for our efforts (or the efforts of others) RIGHT F'ing NOW! I believe patience, especially in today's market is a skill that has to be "brought back to life" first, then nurtured.

Watching the Al Brooks video last week made me money. I put those 1/3 of the move lines on my chart and studied them for a few days, I thought there was something there. Friday, I traded them, I made money (twice). Last night (Sunday) I traded them again, I made money. Did go balls out on a blank chart with total disregard for my own system, NO. But the alignment between the two methods was "clean and crisp" and I thought AL's insight into the market might just benefit me, it did. I'm going to keep this tool handy, keep it sharp and use it in the future. Am I going to throw out my system and become a charter member of the Al Brooks Price Action Traders Association, not today. What's the Risk of trying something new, what's the reward. Would I consider putting my trading on a shelf and pursue a music career, NO, but I'm always looking for a new tool to put in my traders tool box. Now I have one with AB carved into the handle. I sure didn't see that coming.

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 josh 
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Cashish View Post
To my Dearest josh

I believe our online relationship may be suffering irreconcilable differences and any further communication between the two of us may be unhealthy for both of us. I'm afraid if I continue to participate in a relationship with someone who's core beliefs are so counter to mine, I may end up backtesting a MACD trading system! I really DON'T want to go there!

Say it ain't so! Actually I think we have very similar belief systems, and you will never see a MACD on my chart, nor will you see me backtesting anything! And I am all for "give your method a chance to grow," without a doubt.

Regardless of what you say, I think you are a very good writer, and I always enjoy reading your stories...

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 Cashish 
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josh View Post
Say it ain't so! ..

It ain't so!


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 eminitrdr 
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Location, location, location...rotations, rotations, rotations...and
patience, patience, and more patience

Keep it simple. Control your risk.

Mr Cashish has given you all ya need. Don't complicate it. Study it, learn it and it's possible to make it your own

emini

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 eminitrdr 
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To quote Samuel Goldwyn, "The harder I work, the luckier I get" I know, who the hell is Samuel Goldwyn, look it up.

Do I take every trade that @Cashish takes, NO, not by any means. I think our beliefs and personalities may differ a bit. He's certainly more aggressive than I am. He's a MASTER, I'm a beginner . One commonality..we both BELIEVE in the studies!

Has he given me the foundation to take trades that I believe will work and take every time...absolutely.

emini

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 Cashish 
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eminitrdr View Post
He's a MASTER, I'm a beginner .
emini


eminitrdr View Post
All my charts are set up like the Master, Mr Cashish.
emini

@eminitrdr Please, if I was a Master I'd probably be shivering in my boots at the Davos, Switzerland Summit I've always been and continue to be a student of the market, just like you, realizing everyday offers an opportunity to learn something new. I may have learned the password and the secret handshake to the local "speak easy," but I look at traders like Jamie Thorsen and John Taylor as the Masters of currency trading.


eminitrdr View Post
Location, location, location...rotations, rotations, rotations...
emini

Yes I agree, understanding the "normalcy" of price rotation at different locations can be extremely helpful when placing entry orders, stops and taking profits. I've always considered trading a "one man" sport, me against everyone else. IMO, unlike my trades, the market has no beginning and no end, I spend my time trading in the middle. When I reach the outer limits (ends) all I have to do is look at a bigger picture. Friday's settle 1.3325, Tuesday's settle 1.3324, Wednesday's settle 1.3325 This market is beginning to look like a bomb with a very long fuse.






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 WilleeMac 
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cashish

thank you for the insight to the webinar

bill

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 eminitrdr 
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I hate to sound like a broken record, just re-emphasizing what Mr. Cashish has taught us about location.

I personally "preferred" the long side. Why....PA on volume profile chart, rising POC, price stayed above globex VWAP all morning after 5am EST to name a few. I'm not saying it's right or wrong...just what I saw. Could one have traded both sides...absolutely. I'd guess Mr Cashish would have or did

I simply have a lot of faith and trust in the studies...call it whatever you wish.

emini

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 eminitrdr 
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Probably better shows what I saw and explained above at the time of the 10am trade....fwiw. I was looking for a retest of the HOD with what I saw on my buy/sell study.

I hope it's helpful
emini

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 Cashish 
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He's Back!!

and it's Hammer Time!!










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 Cashish 
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Nice example of resistance (1.3413.... so far) becoming support. We've exceeded the Ave Range, BUT we've had some "Big uns" lately, maybe we'll probe the high, it is Friday after all. A close above those highs would make the Sunday night open interesting,,,, IMO.



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 Cashish 
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Some Charts



We did probe that high, came up a little short though, 1 tick under the X2 Resistance.



And 3 ticks short of this Major 50% retracement level, what a shame.



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 Cashish 
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 Cashish 
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I'm not sure this post is going to work, there are (suppose to be) 8 charts here.

This is the link to the post.



I posted this in the Euro/USD thread on Sept 30

If I looked at this chart I would say the price action was range bound.



If I looked at this chart I would say the price action was range bound also.



Yes, there's a point to this, the two charts above are the Euro Monthly (first chart) and Euro Daily (second chart). The Monthly goes back to 2004 the Daily 2007. I believe most traders would say there's no clear direction apparent on either of these two charts (I may be wrong).

Here's my idea, Ben Bernanke has been the chairman of the Federal Reserve since February 2006, his "rule" encompasses the entire Daily chart. He's had his hands full during his tenure that's for sure. In 2008 he introduced QE-1 and the Euro responded as indicated in the chart below.



Twenty two days shy of two years later the Chairman announced QE-2 and the Euro responded as indicated in this chart.



In both of these charts something caused the dominate direction of the market to reverse. Soon after the announcement of QE-1 the Euro changed direction and moved 2141 points in the other direction. Similarly, shortly after the announcement of QE-2 something caused the Euro to change it's dominate direction and move 1406 points in the other direction. This all may be coincidence, I'm not sure, could just be the enigma of the market and nothing more than random movements.

But what if, Ben Bernanke actually knows what he's doing, and realizes the "Tea Party" might just drive a wedge through the middle of the Republican Party and screw up the mid term elections more than usual. This might just cause a major shift in the congress and he (Ben) might just have to single handedly support the Dollar while all the congressmen (new and old) wander around the halls of the capital building with their heads up their asses for another two years.

I believe the 50% line between the movement after QE-1 and the 50% line after the movement of QE-2 is no coincidence. If Ben was "shooting" for the middle of the road with QE-1, two years later he was still "dead on." If he (Ben) was "shooting" for the middle of the road whit QE-2, two years later he was still "dead on."



What about QE-3 ? Is Ben Bernanke an infantry man dragging around a bazooka, or is he a more intelligent, patient, stalker type of solider, more of a sniper, one shot, one kill. Does he always wait two years to take his shot, it seems so. How about the position on the chart where he's taken his first two shots, sure the hype will move the market prior to the announcement, but he knows that. I believe the hype of QE-3 moved the market to a similar vantage point for Ben to take his third shot with QE-3, a near perfect position from the grassy knoll, the low of the reversal move of QE-2. This is similar to the vantage point of QE-2, the high of the reversal move of QE-1.



My theory (idea) is the market will find a bottom soon, either where we are now at 1.2839 or lower, may be 1.2700 and make a run to 1.3595, that 50% area of the first two QEs. If I had 10 million dollars I'd put it all on this trade, long from the area of 1.2850 to 1.2700, target 1.3600. I'm a day trader, and I don't have a 10 million dollar account so this post is the best I can do.





This Morning's Daily Chart


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  #226 (permalink)
 MilesT 
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Hi Guys,

I enjoy reading and learning from your transcripts in the chat box.
Sounds like eminitrdr needs to visit us in FL

I have a question about the "Big Dog"....the cash market I am assuming.

How do you follow the VWAP on cash when there is no volume info?

Thanks in advance,

Miles

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 Cashish 
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I have a question about the "Big Dog"....the cash market I am assuming.

How do you follow the VWAP on cash when there is no volume info?

Thanks in advance,

Miles

Ensign Software uses simulated volume which is a tick count of changes of the bid. This simulated data can then be used to chart "volume" studies. Here are two charts the cash (the Big Dog) and the 6E (the "tail") with some random lines, I intentionally "snipped" out the data bar,, I feel the software does a pretty good job of simulating volume.






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 eminitrdr 
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@MilesT,

Thanks for your kind words above. If you were observing the chatbox on Friday morning, here was a very nice call Mr. Cashish made. I don't know how much you have read, studied, and understand his Old School method. I believe knowing why he was willing to accept the RISK his on this particular trade is important.

I'll post a couple of charts to show what I was watching when the call was made. Only Mr. Cashish knows why he entered where and when he did. I have my own thoughts but it's just my humble opinion Was it something he saw on one of the posted charts, another one of his charts, or pure instinct/intuition on his part? Don't forget the importance of location and normal rotations...VP, VWAP, ADR, etc. Believe me, I have certainly asked my share of questions here in the thread and elsewhere.

emini

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 eminitrdr 
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@MilesT,

More important (IMO) than what Mr. Cashish saw is what you see. He has explained, time and again, the fundamentals of his method. Always know where price is for that specific trading session; the Globex, EU, and US sessions.

Remember one of the main tenets of his method...entries outside the VA (forbidden zone) after a normal rotation (14/16). Attached is what I saw and why I entered. If one has read and studied the entire thread, he has given you all the elements...make it your own

emini

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 MilesT 
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eminitrdr View Post
@MilesT,

I don't know how much you have read, studied, and understand his Old School method.

emini

I have read thru the entire thread more than once and come back on a regular basis for more nuggets.
My charts are simpler than yours (I cannot manipulate the volume profiles for one...) but I use the same principles
of price action and volume to do my trading. I am much appreciative of all the insights I have gained watching the two of you interact. Keep it up!!!!

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 WilleeMac 
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When using cash vs futes

Would TPO profiles (time price opportunity, ThinkorSwim) work in lieu of volume profile?

-Bill

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 Cashish 
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When using cash vs futes

Would TPO profiles (time price opportunity, ThinkorSwim) work in lieu of volume profile?

-Bill

@WilleeMac I'm not familiar with the Think or Swim platform but I would assume it would be fine. I've used the time on price method and still do on occasion, honestly I believe it's "coming back." The one option I find most useful is the ability to start a new profile quickly at any given time of day. This allows me to start a profile on different opening times, Asia, European and US. With the 23/24 hour markets the LONG SLOW times just build and build and build profiles off "go nowhere" prices. This obviously creates a POC that "looks" impressive, but when REAL volume hits the market around a session open for example, I find it useful to start a new profile. I'll post two charts, one time/price and volume/price. I'm looking forward to seeing your chart, I hope you stop by again and post some.









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Building a Better Mouse Trap



I sure would like to spend the afternoon with J. Peter Steidlmayer, maybe Big Mike can lure him in and do a webinar, that would be one I'd clear my calendar for. His recent work, and the few presentations floating around on the web validate a few beliefs I have about the different time frame traders participating in today's market. In every presentation I've heard, someone will ask, "Is Market Profile obsolete?" Peter Steidlmayer responds by suggestion MP is subjective rather than obsolete. He basically says it's up to you to find a method, and make it (MP) work for you. I've been trading with Volume Profiles for several years and what Peter says in these few presentations makes a lot of sense to me. I agree with most of the issues he describes relating to fast one way moves with light and heavy volume. I've pulled my hair out trying to find that "perfect" setting for a volume profile. I've uses profiles that started on 1,3,5,7, 10, 15 and 30 minutes, I've also tried 1, 2, 4 and 6 hour profiles. When I began starting a new profile for each session things began to fall into place. But I wanted more, I wanted to trade the extremes of the value area all day long. But as more and more volume came into the "day" and as the range began to widen the value area often exceeded 50 ticks or more. By incorporating the VWAP on my chart I had another set of targets and my "need for speed" was once again fulfilled. But again, when heavy volume came into the market the VWAP bands would widen far beyond my comfort zone for a target or a stop, 20 to 40 ticks between the bands is not that uncommon, especially after an economic report fuels a major move. I'm a firm believer in daily profit targets, I expect each trade to have a 33.3% chance of being a winner. When I put a trade on I expect the market to go up, down or sideways. Of course I want it to go in my direction but remember, "Shit in one hand and wish in the other, and see which one fills up first!" So when I enter a trade, I enter with enough size to fulfill my daily profit target, if everything "goes as planned" I'm done for the day (or session). So if I only expect a 33.3% chance of success on any trade I need to put the odds on my side. I believe I do this by doing my homework, that's what this post is about. It's no secret that news drives today's markets, markets can consolidate in tight ranges for hours (days) prior to a economic report and within a minute move the entire average range. These fast one way moves are what took me on this journey down the rabbit hole to find a way to read the market AFTER a big move threw most all indicators completely "out of whack."

Friday February 22, 2013

I'm going to focus this post on one move, but if you glean the wheat from the chaff you may, " find a method, and make it (MP) (edit,,, VP) work for you." A few minutes after 6am est reports that LTRO II repayments fell short of expectations by 40 Billion (Euro) and the Euro tumbled 47 ticks in one minute. Forty seven ticks ain't nothing to get excited about but the volume of the move is.

This is a daily chart with an area I've been watching (green lines) during the week. The Mighty Euro dropped on Wed and put in a 164 tick range, it dropped again on Thurs with a 129 tick range, IMO, 1.3148 was dead in it's sights.




Below are two charts, the first is a Globex chart and the second is a EU Session chart that I began calculating at 2am est. The purpose of posting these will be revealed later, I've removed the VP from them but left the Value Areas, the red line separating the upper from the lower is of course the POC. It's pretty easy to see the POC on both charts was between 1.3215 and 1.3220 at the time of the down move. Furthermore, once prices fell below the -2SD level a trader "like myself" was at a loss for 'targets.' Yea, yea, yea yesterdays low and maybe there's a fib number or extension down there from somewhere up above, but I like trading around the VA and SD levels of the VWAP, given that, after big breaks there's usually never much around. IMO, the most important data on these charts is the spike in the volume graph.







When this drop started the volume just kept coming, and coming that's what makes this move worthy of study. When big moves with heavy volume come into the market, I believe it is in my best interest to have statistics available so I can analyse what exactly is taking place. More importantly, can my analysis reveal trade-able opportunities I can exploit.


This chart is an expanded volume sub window from a 1m chart, the spike on the left is the 6:04 bar, when that bar closed the volume reading was 10.5k. A 10k 1m bar is not that uncommon the Euro averages 1 a week but the average high volume 1m bar seen each day in the last 20 days is 5,700. FWIW, there's an equal number of these "high volume" bars between 2-8am as there is between 8am to 2pm est. Another notable observation is the next few bars, another 10k contracts traded within the next few minutes.




My studies (homework) tell me the average volume traded from 2am - 8am for the last 20 days is 93.4k. So when I see more than 10% of the sessions volume trade in 1m I take notice. In this example 23.4% of the sessions volume traded within 5m, another 12% of the 20 day average (total 35.5%) traded before the average bar volume returned to "normal" (286). This chart shows volume "calming down" and getting "back to normal." The bar on the left is not the 6:04 bar it's the 6:21 bar it ONLY had a volume reading of 1345. Do I know these percentages on the fly during trading hours no, I only figured them for this post. But I do know 10.5k is more than 10% of 100k and I do know the session average is less than 100k. I also know any bar with volume greater than 5,700 is a high volume bar in either the EU session or the US session. At the end of each day I open a 6 hour chart, and write down the volume for that bar (session) and calculate an average over 5, 10 and 20 days. Session times are somewhat of a "gray area" these days, IMO. I'm leaning more and more towards, news to news. It aligns well with my beliefs of volume, more than opening and closing "bells."





So what does all this have to do with anything? I'm looking for an opportunity to trade. When high volume comes into the market I've been having some limited success by starting a volume profile and VWAP on the bar prior to the high volume bar. IMO, after a high volume move up or down the market is inclined to consolidate, If I can identify when the market is "back to normal" I can trade the normal market rotations and maybe prepare myself for the next move away from consolidation. This chart shows a VP (value area only) and VWAP which I started calculating after the high volume move. I believe this chart shows the true state of the market, a lazy consolidation right up to the US open. Another point I want to make is the POC of this chart,,, it's flatlined. Look back at the first two charts I posted and notice the shifts in the POC LOWER to MATCH this chart. Of course the EU chart shifted first (less volume) at 8:40 and then the Globex followed at 9:15. Also notice the width of the VA and the distance between the SD bands of the VWAP. IMO the volume of this move was (is) a force to be reckoned with.






Hey guys, here are the simulated trades from Friday morning.


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Mr. B Band Bring Me a Dream












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A Rock and a Hard Place


IMO, this market is in a very peculiar state. Italian elections, Pope (problems) and U.S. legislators doing what they do best, "jerk off." I believe the 6E is being avoided by longer term traders like a hot potato, those that are holding positions longer term are keeping both eyes on their positions.


Here is a COT Chart, Since January Large Specs have been short, long, short, long, short. It's easy to see participation is subdued.







IMO, the 1.3000 level has become the front line of the unending battle between the Bulls and the Bears.

The CME data shows an increase in Open Interest on puts and calls on the 1.3000 strike price. From Friday to Friday the OI at 1.3000 increased by more than 4,000 contracts. During the week the P/C Ratio at this level was incredible. Friday over 1000 put options were added to OI and they were almost matched by 800 calls.








IMO, the 1.3000 level will hold for the near term, BUT if the pressure is to great and the level is breached, I think a free fall to 1.2800 (in a blink) is not out of the question. Only time will tell.


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Statistical Analysis Trading: Throwing a Big Net






I'm going to throw a Big Net with this post. While doing some homework lately I came across the following chart and thought it was a near perfect example of a few statistics that I personally "lean on" when I trade. There's a lot of scuttlebutt being posted on the forum lately about daily profit targets, harmonic rotations, average daily ranges, MAE, MFE and per trade statistics in general. In this post I'll post My Opinion on these topics and why I've geared my trading to incorporate them.

To be absolutely clear, the only reason I trade is to make money, not for fun, not for excitement, not for ego and never to escape from boredom. In my experience I believe trading is more about how much money I don't lose, not how much I make. The best way I've found to assure myself I won't lose any trading capital is to stay on the sidelines and stay out of the market! I operate from the notion that every time I enter a position the market can do one of three things, it can go up, it can go down or it can go sideways. I don't enter positions with an intention of babysitting a trade in a prolonged consolidating sideways market, I "expect" the market to move in the direction of my analysis relatively quickly and trade to or thru my target. This of course is how it is in the perfect world, in the real trading arena things are much different. The random distribution of winning trades and losing trades is the "fly in the ointment." IF, my best analysis of market direction is at best (always) 50/50, I have to take and make an extra effort to control my risk. To control my risk I personally lower my expectation of the random distribution from 50/50 to 33.3/66.6. Since I don't want to sit on an open position in a sideways market and I sure don't want it to go against me, I have to be comfortable knowing I only have a 33.3% chance of my trade catching the random distribution of my analysis/trade/entry to be proven correct by market action on any single trade. Then, there is the theory of diminishing returns, simply, the more chances I take the less I'll win. When I sit down to my trading station for any given session I'm looking for one trade. When that one trade appears I enter my position with enough size to fulfill my daily profit goal if/when the market moves in the direction of my analysis and triggers my resting orders on my target price. As I said, this is a big net so while I'm "at the target" I want to mention MFE. If my trade is successful and the market trades to and or thru my target obviously the MFE on the trade is always equal to the points of profit on the trade. My profit targets are not some random number I pulled out of my ass, they are the result of many hours of studying my market over the period of years. MFE, is IMO a key statistic for anyone attempting to fine tune an already working trading method/system, if understood properly. MFE is IMO, not a statistic for a newbie. To clarify, if newbie is entering trades at totally random levels in the market with limited understanding of S/R levels or normal price rotation (harmonic rotation) and "wishing" for (N) ticks on every trade he enters and he's looking at his MFE statistic as a "reason" to take profits at (N) ticks instead of (N) ticks on the few trades that actually go in his favorable direction, to put it bluntly, he's wasting his time. I believe inexperienced traders view MFE as a tool to "locate" an optimum exit for their past trades and totally disregard its usefulness in "locating" a much better entry of their past trades. MFE and MAE have limitations, as I've said before in this thread a total understanding of "what the hell" I'm looking at is IMO extremely important for everything I put on my chart and the tools used to analyze my trading progress. IMO, Newbie would be better served if he rolled up his sleeves and studied the location of his orders on a naked chart in relation to the "context" of the prior price action, with the majority of focus on risk. Back to daily profit targets. If I can analyze the market, place an order for entry and achieve my price target I'm done "live trading" for the session, I call it "one and done." Anyone who's traded a live cash account is well aware of the psychological affects even a small draw down can create. I'm no exception, if I lose money, I want it back! I didn't fall out of the back of a turnip truck yesterday, I paid my dues to the market, on occasion I still do. IMO there is nothing more demoralizing than being up (any amount) for the day and watching it evaporate away and turn into a loss at the end of the day. The market is a different beast at 2am than it is at 8am than it is at noon and at 2pm. IMO it takes time to truly understand a market and today's 23 hour markets demand a lot of understanding. I believe it's not the 10,000 hours of screen time that makes winners winners but how winning traders react to adversity, do they walk away when their down (N) dollars and come back tomorrow or do they stay and dance with the devil (diminishing returns) and slide deeper and deeper into the abyss. I believe trading is like sex, I know when I'm done.

The Charts and a Few Stats

This is a chart of the 6E H3 on Feb 8 2013 at 1:55am est.. I was updating some stats today and I cherry picked this chart for this post, to be honest I don't know if I traded on this day or not, I haven't checked. This chart has several examples of the prior discussion. Normal price rotation, for the 6E can best be seen around whole numbers '50s and even ('00s) I generally consider these trade-able opportunities, but common sense always takes precedence. An example might be if Mario Draghi is about to give a press conference in fifteen minutes. When price rotates around a whole number I expect movement of 14/16 ticks above and below the whole number. This chart shows (on the left) rotation below 1.3400,,, the 18:55 bar low is 1.3385,,,, 15 ticks below the whole number. Then a move UP to 1.3420 and price rotated around the 14/16 area for more than 3 hours ,,,, then price returned to 1.3400. Rotated back UP to 1.3415 and at 1:55 (hard right edge) price is sitting on 1.3407. So at this point in time, just prior to the Frankfurt Open I look for several things.

1. 14/16 tick rotation above or below the whole number
2. Rotation between the +1 and-1 SD levels of the VWAP
3. Rotation "down to" or "up to" the 2nd SD level
3a. Prior to the open I take notice of the +2 and -2 SD levels and on this chart I've marked that level



AT the Open volume shows up and price falls below the -1 SD level. The -2 SD level is 1.3389, I'm a buyer at any price at or below this level, why?,,,,, I'll get to that later. BUT, since the -2 SD level is close to the 14/16 tick rotation I'll TRY to get filled on '86'85 and '84.



Price falls and rotates within the -1 and -2 SD bands giving plenty of opportunity to BUY below the original -2 SD level and touches '86, and then '84 to the tick. The reason for marking the "original" -2 SD level is that often price will "touch and go" and only give one chance for an entry,,,, but like I said THIS TIME the level was only 5 ticks away from the "normal rotation" of 14/16 ticks. Another entry method I use is to put orders on ALL the prices 89,88,87,86,85 and 84,,,, this of course depends on the amount of contracts you trade,,, or buy the 'odds' (89-87-85) or the 'evens' (88-86-84),,, believe me it works. Where's the stop? as a rule of thumb when rotating around a whole number I use 23 ticks FROM the whole number,,, in this case '77. Where's the target? when rotating around a whole number I use a tick BEFORE the whole number,,,, if the trade is JUST the +2 or-2 SD level I use the VWAP. Mark the time,,,, 2:35am



Two bars later, at 2:45am price trades thru the target and the trade is closed out. One tick shy of the VWAP.



This price movement has more opportunities and as I said this chart shows several, that's why I picked it. I've posted this trade several times on this thread, the 2am reversion to mean trade. Buy or sell the +2 or-2 SD level and target the VWAP. I keep a rolling average of this trade based on 20 trading days and I've seen it successful 80% of the time. A 4 tick stop is "enough" 60% of the time. I take this trade a lot because it has a couple more quirks to it. First, the trade is FAST,,,,, MOST of the time it is over before 3am. Secondly, depending on the entry level LIKE THIS TRADE EXAMPLE part or all of the position could be held for a greater move. 65% of the time either the High or the Low of the price range between 2 and 3am will hold until 6am. Since this trade entry was THE LOW and price moved UP near the 2am open (high) at 2:45 it would signal to me THIS LOW ""might"" hold until 6am. Another factor to consider is the daily range. The 20 period average range between 2 and 6am is 64 ticks. At this time (2:45) the range is 22 ticks, there's a lot more potential for simple statistical analysis to reap profits from this market in the next few hours.



This Chart is Friday March 8 2013 Everyone is anticipating the release of the Non Farm Payroll data. Visions of wild erratic moves keeps many traders snug in their beds on these days. But it is my intention to show that "Normal Rotation" is just that, normal. Do these levels look familiar? I keep rolling averages of several key price movements that I trade, one of them is NFP days. I don't want to get anywhere near the market once a major release is posted but if I come to the market at 2am armed with a few simple statistics I can be (and often am) "one and done" hours before the news hits. Most of my statistics are based on 5,10 and 20 periods but I have one statistic that's based on 12 periods. IMO, most traders believe on a day when a major release is to be announced the market will churn and go nowhere for hours, often it's true, but how true. I keep a 12 period average of the price movement (range) from the Globex open until 8am on NFP day. This range can be as narrow as 25 ticks and as wide as 125 ticks, but the average is 67 ticks. So once again coming into Friday's session "expecting" a daily ave range of 64 ticks and a "NFP Range" of 67 ticks when the '86/'84 level held for a second time (2-3am Low) expansion to the UP side BEFORE 6am wasn't that surprising.





Where I come from everyone throws a Big Net.


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Up, Down or Sideways


Rollover, time change and news makes for interesting trading. For those who are just beginning to look at COT data remember, the numbers include the Open Interest on ALL contracts. I'm a visual trader, stripping out charts and looking at things from different points of view has helped me see "the forest from the trees." When I look at COT data all I'm asking of the chart is point me in the right direction, North or South. This chart IMO, is suggesting the "easy path" is South. BUT, I believe the longer price moves sideways the possibility of a short squeeze increases dramatically. Plenty of trading opportunities here that's for sure, but as always and especially now (IMO) keep both eyes on risk. Any breaking news or sound bite from one of the Major Talking Heads could send this market in EITHER direction, and fast. This is only my opinion of course.







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One and Done A.K.A., Daily Profit Target


I've avoided writing this post for a long time, for many reasons, mainly because I feel it's a very complicated subject with tentacles that entwine around several topics. I touched on this topic in a few posts up-thread but really haven't been satisfied with what I wrote. Since I believe this multidimensional topic could be just as important to struggling traders as well as new traders I found I just couldn't leave it alone. Although this may get ugly, I believe the theories, ideas and beliefs that make up the concept of "One and Done," deserve to be aired out. The Warning; I've had a head cold for the last week or so and the medication may cause me to ramble more than usual.

Risk

All trading systems, either mechanical or discretionary must be evaluated in two interrelated dimensions, profit and risk. This is one of the few facts of trading, furthermore, profit and risk must be evaluated with respect to each other, not individually. The theory is the more accurately the system was evaluated in testing, more consistent real time results should be expected. This is the first concept to put your arms around (there are many). I started this thread with the intention to offer ideas other traders could glean and incorporate into their own creations, creations that fit their personal appetite for risk and their psychology. There are many "mini systems" in these posts, the 2am reversion trade, the B Band trade and the forbidden zone are three. Each of these "ideas" cost me hours of study, when I see them I trust them and I trade them. "Stupid is as stupid does," needs to be expressed, just because I see a B Band signal doesn't mean I jump on the trade! Experience, is something that can't be given away, I am a discretionary trader after all. What about risk? IMO, risk is the answer to all the riddles of trading. That may seem bold but anyone who's traded a live account will probably agree, "it's not how much you make, it's how much you don't lose." IMO, many good traders shoot themselves in the foot by trying to trade "good ideas" (systems) with accounts so small their risk parameters cannot survive the markets "normal" price rotations. This is a snip I found that shows how much percentage of Gain on Balance is required to recover different percentages of losses of Initial Capital. I believe this is the type of information traders should consider when evaluating the risk necessary to trade a system in the live market.




The Nemesis of every trading system whether it's mechanical or discretionary is the point in the market where the system takes a profit. A fixed or predefined profit target is in reality an aggressive method of profit management, period. When a system finds and signals an entry and a predefined target is used and triggered, profit is taken, and it cannot be given back to the market. The flip side of this is, when the market keeps going the potential to accumulate additional gains is non existent. There's a price to everything. Some systems with profit targets are less profitable but achieve a higher percentage of winning trades than those that don't. Other benefits of systems with predefined targets can be, per trade and total risk can be reduced, also returns can be much more stable over time. The "tradeoffs" should be revealed during testing and at some point, a decision has to be made if the system fits your "trading personality." What I've written thus far is the core of "One and Done," there's no secret formula to any of this just hours and hours of refining, refining, refining.

Backward Testing is Meaningless

I agree and I disagree. I believe ferreting through historical data will set you on the "right path," I believe it will let you know in a hurry whether you're wasting your time or not. I'm going to use a simple 20 period SMA system for an example. You put it on a chart and you see potential, the risk is "OK" the losing run is "OK" the max drawdown is "OK" and you believe you have the necessary capital. But, you're a day trader and NEVER hold positions overnight. You wake up Monday morning and pull up your chart, price is 20 ticks above the average all day and the market just trends off into the sunset,,,, with out you. Now, IF you would have entered the trade when price crossed the 20 period ave during the Asian trading session and went to bed with your predefined stop loss in place you could have awoken already riding the wave and closed the profitable position at the EOD. The point I'm trying to make here is (in the 6E) there are 3 trading sessions within a 23 hour day. Each session trades differently and some systems like this 20 SMA example "should" be traded across all three. Due to other responsibilities some days I can't trade the EU session, some days I can't trade the US session, sometimes when I'm sitting at my trading station doing homework for the next day I'll see what appears to be an opportunity in the Asian session. I trade each session differently, and I expect different results from each session. For instance, the BBand trade may not work as well on the lower volume of the Asian session but a retracement trade or a continuation trade to the Globex close or the VWAP of the prior US session may work time and again. Same is true with the 2am reversion trade, try that in the US session and the results will change dramatically. So IMO, backward testing will put you in the ballpark, common sense and experience will define what inning it is and "who's on first." Forward testing on a simulator is the best thing since sliced bread, IMO. But the point I want to make is, keep your results separated by the session you're trading. Take notice of the percentage of successful trades during each individual session AND each individual system, as time goes on you will begin to know what's NOT important, and hone your efforts on what works when.


Probability of Outcome

Up, down or sideways. Look at a chart at anytime the market is open and I'll grantee you within the next 15 minutes price will either go up, down or sideways. After all the backward testing and all the simulated forward testing this fact will never change. The movements of the market are an enigma they're made up of many unseen unknowable forces. Our best analysis is at the mercy of the trading Gods when we click the mouse to enter positions. There is NO WAY of knowing the outcome of any single trade before the trade is entered. If I have a system that I've traded in the live market 1000 times and that system has a historical winning percentage of 80% I must be prepared to accept the loss on the trade if THIS TIME the random distribution of wins and losses hands me a losing trade. This random distribution between the expected 8 wins and two loses out of every 10 entries levels the playing field on each and every trade. This random distribution forces the expectancy of every entry of every system to 50/50. If you cannot get your head around this fact, it's been nice knowing you and I bid you good day! I'm not going to reinvent the wheel here but I will post this graph I STOLE from you know who,,, oh I guess we DON'T know. The purpose of this graph is to show just what it says, the probability of outcome in a streak. If the probability of the next trade being a successful one is 50/50 and if I in fact take the trade and close it out at my predefined profit target and then I get another signal, what is the probability of that trade being a successful trade? According to this, 25% ,, the third trade,, 12.5%. My intention here is to show the probability of successful trade after successful after successful trade isn't very good. This is a statistic nothing more. I call it "Dancing with the Devil," when I believe I can SOMEHOW out perform these probabilities which are skewed against me. Hence, "One and Done."




Managing Trades

Let's say I enter a 1 lot long at even, my stop is at '90, my target is '15. The market goes in my direction 8 ticks stops and rotates between 8 and 4. Then it moves up to 9 back down to 4 then 3 ,,,, what "should" I do and what "do" I do is what trade management is all about. My analysis told me the 15 tick profit target was a worthy target, I "should" hold the trade and keep my hands OFF the stop and let the trade work to it's fruition, win or lose. IMO, it is much harder to trade with one contract, you are locked into the trade and have no where to maneuver. All things being equal a one lot trader has to be very patient and very precise with entries and exits. There is a point to this, managing multiple contracts can drastically help limit risk. Multiple contracts can also be use to hone and enhance the profitability of a system. Trading with multiple contracts in tight ranges of 10 to 20 ticks takes focus but taking risk off the table and reentering on pullbacks or stops above the market can be very rewarding when done systematically. I'm trying to highlight different methods for different conditions/markets. It's no secret there are a lot of undercapitalized traders in the markets. Trading a one lot is IMO, borderline. Borderline meaning, is it really worth the effort, I believe it would be more practical to work in simulation with a 4 lot system and gain the confidence, experience and skills of managing multiple contracts. Undercapitalized traders bring a lot of fear into their trading, fear of missing out, fear of profits evaporating away and fear of losing their trading capital in general. This fear is a powerful force and it is the birth place of many many psychological trading issues.


That is where the notion of "One and Done," can be very helpful to small traders. Let's face it the probabilities of earning any substantial returns trading 1 or 2 contracts is very slim. Especially when given the facts as described above. Working out a 1 or 2 lot trading system that fits all the criteria of acceptable risk, capital and psychology isn't an easy task, but it is possible. The pitfalls are the common ones small traders suffer, overtrading to make back losses, taking profits to quickly then trying to "get back in" on a move just breed frustration. On the other hand, taking one successful 20 tick trade in the Euro and walking away or switching over to the simulator can be a legitimate alternative. The idea of "One and Done," is relative to all the criteria that makes up the system. If you can manage your risk and allow yourself 3 absolute losses a day while only risking 1.5% of your capital for instance you might be surprised at how effective you may become at finding entries. Another factor worth looking at is time, if you trade the EU session limit yourself to the first two or three hours in your live account, same for the US session. The thought of having a money machine sitting in the next room that all you have to do is turn it on is a fallacy. Trading will reveal to you every weakness you have, again and again until you find a way change them. Walking away from the market may seem counter productive to a newbie but ask any trader and most will agree that simply walking away from the screen was a skill that had to be learned.

To summarize the idea of "One and Done," think of it as an action that controls risk first and foremost. By limiting my risk on every trade and staying within my daily loss limit I can take as many entries as my limits allow. IF by chance one trade works "to the letter" and my daily profit goal is achieved I stop live trading for the day. If I enter a trade and exit early due to a sudden change in the market and only achieved half my daily profit the choice to take another trade is still an option. I'm not trying to win over anyone with this post, I just wanted to point out how much ground this concept covered, risk, reward and psychology. I've made some generalizations here to get some points across and by no means were they meant to personally single out anyone. I want to thank everyone for their continued interest in the thread and good trading to each of you.








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 josh 
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Thanks Cashish for the post, a good read and insightful as usual.

I have to take issue with Seykota's logic on that last graphic though; seems kind of an all or nothing attitude, and while large profits once in a while can determine whether the trader makes big money, it's the singles and doubles that can keep us going (especially psychologically) along the way. I think the point is to play to win, but that doesn't mean hit a home run or strike out. Plus, he cited Barry Bonds. Of all the great home run hitters, he picked a juicer whose name, IMO, belongs out of the history books altogether. C'mon man.

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 eminitrdr 
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@Cashish,

I hope our fearless leader is doing ok. I haven't seen or heard from him in quite some time. I, personally, have been dealing with some health issues and not very active trading lately. However, I'm on the mend and hope to be back at it soon .

There has not been much activity in the thread for a while. No questions, no posts recently. I'd hate to see the thread fall to the wayside. There is so much value to be gained and so much to learn from a very successful and experienced trader. I can't thank Mr. Cashish enough for all that he has taught me.

Anyways, it would be nice to keep such a valuable thread alive...just my two cents.

emini

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 eminitrdr 
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As Mr. Cashish has said time and again, Cash is the Big Dog and the 6E is the tail. Did the EUR/USD give you any clue as to the likely direction? How and where one enters and their targets is entirely discretionary...IMO. I base mine mainly on price action, normal price rotations, price behavior near whole numbers, recent volume histograms, and the chart studies I have the utmost faith in.

Just trying to keep the thread alive

emini

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 eminitrdr 
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I forgot to attach to the above. Simply a potential buying opportunity that made sense to me. This is what I saw when we had the pullback at the 2:00am EST Germany open. Also what I saw when we took out the most recent swing high at 2802. I posted some of my possible upside targets.

I'm not nearly as good as Mr. Cashish as far as posting and trading at the same time.

emini

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 eminitrdr 
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Never overlook and underestimate the power of the BIG DOG (Cash). Right, wrong, or indifferent; when I arrive at my trading station well before the Germany open at 2:00am EST, it gives me a sense of who's in control and what side I prefer to trade on. Also, I'm always cognizant of the location of the VWAP SD bands and constantly tracking the normal rotations.
My CASH chart is located right beside my order entry dome. It is on one side and my buy/sell study on the other.

Has anyone seen or heard anything from Mr. Cashish recently? I just hope all is well.

emini

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 eminitrdr 
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What did you see at the German open at 2:00am EST? Based on the attached charts, near the 2:00am open, which side would you have preferred?
I took a trade right after the 2:00am open. I just took a 2nd trade at 3:40am EST after a failure to make a LL and what I saw on my buy/sell study. Two and Through...not quite as good as Mr. Cashish with his One and Done
I can post if anyone is interested.

emini

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 eminitrdr 
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At what point would you have decided to lean in a certain direction. I was done after my second trade sometime near 4:00am EST as I mentioned in the above post.

Is anyone else trying to trade the Old School method? If not, and there does not seem to be much interest, no need in me posting. Adios and good trading to all.

emini

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 AttitudeTrader 
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eminitrdr View Post
At what point would you have decided to lean in a certain direction. I was done after my second trade sometime near 4:00am EST as I mentioned in the above post.

Is anyone else trying to trade the Old School method? If not, and there does not seem to be much interest, no need in me posting. Adios and good trading to all.

emini

Hey @eminitrdr , there may not be much interest, but posting your stuff is a great exercise if only for yourself - unless you're keeping a separate journal somewhere else.

At any rate, I'm sure @Cashish will check in again at some point.

Take care,

-AT

"Is it hard? Not if you have the right attitude. It's having the right attitude that's hard." - Robert Pirsig
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 Cashish 
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.................. there does not seem to be much interest, no need in me posting. Adios and good trading to all.

emini

Not so fast, it's a lonely task, (posting) a labor of love,



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 Cashish 
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There's no School like the Old School

1.2600 or 1.2900 ?




The chart below shows the steady increase in Net Short positions held by Large Specs. The Open Interest is in Green if it was higher than the previous day (I'm lazy, I didn't mark every day's value through the "roll"). I wanted to show how using the total of OI data is helpful during "roll over," it allows you to see a seamless continuation of positions being held.




I also take notice when price "meets-up" with the 200 day SMA and or the 20 day SMA (the bands). It's uncanny all this coming together The Day Super Mario is going to speak, and yes, Ben too, and yes, it's NFP Week too. So 1.2600 or 1.2900,,, how about BOTH! Ok, which one first?




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 Cashish 
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I base mine mainly on price action, normal price rotations, price behavior near whole numbers, recent volume histograms, and the chart studies I have the utmost faith in.

Just trying to keep the thread alive

emini

@eminitrdr Thanks for posting. You posted some nice trades, but I think you've got cards you're not showing! What is that "other" charting software on your screen, tell us about the secret sauce!!

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 Cashish 
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josh View Post

I have to take issue with Seykota's logic on that last graphic though; seems kind of an all or nothing attitude, and while large profits once in a while can determine whether the trader makes big money, it's the singles and doubles that can keep us going (especially psychologically) along the way. I think the point is to play to win, but that doesn't mean hit a home run or strike out. Plus, he cited Barry Bonds. Of all the great home run hitters, he picked a juicer whose name, IMO, belongs out of the history books altogether. C'mon man.


@josh I hear you. We might both agree Ed Seyktoa is a weird guy, and I'll give him the benefit of doubt that his choice of Barry Bonds may have been made before the truth came out. I agree with you, "It's the singles and doubles that can keep us going (especially psychologically) along the way." But sticking to the baseball analogy let's remember batters only have three strikes. If I can control my risk and step up and take three big swings and "hit nothing" and I'm still within my daily loss limit I'm OK with that. Sure I'll hold my head low and walk back to the dugout, hang up my jock strap for the day and either switch over to SIM or call it a day. The UP SIDE is I can come back tomorrow with a clean uniform and stand in the batter's box again. I never took a loss that I didn't wish I took earlier, and I never took a profit that I didn't wish I had "more on." Thanks for your post, "a juicer."

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 Janos 
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As you wrote before to push the "Thanks" button is not enough.....

HAPPY TO SEE YOU BACK !!!

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 josh 
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@josh I hear you. We might both agree Ed Seyktoa is a weird guy, and I'll give him the benefit of doubt that his choice of Barry Bonds may have been made before the truth came out. I agree with you, "It's the singles and doubles that can keep us going (especially psychologically) along the way." But sticking to the baseball analogy let's remember batters only have three strikes. If I can control my risk and step up and take three big swings and "hit nothing" and I'm still within my daily loss limit I'm OK with that. Sure I'll hold my head low and walk back to the dugout, hang up my jock strap for the day and either switch over to SIM or call it a day. The UP SIDE is I can come back tomorrow with a clean uniform and stand in the batter's box again. I never took a loss that I didn't wish I took earlier, and I never took a profit that I didn't wish I had "more on." Thanks for your post, "a juicer."

I like the analogy about the three strikes. But a batter can swing as hard as humanly possible on one swing, and still have two more. As traders if we swing as big as possible on one pitch, that could theoretically wipe out an entire account. Sometimes "going big" for a trader means he tries to take such a big swing on the first pitch that he uses up all his strikes on one swing So it still comes back to how much do we risk per week, per day, per trade, and for some people that "swinging big" means they risk on one trade what they probably should risk in a week. So even if I give myself 3 swings, I have to allocate my risk on each trade such that I take only 1/3 of what a "swing" would be for the day. As I heard someone say though, and as you said basically the same thing: when you have a loss you will always have on more size than you want (even if the size is 1 lol), and when you have a win on you always wish you had more on.

But I think the most important is what you said: take your swings in such a way that they will let you in the ballpark tomorrow

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 eminitrdr 
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@Cashish
The one additional chart I use at key levels to help with my decision making is MarketDelta. No secret sauce here. Just a quick visual for helping with quick decisions. Helps me....may not mean diddly-squat to others.

I made a few notations which are pretty much self-explanatory. Mr. Cashish PM me should you have additional questions. I don't want to sidetrack the thread with questions about a tool/study that you do not use or have not shown in the thread.

Just had a call we had a death in the family. I must run.

emini

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 Cashish 
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Just had a call we had a death in the family. I must run.

emini


Nothing,

means "diddly-squat" when a family is in your position.

I'm sure I speak for many when I say, our hearts are with your family. The time to be a trader is later, the time to be a Husband and Father is now.

Take care my friend.

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 Cashish 
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There's no School like the Old School

Net Short? Still?


I'm pressed for time this morning but wanted to post these charts of the COT Data. I hope to follow up on this later (maybe Sunday Night). As of Tuesday when the COT "snapshot" was taken Large Specs were still willing to increase their Net Short positions,, since this data isn't released until Friday I look at the relationship of the day's range to the previous Tuesday. If trade was within (at or near) Why Not add to shorts, if it was a good position then (previous week) I believe they (Large Specs) would take advantage of the opportunity, it appears they did and added over 15,000 contracts to their Net Shorts.






The bands on the chart below are a 20 day average of Highs and Lows, the significance I place on these will take some time to explain (maybe Sunday Night) ,,, sorry but that is what they are. It is a longer term picture.




Another month has past and the NFP Report was released on Friday, do you remember the "NFP Trade," I flew a little close to the flame but closed my "One and Done" U.S. Session long @ 1.2961. When the Big Dog did what, yes, traded on 1.2950.




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 Cashish 
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@josh

I agree with Big Mike, the time has come my friend.






Well done, Very well done






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Well done, Very well done

Thank you @Cashish -- so far in this current phase though I am not doing very well at all, but I am still in the game at least for now Will post updates to that thread you referenced at some point. Thank you for the good wishes and for your charts as always!

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 Cashish 
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There's no School like the Old School

A Monday Morning Quarterback

I started to get some charts around Sunday night for this post but I was just to tired to follow through. IMO, I believe most traders "these days" focus on indraday charts and indicators that at best analyze short term movements and pay little (if any) attention to the bigger picture. If nearsighted intraday analysis works for you great, but I invite readers to consider combining longer term analysis with intraday analysis. Personally I find this gives me much more confidence in my shorter term indicators and also identifies "riskier times" when those indicators may give false signals or signal trades that may have limited reward, conversely, a longer term outlook can often pave the way for an increased reward.

Since the use of computers, the availability of trading programs, and the granularity of real time data the old daily bar chart seems to have lost it's sex appeal, but I assure you untold millions of dollars were extracted from the markets with hand drawn daily charts with nothing more than a volume graph and an open interest line. These simple studies can still provide a picture of a markets intentions that can be exploited, intraday. Who among us hasn't heard the term, longer time frame traders, these are their tools. These are the tools of the defensive traders, the traders that have the ability to throw millions of dollars, or thousands of contracts into the market to defend their positions or move a market to another level. We're the chickens in the barnyard, pecking the ground picking up pieces of feed that fell from the mouths of the draft horses that do the heavy lifting day in and day out.


This Daily Chart shows volume and OI along with a few SMAs that I watch. OI had been on the rise for 7 days prior to the news out of Europe. The Easter Holiday closed the U.S. market on Friday and the EU market on Monday (low volume bar). OI did tick UP on the Monday session with less than 100k of volume. In a previous post I've charted the COT Data and Large Spec and Small Spec increased their Net Short positions on Tuesday. These calculations were made Sunday night for Monday's trading session. Friday's move pushed price above the 20 period Highs and made a high of 1.3047. I use the 20 period average of highs and lows as a longer term trend indicator. First, price must close above the high band to signal a possible trend change from down to up, second the price bar on the fourth day has to close above the close of the "signal bar" to confirm the trend change. This signal, when price closed on Friday was in a "weird" spot. The close was 3019,,,,, the high band was 2973. To some these lines are just random lines and have no meaning but I trade them. Sunday Night the upper band was tested,,, it just so happen the 50% line of Friday's move was also in the area (2977) the low for Sunday/Monday's trade was 2975.




This move UP brought the real target of 1.3050 into play. Tonight, Tuesday's trade crossed this level, the question now is will this level hold? Defending a position, is in my opinion real. When prices ticked lower and lower searching for the bottom early Sunday/Monday I told myself if 2950 isn't defended NOW (2977) we'll never see 3050. Another question, will the Large Spec "load the boat" at 3050 and continue the down trend or will they change direction. I believe the Large Spec "eat their young" (Small Spec). Like the fable of the fox and the rabbit crossing the river,,, the Small Spec ride on the back of the fox as they swim across the river and the fox tells the rabbit to get higher and higher on his body until the rabbit is riding on the fox's head,,, then CHOMP, the rabbit is lunch. Small Spec end up being the fuel to propel the move.











A Monday Morning Quarterback

This post seems a little after the fact but my intention was to show that time spent on longer term analysis can be very helpful. I'm sure I spend many more hours on long term analysis than I do on intraday. One example is a trade I took Sunday evening while I was preparing for the EU open. Price was trading around even 3000, I sold looking for the rotation DOWN to 86/84 it took FOREVER but I got it. Then at the EU open I felt the 2950 level was a solid support level that was being defended by an army of Large Spec, I bought 86/84 and rode it BACK to even. Nothing works all the time, but I believe traders need to have an objective understanding of the market they're trading. I find the time I spend on daily charts sets the stage for the small intraday moves that my indicators sniff out. When a trade is signaled I feel I have a clear vision of what the market wants to do and who's in control of the move at this level. I'm looking to trade between 2950 and 3050 probably for a couple more days (not sure of news). I think 3050 is going to take some time to chew up,,, just my opinion of course. I hope the market proves me wrong!

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 Cashish 
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You guys are good, I've already gotten a couple PMs about the charts I posted in the last post, I wanted to make the 3 last charts as clean as possible.

The first chart is the June contract only, I don't rollover contracts, I only chart the contract that is being traded. You can see (if you look close) the volume on this chart "arrives" when the March contract expires. I wanted to highlight the gap, even though the gap was filled I believe it still represents "pain" to more than a few traders and they will remember that pain when this area trades again. Also the Virgin POC resting at 1.3073 is a level generated by volume traded prior to the "arrival" of the masses from the March contract. Maybe this random line came into it's own this evening when this contract (June) traded on the high of 1.3075,,,, but what do I know. For the record, at the close of trading yesterday there was over 1000 contracts long and 1000 contracts short in the September 6E 2013 contract, and more than 200 in the December contract, I assume the traders holding these positions are not newbies!

The second chart is IQ's back adjusted data, I use that data for longer look back periods. I question the true validity of looking at volume generated by day traders weeks or months ago within ranges of several hundred points but we all have it and we all use it (so I guess that makes it O.K.).
Edit: This chart is in what Ensign Software calls "tight alignment" mode,,, basically is tightens the profiles together and allows more (profiles) to be viewed on the chart. This skews the alignment with the dates on the bottom of the chart,, these are weekly profiles "crammed together." 6 weeks of profiles within a 4 week scale on the bottom of the chart,,, I could have,,, should have removed the "date scale" from the botton of the chart,,, sorry.

Lastly a spot chart, this is straight from the FXCM "Bucket Shop." To be honest I don't really give a shit! I don't chart the "baby pips" (.0000#) I round them to 4 digits. The levels this chart reveals is most always 50s and even. I've seen differences during moves of 20 ticks or more between the futures and spot and could never bring myself to trade the spot. I think I captured a couple charts the other day of a spike that proves what I'm saying, I'll look for them. I use this chart for long look backs also, mostly to remind me of "battle grounds" like the one we're at now 1.3050.

This brings up the other question, How do I deal with the spread between the cash and the spot? At some level I'd like to say "I don't" just trade either or. Yes, it is important to keep the spread in mind and I've written many times I suggest taking profits "going to" whole numbers not "going through" whole numbers. Why? because IMO every "Bucket Shop" around the Globe has to trade on that whole number, if they don't nobody does! (my opinion of course). But, if spot price approaches 1.3050 and the future is six ticks higher (like today) I'll damn sure place my order at 1.3056 and accept full responsibility for being a Dick for a Tick. When price reaches for high ground, "give 'em time." How about something as simple as Fib levels on a spot chart, if you go from "tail to tail" you might be to perfect, and the guy next to you has a different data feed and his chart might be off a tick or two as well,,,,, see where this is going?

With today's data printing exact numbers on our charts I believe it's very easy to get caught up in trying to be perfect. I want this level, it holds the most volume traded so far today! I'll say it again, don't be a Dick for a Tick. If perfection is your nemesis focus on being perfect at following your rules not picking exact levels for entries and exits,,,, if that is your problem, you're probably trading to big.

I hope this clears up the queries, if not "bring it!" You guys are good, that makes my efforts most enjoyable.

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 Cashish 
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There's no School like the Old School

Road Block?






Update:

IMO, everybody and their Mother-in-law expected this level of resistance (1.3130), where the 50 and 100-day SMAs converge along with the .382% Fib of the Feb/March down move to put the brakes on this rally. While I was posting this chart, the Mighty Euro staged another attempt to push through to what I believe 1.3150, the attempt lost steam, ground to a stop at 1.3128 and retreateted to the safety of 1.3100. I believe the "screw up" (or master plan) of the FOMC Minutes threw a bucket of cold water on this market for the day, so back down to 1.3050 and test support.

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 Cashish 
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Perma-Bear Hunting


This is an update of the chart posted above. I realized I posted the wrong chart (Road Block?) because it didn't have the 100 Day average converging with the 50 Day average, sorry about that. Price has stuck its head up over these moving averages but has failed to close above them. This whole idea of closing above is "Old School" in my opinion, it harkens back to the days before 23 and 24 hour trading sessions, but many people still want to see that little hash mark on that bar above that line.





This next chart is My Version of a "Cram Course" in the use of Open Interest, albeit an extremely basic study. What I'm focusing on here is the turn around (if it is) at the bottom of the chart.

I've posted before I use the TOTAL of all contract months when analyzing volume and open interest , this aids in seeing the continuation (or not) of the accumulation of contracts in OI during the expiration of one contract and the rollover into the next contract. Using the COT "snapshot" data I can see a steady increase in net short positions, these are the red numbers on yellow bars. The sideways price action as the March contract was about to roll shows a slight drop in net short positions and an OI number almost 5000 contracts less. I believe this is an indication of a lack of commitment to the direction the market is headed. But the next release of COT data shows net short positions increased by 20,000 contracts while the market was trading 100 points lower. The bar with the yellow circle travels UP and exceeds the previous two COT "snapshot days" and OI increases, this tells me there's an agreement in direction. The following day the COT data is released again and the increase in net short positions grew by +/-4000 contracts. The green numbers to the left are OI numbers, 202,055 is the OI on the bar with the yellow circle, the next bar is marked, THEN back out to the left and these are the OI readings of the next 3 bars, as price was making higher lows the COT data shows net short positions increased by an additional 20,000 contracts. Now, the steady increase in OI tells me there is a disagreement in direction. For a total of seven consecutive days OI increased, in (on average) smaller ranges. Mario moves this market, then NFP day. The combination of these two days lifted price through the 20 period high/low bands that I use, as described in a previous post up thread. A steady increase in OI can mean an agreement of direction and it can also mean a disagreement of direction, context is king. Nothing "works" all the time but a knowledge of OI is very helpful, IMO.




This chart shows since price traded above the 20 period H/L bands OI contracted by 17,791 contracts, and is now starting to (slowly) add contracts. I chart the COT data in a somewhat crude fashion on a chart but mainly I keep it hand written in a notebook (old skool). This chart shows the last turning point and it is clear (IMO) where the "line in the sand" is between the Bulls and the Bears. On the left side of the chart the COT data shows the net short positions turning to net long, and then when price dropped trades switched again from long to short, then long again. The purpose of all this nonsense is to get a visual picture of an area where maybe the "Perma Bears" have their den. I believe if price can stage a rally and lift price into the area at and above 1.3155 a sleeping giant may be awakened. IMO, resting stop loss orders in this area could provide fuel to lift the Mighty Euro to 1.3200 and beyond creating a situation where a short covering rally could be a whisper away any time the market had the stimulus to move higher. One such stimuli might be the Retail Sales numbers due for release Friday. I know these charts are busy and very crude but as I said, It was a cram course.




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 eminitrdr 
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This is what I saw at the London open. Pretty strong selling on my studies on the break below 3096. I figured we'd get at least a 14/16 rotation below the WHOLE number. Selling remained constant so the BUY number was a distinct possibility at 3064. I covered in the mid 70's.
The chart, farthest left, is CASH.

emini

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 Cashish 
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CME Daily Bulletin


CME posts a final bulletin of trade data for the prior day's trade each morning. This data includes the open interest of the prior day, the benefit of this data allows traders to see yesterday's change in the OI during trading hours. It is my understanding printed pages of this information is available to floor traders each morning for all products traded at the CME.



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 Cashish 
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A 500 Point Run


Here's the Deal

These last few posts are examples of how I view the longer term movements in the market. There was a time when I was a longer term trader and held positions for several days or weeks at a time. I also dabbled in options, mostly selling out of the money options in currencies and of all things, Soybean Meal! Since deregulation, the uprising of bucket shops in FX, the stampede of traders to the screen and the slow death of trading floors, I shortened my time horizon and recalibrated my efforts to intraday trading, but old habits die hard. The whole notion of identifying a market reversal that may carry 500 points seems meaningless when the average range of that market is 100 points and 250 point ranges are not that uncommon. But I do believe the longer term assessment of market behavior is beneficial to my intraday trading even though my current system/method seeks out targets of 20 ticks. I believe there are two ways to increase profits when a trader finds a consistent method of trading that fits his/her personality, trade more often or increase size, I chose the latter. So, "here's the deal." The evaluation of a markets longer term direction is not that difficult (IMO), but I'm finding posting the process I use, is. So to, "Begin with the end in mind," I'm committed to follow through with this "line of thought" until; A.) The 6E travels 500 points intraday above the 20 SMA High Band the day of the signal or a target price of 1.3475 or B.) The 6E travels down and closes below the 20 SMA Low Band which negates the Up trend and signals the start of a down trend. Of course the idea is the trend moves higher and thus the lower band lags along and "closes the distance" over time so at this time I can't post a "drop dead" price that will end this discussion, but the number is always known at the EOD. So let's rock on!








Part of the difficulty of posting is the time requirement, I hope to return to this post with more detail before the Sunday Night open, sorry, but duty calls.

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 Cashish 
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News to News

Action, Reaction

If anyone is following this thread with the expectation of discovering a sure fire way to magically predict the direction of the next 500 point move in the Euro you may be disappointed, that's not what this is about. Right now do I think the Euro will rise to 1.3475, yes, but I'm also aware anything can happen in the market and it can happen fast, without warning. News and economic reports move markets, people move markets, and one of those people is Mario Draghi. This chart, as simple as it is provides a lot of information that I'll use in the coming week. This is basic stuff but often overlooked when trading short intraday moves day in and day out. First take a step back and realize this market moved 394 points in six days, and one of those days was an "inside day," that's an impressive move. When I stick my nose in a five minute chart and never look up for 2, 3 or 4 hours I often fail to acknowledge such feats. Numbers like these bring my "projection" of a 500 point move back to reality. Most traders learn the hard way, but they will learn to never form an opinion that prices are to high or prices are to low, the market is the judge, and the market reveals its verdict to everyone simultaneously. No one knows the HOD or the LOD until the EOD! This chart shows ECB Monetary Policy Decision dates (yellow) and U.S. NFP Release dates (white). In the volume sub window are two moving averages of volume a 10 day (solid) and a 20 day (dots). When policy/statement dates and major economic reports are known well ahead of time the market usually trades on lower than average volume for a few days prior to the event. What's also true is the market will trade on lower than average volume for a few days after the event. This chart is a bit skewed due to the Christmas/New Years holidays but I believe the declines are notable. The theory is this, this time of low volume trading after the event is the time to; a.) Get out of all losing trades and b.) reevaluate the market and initiate new positions. Why, because higher volume is coming and prices are going to move to another level. So what comes first the chicken or the egg? Does volume move price or does price movement attract volume, my answer is yes, and yes. So chew on the previous statements as long as you need, and then look at the "hard right edge" of this chart. Low volume before the news/report and low volume after, now what?







This is one ugly chart, even in my book! But I wanted to add the horizontal grid lines to give a scale to the trading ranges of these news/report days in comparison to the before and after ranges. The grid lines are 50 ticks, (chicken or egg).






So here we are, 5 days of volume under the 10 period average after an almost 400 point move. If you're charting and trading the Euro yourself you've probably identified support and resistance levels similar to the charts I posted up thread. I believe the pullback on Sunday night/Monday morning was a lifesaver, the 1.2950 level was rejected and never revisited all week. Surprisingly 1.3050 proved to be rock solid whenever tested but gave a little more ground on Friday than I thought it would, but buyers came out of the woodwork on a Friday afternoon and pushed it hard to that &^#$@*& 100 day SMA with force! The Mighty Euro, the Big E, the E ster ,,,,,, ok ok .






I'm excited about the bullish show of force on Friday because I can make a case for trouble with the levels on this chart. The Sunday/Monday low was the 50% retrace of Friday's move. This chart shows, (IMO) a 50% retrace of this 400 point move would throw a monkey wrench in the machine. If price tests the low of Friday (1.3042) and exceeds what I call normal price rotation, a level 14/16 ticks below (in this case) a whole number 1.3050 (in this case) or 1.3036/34 it could send the Euro searching for support. In that search the next level (target for bears) would IMO be 1.2950 which is the 50% retrace level. I'm not saying this is all going down in one big move, I'm just being the Devil's advocate and calling it like I see it. The 50% retrace seems to show up about 50% of the time, when I want it it never comes, when I don't want it, it often creeps to that level and "turns tail." IMO this market is going to move, I'll be watching the data out of China Sunday and my thoughts are, the Asian traders might just grind this thing up to 1.3150 and pass the torch to the Europeans. If the data out of China isn't enough and Greece doesn't slide into the sea, then I could see this market rotate around 1.3100 until the Tuesday ZEW numbers come out. That's my two day outlook. Remember, Large Spec were Net Short on Tuesday and OI is building I'm sure more than a few are "switching sides" but it's like turning an oil tanker, they need a lot of room and a lot of time, after they make the decision.






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 Cashish 
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There's no School like the Old School

The Big Dog


We all know the Forex Spot or Cash market is many times larger in comparison than the Futures market. I don't want to get into the pros and cons of each but I did want to follow up on a statement I made a few days ago; "I've seen differences during moves of 20 ticks or more between the futures and spot and could never bring myself to trade the spot. I think I captured a couple charts the other day of a spike that proves what I'm saying, I'll look for them." I found the charts I mentioned and wanted to use this opportunity to make a couple points. I trade the futures mainly because it's a regulated market, but there are times when caution must be observed primarily when traders pull all their orders prior to a news/report event and cause the market to go illiquid. This lack of liquidity causes the erratic moves that catch unsuspecting traders off guard, if you ever witness one of these moves first hand on your DOM you'll never forget it, if you happen to have an open order you'll certainly never forget it!

Here is an example of such a move during the ECB Interest Rate Decision on April 4, 2013.










Out of curiosity, later that day I drilled down to a 5 second time frame and it showed the completed move in one bar!

The bottom chart shows the Spot market had ample liquidity to contain the move and prices never went higher than that bar until both market re-aligned themselves again. I should say the re-alignment took place inside that 5 seconds I spoke of. This is why I refer to the Spot/Cash market as the Big Dog and the futures market as the "tail," the Big Dog wags the tail.

Another point I want to make is always, the Big Dog always wags the tail. Let's say the 6E Future contract is trading 5 ticks higher than the Cash and you're holding a winning trade and price is heading straight for your target, the +2 SD Band from your VWAP study the target price is 1.3158. Price trades thru 1.3150 and trades 54,55,56,54,55,56,54,55,56 What's happening here? Yes, the Big Dog is refusing to trade on 1.3152,,,,, if it did the future would trade on 57,,, so to get a fill on a 6E Futures contract at 1.3158 the Spot/Cash (Big Dog) has to trade on 1.3153. So to further the example a 6E order resting on 1.3150 would only require the Big Dog to trade on 1.3145.

These are simple examples at hypothetically extremes, there are exceptions, just as often the futures will trade a tick or two higher than the 5 ticks. The point I'm try to make is, if the Big Dog is sleeping under the porch the 6E ain't going to move either! Until Mario calls him.

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 Cashish 
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PSY is Back





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 Cashish 
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There's no School like the Old School

I'm just, Waiting on a Friend






I'm just waiting on the ZEW




Trying to hurry along here and post an update before the 9:00 GMT News. Volume is rising, open interest is rising (there's interest in this market at this level by bulls and bears) and I'll stick my neck out and say the 1.3050 level showed its Quality again. The ZEW is a market mover (most of the time) BUT if the market stays in the 100 point range of last Tuesday I believe all eyes will be on the Fed's Beige Book report tomorrow. It is Tuesday, "snapshot day" for COT report that we won't see till Friday afternoon.










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 Cashish 
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For every Buyer there is Seller, for every Seller there is a Buyer

Sellers become Buyers, Buyers become Sellers

(at some point)

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 Cashish 
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I'm just throwing up a quickie here. This is a weekly profile, a lot going on near the HIGH of today,,, but the low is also busy IF I look at the bigger picture. Remember resistance at 1.3150, I'd have to bet that will be the first line of defense, why, because that was the area that changed the game Yesterday ,,, and when did the game change ,,, At the EU CLOSE. This tells me positions were being adjusted. Also remember that "#$%^(^" 100 day ave line? Where is it now? And the Pivot, And the volume from the adjusting of contracts at the close (MY Opinion). Fundamentals don't support this up move at all. I think it is obvious traders are tired of Mario Draghi's drum beat, an hour before the move he spoke and the Big E showed him, it rallied a 100 points!! No news out of EU to get in the way of this move all week,, last hurdle (IMO) is the today's Beige Book numbers this afternoon. But the Mighty Euro has proven to me it doesn't, "need no stinking numbers" to decide direction!!!! To the up side I think there's a glass ceiling at the 50% Fib number of the last move down (second chart) IF I was long up there I look for the "Big Dog" to start tapping on the brakes around 1.3220. Remember the rule of three.








EDIT: I threw this post together VERY quickly ,,,,,, the LOWER CHART is a few DAYS OLD,,,, the levels are NOT CORRECT,,,,,However; the Fibonacci levels are.

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 eminitrdr 
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This is what I saw after failing to put in a HH. Note increase in volume and what I saw on buy/sell study...fast selling . I sold the break near swing low of 3179 (got slipped)I had targets of y-day's VAH (1.3157) and possibly y-day's POC (1.3139). It didn't quite reach them...covered at 3162.

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 Cashish 
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A (Re)Balance of Power?

I've been a little (OK, a lot) side tracked lately. There hasn't been much going on here since the two big swings of Tuesday and Wednesday but I believe this dog is still on the hunt. Tuesday's move carried the CASH market to 1.3200 to the tick and I believe the decline in OI is "normal." Everyone looks for the door during a "200 point" move winners, losers, strong hands and weak hands. Chalk it up to balancing out positions. Getting a peek at the COT Report will be interesting this week I cannot imagine what those figures will reveal, but by looking at the increase in OI on Wednesday I'll go out on a limb here and predict the COT data will show Large Specs continued to decrease their short positions. The bomb shell Wednesday that railroaded the up move appears to be a flash in the pan. These two Volume Profiles from Tuesday and Wednesday look like an inverted matched set. I believe this is a good example of a "Down Day" using the structure of the Volume Profile built on the "Up Day" to ease the market down, (just my opinion). As I'm posting these charts the "Big E" is trading within a handful of ticks of Wednesday's POC. Thursday's preliminary data is posting a further decrease in OI but I believe this is the weak shorts that entered Wednesday during the US session with wild dreams of huge profits and expectations of a continuous slide into the abyss. Shorts are probably rethinking their positions as the market keeps testing higher levels almost 100 points off Wednesday's lows.








This is the weekly profile since Sunday evening from the lows on this chart it appears price action is slowly putting together a little 125 tick trend.












I Just Like this Picture

Here's to the Euro





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 Cashish 
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The Tenacity of Small Traders



To be absolutely clear, I am a small trader. Small traders have always been an "open book" to professional traders. The behavior of small traders is so predictable it doesn't take long to see what I've described earlier that Large Spec (large traders) "eat their young," (Small Spec...small traders). One of the characteristics of a small trader is his belief that he can only afford to win. Small traders take more heat on losing trades than professional traders for many reasons but I believe the pain of taking a loss and the desire to be proven right by the market tops the list. Last week I posted this chart of the April 09, 2013 COT data and said I hoped to add further comments, these are those comments.


The first thing you may have noticed on this chart last week is I had high lighted the data for the Small Spec. The Net Short positions held by the Small Spec appeared to have flat lined, even though the market went up 283 points! To make a point I'm going to dig deeper into this simple COT chart.





From the close of the previous Tuesday (4-2-13) to the close on the day this data was compiled (4-9-13) the market moved 283 points. This chart shows Large Spec might be "turning a corner" here. This theory is based entirely on the data of this chart and needs much more analysis to make such a claim, but this is part of that analysis. From 4-2 thru 4-9 the net short positions of Large Spec dropped by 14,843 contracts, during that same period the net short positions of Small Spec dropped by 170 contracts. This COT data signifies that 99% of Small Spec thought holding net short positions was still a good idea! Only 1% decided to stand aside. In comparison 23% of Large Spec headed for the door. Why? Do Small Spec have deeper pockets? Do Small Spec have more resources? Or are they simply the Dumb Money, I believe the latter.


The Tenacity of Small Traders, This Week


This week the Large Spec reduced their Net Short positions by another 21,094 contracts or 42% and the Small Spec reduced theirs by 20%. IMO, that last 100 points against the "little guy" was two fold, first it revealed that his threshold for pain was at 1.3100, and second, his short covering provided some of the buying fuel for the up move from 1.3100 to 13200. Of course the next day the move to 1.3200 evaporated and further analysis will be needed before we get another peek at next weeks COT data. As always, the question is where do we go from here? FWIW, I'm still bullish, but there are levels that are beginning to concern me and I'm watching them like a hawk. I hope to follow up with one more post before Sunday night, time permitting.





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 Cashish 
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There's no School like the Old School

3 Day Old Data


Many traders dismiss COT data because they believe the 3 day lag of its release deems it questionable or even useless. I believe with conscious effort and study getting a read and keeping that read of the market between the COT release dates isn't that difficult. I consider the COT data a spectre that oversees my analytical efforts and skill. I enjoy trading the market and I enjoy analyzing the market. If I can keep my finger on the pulse of the market and juxtapose my views to those of the COT data on a weekly basis and remain within a level of consistency, I feel I'm on the right track. Obviously the range prices moved from the Wednesday open thru Tuesday's close contains ALL the data on the COT report. If readers have taken any interest at all in these posts of longer term analysis they may have noticed the number of contracts held "open" (OI) usually exceeds the average volume traded each day, often multiplies of that. These "open" contracts represent both buyers and sellers, this is an important fact to remember. As an example, if there are 5,000 "open" contracts resting on even and price approaches, it is possible that 10,000 traders are preparing to get involved in the market. The task therefore, IMO, is to locate where these "open" contracts are resting in the market, who's holding them and identify the levels that would force the holders to exit, in other words, who can the market inflict the most pain on. If you subscribe to my theory of the Small Spec as I do, it is obvious they don't give up easily. This is a snip of the COT report when the Open Interest in the Euro was at it's unprecedented high, I've circled the OI in red. I would guess, most intraday traders unknowingly traded through this historic event without a clue of it's happening.




This is the updated Open Interest chart. I know it is getting pretty ugly but this project is temporary and I don't want to redo any of this. The 81 point range of Friday that tested the area above 1.3100 and closed near the lows still drew traders into the market willing to initiate new positions, according to the Preliminary Bulletin of Friday's trading OI ticked UP +483 contracts. A note here: This "ain't much" and the final report may lower (or raise) this number, but until that happens,,, it stands.







I believe all eyes were on Boston the second half of this week and this market rotated in anticipation of closure to this horrible event. In my previous post I thought the COT data identified a pocket of resting Small Spec at 1.3100. Friday this sleepy market came alive when that level was breached. This Volume on price chart shows the high of Friday reached up to an area that may come back into play. This area between 1.3130 and 1.3150 (green lines) paused the market on the way up and paused the market on its way back down. Friday's probe of this level retraces again a range this market has traded in and through for 2 weeks.




If I'm looking for traders that are in the market right now I use the volume on price study, If I'm looking for traders that I believe have been in the market for a week or two I use the time on price study. This chart is time on price, of course most Small Spec long term positions are at or near whole numbers but I believe this chart shows where traders "had the time" to enter positions. It is my belief position traders are not sitting on the edge of their seats when entering positions, they let the market do the work, savvy traders enter orders days in advance and let the market come to them. Comparing these two charts may offer a different view of the same area on the chart, remember OI is relatively constant, but volume often fluctuates dramatically.




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 Cashish 
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Wepa


I'm going for the record (one more post), a change of plans here at the house and I have some Me Time
but I need a little "pick me upper".





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 Cashish 
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Just a Quickie before this market starts trading. The two levels I'm watching are 1.3000 and 1.3200. The 1.3050 level has been hammered on since this project began, and supported the market every time. Another probe lower searching for weak longs may prove to be to much, and trade around 1.3000 could get especially intense. However, traders positioning themselves for the GDP numbers on Friday may lift this market before or after an honest test below 1.3050. IMO, another "wake up call" above 1.3100 and that area of the 30s could spark a "mini panic" and fuel a move above 1.3150. From that level the slightest sneeze could turn into a full blown "Perma Bear" short squeeze. I'm looking for an increase in OI and trade in ranges of sub 100 points as we approach the GDP numbers. But then, if the YEN goes ballistic and trades on 100 .... GOD HELP US ALL!

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 Cashish 
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There's no School like the Old School

50% Retracement or Game Changer?


If the Bulls are serious about turning this market the 50% retrace of the up move is a sweet stop to enter. Today is once again "snapshot day," after the close the COT data will be extracted and put on the shelf until Friday. But the OI data is available now and Friday's numbers were increased from 400+ to 600+. Yesterday (Monday) the market traded in a 70 point range on both sides of the battered and bruised 1.3050 level on low volume and basically went nowhere. As this sideways trade churned throughout the day, the Preliminary data for Monday's trade shows OI increased by 4023 contracts. Obviously, these 4000 new open positions are all "North" of 1.3019 (Monday's low) and "South" of 1.3089 (Monday's high). This morning's London rally up to 1.3090 probably shook out more than a few weak hands, but another run back up to 1.3050 might cause some traders to take profits and rethink their positions. If this market does move back to 1.3050,, I believe every tick above that will add pressure to the short traders. 1.2950 is obviously the next level to look for support, but this is the first real encounter with 1.3000 and Yesterday 4000 traders went long at the close! This could be an exciting session.








Updated Average Values




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 Cashish 
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Squeeze me like you do, I'm so in love with you




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 Cashish 
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There's no School like the Old School

Johnny Come Lately


This week offers all kinds of stuff for the "Talking Heads" and gurus to spew out among the masses of sheep that keep their ears and eyes fixed on the cable channels. A 87 year old President who, after less than a day in office said he'd resign if, "you guys don't fix this (paraphrased)!" And the ECB rate cut conversation didn't die, the one that put the brakes on the up move last week. But I believe the talk of Euro sliding to 1.2900 before the "rate cut" brought traders off the bench and getting short the 6E after hearing all the numbers out of Germany. It is no secret small public traders are usually the "Johnny come lately's" when moves start to develop, IMO, they setup this rally. How far will it carry, I don't know but if we test above 1.3100 I wouldn't be surprised to see volume numbers at the end of the day North of 350,000.


Open Interest rose Friday, Monday and Tuesday to 220,000, I believe this was an agreement in direction. Tuesday's rise of more than 4000 contracts near the 50% retrace level had "late comers" stamped all over it. I believe Wednesday's drop in OI was profit taking by some and feeding more shorts to the public when the brakes started dragging on the down move and 1.2950 failed to give way. FWIW here are the charts. Jobs numbers today, GDP tomorrow and I believe it's not to soon to consider NFP next week! Yes, it's been a month,,,, News to News. One note: the exit is a close below the lower 20 period band, you can see it is slowly rising, as it does risk is diminishing, (more on this later ).







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 eminitrdr 
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I was in a chat room with Mr. Cashish and another trader. This is a trade we talked about and the way it played out.

emini

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 Cashish 
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There's no School like the Old School

The Last Man Standing?


Big sell off at 1.3100 yesterday driving price down through 3050 (again) to that magnetic 1.3000 level. Yesterday's 100 point range redefined the heart of this whole move for the last 2 weeks. The mighty Euro has analysts far greater than me not knowing whether they should "scratch their watch or wind their ass." Big expectations for GDP numbers today might create a stir, and the fact it's a Friday, but who knows. The OI numbers this morning shows an increase, and I believe that says something given the trading range is, "getting old." The COT data is coming out this afternoon and I'll make my call, FWIW. I believe yesterday's OI numbers signify uncertainty or a lack of commitment to direction. Until this market closes below 1.2950 I have to remain bullish. I'm beginning to feel like the last man standing, my view is contrary to all the analysts I respect, but hey, what do they know! Looking back to Tuesday's OI and and making a prediction of the data on the COT report, I have to believe Large Spec continued to decrease their Net Short positions. Here are the updated charts. I'm back in the courtroom this morning and I'm going to miss the release of the GDP numbers (judges don't allow phones) my first look at the numbers will be after 11 a.m.. Thanks guys for following the thread, there is another twist to this but I haven't figured out how to present it, maybe today will answer that for me.









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 Cashish 
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There's no School like the Old School

COT Data


The COT Data for 4-23-13 shows Large Spec increased their Net Short positions 4,511 contracts to 34,275, this was a hard call for me to make. I do believe this data shows Large Spec were not against the idea of committing to the short side when price was trading under 1.3050, this was my basis for predicting a decrease in Net Short positions. This move lower was fueled by the EU PMI data and although price retraced 50% of the down move, price soon fell back to the safety of what has come to be its new home 1.3000.












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 Cashish 
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There's no School like the Old School

Mr Toad's Wild Ride







Of all the price action of the week, the two moves that I believe deserve honorable mentions are the rejection of 1.2950 and the sell off after Goldman's comments about the ECB rate cut. When I analyze longer term movements I find it helpful to look at the market from the bear's side as well as the bull's side. After Tuesday's news fueled drop to the 50% retracement of this 1.2750 to 1.3200 move it appeared 1.2950 was dead in its sights. Everyone and their cat was waiting for the IFO numbers and when they came out the traders were there, in force. The move on Tuesday's PMI release generated over 6,600 contracts being traded in the 1 minute after the release. The move on Wednesday's IFO release matched that volume almost contract to contract, amazingly within a hundred contracts during each 1 minute period. Makes me believe in the notion, "it's the same players everyday." The bulls where there and 1.2950 was never touched, IMO, incredible! What I find just as fascinating is the rally that followed, a steady march from the U.S Open on Wednesday to the U.S. Open on Thursday, the range of the week!




And then it appears GS had had enough! I wanted to post this chart for us V-Whoppers, take what you want and leave the rest. I think it is a good example of a trading range that has no commitment to direction, when the dust settled the 6E was down only a few ticks for the day.





The two charts below are the week in profiles.

Volume on Price






Time on Price






I was surprised at the trading range on Friday. The GDP numbers fell short of the mark but nothing could be made of it, I guess the numbers were already "baked in the cake." The two profiles above suggest to me this market can retrace this range at will, with very little resistance. I think my "project" here is coming down to the "Final Four." I believe the GS comments were released at that level at that time, for a purpose. I also believe there’s a $h!t load of stop orders and options below 1.2950 that is helping hold this level. I think it's obvious now given the failed attempts of Tuesday, Wednesday and Thursday that it is going to take a major event to move this market either way. Mario can "git-r-done," so can NFP, but the docket is full next week and here are the "Final Four" that I believe could supply the propellant to, "get this party started." Tuesday, Chinese PMI data, Wednesday, FOMC rate decision, Thursday, Mario and Friday NFP. IMO, any credible talk either way about the ECB's outlook on rates could light the fuse, at any moment.

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 Cashish 
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There's no School like the Old School

Options


This whole method of charting the OI and tracking longer term movements was taught to me for options trading. I haven't come up with a way to present all the twists and turns but I at least wanted to put something out there. I also don't want to reinvent the wheel and do a whole "ground up" basic options primer. After searching for "something" I've decided to lean on, Carley.

This is a link to Carley's excellent and very detailed introduction to option trading.
The Nuts and Bolts of Alternative Option Trading

I believe this gal is very smart, she knows options. Carley also did two "intro" to options webinars here on futures.io (formerly BMT), if this topic of options interests you, search Carley Garner. When someone like Carley does a basics webinar on a topic they're expert in, and passionate about, you can almost feel the struggle they experience trying to "tone it down" and "keep the information basic." The link I posted is very well done (that's why I posted it) and if you're new to options, a great place to start.



I'm going to keep this very simple, this data is from the CME site. Just wanted to show how the movements we're having in the 6E is also stirring things up in the "spooky" world of options. I snipped these from the CME, to do so I had to omit the headings. Briefly, the far right column is surprise, Open Interest. Simply compare the OI of the top (PUT) panel OI data and the lower (PUT) panel data and you will see OI for the 1.2800 put increased by 1608, last week. This information is much more meaningful if you know the difference between a put and a call. Click the link above, and Carley will explain it all, (so I don't have to).










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 Cashish 
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 Cashish 
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There's no School like the Old School

Snapshot Day


The Preliminary data shows Yesterday's price move increased the Open Interest to the highest level since the move off the April 4th low. I believe this indicates a renewed interest in the 6E at these levels by bulls and bears. With Chinese and Japanese markets closed during Sunday Night, Monday trading I thought the slow grind up was impressive. The 1.3120 level has been the turning point of every move above 1.3100 but, with the renewed interest and that 1.3050 level at the backs of the bulls again more attempts to test this area seem sure to materialize. The one area I'm watching is 1.3050, if price returns there I believe it is certain price will be sucked back into the value area of last week. So far I believe this market has developed a slight upward bias. Mario's comments are two days away and traders are adjusting positions in preparation for the event, this can mean a slow grind on light volume or fast moves with heavy volume. Control your RISK, also keep an eye on the holiday trading calendar.













For those who may have an interest in the OI data, I watch the range and volume of the U.S. "pit" session and base my projections, mostly on this range and volume only. Remember, the data isn't released until Friday afternoon, all the fireworks of this week will be over. The real benefit of this analysis is the ability to read the movements (value) in options, puts and calls. I hope to further that discussion soon.


Rate Cut? Who Cares?

Eonia - current rates and charts


I feel silly posting this, by the time I put it all together, the Big E made a nice run.


Remember these charts?





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 Cashish 
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So far I believe this market has developed a slight upward bias.


With the Big Dog (Spot/Cash market) trading through 1.3150, my bias is a bit "firmer" than slight.

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 Cashish 
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 Cashish 
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There's no School like the Old School

Venez m'aider, Venez m'aider, Venez m'aider












I'm posting these charts to show price has entered into the level where Large Spec were previously Net Long. The first chart is becoming very busy when I compress it so I've included two charts I've previously posted. IMO, this data (COT Reports) allows me to see inside the longer term Volume Profiles and make informed decisions as to the true availability of participants at these historic levels. That was the original "reason" for marking the chart with the Fuzzy Green Line, this area could become a battle ground for the near future, only time will tell. I don't put much faith in historic VP ("nodes"), but I assure anyone following this thread, Whole Numbers will offer all the trading opportunities most traders could ask for.