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Trading NQ Order Flow using Cumulative Delta


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Trading NQ Order Flow using Cumulative Delta

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  #1 (permalink)
 mecb 
Takoma Park, MD USA
 
Experience: Intermediate
Platform: Investor R/T, TOS, Sierra Chart
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I am starting a trade journal because I hope the public accountability will help me reduce the number of unforced errors I make.

I trade pullbacks in the trend on my larger time frame (2 Renko).

I enter when price rolls back into the direction of the trend and is confirmed by order flow (cumulative delta and cumulative up/down tick) as well as by the flow in the NASDAQ equities (NASDAQ 100 TICK).

I enter no more than 3.75 pt from the previous swing high/low.

I trade 2 contracts - stop is 4.5 pts and I use two profit targets: 4.5 pts and 9 pts. The profit targets are adjustable based on price action.


Constructive criticism is welcome.

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  #3 (permalink)
 mecb 
Takoma Park, MD USA
 
Experience: Intermediate
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Bad trade.

Structure-wise the entry was good. I tried to short a pullback that put the NQ a few points below the vwap. Entered at 2548.75.

Unfortunately, I was too early. The cumulative delta on the higher time frame and the NASDAQ TICK were both still showing buying; I should have been more patient.

Exit at 2551.75 for 3 pt loss per contract.


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  #4 (permalink)
 mecb 
Takoma Park, MD USA
 
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Trading: NQ
 
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Bad Trade

After the short went against me my bias switched to long despite the structure and order flow saying short.

Entered long at 2555.75 right at the vwap even though the was a strong sell response on the large time frame Cum delta. Another thing I missed was that this move up was just a retest of the consolidation at the end of the session yesterday. If I had done a little homework before trading to day I would have realized that sell response was a reaction to that area. Took the full 4.5 pt loss on this trade.




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  #5 (permalink)
 mecb 
Takoma Park, MD USA
 
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Good Trade

Went short at 2538.25 after a 20 pt pullback. NQ came within 2 points of vwap and rolled back over. Order flow was bearish on both time frames and NASDAQ TICK was making lower highs.

Moved my first target in 2 ticks because of small consolidation area made during the up move. You can see it in the screen shot just to the left of the 1st target arrow - after two bad trades I wanted to make sure that my first one got hit and some risk was taken off.

Got a small pullback shortly after the 1st target got hit. The higher timeframe showed decent buy response and I was still impatient after the two bad trades so I flattened the trade for 3 pts and that contract.


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Nicely done on the journal, looking forward to more.

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  #7 (permalink)
 mecb 
Takoma Park, MD USA
 
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Two trades today: one good one bad.

First trade entry was great; 2nd contract could have been managed better.

Shortly after the open, NQ made a lower high in a failed retest of the Globex high. Price rolled over then retraced about 13 pts back up to vwap to make a second lower high. I went short at 2507.00 and 1st target was hit easily. Unfortunately, it failed to extend the downtrend as there was a buy response at previous swing low. Should have exited the 2nd contract when I saw the up/down tick on higher timeframe turn bullish but let it run so I was taken out at breakeven.


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  #8 (permalink)
 mecb 
Takoma Park, MD USA
 
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Bad entry. Bad Trade.

After the NQ failed to make new lows in my first trade price moved back up to vwap and I got short again. 3 things should have told me it was a bad short:

1. Higher time frame up/down tick was still above its moving average which is bullish

2. the move from swing low to swing high was stronger and faster than the previous move from low to high. Order flow was stronger, there were no retraces and it made the move in 3 min vs. 15 min.

3. there had been no follow through in the NASDAQ tick in the previous leg down, it never made it to -350.


Should have skipped this one and it cost me the profit from the first trade.


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  #9 (permalink)
 mecb 
Takoma Park, MD USA
 
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Tough day for me today. 4 trades: Two full stops, two tiny winners. The winners were bad trades though, I just recognized it in time to get out without feeling any pain.

This morning's choppy downtrend was just a bull flag after monday's strong move up. There were a couple of decent short setups on pullbacks but I didn't get in on either of them. After today I realize that I get tunnel vision when I trade and that there are two things I need to work on watching more consistently. I need to pay better attention to the NASDAQ TICK and I need to look to the left on the chart to look for support/resistance that might prevent my trades from moving in my direction.

I've also decided to post homework chart for the next day's session showing what I should anticipate.


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  #10 (permalink)
 mecb 
Takoma Park, MD USA
 
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Full 4.5 pt stop.

Trade was good in structure and order flow. NQ made a double bottom then ran up through the vwap then pulled back to it. Good buy response came in so I got long (it's hard to tell on the HTF but the arrows point out the topping tails on the CD and UpDown tick).

What I didn't give enough weight too was the equities. In the move up, the TICK didn't even get up to 350. At the time of my entry, it was making lower highs and lower lows and the moving average was well below the zero line. I got sucked in by a quick spike that barely passed above the zero line.


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  #11 (permalink)
 mecb 
Takoma Park, MD USA
 
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+3 ticks per contract.

Counter-trend trade. Should have been looking for shorts instead. I realized this right away and flattened despite order flow being bullish.


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  #12 (permalink)
 mecb 
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+1 tick per contract

After my long realized I was looking at a bear flag and took a short. I decide right away that I was too early because the up/down tick on the HTF was still bullish so I flattened. Price made one more swing up to retest previous high and then rolled over. Unfortunately because I had already made 3 bad trades I was scared and passed on the entry.


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  #13 (permalink)
 mecb 
Takoma Park, MD USA
 
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full 4.5 pt stop

After the European close the Price ran up and then pulled back down below the vwap. I chased the market and tried to short right in the middle of the morning chop.


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  #14 (permalink)
rainman2
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mecb View Post
+3 ticks per contract.

Counter-trend trade. Should have been looking for shorts instead. I realized this right away and flattened despite order flow being bullish.


Good journal... CDV is a very powerful tool.



It becomes more powerful when you use it in conjunction with channels... good luck

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 mecb 
Takoma Park, MD USA
 
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rainman2 View Post
Good journal... CDV is a very powerful tool.



It becomes more powerful when you use it in conjunction with channels... good luck

Thanks for the reply. I stopped looking at CDV that way because I found myself counter trending and trying to pick reversals (and doing it poorly). But my prep chart for tomorrow is below.

I think the yellow divergence you show on the upside will be negated. Overnight/tomorrow I think the Consolidation area from yesterday will be retested and traded through. Today's high was right in the middle of it. If that happens the next target is the area from last week between 2585 and 2615. The 2596 level stopped the market cold 3 times last Wednesday and then price went down 130 pts.

If it fails to breakthrough we'll retest today's lows and possibly Monday's consolidation.

What do you think?

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  #16 (permalink)
 mecb 
Takoma Park, MD USA
 
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Boring day today. Two trades for a net +3 ticks. Barely enough to cover commissions but both entries were good.

Tried to take a third trade and watched a bear flag setting up for an hour but price rolled over too fast and I missed the entry. I was annoyed so I took a nap rather than trade the rest of the session.


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  #17 (permalink)
 mecb 
Takoma Park, MD USA
 
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Pre-open the market tested up into Tuesday's range twice and failed. Price rolled over below vwap and I shorted a bear flag after it bounced off bottom of the vwap. Setup was good in structure, order flow, and confirmed by TICK but the equitites just didn't follow through to the downside. I flattened - 3 pts per contract as strong buying came in.


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  #18 (permalink)
 mecb 
Takoma Park, MD USA
 
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After my first trade, NQ ran back up above vwap then pulled back to retest it. Got long and took 2.5 pts of heat before trade went in my direction. Again equities didn't have much strength so I ended up pulling in my targets: took 3 pts on 1st contract and 3.75 on the second.


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  #19 (permalink)
 mecb 
Takoma Park, MD USA
 
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Not sure what tomorrow will be like going into a long weekend but I still think we get up to 2596 before we retest the lows from last week. The choppy consolidation of the last 3 days has formed a triangle which I think will resolve to the upside. We may have to wait until next week though.


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  #20 (permalink)
 mecb 
Takoma Park, MD USA
 
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Slow Friday before a long weekend. Only took one trade today and it was a good one. Net + 4.5 pts.

Over the past couple of days the NQ has formed a triangle consolidation. During the Globex session price tested the upper boundary. At the open, it was right in the middle and trending down so I expected a test of the lower boundary. A bear flag developed and the order flow and equities lined up so I got short. Hit first target for 4.5 but 2nd contract got stopped out at BE.






The lower boundary still hasn't been reached as I write this so we'll have to wait until next week for a breakout of the pattern. (I still think to the upside).

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  #21 (permalink)
 mecb 
Takoma Park, MD USA
 
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Net -9.5 pts. Down day but still feel I traded pretty well. Entries were good, I controlled my losers, and I waited for confirmation from NASDAQ TICK (which I'm really focusing on this week.)

Lesson learned today: DO NOT move profit target for 1st contract out, only in. On my last trade I thought the market was going to have a big run in the last hour so I removed my target order and trailed a stop manually. Price hit my original target of 4.5 pts but pulled back and took me out for 1 pt. The 3.5 pt difference would have cut my losses by a third. I shouldn't have been greedy when I was down for the day.


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  #22 (permalink)
 mecb 
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Price broke out of the triangle it has been in for several days to the upside. I got long on a pulback as order flow and TICK turned bullish. NQ rolled back over and I exited - 2.5 pts.


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  #23 (permalink)
 mecb 
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Net -2.5 pt.

Shorted a pullback after the failed breakout. NQ ran up into a consolidation from earlier in the session. The was a ton of buying on the offer that was getting absorbed as price, equities, and up/down tick made lower highs but cum delta made higher high. Good entry but trade went against me.


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  #24 (permalink)
 mecb 
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net -.5 pt.

Retried the short a little higher right around the vwap. Entry was good based on TICK and order flow but not on structure. Price was above the earlier consolidation zone so there was too much support too close to get short. Once I realized this I exited for a tiny loss.


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  #25 (permalink)
 mecb 
Takoma Park, MD USA
 
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net +1 pt

Good long entry right after I realized the was good support. Only had 1 contract on since I started with two losses but I took my target limit order off and tried to trail a stop. Price traded through my original target price then pulled back to stop my out. Missed out on 3.5 pts.


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  #26 (permalink)
 mecb 
Takoma Park, MD USA
 
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Not sure what to expect tomorrow. I thought the path of least resistance was to the upside but NQ has broken out of the triangle twice today and both times pulled back down into it. The second time making a lower high.



The S&P 500 tested the top of its upward channel twice today and both times sold off sharply.



We found good support in the noon hour today and if it holds overnight/tomorrow I think 2596 is still in the picture for the NQ. If those support areas breakdown then I believe we retest the bottom of the channel for the s&p and the bottom of the triangle for the NQ (and possibly breakdown below that.)

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 djkiwi 
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Hi MECB. Nice work on the journal. I really like the way you trade. Here is one of my day trading charts. Does it look familiar? I also have the NYSE tick providing voice alerts all day. It provides the pulse of the market beautifully. I also automatically mark excess ticks (see charts with squares marked) based on a historical percentile system I designed. A couple of observations/ideas from one delta trader to another.




1. Delta

I'm not sure if you have explored opportunities arising from neutralized delta and then trading new rotations? What I mean by this is from my experience at least the best opportunities arise after the shorts covered an entire rotation or the longs liquidated. I've attached a chart of the ES to show what I mean. If you look at the DS3 line (Delta Support 3 line) each time the longs liquidated after a swing price popped for good 5-6 point move. I've also attached the NQ chart as well. These are my bread and butter trades.

Also I notice quite a few great divergence trades on your charts as well. As you know these are great trades as well.



2. Market profile

I notice you use market delta. I'm not sure if you use market profile but I've been using market profile and delta for awhile now and personally would not trade one without the other. The good thing about is if you understand the shape of profile you can adapt your style. For example if the distribution is fat ad symmetric like the ES chart then you would probably take lower target trades as the market isn't trending. However if the profile is elongated than you may want to step up to a higher timeframe and hold out for bigger targets. Anyway I think market profile is worth looking at.

The problem with trading pullbacks all the time in the market is non-trending 70-80% of the time. Pullbacks work well when the market is trending but in chop doesn't work so well.

3. Bigger Picture Charts.

I'm not sure if you have tried a bigger picture chart to get a better handle of what is really going on from a support and resistance perspective like a 30 minute chart. A 2 renko still seems quite a small timeframe for a bigger picture chart.

Apart from that I wish you ongoing success with your trading and journal.

Cheers
DJ

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 mecb 
Takoma Park, MD USA
 
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Thanks for the post.

1. When I started using cumulative delta I used it that way but couldn't seem to get it to work for me. I guess I've just ever really had confidence that it tracks open interest/inventory levels. So now I just wait for flags and use it to tell me who is winning; buyers or sellers. I still haven't become consistently profitable but it's obvious from my trade log that my inconsistency with p/l comes from a lack of discipline and not my intended application of delta.

2. I actually just have the version of Investor R/T without Market Profile but I keep and eye on it with TOS just to get a general feel for it. The data isn't as good but I'm not using it to make trade decisions, just keeping an eye on it. Right now I'm trying to keep my trading as simple as possible until I reach consistent profitability. For now I'm just using swing points and consolidation to look for support/resistance.

3. For a longer term chart I just zoom out on the 2 renko which is really easy to do on IRT. It looks like a plain line chart that shows significant highs and lows and consolidation areas.

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  #29 (permalink)
 mecb 
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Net +3.5 points.

Decent day. Couldn't pull the trigger on two early trades because I was scared. The last two weeks of drawdown has hurt my confidence a little bit. Even though I didn't make those trades it feels good to have stalked them waiting for a setup and then having them turn out as i thought they would. This game is all about avoiding unforced errors. Not only do bad trades cost money but they prevent you from taking good trades and managing them properly.


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  #30 (permalink)
 mecb 
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-4.5 pts

I was hoping for a retest of the lows even though there was already one test that failed with huge absorption (visible on the chart). After the failed retest with that absorption followed by a very strong buy response I should have been prepared to get long on the next pullback.


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  #31 (permalink)
 mecb 
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+8 pts


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 mecb 
Takoma Park, MD USA
 
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I think we are headed down. First target area is 2492 down to 2476.


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  #33 (permalink)
 mecb 
Takoma Park, MD USA
 
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Target area hit overnight. I am looking for a retest of previous consolidation area which is right around the vwap. 2494-2498. Looking to short there and get a retest of the globex low - 2470.75.


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 mecb 
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Thanks: 7 given, 17 received

+7.5 pts.

NQ did what I thought it would do: retested consolidation/vwap and then rolled over. Didn't get much follow through to the downside probably because it was fighting some short covering in the equities and there was news pending for 10AM EST. Covered 2nd contract manually when I saw decent buy response on shorter time frame. It's good to start with a winning trade for the first time all week I think.


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  #35 (permalink)
 mecb 
Takoma Park, MD USA
 
Experience: Intermediate
Platform: Investor R/T, TOS, Sierra Chart
Broker: Velocity/TT/DTNIQ
Trading: NQ
 
Posts: 42 since Dec 2010
Thanks: 7 given, 17 received

Done for the day. Just one trade which I already posted. +7.5 pts.

Good way to start the month.

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  #36 (permalink)
 mecb 
Takoma Park, MD USA
 
Experience: Intermediate
Platform: Investor R/T, TOS, Sierra Chart
Broker: Velocity/TT/DTNIQ
Trading: NQ
 
Posts: 42 since Dec 2010
Thanks: 7 given, 17 received

Didn't have time to do charts yesterday. 3 trades, 3 good entries. Last trade could have been managed better.

+4.5
+.25
+1.75


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  #37 (permalink)
 mecb 
Takoma Park, MD USA
 
Experience: Intermediate
Platform: Investor R/T, TOS, Sierra Chart
Broker: Velocity/TT/DTNIQ
Trading: NQ
 
Posts: 42 since Dec 2010
Thanks: 7 given, 17 received

Looks like were are retesting the range from 2476-2496. I doubt we break above the top of the range and think we roll over before the day is over.


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  #38 (permalink)
 mecb 
Takoma Park, MD USA
 
Experience: Intermediate
Platform: Investor R/T, TOS, Sierra Chart
Broker: Velocity/TT/DTNIQ
Trading: NQ
 
Posts: 42 since Dec 2010
Thanks: 7 given, 17 received

No trades today. NQ was back and forth on both sides of the vwap. Saw a few mediocre setups but stayed out because I think there is plenty of volatility coming in the near future.


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  #39 (permalink)
 mecb 
Takoma Park, MD USA
 
Experience: Intermediate
Platform: Investor R/T, TOS, Sierra Chart
Broker: Velocity/TT/DTNIQ
Trading: NQ
 
Posts: 42 since Dec 2010
Thanks: 7 given, 17 received

Net -12.25

-5.5
-4.5
-2.25


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  #40 (permalink)
 mecb 
Takoma Park, MD USA
 
Experience: Intermediate
Platform: Investor R/T, TOS, Sierra Chart
Broker: Velocity/TT/DTNIQ
Trading: NQ
 
Posts: 42 since Dec 2010
Thanks: 7 given, 17 received

-5.5 pts

Shorted what I thought was a bear flag right after the open. Good trade based on structure; price ran up just above vwap and retested consolidation seen at the left. 2 things could have kept me out of the trade: Orderflow was very bullish at the open and the TICK was giving much information in terms of trend. Several times over the last three weeks I've tried to trade pullbacks right after the open and have gotten run over. I'm going to force myself to avoid trades during the first 15 minutes of the session to give the market time to settle in. That will give the TICK more time to show me what is actually going on.


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  #41 (permalink)
 mecb 
Takoma Park, MD USA
 
Experience: Intermediate
Platform: Investor R/T, TOS, Sierra Chart
Broker: Velocity/TT/DTNIQ
Trading: NQ
 
Posts: 42 since Dec 2010
Thanks: 7 given, 17 received

-4.5
-2.25

After the first trade I didn't see anything that I thought was good value until the last hour. Got long twice after a pullback. Trade 2 was a bad trade because the order flow on the ES was clearly bearish but I got long anyway. Trade 3 was decent but it just wasn't ready to break out to the upside yet. Stopped for the day after the third loser in a row. If I had skipped the second trade I may have kept trading and caught the move when the market did eventually run up into the close.


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  #42 (permalink)
 djkiwi 
Mercer Island WA
 
Experience: Advanced
Platform: Ninjatrader/Strategy Desk
Broker: Various
Trading: TF/NQ/ES/Stocks
 
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Posts: 561 since May 2010
Thanks: 981 given, 1,551 received

Hi Mecb, nice work on the journal. You put most of us to shame. If you don't mind the intrusion I thought I'd provide a couple of thoughts/ideas.

1. Today

I think your idea of waiting the 1st 15 minutes is a good one unless you understand the volatility of the NQ in the first hour after opening. Within the 1st 15 minutes I have usually a fair idea of what sort of day we are facing by just watching the NYSE tick. I used to watch all of them ADVN, trin, vix, etc etc, sector strength and weakness but I've found the NYSE tick or Nasdaq tick in your case is the best leading indicator. Today within the 15 minutes it was fairly clear we were in for a trend up day. I've put some more notes on market structure in this post:



2. Planning

It is unclear whether you are following any set plan each day as you seem to be placing trades purely on developing action.

As I've researched the qualities of master traders and strive to become one myself, the common factor I've found is they all have a very specific plan of where they intend to do business, a risk analysis and what they expect to get out of the trade.

To emulate their success I'm now following a similar process. For example every night I study the charts of 7 instruments looking at potential trades and $risk/reward opporunties. Of those 7 instruments I know which ones are trending and which ones are balanced. Before the day even starts I know which instruments I'm trading (if at all), what type of strategy I will employ, my target and stop. I'm waiting fo the market to come to me and then based on the events that have unfolded since open make a final decision to enter the trade if price comes to my entry area. This has helped me become a better trader in so many ways and would encourage anybody to at least consider the idea. It also makes trading very relaxed.

This is not to say I won't do unstructured trades during the day but these make up 20% and are based on very strict entry criteria and analysis.

Cheers
DJ

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  #43 (permalink)
 mecb 
Takoma Park, MD USA
 
Experience: Intermediate
Platform: Investor R/T, TOS, Sierra Chart
Broker: Velocity/TT/DTNIQ
Trading: NQ
 
Posts: 42 since Dec 2010
Thanks: 7 given, 17 received

Net +12.50 pts.

3 Trades, 3 good entries. Picked good spots today but trade management definitely needs some work. I'm considering going to an all-in-all out for the two contracts and add a second target when I add a third contract.

Also, I'm reconsidering changing the way I use my S&P chart. I never include in it my screenshots but I use a .75 Renko chart with CDV and up/down tick to confirm my entries. On my second trade today part of the reason I got jumpy and flattened way too soon was that the S&P was still trapped in consolidation while the NQ had already broken out. I'm considering using only my NQ charts for structure and just use the ES order flow as confirmation and ignore the price.

Here are my trades. individual break downs will come saturday or sunday.


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  #44 (permalink)
 mecb 
Takoma Park, MD USA
 
Experience: Intermediate
Platform: Investor R/T, TOS, Sierra Chart
Broker: Velocity/TT/DTNIQ
Trading: NQ
 
Posts: 42 since Dec 2010
Thanks: 7 given, 17 received

+9 pts.

Haven't traded much the last couple weeks due to my work schedule but had 1 winner today.

Just after 10 EST the NQ retested the consolidation area formed between the end of session yesterday and the overnight globex session.

I've decided to go all-in all-out through at least the end of July because I haven't had great results managing the second contract on a larger profit target.


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  #45 (permalink)
 mecb 
Takoma Park, MD USA
 
Experience: Intermediate
Platform: Investor R/T, TOS, Sierra Chart
Broker: Velocity/TT/DTNIQ
Trading: NQ
 
Posts: 42 since Dec 2010
Thanks: 7 given, 17 received

1 trade
+9 pts.

NQ was stuck in a range early. I shorted the pullback after it broke down out of that range. Got slight divergence in the Cumulative Delta, Updown tick and NASDAQ TICK. Entered once I was confident the higher time frame order flow was bearish.


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