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Learning to trade the ES using volume profiling
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Learning to trade the ES using volume profiling

  #211 (permalink)
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garyboy275 View Post
Nice work - that Mid at 45.50 was the bomb. Set up very cleanly too. Measure move from low to top back to mid, from mid to high was expected 51 which was the day high.

can you explain this measured move better and also the theory behind it?

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  #212 (permalink)
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Profiler View Post
can you explain this measured move better and also the theory behind it?


There is really no theory behind it but it's fairly common. In todays case it was exactly the 50% fib extension which might have been the reason for working perfectly. Here is a chart to explain it a bit


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first time posting an image hope it works, the two red arrows are equal in length. Basically the instument moves from bottom point A to top point B, then retraces to point C(where you buy hoping up move continues), then you look for continuation of move of an equal value B-A, starting from point C or whereever the low of the move was.

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  #213 (permalink)
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I didn't trade today had to work.but I see u had a good day. Congrats! I admire your patience to hold on to a trade and wait for it to play out.

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  #214 (permalink)
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3-14 pre-market

Economic Data: claims, PPI, current account

ON Profile: We have a double distribution shaped profile seperated by a distinct LVN a tick above the 3 day hi balance area hi. 5 pts of range with ES currently sitting on a new 5 year hi at 1554.25 and above average volume so far (150k). The low is 1549, the 3 day mc vpoc, so they auctioned it down there to the tick to pick up buyers and then it broke out.

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Potentially very interesting day on tap here. ES is set to open with a gap up above a 3 or 4 day balance area at a new 5 year hi. It could open OD and just drive higher but I don't think so. I am expecting an OAOR with responsive sellers making the first push. How far they get will be the key to the day. If they can take it to the pHi at 1551, I expect buyers to respond and possibly set the low of the day around there if they take control and grind it higher into the close. If sellers can't come close to filling in the gap, that is even more bullish. However, if sellers can take it back into balance and it is accepted, a potential big down is on tap with 1535 or even lower being on the table. Same scenario if bulls make first push out of the gate and fail then sellers take control. Can they get it into prior balance is the key for me. If we end up with a big down day after gapping up to new highs on the open, could be a major reversal signal. However, my bias is definitely to the long side. All time frames are trending higher.

Levels Above: ?

Levels below: 1551 BAH/double top**, 1549 mc vpoc, 1548 CLVN, 1546 CHVN, 1540.25 nvpoc/prior balance area hi**
1535.25 mc vpoc***

Hypo#1- ES opens OAOR, responsive sellers push to pHi but fail just before and buyers take over and grind it higher thru the day.

Hypo#2- ES opens OAOR, buyers push out of the gate but fail and sellers take control and auction it back into pBA and the bottom falls out.

Hypo#3- ES opens OD (up or down). Go with!!

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  #215 (permalink)
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Profiler View Post
Levels Above: ?

All-time cash high: 1576
All-time closing high: 1565

Cash about 5.50-6 ahead of futures, so your ES prices are 1559-60 first, then 1570-71.

Anything's possible, but it would seem strange they won't gun for 1565, esp. since we will open above yesterday.

Or better yet, watch a cash chart, if you don't have it then look at marketwatch, as it's updated real-time, just open it there and shrink down the window small and put it in a corner, and you can be aware of the price. Just know 1565.

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  #216 (permalink)
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3-14 trades and recap

1. Long 1553.75 mid/vwap on 1.5 pt pb off highs. Market not acting as strong as I would have liked to take this trade but it did fail to close the gap, only printed 1 tick below the open and left a poor hi behind with over 4k at the top tick which to me doesn't indicate a completed auction. Downsides are that its only a 1.5 pt pb and volume on this breakout is right at or even a little below 20 day average so no confirmation there. Breadth also acting poorly, opening ~340 and now trending down at 220. Tick mostly positive but nothing extreme, either way. Scaled after 5 min and 0 MA- love it when I take no heat. No second scale...wow.
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Recap
ES open OAOR and market on open orders caused an instant 1 pt spike up but then sellers came in for the ol college try and failed, only able to take it 1 tick beneath the open. Buyers took it higher but it was obvious they lacked conviction and volume was pathetic. We ended up with an extremely boring rotational day. Vpoc shifted higher, value shifted higher. Volume was horrendous- with 20 minutes or so left to the close I saw only 875k had traded but late day action took it over a mill. Price closed near hi's, above/at value area high. Overall, the march higher continues. The gap up held. Aggressive sellers remain elusive.

This definitely was not the type of day I had planned for- nowhere in my playbook did I have small range rotational day considered. Another example of why trading is hard... Might of had a nice day if I had pulled the trigger on the trades I considered but I just didn't see a whole lot of opportunity today. Tomorrow is another day. Maybe I should start looking at crude to just get familiar with it?


Last edited by Profiler; March 14th, 2013 at 09:16 PM.
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  #217 (permalink)
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3-15 pre-market

Economic Data: CPI, empire, michigan

ON Profile: Interesting shaped profile so far. ON vpoc lines up exactly with yesterdays vpoc. Only 4.75 pts of range and a very tight value area with no downside exploration and a probe above yesterdays hi that got rejected and sent back into range. The hi of 1558.75 roughly corresponds to the 1565 all time cash closing hi so not unreasonable to believe sellers would be expected there on first touch. To me it seem this profile says higher is still the way.

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We have some important 730 numbers coming out that could change the picture but for now I am expecting ES to open OAIR and to have another balanced, rotational session with a bias at least initially to the upside. Yesterdays action was interesting- it gapped up higher and held the gap which is bullish but it made very little upside progress beyond that. I think the DOW has been up 10 days in a row. Kind of feels like they want to tag the all time high and then start taking some profits. We shall see. All time frames point higher but I think the risk of a sharp big down day is increasing.

Levels Above: ~1559 all time closing cash high, ~1570 all time cash high

Levels Below: 1551-1551.75 gap zone**, 1549.25 nvpoc, 1548 CLVN, 1546 mc vpoc, 1540.5 nvpoc**, 1535.25 mc vpoc***

Hypo#1- ES opens OAIR inside value and pushes lower, possibly fills gap at 1551 to pick up buyers then rotates higher up to the all time cash close hi where responsive sellers await and a close in the middle.

Hypo#2- ES opens OAIR and pushes higher out of the gate to 1559 level where responive sellers kick in and auction it lower. I expect support at 1551 but if that does not hold, could get interesting.

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  #218 (permalink)
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3-15 trades and recap

1. Long 1551 double top on 3.5 pt move down. ES opened with an aggressive move down but buyers were definitely present around yesterdays VAL. Volume is ~25% higher than average. Stopped after 4 min and .25 MF, really expected more support here...

2. Sold 1550.5 on 1.5 pt move off low. They are really trying to hold it inside prior balance area as 40k has printed at 1550.75. Wanted 1551 but bailed after no fill on first print, then decided to wait for 1552 mid/vwap/pLo but after so much resistance at 1550.75 I jumped in and sold 1550.5. Negatives are small rotation and the fact current low has a weak print from a known point (mc vpoc). Volume still running above average. If this prints above 1551 I am toast. Toasted after 6 min and .75 MF. Well even the mid fade would not have worked...

3. Long 1553.25 vwap/ prior vpoc on 3.25 pt move. We've had range expansion up. Vpoc is up above at 1554.75 and the hi looks good but it stopped short of pHi and ONHI and given that we went below balance today and came back in I would expect a move to the top side of balance. Mid is 2 ticks below. Vpoc just shifted to my entry- is that good or bad? If this is a rotational day then I am playing in the middle and thats not good. 16 minutes in and its gone 4 ticks against me down to the VAL, hopefully it holds but not looking likely. 6 tick against me but weak print (193) so i didnt get out. Stopped after 27 min and .5 MF. Done for the day, I'm clearly not in sync with this market...

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Recap
ES opened OTD or OAIR with sellers eager to do business. A trip through yesterday's lows and back into the prior balance area picked up buyers and set the stage for standard grind it up rally. Market hasn't closed yet but its come off hi's and is near lows. As of now, vpoc is lower and value is overlapping lower which is a change of pace. Price is lower and volume is ok. Overall profile shape is balanced.

I'm fine with my first trade-it didnt work out but I think the reasons for doing the trade were valid. Second trade was questionable but we broke back into prior balance on above average volume and then printed size at the key 1551 level so I thought they were trying to hold it in. Bad trade or not? Third trade...playing in the middle on rotational day and aiming for the late day levitation that has been standard lately but didn't come today. So crappy way to end the week. Eventually I will figure this out!

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  #219 (permalink)
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Profiler View Post
1. Long 1551 ... really expected more support here...

I sort of did as well. But this is 2 minutes after a very weak Michigan number, and since so many were probably buying this gap fill, it's not surprising that the VPOC of the distribution above 47 was tested, and it provided beautiful support. Run a few more stops, fill a few more below 51, THEN go up as planned.


Profiler View Post
Second trade was questionable but we broke back into prior balance on above average volume and then printed size at the key 1551 level so I thought they were trying to hold it in. Bad trade or not?

Bad trade? Not really, but FWIW I took the other side long at 1550 right after you took the short, so I saw the likelihood to break 1551 as stronger than the likelihood to break lower. Delta was rising since 49 printed, and I bought at the real make-or-break point, so I think it could have gone your way, but sellers had just lost momentum, and when 1550 received some volume and they pushed but it didn't budge, it was all over. The fact that you see size at 51 means that sellers are holding it, yes. But it also means that buyers are pushing and pushing hard. What you would prefer to see there in this case IMO, is a lack of volume, a weak attempt up to 51.25 or 51.50, and then there's your short. But the fact that buyers are trying very hard there means that unless sellers can take it down fast, they are going to try again, and likely to break through the next time.

Breaking into prior balance is simply a test -- that's why so many people get screwed when they sell resistance and buy support--because it's just a test, and has little to do with value and acceptance. At the time you shorted, 53.25 was still the most fair price, and only 51 had really received much attention in the lower half of the range. If the market breaks 2 ticks below a prior low and then goes up strongly, it is usually more bullish than if it had not broken the low at all. The market had a shot, couldn't do much with it, so now buyers have more confidence, knowing that sellers had a great shot and could do nothing with it. Wait until your opponent is worn down, and then go for the kill; not when they are still fighting strong.

BTW, check out the afternoon action, and you see 51 hold on the test this afternoon. Below that would have been a warning sign, but there needed to be a venture below this morning to confirm the level of selling interest, whereas now it is not necessary to go below it, only to it.



Profiler View Post
3. Long 1553.25 vwap/ prior vpoc on 3.25 pt move.

FWIW I probably would have taken that long if I had still been trading at that time, but it's hard to say for sure since I didn't see it actually happen. To me this is your best trade today, even though it didn't work out.

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  #220 (permalink)
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Weekend Update with profiler


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All time frames are trending higher.

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I don't think I have any particularly valuable insight to share from the composite. ES is slowly but steadily auctioning north as evidenced by successively higher vpoc migration. A mere 3 weeks ago the ES traded almost 80 pts lower. There are definitely some spots that could use some re-visiting (1535.25, gap zone, 1511.5...) but thats not for me to decide when. Perhaps this weekend's Cyprus news will have some collateral damage and introduce some volatility into the mix. For now, up is still the way...until its not.

The Struggle
Trading is hard. I remember how I felt in 2003 when I started learning how to be a scalper. I remember the feelings of utter confusion and frustration and depression over losing money literally every day. Feeling like I will never get it. To top it off I was not getting paid- my company hired me strictly on a split of profits basis (and a crappy one at that) in exchange for backing me. We traded a german market and that meant a 2am start time which fucking sucked! Imagine having to get up at 115am in the middle of winter in chicago and trudge through freezing wind/snow while walking to the red line and get on with all types of shady people. Imagine waking up at 5pm and thinking its 5am because either way its pitch dark during winter and wigging out that you missed 3 hours of work and you might be fired and you wonder why nobody is picking up the phone in the office when you call to try and explain why you aren't there. I remember it being horrible but I persisted and soon enough instead of all red days, there were some green ones and then some time after that it went to mostly green and finally basically only green. I had my first profitable month after 5 months of trading.

I have now been trading the ES live for almost 6 months. I still trade 1 lots and I still lose money, on average, though very little. This feels way harder than it was last time even though I dont have to get up at 115am and I do have other sources of income. I honestly expected to be trading 2 or 3 lots by now and making a little bit of money. I don't feel like I am making that much progress. Figuring this out has been on my mind almost 24-7 since I started. I wake up at 5am because it bothers me I have not made sense of this yet. I can go out to dinner with friends and be engaged in conversation but I'm thinking about the ES in the back of my head and my failure thus far is eating me up. I will persist. I will figure this out. I have committed myself to do whatever it takes and a truly committed person can not be stopped. The next few months or more are really going to suck- maybe even worse than it has already been. But I look back on overcoming my prior struggle as one of the high points of my life. I plan on doing the same for this period.

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