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

  #251 (permalink)
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Profiler View Post
1. Long 1561.75 on 4.5 pt move. Wanted long at 1562.75 CHVN but lots of volume traded at 1563 so I figured more downside was in cards. Saw some absorption at 1562 then weak print at 1561.5. Stopped after 10 min and .75 MF. Profile looking trend-ish down.

2. Sold 1559 pLo on 1.75 pt move up. Very poor low in place with a triple bottom and almost 8k on bottom tick. I was unfilled on first attempt up here and this is third attempt which sucks. This could easily rip in my face. Vpoc shift to 1558.25, is that bad? Man lots of swirling context in this trade. Scaled after 15 min and .5 MA. Second scale given.

3. Long 1553.5 CHVN/2nd vwap on 5.75 pt move down. I took this on a blind given confluence of factors. As I look at the vwap, I take it back as an additive factor as it has just stair-stepped down with the ES as opposed to it being far away and ES swoons to it. Pretty quickly 6 ticks in favor and over 500 print my exit but no fill. Now back to entry . Scaled after 12 min and .25 MA. Second scale given.

4. Long 1552.25 after 1551.5 CLVN held on second test with weak print. Dang, instantly 5 ticks against me. Just looked at MP chart and market is still one timing down... Stopped after 12 min and .5MF, did a manual stop and screwed myself with a 9 tick loser, 3 ticks slippage.

5. Sold 1550.75 on 3 pt move up. I was cued at 1551.5 CLVN but only 75 printed there and ended up moving my order down 3 times. 1st vwap is here too to provide possible resistance. Lots of size was chewed through on the offer to get up here. Man this is annoying, its gone 5 ticks against me then 6 ticks my way and printed my exit 5 times but weakly and no fill, getting worried. And as soon as I write that I get filled after 31 min and 1.25 MA. Second scale given.

6. Sold 1548.75 1st vwap on 4.75 pt move. Ok this could be a stupid trade but its a big rotation and trend day down. Time of day is bad (245) and it looks super news-y with a strong reaction off the low. Stopped after 3min and .5 MF. Oh well. Done for the day.

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Recap
ES opened OAIR inside value and trended lower all day save for a bounce off the low. There is no value area (meaningful at least) but vpoc shifted down to 1548.75, a healthy 18 pt move down. Price closed right at vpoc. Volume was heavy at 2.04 mill but I don't think it is insane volume. So we have a dramatic big red candle on the daily chart and we are now firmly back in the 1540-1551.5 balance area. Might we finally test the gap zone of 1527-1521 soon?

I made some bad trades today but I also made some good ones and even though I finished down, it was small and if I was trading 2 lots, all my winners would have given second scales and therefore I would have been positive. FT71 made mention that many people in brokerage were violating their risk parameters and getting crushed. I know what thats like all too well and it sucks. If you aren't on the right side of a day like today, no risk control can ruin your month or worse, blow you out. On my losers I could feel myself saying "watch me get stopped right at the exact bottom only to watch it reverse and make new all time hi's" but look back on my chart and see how much more the market fell after I was stopped. So keep risk controlled! And I say this knowing that I too will lose my discipline one day and get "got", I just need to make sure it is manageable.

That's a good result considering the trend down day in the context of a bull market. The challenge with days like today is firstly recognizing there was a change in sentiment and secondly accepting the change in sentiment. It's easy for traders to get complacent when all we see is every pullback aggressively rejected with buyers stepping in at every opportunity no matter how bad the news.

Then one day buying the pullback doesn't work so you try 9 more times with the same result wiping out all the gains for week. I think that's where even the basics of volume profile help considerably. It's certainly helped me accept the change in sentiment I'm seeing right before my eyes.

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  #252 (permalink)
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I follow your thread religiously - I am sure you arent feeling good about your trading today. In case you didnt read it yourself after the end of the day Read your "hypo #2". You called it as it was today "before it happened" so how come a negative result ? I hope you do some good introspection 'cause I think this kind of day will be repeated within the next 2 weeks imho. I don't mean to belittle you just pointing the obvious as I have been in those shoes. I had to literally walk out of the trading room instead of "being smart once in trade" cause I tend to overthink once I am in it.

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  #253 (permalink)
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garyboy275 View Post
I follow your thread religiously - I am sure you arent feeling good about your trading today. In case you didnt read it yourself after the end of the day Read your "hypo #2". You called it as it was today "before it happened" so how come a negative result ? I hope you do some good introspection 'cause I think this kind of day will be repeated within the next 2 weeks imho. I don't mean to belittle you just pointing the obvious as I have been in those shoes. I had to literally walk out of the trading room instead of "being smart once in trade" cause I tend to overthink once I am in it.

i really dont have a good answer for you- i kind of think i did follow the hypo#2 with the short at 1559 but then i also admittedly just forget about my plans sometimes when i get caught up in the market. mix in some low confidence and disbelief about whats happening/possible and i end up doing some boneheaded things. to be honest im not really disappointed with my pnl today, im actually pretty ok with it. i think a few months ago i would have been limit down so to basically be a scratch seems ok. i wonder if maybe i have an attitude problem. should i be pissed i didnt make cash today? am i being too easy on myself and demanding too little? i've been thinking about that a lot lately. because i am struggling, but maybe i am not struggling enough to get to the point that i need to get to really make this happen?

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  #254 (permalink)
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I used to rate myself totally on PnL basis but now I do it on how the market does and how I did in relation to market. Not just profit and loss. If the market is moving I should have a good day, if its not moving I dont really care if I didnt make anything. I think its unduly unjust on yourself if you treat yesterday same as a trendday like today where making 2 points was easy and yesterday it just traded for 1.5 points(one tic for entry one for exit) for over 3 hours. Yesterday, I couldnt get a move on, tick here tick there and today was in total flow although right before the open I was pretty sure it was going to be another grind day. My opinion was that since we wouldnt move until Thursday's numbers and then Fridays job report but the fast drop really woke me up.

What has really helped me is "post it" notes-I write them down. Simple things like "don't counter trend first day of trend" or "Patience"-its very helpful cause you are staring at the monitor and not finding opportunity and then you see the note on the side that says "patience" and your brain automatically clicks it in. I always keep paper and notebook for ideas that are working handy. Anytime I get an awesome trade I note everything down-my state of mind, how I identified it etc etc. Its different than thinking about it at the end of day and noting it. One more thing is Kaizen, in Japanese manufacturing - constant improvement. Doesn't mean constant tweaking but just constant improvement-baby steps. Change one thing at a time.

Trust in yourself and confidence is important and I am glad you are doing this exercise. Keep it up. One more question-do you just go for 6 tic target on ES or depending on day you'd go for more if you get to your target easily ?

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  #255 (permalink)
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I will always take a 6 tick first scale when i trade multiple lots and then im thinking 10 ticks for a second scale and then let runners work for the remaining-at least that is the plan. so yes, my eventual plan is to capture the bulk of the days range with runners but for now as a single lot guy i will always just take a 6 tick winner and pretend i have a second lot on for stats purposes.

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  #256 (permalink)
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4-4 pre-market

Economic data: ECB announcement, claims

ON Profile: We have a 10.5 pt range and above average volume so far (218k). Yesterdays LVNs are capping the upside and downside pretty well. Vpoc is sitting right at the 1553.5 CHVN. It appears vwap has been supporting this move up.

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Could be another volatile day on tap. We have an announcement from the ECB that it appears people think could be important and non-farms tomorrow. North Korea might stir something up again as well. Yesterdays action solidified 1548.75 as the mc vpoc since the breakout above 1521. Overnight the ES rejected that level and climbed back into the 1551.5-1558.5/1560 balance area. I think responsive sellers will be key today. If they don't jump on this gap up and knock it back down below 1551.5 pretty quickly then yesterday will begin to look like just another one hit wonder. Zooming out, long and mid-term time frames are still incredibly bullish. The daily time frame appeared to be bullish as well but now looks to be balancing or transitioning to bearish.

Levels Above: 1558.5 BAH/1560.25 CLVN/LVN*, 1563 CHVN, 1565 LVN, 1570 all time cash hi

Levels Below: 1551.5 CLVN*, 1548.75 nvpoc/CHVN*, 1545.5 LVN, 1544 pLo, 1540 CLVN**, 1535.25*

Hypo#1- ES opens OAIR and responsive sellers get to work targeting 1551.5 or 1548.75. Rejection from either of those spots looks upward toward 1558.5/1560 area. Acceptance means continuation on to 1540.

Hypo#2- ES opens OAIR and pushes higher but fails near 1558.5/1560 and then sellers target 1551.5/1548.5. Failure to hold there opens up 1540 CLVN.

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  #257 (permalink)
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4-4 trades and recap

1. Sold 1553.75 CHVN on 4.25 pt move. I really wanted a long from 1551.25 on re-test of OSHI but it didnt pull back. Man this thing is ripping, 5 ticks in my face instantly with size iceberg bids. Gonna try and scratch. Stopped after 4 min and .25 MF. Man stupid trade. Possible trend day up, looking long.

2. Long 1554.5 1st vwap on 1.5 pt pb. Risky trade for me but I have to try it as market is so strong and there are iceberg bids at my entry. Scaled after 1 min and 0 MA! Second scale given shortly thereafter, sweet!

3. Long 1553.75 vwap on 3.75 pt pb. I am surprised sellers got it down this far actually. Dang, stopped after 2 min and .25 MF. Spiking down to lows, WTF? Thats what I get for being cocky on the prior trade!

Ok this market is actin' a fool, going to sit on my hands for awhile. Might be done for the day with this action...

4. Long 1548.75 IBLO/CHVN/nvpoc/2nd vwap on 2 pt move down after double bottom was only taken out by 1 tick on a 74 lot after a big 5600 lot iceberg bid held low at 1558.5 before then bounced and came back down. Trying to play the edges here. Vpoc above at 1550.75. Market has calmed down considerably last hour. Scaled after 6 min and 0 MA. No second scale.

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Recap
ES opened OAIR and chopped around a bit before making an aggressive move higher only to stop on a dime and make an even more aggressive move lower. The rest of the day was basically balancing. Value was established in the thin area of yesterdays middle profile area. Vpoc shifted up about 4 pts along with price. Volume was a little above average at 1.5 mill. I think the hi of the day is weak but the low looks strong and started above the single prints from yesterday's strong low indicating high demand. This weeks vpoc is 1555 so far with overall mc vpoc since breakout a few weeks ago is 1548.75. The daily candle is an inside day which makes sense considering the big day yesterday and non-farms tomorrow.

That was some crazy action in the first hour or so! My first trade sucked. I wanted the long, didnt get it so instead I take a short a mere 2 pts higher in the face of such strong action. Second trade worked out great. Third trade, man, I heard after the fact that bernanke was talking, not sure if he said something specific to cause that sell off to get kind of nasty or what. Funny though because I was so proud of myself for the prior trade then I get my teeth knocked out. Classis market behavior. Last trade seemed good, didn't give me a second scale and I doubt if I would have gotten long again near the lows as I prolly would have waited for lower prices. Another day, another scratch...

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  #258 (permalink)
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4-5 pre-market

Economic data: non-farms

ON Profile: We've got some action going into the NFP report. Maybe this is caused by japan or something else but ES is currently down 10 pts and below yesterdays low. Wednesday strongly rejected low at 1544 was taken out by 3 ticks and isn't bouncing as hard this time but rather milling around a bit. Volume is above average at 235k. Profile shape isn't pretty suggesting no real consensus on value. The hi is just above yesterdays settlement indicating no real desire to take prices higher.

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Very interesting day on tap. Yesterday we had an inside day with a mostly balanced profile. If I am correct a breakout from this context should NOT be faded but rather gone with. As of now, pre-jobs that would mean a downside breakout. Assuming the ES holds below yLo into the close I will be expecting responsive buying on the open and depending on that strength will be looking to short yLo or yVAL/CHVN 1548.75 looking for rejection. If no responsive buying shows up I think that calls for a more aggressive short entry. If prices are accepted in yesterdays range then obviously you have to look up to 1555-1560.

Levels Above: 1546.75 yLo*, 1548.75 CHVN, 1551.5 CLVN*, 1554.75 nvpoc, 1560.25 CLVN/MP single**, 1563 CHVN

Levels Below: 1540/1539 CLVN/3-25 lo**, 1535.25 CHVN**, 1531.5 3-5 LVN/swinglow, 1527.25-1521.25 gap

Hypo#1- ES opens OAOR and responsive buyers push to pLO or pVAL but are rejected and sellers step in and auction it lower to 1540 and possibly 1535 CHVN or even lower.

Hypo#2- ES opens OAOR and pushes lower to 1540 CLVN to pick up buyers and then auction higher steadily thru the day facing resistance at 1548.75 then 1551.5 and if it gets thru finally 1554.75 nvpoc.

Hypo#3- ES opens OD lower, get on board!

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  #259 (permalink)
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4-5 trades and recap

1. Long 1535.25 CHVN on 4.5pt move pre-market. Stepped in front of a bus on this one. Instantly 5 ticks against me. Now 4 ticks in favor. Scaled after 2 min and 1.25 MF. Second scale given.

2. Long 1535.75 mid/vwap on 3 pt move down. Vpoc above at 1537.5 and I am cautious on this because on the prior move up to hi sellers stepped in and just pushed it right through vpoc with no fight indicating fair value perceptions may have changed. It is only 20 mins into the day though so how much is vpoc worth? Stopped after 7 min and 1.25 MF.

3. Sold 1540 CLVN on 3.5pt move. Some absorptive sellers up here. Day is looking rotational. Worried about how last move down stopped at vpoc and bounced. Stopped after 15 min and 1.0 MF.

4. Long 1538.5 1 tick below IBHI on 3pt pb. Value has been building higher and we have a very poor hi above. However, this sell off smacks of a sell program and profile shape is one big box. Mid/vwap are below at 1538 which could provide support. Christ this thing has touched my exit two times now and only printed 39 contracts and now its back to entry. Wow, quick bounce back to exit and filled after 18 min and 0 MA. And as soon as I was filled it instantly traded back to entry. Only 1 ticked my entry and rose back up to give a second scale, wild.

5. Short 1546.75 pLo on 5 pt move up. Very strong move but expecting reaction here, if anything just a pause. Above 2nd vwap which is 1545.5. 5 ticks instantly in favor then back to entry...Admittedly I lost track of time and didn't realize it was 2:42 on a friday when I put this on. Stopped after 7 minutes and 1.25 MF. Poor trade.

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Recap
ES opened OAOR and headed straight for the ONLO but weakly and lacking conviction. Buyers stepped in and pushed it higher. It was a slow grind higher all day culminating in short covering into the close. Value finished lower along with vpoc. Price closed down 9 but above value and below prior range. Volume was good at 1.65 mil. Victory for the bulls I would say.

Another 5 trades to throw in the stat pile. I did 21 trades this week and finish with a net pnl of -$12.50. Im deflated and have nothing else to say at the moment.

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  #260 (permalink)
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Weekend Update with profiler


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Longer time frames are still very bullish. However, the weekly timeframe could be transitioning to a balancing market. A month ago the market opened around 1547 and yesterday the market closed at 1547. So while new 5 year hi's have been made and volatility has upticked, the market is literally at the same price it was 4 weeks ago. The daily time frame could be looked at as one big balance area over the last month. Yesterday had a test and rejection of the accelerated uptrend. So for now, the shortest time frame is balancing but a break below that could signal the start of a downtrend.

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Based on the volume profile, last week never happened! I wouldn't believe it if I didn't see it with my own eyes. MC vpoc (1548.75) is exactly the same. VAH and VAL are essentially the same. Thinking in terms of market logic, ES auctioned higher to new balance area hi's and were rejected. Logical target then would be the other side of balance near 1527. ES traded a 1533 low yesterday and found rejection then rotated up to the mc vpoc. Will sellers defend that level going forward or does the market auction to the top of balance again?

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