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

  #371 (permalink)
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5-15 trades and recap

1. Sold 1651 on 5 pt move after spike above 1650 caused decent selling response. ES is above 2nd vwap and 1.5 IBHI (albeit tiny IB). Stopped after 11 min and .25 MF. Bad trade.

2. Short 1649.5 after hoping for a 1651.75 vwap fill and chasing it down all the way. Unreal, stopped after 2 min and 0 MF. What a horrible decision. Well even my vwap short would have lost.

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Recap
ES opened OAIR and chopped for the first hour or so before breaking decisively higher only to fall apart but regain its footing at the breakout level in a volatile day. Vpoc and value once again shift higher. Price closed higher and inside value right around vpoc on heavier volume than yesterday at nearly 1.8 mill. Another positive day, this market is seemingly going parabolic.

My trading was horrible today. I was gone for the majority of the day actually and based on the chart it seems like that have been a good thing. As far as the market is concerned, it seemed that it finally reached a price where aggressive sellers were willing to step in but the late day rally erased most of their progress as buyers stepped in at the VAL. I cant believe how strong this market is...

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  #372 (permalink)
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@Profiler
Interesting look at the ES today. I looked at your first trade not long after the ES caught fire. Doesn't always work out so pretty as the chart shows, but even on negative volume 5 min candles, the market refused to drop even 1 tick on the next bar. Amazing strength.

Ken

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  #373 (permalink)
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5-16 pre-market


Economic data: claims, cpi, housing, philly

ON Profile: ES traded in a 6.75 pt range last night, totally within yesterdays value area and mostly below yesterdays vpoc. Volume is average at around 170k. ON vpoc sitting at 1652.75.

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ES had kind of a wild day yesterday but still managed to establish higher value. This market just won't quit going up! Overnight the ES put in a balanced session that featured a strong bounce from the 1650 ~pVAL area. We are set to open right around the nvpoc and yesterdays action did the same thing and sellers were just totally unable to auction much below it. A difference between yesterday and today is that today's ON session auctioned almost entirely below the pVPOC but yesterdays stayed above it almost entirely. Maybe a subtle clue, maybe nothing. 730 numbers are out and a nearly 6 handle sell off has resulted. Might today finally be a down day? All timeframes are still incredibly bullish so I think the first thought has to be to lean long still. However, a break below 1648 and acceptance below would give bears the slightest of upper hands I think.


Levels Above: 1655 vpoc, 1659.75 pHi

Levels Below: 1648.5 LVN/5-14 Hi**, 1645 CHVN, 1640.25 LVN**, 1638.5 MP single, 1633.25 pBAH***

Hypo#1- ES opens OAIR inside value and pushes lower to 1548 level to pick up buyers then grinds higher the rest of the day until sellers emerge at close.

Hypo#2- ES opens OAIR inside value and pushes higher to nvpoc 1655 then grinds lower thru the day finally giving bears a victory.

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  #374 (permalink)
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5-16 trades and recap

1. Short 1657.75 pVAH/LVN on 3.25 pt move. Philly fed coming out in a few minutes but I will leave this on as it had a strong reaction from here this morning and its only a 1 lot. Overall context is a lack of selling as it opened in value and only 2 ticked below the open before moving higher, albeit weakly and not with much conviction. Scaled after 3 min and 0MA. Second scale given. Max theo winner 7 pts.

2. Long 1656.25 1st vwap on 2.5 pt pb from double top. This is second pullback to this area so don't like that and have had only 3 ticks of range extension above the IB but there is a double top and bias is long. Scratched after 3 min... its been a rotational day with a balanced profile so I just cant justify a long above vpoc. Would have been a loser.

3. Long 1648 ledge from yesterday on 2.5 pt pb late in the day. Instantly 5 ticks against me but now 3 in favor. Stopped after 12 min and 1.25 MF. Stopped 2 ticks off the low, dangit!

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Recap
ES opened OAIR and chopped around inside yesterdays value area and building a very prominent vpoc before a late day break took the ES down to yesterdays HVN at 1646.5 where it bounced a bit into the close. Vpoc did not shift while value area shifted ever so slightly upward. Price closed near the lows and below value which is definitely noteworthy as that has not happened in awhile. Volume once again above average at around 1.6 mill. Over the last 3 days we have concensus that 1655.25 is the fairest price followed by a murky area of undetermined value between 1644 and 1647 then a vacumm down to 1633 where volume builds again reaching its peak at 1626.25.

I had a great first trade today, with size that trade will pay for some losers. Second trade made no sense and I am glad I could scratch it quickly. Third trade... I dont know, maybe I should have treated yesterdays pullback to 1648.5 as first test and this as second and waited until 1646.5 HVN to get long but I thought the ledge at 1648 would provide good support. Maybe I just got unlucky as it happened late in the day. Not sure. Either way, that missed trade at 1653.5 really bothers me because I was honestly going to hold it until 1648. Another couple trades under the belt at no cost to the account I guess.

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  #375 (permalink)
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5-17 pre-market

Economic data: michigan, LEI

ON Profile: ES traded in a 6 pt range and a generally balanced profile shape. The hi is currently just below yesterdays very prominent vpoc and the low is 1 tick below yesterdays settlement. Vpoc sitting near the hi just a tick above yesterdays VAL. Volume is light so far at 130k.

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Yesterday's down day did little to give the bears the upper hand as value was established higher and vpoc did not migrate lower along with price. Indeed, after the bell sellers seemed to vanish and ES made no further effort at going lower and is currently trading back inside yesterdays VA. Maybe bears will re-appear at the open but benefit of the doubt has to be given to the bulls still. I anticipate an OAIR inside value open with a choppy open ahead of the data. I think a rotational day is in store with bears making first push lower to the VAL or 1650 to pick up buyers and then grind higher.

Levels Above: 1655.25 nvpoc, 1659.75 all time hi

Levels Below: 1650 ledge, 1646.5 CHVN, 1640.25 ledge, 1638.5 MP single, 1633.25 pBAH

Hypo#1- ES opens OAIR inside value and chops, pushes lower to 1650 then rotates higher and sells off into the close.

Hypo#2- ES opens OAIR and pushes higher to VAH/pHi and finds rejections then rotates down to 1640.

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  #376 (permalink)
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5-17 trades and recap

1. Long 1652.75 pVAL on 3.75 pt move down after OAIR and initial push higher and overall bullish bias based on overnight action. Scaled after 7 min and .25 MA. Second scale given. Max winner 6 pts.

2. Long 1657.5 dVPOC/1st vwap on 1.5 pt move down from double top hi. The hi is very poor but also at a known place of rejection and I am taking a long from an aggressive location so who knows about this. Sellers came in pretty aggressive on this move down. 12 minutes in this thing has printed 40k at 1658.5 but not a single at 1659, super frustrating. Stopped after 28 minutes for 10 8 tick loser. I really cant believe this trade didnt work.

3. Sold 1662.25 1.5 IBHI on 6.25 pt move up. Maybe this is stupid to sell 1.5 IB on breakout to new hi's but day was very rotational with a huge vpoc below. Scratched after 11 min and 1.5 MA. Would have been a loser.

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Recap
ES opened OAIR right around yesterdays prominent vpoc and moved higher initially before pulling back to yesterday's VAL and taking out pHi. A few hours of chop and a pullback led to a powerful afternoon breakout and a close at new all time hi's. Vpoc only shifted up a few ticks and was once again very prominent while value shifted overlapping higher. Price closed near the hi and above value on higher than average volume of about 1.6 mill. Amazingly the daily candles continue to one time frame higher. ES strong like bull.

I think 2 out of 3 trades I made today were solid. First one worked like a champ, second one almost worked, looks like the market just got too long up there and needed to force some people out first. Maybe my entry was too aggressive and I should have waited? The hi was so poor, I don't know. Third trade was not smart for one thing as the IB was small at only 6.5 pts so 1.5 IB would 9.75 pts and average daily range is 12-13 I think right? Had I waited for the double IB that would have worked with minimal heat but given the time of day it was dicey. I wish I had gotten long again around 1655 but I just didn't see the edge there. After my first trade and then having my 2nd trade go 5 ticks in favor I really thought today would be a good day for me and I would make up my weeks' losses but instead I finish down 2 ticks. Don't care about the money but the psychological aspect would have been nice.

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  #377 (permalink)
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I too was surprised that 55 didn't hold better, and even more surprised when 54.25 didn't hold. That was tricky to say the least. Markets are very good at fooling people; how many shorts at that moment thought they were about to get seriously paid? And at 1pm ET, when it looks like it might just roll over... all that volume traded, positions taken in the 55s/56s, and then excitement turns into fear and anger, as they squeeze the hell out of them. Always fascinating to me how markets work.

At least you scratched the short at 62. But when ES breaks out of a 2 day balance to the upside, the 1.5x IB is even less important than it normally is. I don't put much importance on the IB, but with no other reference I think the 2x IB was reasonable (before the open I said 65 was a potential long target, but that was because 65 is just 5 points higher than the prior high, and it's as good a method to project as any!), and it turns out the 2x IB was the HOD, but IMO that's a crap shoot and not something to put much weight in unless you have done some statistical research and have confidence in something you find that indicates that it is important. I did scalp a short but IMO this has to be based solidly on a tape/order flow read, and not an arbitrary 1.5x level. Still, a long pretty much anywhere in that move up was a better play than a short. It's hard to take if you're flat but just look where the strength was and where the path of least resistance was.

You said the day was rotational as a basis for the short, but look at the bigger picture break out of balance. Also, the "trend" if you will call it that was solidly up since the globex open on Thursday. VWAP stayed pretty upward the whole time (look at ETH VWAP, not RTH here), and stayed above the -1SD the entire day, whereas it traded quite heavily above +1SD before the open, after the news, and was well above +2SD when you shorted.

Hope you have a good weekend buddy.

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  #378 (permalink)
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Weekend Update with profiler

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I don't have a whole lot of value to add here but wanted to post a pic of the composite profile for last week. Its pretty clear the market really liked 1656. God forbid the market sell off for once but if it did I would anticipate a nice bounce off that level on first touch. If it knifes right through it then that would be a clue that perceived fair value has changed.

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I think 1640 is a good area for a long but if that fails then its a straight shot to 1633 top of prior balance area with the 1626 mc vpoc looming large below. All time frames are incredibly bullish at the moment. Next week has no data out until wednesday when the bernank speaks again and maybe he starts priming the market for an end of QEi (yeah right!). I anticipate slow rotational action until then.

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  #379 (permalink)
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5-20 pre-market

Economic data: none

ON Profile: Extremely tight 4.25 pt range so far on very light volume of 127k. Profile shape is pretty balanced. Vpoc sitting at 1662.50. The entire session has taken place within the upper balance region formed after the breakout on friday afternoon.

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As expected with no economic data on tap until the bernanks big testimony on wednesday the market did nothing overnight. At least for now, prices within the upper balance region after friday's breakout are being accepted. ES is set for an OAIR above value and I anticipate responsive sellers to make the first push and test the breakout area in an effort to get back inside prior value. There is a nice confluence of IBHI, VAH and MP single at 1659.75 so I expect buyers to respond there. However, if prices below ~1660 are accepted then 1656 is the natural first target with 1648 and 1640 after that. To the upside, friday's hi is our only reference point so a peak above followed by rejection will be our only clue for upside excess. All time frames are incredibly bullish...

Levels Above: 1665.75 pHi

Levels Below: 1659.75 MP single/pVAH**, 1656 mc vpoc*, 1652.5-1648.5 GAP, 1640.25 LVN, 1638.5 MP single

Hypo#1- ES opens OAIR above value and pushes lower to 1659/1656 to pick up buyers then grinds higher thru the day.

Hypo#2- ES opens OAIR and is accepted inside prior value then grinds around 1656 all day.

Hypo#3- ES pushes above pHi and fails then sells off down to ~1648.

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  #380 (permalink)
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I'm seeing nice improvements man. Keep up the great work!

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