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Learning to trade the ES using volume profiling


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Learning to trade the ES using volume profiling

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  #471 (permalink)
Market Wizard
Quebec
 
Experience: Intermediate
Platform: NinjaTrader wt Rancho Dinero's profiling tools
Broker: AMP/CQG
Trading: ES, NQ, YM
 
trendisyourfriend's Avatar
 
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Profiler,

Earlier today you identified a poor high at 1638.00 (Globex High). I'd like to ask why did you qualify it as a poor high? And what was the implication of this judgment call? I am not new to MP concepts but i must admit i am not able to differentiate a poor high from any other swing high. Maybe you'll be able to clarify this elusive concept. Thanks

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  #472 (permalink)
Rio de Janeiro, Brazil
 
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trendisyourfriend View Post
Profiler,

Earlier today you identified a poor high at 1638.00 (Globex High). I'd like to ask why did you qualify it as a poor high? And what was the implication of this judgment call? I am not new to MP concepts but i must admit i am not able to differentiate a poor high from any other swing high. Maybe you'll be able to clarify this elusive concept. Thanks

Well for starters, just because the hi/lo is poor doesnt mean it will get taken out and that you should take a trade to target it, obviously. However, last nights globex hi was poor for a few reasons. First, it traded there twice to the tick before selling off. You can see this as a double top on the chart I posted as well as a TPO chart. Second, there was a lot of volume at the top tick, something like 1400 contracts which for the globex session is a lot. Imagine if you saw the top tick during the RTH session have like 7000 contracts traded- you would be pretty sure that it wont hold because if there was enough interest there for 7k to trade, how can it not go at least 1 more tick, you know? Finally, it just didnt look right, like a proper auction had been done. Compare it to the globex lo in that same chart, how the volume profile tapers nicely which shows that as price went lower it gradually attracted fewer and fewer sellers. The hi looks like a rectangle from 1638 to 1637 and then a huge ledge juts out- definitely not a gradual taper. In MP language it "needed repair".

The implication of this judgement call is that its just another potential clue. Given all the context going into the open it was just one more thing that made me think ES would trade higher than 1638 at some point today. I hope this helps- let me know if anything I said doesnt jive.

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  #473 (permalink)
Rio de Janeiro, Brazil
 
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Posts: 617 since Jan 2013
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Economic data: none

ON Profile: ES traded in a 9.25 pt range on light volume of 153k so far. The low is yesterdays settlement to the tick so people had absolutely zero interest in selling it after the bell. The hi of 1645 is 1.25 pts above the 1643.75 nvpoc. Vpoc at 1641.5 so overall the ES is holding above pHi. Profile shape is kind of a double distribution with a very small lower balance area.



ES broke higher in the overnight session and we are faced with yet another OAOR start to the day. Yesterday I was bullish, today I remain bullish but we are at an area or close to it where its not unreasonable to expect sellers to enter. Both 1643.75 nvpoc and (more so) 1650 CHVN represent logical entry points for sellers with the logical first target being yesterdays nicely balanced profile vpoc at 1634.75 and then further below the 1628.5 gap close. 1650 being more important as it was the breakdown area from june that resulted in almost a 100 pts loss. So unless ES opens OD or OTD strongly higher I will be preferring shorts. Given the multitude of doji's we have had on a daily basis I would be remiss to acknowledge the possibility of yet another one. Longer term time frames are super bullish and the daily time frame is bullish as well.

Levels Above: 1643.75 nvpoc/1645 ONHI*, 1650 CHVN**, 1655 CLVN/ MP single, 1658.25 CHVN

Levels Below: 1639.5 pHi, 1634.75 nvpoc, 1631.25-1628.5 gap, 1620.5 CHVN*, 1618.5 nvpoc***

Hypo#1- ES opens OAOR and pushes up to 1645/1650 where sellers enter and knock it down to 1635 and buyers step in.

Hypo#2- ES opens OAOR and sellers make first push to 1639.5/1634.75 and then buyers grind it higher thru the day.

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  #474 (permalink)
Rio de Janeiro, Brazil
 
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1. Sold 1643.75 vwap on 1.5 pt move off bottom. Bad trade location but ES opened OAOR and popped right off the open but since then sellers have slowly ground it lower. I wanted to enter at a location that would put my stop above HOD but it never pulled back enough to let me in. Win or lose this is a good experience for me. First scale! Second scale after 17 min and .75 MA!!!




Recap
ES opened OAOR and put in a balanced rotational day. Value and vpoc shifted completely higher. Yesterdays range was rejected. Price finished higher and inside value on absolutely pathetic volume of about a mill. P shaped profile with a poor hi-I would anticipate that being taken out overnight. Another doji on the daily candle. Market keeps floating higher, no aggressive sellers found yet.

So I made my first 2 lot trade today and it was a winner. There were 2 other potential trades that I didn't take. The first was a long off pHi 1639.5 when the IBLO was 1-ticked and then it bounced 3 handles back inside then pulled back. I didn't take it because I thought context still favored downside slightly and I was looking to go long around 1634.75 nvpoc. The second trade was around 1648.5 short but I really wanted to wait for 1650s to print as the ES was just grinding higher and holding above IBHI and just rotated for awhile after printing the 1648.25 hi. So I backed off and it would have provided 1 scale at least. Oh well. I'm happy to start off 2 lots on the right foot. Tomorrow is another day.

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  #475 (permalink)
Market Wizard
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Nice your short and congratulation for your first winning trade with two lots. As i have not read the totality of your journal i was wondering before taking a trade are you looking for some price pattern to form or do you just trade your levels?

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  #476 (permalink)
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trendisyourfriend View Post
Nice your short and congratulation for your first winning trade with two lots. As i have not read the totality of your journal i was wondering before taking a trade are you looking for some price pattern to form or do you just trade your levels?

Im not looking for price patterns at all. I am trying to figure out the proper market context first and foremost and then i am looking for some sort of confluence of levels to give me a good trade location with a stop that will only be hit if the trade is wrong and not because of some normal market wiggle. Not saying I am good at it and I sure do still do my share of clown trades but that is my goal.

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  #477 (permalink)
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So if i understand correctly, the context gives you a directional bias? I suppose you are using some sort of heuristic rules to define if you go long or short. Could you elaborate a bit more on this aspect when you have time. Thanks.

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  #478 (permalink)
Rio de Janeiro, Brazil
 
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Trading: Es
 
Posts: 617 since Jan 2013
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trendisyourfriend View Post
So if i understand correctly, the context gives you a directional bias? I suppose you are using some sort of heuristic rules to define if you go long or short. Could you elaborate a bit more on this aspect when you have time. Thanks.

lets take todays trade example. ES opened out of range, about 10 pts higher than yesterdays close and 6 pts higher than yesterdays hi. So just given that you assume the bulls are in charge and have a bullish bias. However, this opening was right around the area where sellers stepped in aggressively en route to the 100 pt decline we just had so they might want to-enter this area again. at this point I am not exactly sure who has the edge. then the ES opens and only 1 ticks the ONHI and sellers dont start blasting it but there is definitely pressure and the ES feels heavy. So right there is when I finally decided to play the short side. the only question was where to enter. I usually like to wait for a pullback to a level and finally it pulled back to the vwap/mid area and i put the trade on.

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  #479 (permalink)
Rio de Janeiro, Brazil
 
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Economic data: FOMC

ON Profile: Small 7 pt range on light volume of 154k so far. Generally balanced profile but with a bulkier lower area. ES traded within yesterdays range the entire session finding support at yesterdays LVN at 1641.75 and resistance at pVAH 1648. Vpoc right in the middle at 1644.25.



ES had a quiet night and did not explore any new territory. We are looking at an OAIR inside value as of right now, possibly below value. Today's big news will be the FOMC minutes release and its entirely possible ES does nothing until the 1pm release. ES remains in a tricky position still- overall my bias is bullish yet we are at an area that sellers might re-enter aggressively. Yesterday traded up to 1649 with no sign of aggressive sellers so I am decreasing the possibility that sellers will enter a little bit. I will still look very hard at a 1650 short and almost assuredly a 1655 short unless I am staring a trend day in the eye. To the downside, my ideal entry would be the 1634.75 nvpoc for a move back up to 1650/1655. All time frames are bullish.

Levels Above: 1650 CHVN**, 1655.5 CLVN/MP single***, 1658.25 CHVN, 1661.5 CHVN

Levels Below: 1641.75 LVN, 1634.75 nvpoc**, 1631.5-1628.5 gap, 1620.5 CHVN, 1618.5 nvpoc***

Hypo#1- ES opens OAIR inside value and chops around until fomc then spikes to 1655 before selling off down to 1635.

Hypo#2- ES opens OAIR inside value and sells off ahead of fomc to 1635 then rallies after fomc to 1655.

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  #480 (permalink)
Rio de Janeiro, Brazil
 
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1. Sold 1648.75 pHi/IBHI after ES popped up to 1653 and was quickly sold back inside the IB. This is the second pop back up here though which I dont like. Stopped after 2 min and .5 MF. Dang.

2. Long 1648.25 IBHI on 4 pt pb. Maybe I am getting spun around here but it seems like it tried to break out of 2 day balance and got denied then popped back above again so I am thinking this time will hold. Stopped after 11 min and 1.0 MF.




Recap
ES opened OAIR inside value and chopped around until FOMC then broke higher above the 2 day balance area hi, got rejected and headed down to the lows and got rejected from there before hanging out in the IB into the close. Value area and vpoc are basically unchanged. Price closed incrementally higher and above value which is interesting. Volume once again below average at about 1.15 mill. Another doji on the daily candle. The two day balance area gives us a very nice balanced profile on the TPO chart with poc of 1645. The vp chart is not as nicely balanced with two fangs at 1646.5 and 1644.5 but overall the two charts mesh well. One would think that after a failed breakout above 1648.5 today that the bottom might fall out but it didnt and in fact ES closed right near the base of the spike. It seems up is still the way.

So this is my biggest losing day with this style of trading so far but thats to be expected after doubling size. I went 0/2 and thats not a big deal. I don't think I made the market work very hard to take my money today which is what bothers me. First trade I think was too aggressive as ES only came 1.5 pts back inside the IB and was quickly rejected but then came back inside again only 1 pt before popping back up where I sold it. So I didn't really have a good set up. Second trade...well that was the second (or third) trip back down to the IBHI so right there that tells you something. The good news is I was pretty comfortable with 2 lots and I wasn't timid about putting the trades on.

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