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

  #51 (permalink)
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2-1 Pre-market

Economic Data: non-farms, Michigan, ISM, construction

ON Profile: We've got a 5 handle range with an upward bias before the non-farms number. It seems market is going to straddle the CLVN at 1499 before the number to decide which CHVN will be auctioned today. I'm going to leave orders out on the other side of balance below the CHVN's to see if I can get filled on a spike with rotation back to the CHVN. So my orders are at 1509 and 1488.5.

Lately non-farms days have been quite a bore with maybe a 7 handle pop on the number then an extremely boring RTH. Unless a crazy number comes out, I am expecting a balanced, rotational day. ISM and construction are big numbers that could also make an impact. First trading day of month also could have an upward bias due to fund in-flows(is this statistically confirmed?).

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So the number is out and no big deal, a little spike thats it. Currently trading 1503.5)

Closing Swing: 1496.5-1493

Levels Above: 1501.25 nvpoc, 1502.75 CHVN/1503.5 LVN, 1505.5 dbl top, 1509 CLVN, 1514 CHVN

Levels Below: 1499 CLVN, 1497 CHVN, 1493.75 nvpoc, 1490.25 nvpoc, 1488.5 CLVN

Hypo#1- Spoos open OAOR, rotate down to yesterdays Hi then auction higher rest of day.

Hypo#2- Spoos open OAOR, rotate higher to 1505.5 double top and fail then target 1497 CHVN.

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  #52 (permalink)
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2-1 Trades and recap

1. Sold 1503.5 LVN pre-market on 2.75 pt move. Stopped after 4 mins and .25 MF.

2. Long 1502 OSLO after making lows and failing to reach yHi by 2 ticks. Tick +300 and holding positive. Breadth +380. Stopped after 5 mins and .5 MF.

3. Long 1505.5 on 2 pt pb after breakout. Breadth +357 and tick +100. Possible better trade location below at 1503.75 mid/ledge. Stopped after 17 min and 1.25 MF. Done for the day. And the better trade location would have been a winner.

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Recap
Spoos opened OAOR and responsive sellers made the first push, down to yesterdays Hi/1500 to the tick. Off to the races it went with only 2 buyable pullbacks offered up (IMO). We end up with a very p-shaped profile and interestingly price closed inside value, near the mid when I had expected a rally into the close and price settle on hi's. Vpoc migrated a solid 15 handles higher. Value area significantly higher as well. Volume was good (relatively speaking). Price did manage to close above the 1405.5 prior highs making it new 5 year hi's on a closing basis.

My trading didn't go well again. Funny how the market didn't care about the 1403.5 LVN during pre-market when I sold but during RTH it stopped there to the tick on first touch. Second trade, maybe it was too agressive or maybe it just didnt work. Third trade, man, that 1405.5 level had been tested and held 3 times to the tick so I figured once we went through it it would hold from above. And it did put up a fight but still stopped me out and ended up going back to mid. I end the day/week with a loss and no chance to get it back until Monday.

As far as auction theory, I'm just not understanding it. I dont understand context. How do you know whats most important at any given moment? Who has been in my shoes and can take me to the next level? At least I can look forward to ribs at twin anchors tonight. Been cravin' that prohibition sauce...

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  #53 (permalink)
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Profiler,

The ES is very choppy at the moment with both historical and implied volatility at multi-year lows. The lack of volatility may make it more challenging when testing new ideas or strategies. You may wish to consider looking at markets with more movement at this time (such as the 6J). IMHO, it is best to leave the choppy ES to the market-makers (who certainly love it at the moment) and to other very seasoned traders/pros. Have a good weekend.

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  #54 (permalink)
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Nyati View Post
Profiler,

The ES is very choppy at the moment with both historical and implied volatility at multi-year lows. The lack of volatility may make it more challenging when testing new ideas or strategies. You may wish to consider looking at markets with more movement at this time (such as the 6J). IMHO, it is best to leave the choppy ES to the market-makers (who certainly love it at the moment) and to other very seasoned traders/pros. Have a good weekend.

Not to be argumentative in any way and respect your views but there are a few things that are inaccurate with what you've said here just to give you a heads up. First of all, there are no market makers in ES. Second, the ES is not a trending market typically on an intra-day basis and there are certain ways to trade it that are very fruitful if you know how to do it. This involves size and trade location. Some of the best traders in the world trade the ES every single day and make more money than you can imagine.

I started trading futures in the ES and can speak from experience that there is huge opportunity here. Its just a matter of perspective really.

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  #55 (permalink)
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@privatebanker

Agreed- definitely some people still crushing it in ES. Feel free to share some of your ES insight over here. I am starved for proper interpretations of auction theory.

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  #56 (permalink)
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@Profiler,

Interesting thread and back story. So did you blow out? I don't get it. Trading such huge size and then walking away on a small loss? Maybe I missed something there.

Anyway, I've seen some good suggestions being made here and thought I'd just ask you what are you using for your trade criteria? I see you're taking trades based off of volume levels which is fine but how do you know if these levels are correct? It appears you're looking to emulate FT71's approach which is great. The danger in what you're showing with your trades is that it appears to be very myopic.

Glad to see you've read into Market Profile as well which is great. The ES works very well with MP. If you were following MP, Friday's trade locations were pretty clear.

Open gap up, out of balance. Responsive selling into Thursday's excess high (extreme). That's your trade location. You could've also referenced Wednesday's excess ledge and sold that into the high of Thursday and flipped long. I would've just waited and favored the long however. Once the trade location was identified, you could've just looked at the ON session's VWAP which was confluent with your trade location. You could then see how the order flow remained long bias throughout the remainder of the day.

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Just a heads up, the VWAP below is rounded to the nearest tradeable price which results in a wavey/stair step look.

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RTH chart showing the order flow move higher.

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Same RTH chart with the footprint showing the same thing.

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Anyway, I noticed you've stopped in on the CL thread and just thought I'd give you a quick tip if its at all helpful for you as I was pointed to your thread by @djkiwi. Don't intend to change your trading perspective or anything but it just seemed like it might be helpful for you and thought I would show you how I would've approached this particular day.


Last edited by Private Banker; February 2nd, 2013 at 03:09 PM. Reason: Typo
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  #57 (permalink)
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no blow out, nothing of the sort. i walked away with my account 8k off all time highs. i was a tape reader, i worked the book when position in the queue itself was an edge (though not enough alone), jumping in and out of the market for 1-2-3 ticks only but all the time. then over xmas break of 2011 somebody flipped the switch on a new algo that just changed the game completely. the feel/character of the product instantly changed from that of a human to just a robot. i could write a few pages about what happened but i assure you i wouldnt have left if I thought i was leaving money on the table. unless you ever actively scalped on the time frame I did, you probably wont understand.

Yes, i am trying to trade using FT71's style. And yes, my trades are generally very myopic because I really dont know how all the pieces fit together. So I latch onto seemingly obvious things. I will fade a move into a prominent LVN from a prior day because that means it was a rejected price so maybe it will be rejected again, right? Or i will buy a re-test of the IBHI after a breakout. But sometimes I think I make good trades too for right reasons. Like friday, I was looking to get long around 1500. I had an order in at 1499.25 which was an important level the prior 2 days. But we opened OR, fell to 1500.5 then bounced back to the open swing low at 1502 and printed some volume there (over 4k on the bid from your footprint) so I thought "ok, we failed to touch the prior days hi by 2 ticks and are now holding the OSLO, get long". so i did at 1502. I use a 6 tick stop and got stopped out at 1500.5 on next move down to 1500 and from there up it went. was that a bad trade/analysis or just unlucky? you never know, but should i have know that another drop to 1500 was more likely than not?

i enjoy reading your stuff on crude because i think your analysis is more about market behavior, irrespective of what the underlying is. my brain isnt trained correctly how to think about the market in the right away, what is significant, what isnt (yet). like your short from the vpoc right off the open the other day. it made no sense to me at all! so please keep posting, anything and everything is helpful!

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  #58 (permalink)
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Private Banker View Post
Not to be argumentative in any way and respect your views but there are a few things that are inaccurate with what you've said here just to give you a heads up. First of all, there are no market makers in ES. Second, the ES is not a trending market typically on an intra-day basis and there are certain ways to trade it that are very fruitful if you know how to do it. This involves size and trade location. Some of the best traders in the world trade the ES every single day and make more money than you can imagine.

I started trading futures in the ES and can speak from experience that there is huge opportunity here. Its just a matter of perspective really.

Hi Private Banker


Please could you give us his views on the ES.
Prefers CL? for some special reason.

Thank you very much!
Felix

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  #59 (permalink)
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Weekend Update with profiler

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We have all 3 timeframes trending higher at the moment. None are trading within a bracketed area as we are at 5 year highs (unless your time frame is ~5 yrs). Market is likely to keep exploring higher until it gets to a price where sellers want to step in with authority.

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Here we see vpoc migrating higher along with the higher price action. The trend remains up.

For those that are experienced with this style of trading, what other things should I be noticing when I do these weekend updates?

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Felix trader View Post
Hi Private Banker


Please could you give us his views on the ES.
Prefers CL? for some special reason.

Thank you very much!
Felix

I don't want to hijack Profiler's thread so I'll keep this very brief. The ES is a very precise calculated market. Professionals like it for that and the fact that there is massive liquidity. If you want to trade 500 cars per trade with very little slippage if any, you can certainly do that. 1 point on 500 cars equates to $25,000 so you can see how that works out nicely. As I mentioned, the ES is a very precise market, it stops right on key levels typically which makes it fairly easy to load up the truck on a position. As I mentioned earlier, this market works extremely well with Market Profile and would encourage anyone looking to learn MP to maybe start with the ES as its a slower moving market than many others. It affords you the time to think about getting into a trade or identify if you're wrong.

I like CL because its a faster moving market with a wide range. Because of the wide range, less leverage is required to obtain the similar results as I mentioned with ES if not better. Choosing a market to trade is just a personal preference that needs to work with your personality, experience and trading method. CL also works incredibly well with MP.

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