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

  #61 (permalink)
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Some good stuff on here. I am writing this because I wanted to join the topic and say how I see it personally.

I think the key to profiling is that the underlying theory of a profile is that it helps you define extremes.

A great deal of the time the ES is in a range but longer term ranges that people tend not to comment on. Look at August to the start of November 2012 - depending on how you look at it, we had 3 overlapping ranges. When you profile longer term ranges like this, prices outside of the value area presents opportunity or bias. If you hit the top of the range, chances are you will work your way to the bottom over the next few days/weeks. I think this sort of situational awareness is handy for intraday trading.


For intraday - I don't personally trade off CLVNs within a range, I tend to trade more off common reference points that get hit over & over & over again. Globex high/low, overnight high/low ,market profile (not volume profile) levels.

Most days on the ES will play out one of the following ways:

1 - Tight range day
2 - Larger range day - putting in 2-4 decent sized swings but price ending up not really moving anywhere
3 - Moves one way

And of course, it can start one way and news can change it. The key with the ES is making a call quite early on how it's going to play out today. Having a few scenarios of how you think it could play out in terms of turning points is important but I think participation after the open is more important. You can have all the scenarios you want but if participation is low and it's just putting in little rotations back & forth, it changes the dynamics.

After watching a lot of days you get a feel whether you should play from the outside in, look for the larger swings or grit your teeth and jump on a one way move. Some days, you can tell in the first few minutes if it's going to be a really narrow day.

My own advice to anyone wanting to trade the ES, is to not take reversal trades on those days where it looks like we'll put in the 2-4 decent sized swings. You only need a few failed swings at the reversal before you end up in catch up mode for the rest of the day (or week). Much better to watch it go to a key intraday level, reverse, show participation and then take the first pullback. It's a smaller trade but it is a less crowded place to enter and much easier to read.

There is my official 2c

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  #62 (permalink)
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Tip


Guys, this is a journal thread. Let's keep all commentary out of the thread and not turn it into a methodology thread, as that would create a split topic.

The main discussion thread on ES is here:
https://futures.io/index-futures-trading/13452-es-s-p-500-futures-contract-sp500-spoo-nalysis.html

The main discussion thread on profile/footprint is here:
https://futures.io/elite-circle/20727-volume-profile-footprint-discussion.html




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  #63 (permalink)
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2-4 pre-market


Economic data: factory orders

ON Profile: We have some selling in the ON session, apparently related to european issues. ONHI stands at the 1408.5 CHVN to the tick while the low as just gone through the pLO at 1500 and the 1499 CLVN and currently trading 1497.75. ON vpoc is at 1506.25. Hi looks strong, low looks poor. Profile shape is toothy indicating imbalance. Assuming we open right here at 1499, it will be an open out of range right at a key CLVN meaning spoos will have a choice to make regarding which balance area it will want to explore. 1499 up to 1501.5 CHVN and then other side of balance at 1507.5ish or down to 1497 CHVN then 1492 other side of balance? I think that buyers have to be given the benefit of the doubt that they will show up and will be anticipating responsive buying on the open. Question is what will happen after that.

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Closing Swing: 1509.75-1506.25

Levels Above: 1501.5 CHVN, 1505.5 DBL Top, 1508.5 nvpoc/CHVN, 1510.75* CLVN

Levels Below: 1497 CHVN, 1493.75 nvpoc, 1492 CLVN, 1488.5 CLVN, 1486.75 CHVN

Hypo#1- Spoos open OAIR/OAOR and find responsive buying into pRange and holds, grinding higher through the day.

Hypo#2- Spoos open OAIR/OAOR and sellers lay into responsive buying and knock it into lower balance area targeting 1492 CLVN then 1486.75 CHVN.

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  #64 (permalink)
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2-4 trades and recap

1. Long 1499 CLVN on 4.5 pt move pre-market. Scratched after 1.25 MA vs 0MF and 7 minutes due to poor looking low. Would have been winner after an hour...

2. Long 1499.75 mid on 2 pt pb with breadth -300 and tick -418. We have a poor-ish hi and lo in place. Looking for market to hold inside previous range. Stopped after 14 min and 1.25 MA.

3. Long 1497.5 IBLO after new lows made by 3 ticks and low looks good while profile is very balanced. So outside -in type trade. Breadth -330 and tick 0. Stopped after 10 min and .75 MF.

4. Long 1492 CLVN/thurs lo on 3.75 pt move with breadth -413 and tick -600. Scaled after 4 min and 0 MA. Second scale given.
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Recap
Spoos opened OOR and went into prior days range by 1.75 pts then fell back out and had a perfectly balanced profile for first hour or so and then the bottom fell out a bit. Breadth was solidly negative all day. Value area decidedly lower along with vpoc and price. Price did manage to close back inside value thanks to a last minute drive higher indicating sellers still aren't that confident and perhaps were closing out their shorts into the close instead of letting them ride. Volume was decent at 1.41 mill and lately their has been an uptick in that regard so interest is picking up.

I'm not happy with my trading again. I pussed out on a few trades, I scratched a trade that would have been a winner and I had 4 buys and zero sells on a day that basically trended lower all day. That IBLO trade was so stupid. It only printed 2 ticks above it and for some reason I thought I should buy it. Didn't give myself a good chance there.

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  #65 (permalink)
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2-5 pre market

Economic data: ISM

Overnight Profile: Spoos explored the upper half of yesterdays profile trading up to yesterdays hi to the tick at 1501.75 where responsive sellers have stepped in causing a vpoc shift up to 1500.75. The stands at 1492.25 which corresponds to yesteradys VAL and also where a sharp bounce occurred on the first touch of it yesterday. Profile is very toothy indicating a disagreement over value and we are now trading back at 1499 where we opened yesterday and also a CLVN.

Given this info we are likely headed for an OAIR above or near VAH and an open right at a CLVN with the balance area above centered at 1501.5/1503.5 and below at 1496.25. I would think responsive sellers would step in on the open taking it back inside yesterdays VA. And from there it depends. Yesterdays profile had a distinct LVN at 1496. I will be looking for rejection there as a sign the market prefers to explore the upper balance area above. Stepping back a time frame, on the daily charts we now have a bit of a bracket between 1490 and 1510 and we will be opening right in the middle of that. Longer time frames are still decidedly bullish.

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Closing Swing: 1494.25-1490.25

Levels Above: 1501.75 CHVN/ DBL Top, 1507.25 LVN from 2-1, 1508.5 CHVN/nvpoc, 1510.75 CLVN

Levels Below: 1496 LVN/CHVN, 1494.25 nvpoc, 1488.5 CLVN, 1486.75 CHVN*, 1482.75 CLVN

Hypo#1: Spoos open OAIR above value, responsive sellers push to 1496 LVN where buyers are waiting to auction higher through the day.

Hypo#2: Spoos open OAIR push higher and fail like yesterday then auction lower to 1494.25 nvpoc and below.

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  #66 (permalink)
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2-5 Trades and recap

1. Sold 1502.25 on a 2.75 pt move in a go, no-go type trade above ONHI due to OAIR above value. Breadth +400 and tick +518. Stopped after 1 min and .5 MF.

2. Long 1505 IBHI on 1.25 pt pb. Breadth +400 and tick -200 on a strongly trending higher up day. What I don't like about this set-up is that vpoc is 1.5 pts below where my stop is in addition to the small rotation. Scratched after 22 min and 1.25 MF vs .25 MA. Looking to get long lower as high above looks poor-ish. Would have been loser (after ~ hours).

3. Sold 1408.5 nvpoc on 5 pt move. Breadth +390 and tick +396. Quality of rotation is not good as it moved up 4.75 then churned for 30 mins before filling me. Stopped after 40 min and .25 MF. Unreal. Took 8 tick loser since I leaned on a 6000 lot offer in the book for a manual stop and someone took it and caused 4 tick spike.

4. Long 1406.5 LVN on 4.25 pt move down. Breadth +382 and tick -400. Scratched in the extra session at 330.

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Recap

Spoos opened OAIR above value and trended higher all day until the end. It wasn't an open drive higher but both breadth and tick were solidly higher at the open and through the remainder of the day. Perhaps it wasn't a good day to try my go no-go trade above the ONHI. Value was established significantly higher along with vpoc and price compared to prior day. Interestingly the 24 hr session basically traversed the entire balance area of the last few weeks from 1492 low to new 5 year highs at 1511. Volume was good again at 1.45 million. I did not see that slide into the close coming. They forced price back to the mid basically, so inside value, near vpoc. Similar to yesterdays move at the close, this time buyers didnt want to hold.

My trading was horrible. I now have 1 winning day in the last 12 trading days. I am obviously doing something wrong. That nvpoc trade was stupid in hindsight. I didn't not want to take it because it was a 5 handle move at that point and I didn't want to let a 5 handle move into one of my levels go by without a trade. But I should have because it consolidated for almost 40 minutes between 1507.25 and 1508.25 before I got my 8.5 fill. So any excess energy had been burned off. So not only did I lose on the trade but it also prevented me from getting short at 1510.75 CLVN which ended up being 1 tick off the high... Otherwise, I think I learned I will have to pay very close attention to the vwap on trendy days as today the vwap pullbacks were the best buys. Tomorrow is another day. Can it be a winner for once???


Last edited by Profiler; February 5th, 2013 at 09:01 PM. Reason: forgot some things
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  #67 (permalink)
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Profiler View Post
1. Sold 1502.25 on a 2.75 pt move in a go, no-go type trade above ONHI due to OAIR above value. Breadth +400 and tick +518. Stopped after 1 min and .5 MF.

2. Long 1505 IBHI on 1.25 pt pb. Breadth +400 and tick -200 on a strongly trending higher up day. What I don't like about this set-up is that vpoc is 1.5 pts below where my stop is in addition to the small rotation. Scratched after 22 min and 1.25 MF vs .25 MA. Looking to get long lower as high above looks poor-ish. Would have been loser (after ~ hours).

3. Sold 1408.5 nvpoc on 5 pt move. Breadth +390 and tick +396. Quality of rotation is not good as it moved up 4.75 then churned for 30 mins before filling me. Stopped after 40 min and .25 MF. Unreal. Took 8 tick loser since I leaned on a 6000 lot offer in the book for a manual stop and someone took it and caused 4 tick spike.

4. Long 1406.5 LVN on 4.25 pt move down. Breadth +382 and tick -400. Scratched in the extra session at 330.

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Recap

Spoos opened OAIR above value and trended higher all day until the end. It wasn't an open drive higher but both breadth and tick were solidly higher at the open and through the remainder of the day. Perhaps it wasn't a good day to try my go no-go trade above the ONHI. Value was established significantly higher along with vpoc and price compared to prior day. Interestingly the 24 hr session basically traversed the entire balance area of the last few weeks from 1492 low to new 5 year highs at 1511. Volume was good again at 1.45 million. I did not see that slide into the close coming. They forced price back to the mid basically, so inside value, near vpoc. Similar to yesterdays move at the close, this time buyers didnt want to hold.

My trading was horrible. I now have 1 winning day in the last 12 trading days. I am obviously doing something wrong. That nvpoc trade was stupid in hindsight. I didn't not want to take it because it was a 5 handle move at that point and I didn't want to let a 5 handle move into one of my levels go by without a trade. But I should have because it consolidated for almost 40 minutes between 1507.25 and 1508.25 before I got my 8.5 fill. So any excess energy had been burned off. So not only did I lose on the trade but it also prevented me from getting short at 1510.75 CLVN which ended up being 1 tick off the high... Otherwise, I think I learned I will have to pay very close attention to the vwap on trendy days as today the vwap pullbacks were the best buys. Tomorrow is another day. Can it be a winner for once???

@Profiler

Keep at it. At least your losses are small and you are controlling your risk until you gain an edge. That's a big plus. What does stand out is on a number of your trades the price action is opposite to your trade. For example you will take a short when there are HH and HL in place or there is a strong uptrend. As a general rule it's better to go with price action than against irrespective of the importance of the level.

Cheers
DJ


Last edited by djkiwi; February 5th, 2013 at 09:48 PM.
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  #68 (permalink)
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thanks @djkiwi-
yep, just keep my losses small and stay in the game until i figure it out is the plan. i know last time around it took me 6 months before i became profitable but that was doing like 30-50 trades a day, so around 5000 trades. hopefully i can shorten that up a bit because at my average of 4 trades a day now that means i wont be profitable until 2017!

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  #69 (permalink)
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Profiler View Post
1. Sold 1502.25 on a 2.75 pt move in a go, no-go type trade above ONHI due to OAIR above value. Breadth +400 and tick +518. Stopped after 1 min and .5 MF.

Market opens near yesterday's high, up 7 handles from Monday's close. It opens above prior major resistance of 98-99 (see your profile for the last few weeks), after trading up through the 92-98 balance overnight. IMO the default bias here is, get long, or stay flat. I see no reason at all for a short at the open, even less so after the push above Monday's high. The fact that the market opened in range, and then pushes up out of that range without even an excursion into the value area for the previous day, is a sign to look to buy--this is not bearish in the least. This is initiative buying at its best. If you look at volume, you will see very heavy volume moving the market out of yesterday's range; stepping in front of that is suicide.


Profiler View Post
3. Sold 1408.5 nvpoc on 5 pt move. Breadth +390 and tick +396. Quality of rotation is not good as it moved up 4.75 then churned for 30 mins before filling me. Stopped after 40 min and .25 MF. Unreal. Took 8 tick loser since I leaned on a 6000 lot offer in the book for a manual stop and someone took it and caused 4 tick spike.

Almost always will a 6000 lot offer get taken or get out of the way. Don't let this fool you into thinking that this is even a seller with a directional bias; maybe someone just bought a bunch of SPY for a fund and is hedging, and is actually wanting it to go up.


Profiler View Post
4. Long 1406.5 LVN on 4.25 pt move down. Breadth +382 and tick -400. Scratched in the extra session at 330.

Tempting, but at 8 mins to close, you are likely to have lots of longs from earlier closing out. If there is a fire in the theater, everyone runs for the exits. When 3:55 ET or so rolls around, people begin to run for the exits, and crazy shit happens. When the market has just rejected a prior day high by 4+ handles, it's just a gamble that you will get a bounce. It's not so much a trade, as it is hoping that you can finish your day with a little less of a loss. But for this situation, it's really better to just call it a day. You're lucky it didn't keep selling off and you were able to scratch. Look at cumulative delta and look how much selling pressure is coming in from the high until your trade... not a high probability play that you will get much of any response there.


Profiler View Post
My trading was horrible. I now have 1 winning day in the last 12 trading days. I am obviously doing something wrong.
...
Tomorrow is another day. Can it be a winner for once???

As djkiwi said, you are keeping your losses small. This is important. It allows learning. I have thrown a crapload of money away in 10 minutes because I got too big. You can't learn like that, you only get blown out. At least you are bleeding small.

I think if you look at your maximum open profit per trade you will see one major reason for your losses. On 3 of 4 trades, not once did the market even move in your favor more than 2 ticks. This means very simply that you are swimming upstream. The fact that you have a "level" does not mean anything. It must be considered in context. And even in context, there is nothing wrong with waiting for the market to prove to you that it is going to work for you, not against you. For the 2 shorts, if you had simply waited for the market to move in your favor 4 ticks, you would not have taken the trade. If the market can't even move 3-4 ticks in your direction, then what confidence should you have in the trade? So, wait and let others work for you first; if they prove to you that they are willing to put their money on the line to move the market a particular direction, then join them.

If you had recognized the real nature of the day, you would have only looked to buy, and those trades would be a moot point. If you are aligned with the context of the market, you can do a blind buy or sell, but only if your analysis is correct; if you are looking short when the market is clearly long, then it does not matter how significant a level is.

I am saying all this from one trader who has struggled, and continues to struggle in many ways, to another. I can only say this with conviction because I have lost money and lost my patience time and time and time again; I have been on the other side of trend days MANY times, and it sucks. I have stepped in front of the train and still want to do so sometimes. But it is not a high probability trade, and professional traders, who I am trying to emulate, take high probability trades.

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  #70 (permalink)
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2-6 pre-market


Economic data: crude

ON Profile: Spoos spent the majority of time and volume last night trading above yesterdays settlement/vwap at 1505.75 and exploring upwards but stopping 3 ticks shorts of pHi. ON vpoc stands at 1507.75. However, something caused spoos to break around 6am and we are now trading right at the lower LVN of yesterdays profile at 1501.25. So we went from one side of balance to the other in the ON session and I am expecting a return to balance now.

I am anticipating an OAIR open, not sure if it will be inside value or outside. With little economic news I think we have a rotational day on tap. If we open around 1501 we will basically have an open in the middle of our MC with the most fair price below at 1497 potentially acting as a magnet. Longer time frames all point up.

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Closing Swing: 1510.75-1505.5

Levels Above: 1501.75 LVN, 1503 CHVN, 1505 nvpoc, 1507 LVN, 1508.5 CHVN, 1511.5 CLVN

Levels Below: 1497 CHVN/MC vpoc, 1496 LVN*, 1494.25 nvpoc, 1491.75 LVN, 1488.5 CLVN, 1486.75 CHVN

Hypo#1: Spoos open OAIR below value and first push is lower to 97-96 area where responsive buyers step in and auction higher through the day.

Hypo#2: Spoos open OAIR below value and push higher to 05 nvpoc but find rejection there and sellers auction lower to 97 CHVN and possibly lower.

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