No, supertrend is based on price. This one, like all my indicators, is based on non-price data and in this case it's volume. Larry Williams wrote in one of his books, "A cannot predict A" and "Price cannot predict Price". I didn't believe him when i read it because I thought a high RSI or a price outside a bollinger band would revert to the mean. But now I believe him.
Here's the last few days. I'm still working on how to interpret this. 4/14 was an imbalanced day and 4/15 was a balanced day. So I'm studying it to see how it behaves in the two. In the imbalanced day, it is the indicator that caught up with price. In the imbalanced day, price overshoots and returns to the indicator. Replace the word "indicator" with "value" and I think it all starts to make sense.
PS: I wouldn't use this mechanically, I think it could give a bias though. if price goes too far away from value, say above value then there would be a short bias. to far below value would be a long bias.
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Here is a dax trade from this morning, I think it shows what I'm looking for.
Tradestation charts (left)
1 - highest timeframe in uptrend (breakout of resistance)
2 - lowest timeframe cyclical turning point in direction of trend - Setup #1
MD charts (to the right of TS charts)
1 - lower timeframe I drew the unfair high & low, went long on a triple bottom with volume breakdown divergence at unfair low
1 - I did an aggressive entry on the HVN. usually I wait for some buyers to lift the offer, they did and there was a pullback and retest of the low and that's when I entered on the way up after the pullback
my target is +10 and I had my stop at +2 which is a tick under the current bar on the ladder chart. I saw a HVN node developing and I figured if price broke below it that would mean sellers were more aggressive. Price continued stalling at the fair value line (see chart 2) so I got out with +5 ticks which was pscyhologically important because it made me positive for the day. The market is really slow and it's about that time when I start looking at the Euro.
I'd love to get some comments on this setup, which is from the l2st trading plan (simplified version for crude). I have some concerns about it. The main one is that if you look at the market profile chart, we're near the upper end of the daily balance area. I hesitate to go long up their as the market could return to value.
All comments & feedback greatly appreciated.
PS: Price dropped back down towards the unfair low so I did well to exit. I'm learning that my intuition is really improving. Often I don't trust it and miss a move.
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I usually dont mind the developing blance area that much. It´s mostly important in relation to the previos areas. From the mp chart it seems that price is at ydays POC and VA. Actually because c opend inside i´d look to the upper part of ydays VA (80%-rule). Todays development also shows the most trade took place below the developing POC, that would favour the upside (tpo-count) aswell. Whats worring is that bulk of trade that took place over ydays profile...
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Very interesting Fiki. L2ST puts more emphasis on today's profile whereas a lot of other traders put more emphasis on yesterday's profile. Since I'm new to Market Profile I'm learning the pros & cons of each.
It's interesting that you said that since the vwap is below the DPOC that it favors the upside. I was reading a thread at trader's laboratory where the thread starter was saying the opposite. I have been trying to prove or disprove his theory but haven't had any luck either way so far. Here's what he said:
You have to read the rest of the post to get the context I think.
I'm curious why you say it gives a bias to the upside? The way I see it, the average person paid less than the "fair value price" and so that would favor the upside. But I can see it the other way: "the price fair to the most traders is above the average price, so they must think it's going down". I actually think it depends on context really. in an unbalanced market that is moving higher, those who paid before the fair price have an advantage so that is upside. But it gets confusing after that.
One more thing: in my trade I'm just going for 10 ticks so one could even say that the bigger picture doesn't really matter. However I'm hoping to add a 2nd target and get more than 10 so the big picture is important.
if you are referring to Markte statistics jperles on Traderslaboratory , you're right.
Well, this is still a theory which I decline to prove or disprove the validity, each point of view.
Regarding Trend today, Bear Gap has surprised many. But if you look at the weekly profile, we are in a range, therefore, a lower buy is more likely to succeed than to sell the lower range.
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I took a trade today and i took 2 screen dumps in the middle of the trade as i moved my stops higher. i´m not in the trade longer because i closed it by misstake when it went to 1206 and i wanted to move my stop to 1204.5. i first clicked on target to move it higher but then changed my mind and clicked on the stop to move that instead. so target got moved to 1204.5 and the trade was close atm. now its above my exit and i cant bring myself to buy higher than i sold
but i dont even look at the daily profile that much. most classic mp, steidlmayer, dalton (and even newer alexander) put move empishis on the previos strukture. we´re trading ydays value and betting that nothing changed that offset this value. todays profile cna be usefull to gauge previous value or somtimes when its more developed you can trade it.
I read all that vwap-volume statistic method/system but i don share their view. like you said it in the context. genereally if you se bulk of volume(tpos) under poc this is bullish. why? because it shows you that buyers are willing to step up. if there is no buyers the profile would be thin. it would be a 1-sided trade only. now the vwap i use differently. its the average price and i look at it in realtion to vpoc. for me thats more short term condition. both represent a fair price. if i see volume builing over vwap i know buyers are agressive. vwap is the most common institution benchmark for a good price to the costumers. if people are willing to buy above i think its bullish.
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probably no right or wrong, just different ways of thinking of it.
His reasoning is that at the VWAP it's the center of the distribution, there are an equal number of prices below & above. So at the VWAP it has 50/50 of going up or down. But what's confusing to me is if the distribution is not a normal distribution, then are the odds really 50/50?
Here is a link to the index thread which has links to the individual threads, one for each topic. I think it's great reading: