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Trading ES with Depth of Market


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Trading ES with Depth of Market

  #1 (permalink)
London/UK
 
Experience: Intermediate
Platform: NinjaTrader
Broker: Optimus/Rithmic
Trading: ES, 6E, FESX
 
Posts: 104 since Jun 2012
Thanks: 78 given, 158 received

Trading ES with Depth of Market

I decided to start a journal because I noticed there is no thread with regular posts on trading ES using the DOM (at least for non-Elite members).

I am planning to post some of my trades with explanation of both entries and management. Given we are in a summer market, I hope there will be something to write about

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  #3 (permalink)
London/UK
 
Experience: Intermediate
Platform: NinjaTrader
Broker: Optimus/Rithmic
Trading: ES, 6E, FESX
 
Posts: 104 since Jun 2012
Thanks: 78 given, 158 received


Felt a bit rusty in the first 5 minutes after several days of a dull market. It was easy to see straight away that today may have some moves. I guess not having any support levels from yesterday or overnight session also helped.

Here is a trade I took with some comments on its management:

We sold off after the pit session started and built quite a bit of volume between 1963.50 and 1964.25. This gave me an indication that many buyers were positioning themselves here. I placed my sell order when I saw that market broke lower and left those longs trapped:

My stop was just outside of this volume cluster, but ES only ticked to 3.50. Market moved lower 5-6 ticks pretty quickly but then got stuck at 1962.50 and started trading volume there. To me it looked like momentum wasn't present so I exited half of my position at 2.50:

I keep my trade management tight and try not to let on-side trades turn into losers, so I am constantly looking for reasons to exit. I noticed that we couldn't really push lower than 2.25, with very few contracts traded at 2s. It looked like 2.50 was absorbing sellers and started holding as a support:

So when I saw next wave of buying I hit into 2.75s and closed second half of my position.

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  #4 (permalink)
Spain / Europe
 
Experience: Intermediate
Platform: Ninjatrader
Trading: FESX, FGBL, ES...
 
Posts: 53 since Mar 2012
Thanks: 327 given, 21 received

Congratulations on the thread. It looks interesting

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  #5 (permalink)
London/UK
 
Experience: Intermediate
Platform: NinjaTrader
Broker: Optimus/Rithmic
Trading: ES, 6E, FESX
 
Posts: 104 since Jun 2012
Thanks: 78 given, 158 received

Moving to London this weekend. Will be back trading on 22nd. Best of luck to everyone!

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  #6 (permalink)
London/UK
 
Experience: Intermediate
Platform: NinjaTrader
Broker: Optimus/Rithmic
Trading: ES, 6E, FESX
 
Posts: 104 since Jun 2012
Thanks: 78 given, 158 received

Changing markets/where is an edge?

In other threads I read about traders' experiences trading on the floor or on screen with prop firms. I thought I'd share some of mine as it seems to be more recent.

These are just my thoughts and conclusions based on personal experience.

I joined a prop firm in February of 2011. I was in the first intake with 6 other guys. Our office mainly traded European STIR products through spreads and strategies like butterflies and boxes. Within 6 months we got involved in softs and energies spreads as well.

We had support from senior guys with couple of years of experience as well as our managers who traded longer. Occasionally we had visits from our company's directors and they had chats with us about trading and how things were going generally.

Essentially, we were market makers, liquidity providers. We were selling volatility expecting to get filled on the other side for a tick. That's what we were taught and that's how our group started seeing first positive results.

Now, some people may think there was more to it. And I will agree. Unfortunately, I could never understand what it was.

Some things in trading take time, like gaining experience, but I think I gave it a good shot. I must admit I wasn't among the best when I decided to leave 2.5 years after I started, but I wasn't among the worst either.

I made money both years but never even close to the bonus territory. The most disturbing thing for me was my complete disbelief in what I was doing. To me positive results didn't feel like a sign of my skill, nor did I think I had an edge. The way I saw it, people who made bonuses took more risks, made more intuitive decisions and enjoyed what they were doing (presumably).

Another important factor for me was that nobody could really explain logically why we were expected to make money trading for a tick or how to determine conditions when the market may strip 10 prices one way. I heard quite a few vague explanations and was satisfied with them while I was still in a "take a leap of faith" mode. I should mention that, in my view, it was a proper trading firm and we even got paid straight away to keep us going.

As I said, I was profitable. 2011 and first half of 2012 were quite active with a lot of uncertainty about European economies and interest rates. There was a lot of paper in the market and things looked rosy. But then something changed.

I noticed this change only on my year end review. I stopped making money in STIRs, which was my main market, and couldn't find another explanation to this fact apart from market being "slow".

That's when I turned my attention to outrights. Partially because how uncomfortable I felt trading spreads, partially because of the abundance of information available online. But intellectually I believed that this should be my future path.

I did economics at uni and after years of research I knew enough about market inefficiencies and changes that take place. I believed that manual market making in spreads would have the same story end as in outrights. Obviously the drop in volume, that could have been temporary, didn't help either.

I think being able to make decisions on your own is one of the main advantages an individual trader has compared to any institution. Now I trade what I got an understanding of working for a firm, which is how traders position themselves and how those positions influence future decisions.

Markets are always changing, I agree. But, in my view, an edge must be based on actual market mechanics, not on a temporary inefficiency or correlation.

If anything, what I wanted to say with this story is that there are no secrets in trading. The market generates more than enough information to enable a trader make decisions about what works and what doesn't. Keep track of your ideas and results and you will have as big edge in current markets as any veteran trader.


Last edited by isla; July 15th, 2014 at 11:57 AM.
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  #7 (permalink)
London/UK
 
Experience: Intermediate
Platform: NinjaTrader
Broker: Optimus/Rithmic
Trading: ES, 6E, FESX
 
Posts: 104 since Jun 2012
Thanks: 78 given, 158 received

that rare opportunity

ES is trading at all-time highs, but unfortunately volume is not there, hence opportunities don't come around often. It's weird, considering the trend, that majority of momentum trades have been on the short side for me recently.

Here is what I saw today:

We opened around overnight session high and yesterday's high. ES did push through these levels but reversed sharply. Given yesterday's close and overnight session low were quite far away, I started looking for a good place to sell.

Market built decent volume between 1978.50 and 1979.00. If broken, these prices could hold any upside, so I waited for shorts to attack:



I placed my order at 1978.00, just in front of volume at 8.25. Trade started working pretty quickly. I have my first scale out at two points. Not that I use fixed targets, but it is a reasonable size of an impulse move, in my view. I try to manage all my trades anyway.

ES sold off to 1976.50 and 6.75s started absorbing sellers. I don't like taking heat on my first scale out, so if a decent size gets absorbed, I am out:



You can also notice that on the last attempt to push lower only 51 contracts traded into 6.50s. Combined with buyers at 6.75, it was enough of a reason for me to exit half of my position.

More contract got absorbed at 6.75 after my exit and we only traded 10 lots at 6.50:



At this point I started bidding 6.75s, then moved my bid to 7s. I was willing to get out for a scratch or a one tick profit worst case.

Market did go to 1977.75 but quickly traded back to 7.25 and then I saw this:



A couple of block orders got absorbed on the bid, clearly indicating that 6.75-7.00 can now present some support area. So I moved my order to 1977.25 and got filled on the second half.

It did look like 7s were holding the price for a minute, but we did have another push lower.


Last edited by isla; July 23rd, 2014 at 01:39 PM.
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  #8 (permalink)
London/UK
 
Experience: Intermediate
Platform: NinjaTrader
Broker: Optimus/Rithmic
Trading: ES, 6E, FESX
 
Posts: 104 since Jun 2012
Thanks: 78 given, 158 received

Combine, here I go!

In attempt to adjust to the current more "rangy" environment (who knows, maybe it's all back to normal considering today's session), last couple of weeks I've been practicing in execution of some new ideas.

I haven't changed anything in my plan, just added a couple of new "setups". And I feel that a Combine will be the best place for me to see how it all works together.

So, given all the macro data coming out tomorrow and on Friday, and generall instability in the world, I decided to postpone the start of my Combine until Monday 4th August.

I haven't decided yet about the format in which I'll be showing my progress. I still want to keep this trhread devoted to DOM trading, not just sharing results. For now, I think I'll be posting charts with all the enries and exits and then possibly adding some comments if I have time.

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  #9 (permalink)
London/UK
 
Experience: Intermediate
Platform: NinjaTrader
Broker: Optimus/Rithmic
Trading: ES, 6E, FESX
 
Posts: 104 since Jun 2012
Thanks: 78 given, 158 received

Day1

Took one trade today:


Here is how the DOM looked seconds before the trade:


You can notice strong sell limit orders above 0.75. When I saw a block buy order into 0.75s got absorbed, I put my limit at 0.5s as soon as they went offered.

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  #10 (permalink)
manchester
 
Experience: Intermediate
Platform: tradestation
Trading: oil
 
Posts: 57 since Mar 2010
Thanks: 15 given, 21 received


Good thread this.... keep up the good work

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