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There are multiple occasions this week when I saw sudden move coming out of nowhere and finally realized that is the higher time frame trader has stepped in the market.
When higher time frame players come in, they are not going to make it gentle and smooth. Quite the opposite, they are driving price ruthlessly to their intended entry point. The short term trade could just stare and watch with an open mouth!
For example the drop in NQ has sent the price into the buy zone just below 7050 for the long term trader to pick up. Notice that consolidation formation from 7020 to 7050.
An even better example was DAX. This afternoon, DAX was pretty much on the way down. Finally there is a bullish reaction from 12400 round number. But if you buy the pullbacks of that bullish leg and set stops below that 12400 low, you would be stopped out in the stop run ensued. This stop run is initiated deliberately to ensure that no weak long is allow to be profitable with the big hand higher time frame trader.
When market maker was doing the stop run, I didn't get out immediately, but decided to cut my position in half to calm myself down a bit. Cutting position in half is an OK decision, but the problem is that when I saw the test bar with strong bid holding, i should add my half position back. Moreover, when it trades back above 12400 level sign of strength appeared. There are multiple re-entry opportunities to add more positions to swing to the high. However, I was too caught up with the sudden move in Dow and NQ, hence failed to react properly in DAX.
The reason why I love to trade dow not so much in ES is in the following chart.
In the overnight session, YM has found strong buyer right at 24250 and see where the big hand trader take profit after the other hand of the range?
Precisely at 24380.
If you are interested to find evidence of algo manipulations in dow, you only have to mark out all 20, 50, 80 levels on your YM chart, you would see yourself catching the turning points like magic.
The algos in NQ and DAX are working in the similar fashion, but the traces are a bit more difficult to find.
Watch closely and you would find consistent turning points in those charts as well.
Sorry for the late reply. I fell seriously ill last a couple days due to my kids.
There a lot of Algo activities in NQ, hence the market maker never turns the market on the dime from a significant level. Otherwise those algos are going to figure out what the market maker is going to do.
But the price still attracts noticeably to the big numbers, like 20, 50, and 80, just the game is played differently in NQ. When the master algo targets a level, it nearly always runs over it instead of stopping the price by a massive ice-burger order. There are two reasons for this, firstly run stops of those who dare to put down limit order before or near the big number; secondly, hide their real absorption orders which are triggered 2.5 to 8 points beyond that big number.
If you have a footprint chart, you can see the big absorption volume is usually centered around 5 points beyond the big number just like in this example.
It is the last week of August. We are still seeing light volume and small rotations in the market. This is the type of market that is quite difficult for the short term traders to profit from.
The first two weeks of August were quite slow during the week in US equity, but there were always something happened on Friday to spook the market so that we could have the volatility that we crave. The last two weeks was just some slow grind higher which can best be captured by a simple moving average cross system (see below chart).
Therefore I was working on upgrading my system to the NT8 version. After two weeks of testing, I think it is adequately functional, though there are still some auxiliary components missing. One of the biggest benefit of this upgrade is the tick replay feature in NT8 that the bid ask evaluation strategy is finally able to function on historical time series. The bid-ask evaluation strategy is much more accurate than the up and down tick evaluation strategy, so that the footprint chart is exponentially more useful now. The other feature that is surprisingly useful to me is the trade detector indicator as part of the order flow indicator suit, which is part of the NT8 platform. It is possible for me to construct a tick chart with an insight into the underlying order flow that proceeds major turning points.
Here is another major progress that I made during the summer break -- the relative strength rotation graph. It shows you the relative strength of various indices normalized by a benchmark index. Here is the RRG chart benchmarked on the SPX500 index.
Here you can see that the IWM (blue line) is leading the charge and NQ is taking a bit of the back seat right now. In the meantime, the emerging market and European equity has finally rotated out of the bear territory and is gaining momentum at this moment.
