sdoma

100% right. For anyone who disagrees, analogize it to surgery. A surgeon learns to perform a procedure exactly as it is taught. Later on, as he or she gains skill and what Rommel called "fingertip feel," they can become more creative, think about other ways to perform the procedure, and develop a "style" as a surgeon. But first, you learn the "textbook" way as it teaches you fundamentals. If you don't first follow a plan, through draw down as well as profit, how will you gain a feel for the system's performance and profit curve? Remember, for a beginner, it's easy to get that feeling that "it's not working!" after a couple of losses, but losses are common, even in a system with a high win rate. So, if you stick to it, you may realize that you're making money and losses are just a cost of doing business. If your plan requires modification, then you can do that in a controlled manner by making a formal written change to your plan and then testing it. Your plan can grow and adapt over time along with your skill set, but it should be done in a thoughtful and controlled manner.

That depends on which time frame you're talking about. The entire day and overnight action has been trending up, and so, on a day frame, shorting it is betting on either reversion to the mean or outright reversal, and thus, counter trend on the day frame. If you're looking at a shorter time frame than that, say, since about noon, then you are trading with the current trend, which is down. Be careful that you aren't late to the party.

This is a good idea, but I'd take it further. Put on your full position, use your discretion to exit on all but 1 contract, set your stop and take profit orders, and then record which stop was hit. After you have a month's worth of data, take a look at it. If you're exiting at break even most of the time, then you know that your targets are too ambitious for your risk level. If you're hitting most of the time, then you know to get out of the way, so to speak. If the results are more mixed, or hard to interpret, you might switch to other exit strategies, such as an aggressive trailing stop or gradual scaling out with stop shift to break even + x, y, z as you scale to lock in profits. Run a sim account alongside your DOM. If you're entering with limit orders, it's easy to do. Otherwise, just use a piece of paper and write down the time of the trade, your exit and whether your planned target was hit.

The key to reading this day was to see the market's failure to retest the lows in the 9:05 - 9:20 CST period. Volume dropped off as well, and in the context of the move we had experienced overnight, that was a clue to me to get flat and see what would develop. After that, the market exploded up. I caught some of it and had a good day. Big gaps can be dangerous to fade, and you should never fade the open on a big gap, because probabilities favor at least one test down. I love to catch reversals off of them, however, especially down gaps. If you're wrong, it's immediately apparent, but if you're right, you get paid.

Not only that, but you have to take your eyes off the market to make these lengthy posts. That can break your concentration. I don't know about you, but I wouldn't be able to. One thing you could do is, when you start to think about a trade, press record on a camtasia type program and just verbalize your thoughts and point things out on the chart. If you want to, you can also record the trade. This is something I've mulled over to keep really detailed records. Not only would it be faster than writing stuff up and labeling charts, but there's no muddling of details due to hindsight. You can watch it later and use it to fuel your feedback loop.

It turned out to be option 1 with a twist. We made new lows by a small amount, retested that low, and when no significant new selling was found, traded back into value/to the day's midpoint/VWAP/Whatever method one uses to identify mean reversion targets. It was a nice trade, and paid quickly if your location was good. PS If you want, I'll show you how to use IRT to keep track of relative volume a different way that's pretty nifty.

I wouldn't say it's that much messier. The only point I think substantially differs from my chart is that when, after the big drop and double bottom are made, the ES didn't retest value like the Dow did. The test of value was more severe, but it didn't close below it on those weeks. It's a different index, calculated off of a different basket of stocks and weighted entirely differently, and just because the two don't exactly correlate doesn't invalidate everything I said. Hell, there are traders who look at differences between the two on the day frame to place trades. Understanding market context is not only key, it is the most important skill any trader can learn. If you understand the context, you can easily modify your strategy to fit the current market structure, or decide whether to trade or not if you're a one trick pony (not that there's anything wrong with that, some of the best traders trade only one setup).

I'll start with the weekly chart. I am a market profile theorist by training, but I've significantly modified my approach and generally use VWAPs, its standard deviations and basis, and volume profiles. So, in my charts, the orange line are cumulative VWAPs, the blue lines mark off one standard deviation on either side of the VWAP, and thus act much like a value area, and the basis lines are in red and green dots, and tend to represent stretch zones, though it's more tricky than that and I'll elaborate. In this post, I'm using a weekly chart with a cumulative VWAP started on 7/6/10, a major swing point in the markets that has not yet been breached. I've numbered the chart, and will post my comments here, as they are too long to include on that chart. 1. This is the first major retest of value since the swing point was created and we had a series of higher highs and higher lows. As we see here, it was tested repeatedly in a three week time period. We ended that period with a strong move off of value on increased volume. After this point, I was cautious about selling the market. 2. The market then moved into what I call a bull crawl, which is a slow, grinding move up with little volatility or tests to the downside. In this period, all but one week finished neutral or up. It ended with a minor volatility expansion and three consecutive weeks of upwards movement to second basis. 3. After that volatility expansion, the market dipped to test value. It showed good penetration, but failed to close inside. After this, the market again began to rally. 4. The market came close to second basis, had a strong week up and decent volatility, and then failed. If I were short at this point on a swing basis, I would have had a target of value, since a probe of value is a good probability. 5. The test of value was more serious this time. The market stayed inside of value for about a month, before rallying out strongly, but on poor volume. This was the canary in the coal mine, technically. The test of value was stronger, and the rally's volume was relatively poor. 6. The market failed to retest the highs made in #4, and then failed back into value. In the week after, we saw a hard and fast move back to the VWAP on high volume, where it found temporary support. 7. What ensued after this was a high volume balance, where market participants struggled to establish a new order. We saw two tests of the bottom of value, both of which saw strong responsive action. Likewise, we saw sellers above the VWAP. After the second unsuccessful attempt to auction below value, the market rallied past the VWAP, tested and found buyers. 8. It then tested the upper edge of value and the upper edge of the previous range repeatedly over the next month, and then failed. 9. After it failed, it retested the VWAP, but interestingly enough volume was weak for a strong down move. It then found support, and rallied. 10. The market tested the upper edge of value again, but this time was able to hold above it. 11. We then entered another bull crawl, spiked up at the end, couldn't extend its highs, and now we are auctioning down again.

You probably paid for those books. If you want to test someone's strategy, get them to give you their rules and test it yourself. As long as there's no money going from you to him, you don't have grounds to ask for back-testing results.

Wow, I know Europe was closed and all, but this is choppy as a benihana.

Of course, but that is not the issue. If what you did was correct according to your method, then you should look at it as having acted correctly. The above quoted statement tells me that, in some way, you would still regard your decision as "wrong" if the market moved in your direction. It may or may not be wrong, but that would be determined over time and then would require a modification of your plan. No matter how well your plan is constructed or how good you are, you will have losers.

I'm not saying anyone's trade will be wrong, just not to automatically assume that low volume means a lack of conviction. I don't look at it as conviction anymore, sharp moves are more driven by need and reaction than conviction.

Low-volume days often exhibit steadily upwards, grinding action. Think about it, that happened all last year; steadily grinding bullish action on no volume. Machines have changed some of the rules.

Negotiator, today's action is nice, eh? Opened outside of 3, 5, and 10 day value, couldn't auction higher and reverts back in towards the POC. Classic responsive action. By the way, if you don't mind, I'd like to explain a couple of things to Ants before we put this to bed. If you don't like what you see, edit my post. Trading is risky. If he can do both, he now has a second source of income which isn't volatile. It also makes getting financing for various things much easier. Banks do not like to lend to traders. It's OK that you don't know this, you probably don't know any successful pro traders. You give Goldman too much credit. They make money on grey zone information and HFT, which depends on access and speed. Their trading operations don't do all that well otherwise.

For the last few days, all I've seen is volatility in the stock indexes getting crushed intraday. This isn't to say that the markets aren't volatile relative to the last year or whatever longer term time frame you wish to choose, but in the short term it's decreasing quite a bit. There has been some drift upward, but it's really just a balancing market. I don't know about the SP500, but in the Dow we've retraced half of the move down that began on 7/22. I have to continually remind myself of this while I trade, so I just stick and move and don't get married to anything. I am waiting for it to break out of this balance, of course, because of the sharp movement this could produce.

Sorry, my government monopoly electrical utility just told me, after a month of trying to get a hold of them to start my electrical service, submitting multiple support tickets and trying in vain to get through their automated phone system to talk to a person, that there is a fourteen business day waiting period so they can do my background check (!). A car dealership can access this information in 5 minutes, and a multi-billion dollar a year company needs 14 days. Not that you should care about my problems, but you can maybe see why I am half-cocked already.

If you're expecting me to throw pages of text, charts and graphs at you in an attempt to prove that I'm right, you are sorely mistaken as your opinion means very little to me. The reason it means very little is that, instead of actually taking the effort to write five sentences explaining why you disagree, you simply say "based on what empirical evidence?" What are you, a freshman in high school who just joined the debate team?

Markets are quite upbeat. We'll see how the home sales data impacts that positivity. Edit: Not that this affects me all that much, but it's disheartening to see our markets reduced to what we have now. All the "market moving participants" do is watch world governments and trade off of what they think the possibility of aid will be. This recent move downward was due to the discontinuation of QE2 with no mention of QE3, not the shitty economic data we experienced. Now that we're more positive about the possibility of government intervention, bad economic data doesn't dent the markets, even though after a run up like this a bad economic number of this importance should at least create a dip to be bought.

Lookie here, we're working our way back to the lows, and so late in the day! Traders have been playing for a rally since we made the lows. Very interesting. EDIT: In the 30 seconds it took me to type that, the dow popped like 25 ticks. Guess they're still going for that rally.

OMG or "YESSSSSS!" Marv Albert style, since you could just close your eyes and short it. It's gotten choppy down here, but if this base fails we could be back to last week with huge volatility. EDIT: By the way, this reminds me of the first bear move we had in '08 where things would calm down and retrace a bit and get hit by another terrible news release.

We have many threads on reading the DOM. Use the search function and go post in those.

Nope. What feed do you have?

I have dtn.iq, all it says is "invalid symbol" when I try to load it.

No, but in this kind of a market that is this stretched to the downside you could easily see a large retracement. If you are long and it really starts eating through offers, you might want to at least trail a stop behind a part of your position. Interestingly, the market hasn't made new lows but has remained weak. I'm interested to see where we go from here. This is the type of market where I have to constantly remind myself not to predict. PS Can you post a chart of the dollar index? I don't have it on my feed.

We're on the same frequency. I bought a tick off the low and it turned out well. We'll see if we can retrace from here or if this is just a scalp, but scalps in this environment pay like normal day trades.