sdoma

A caveat: remember that nothing is ever 100% clear except in hindsight. That being said, look at your value areas for yesterday, the last few days, etc. If you're within those values and the market attempts to auction above or below them, it's initiative. If you are outside and the market begins to move back into value, it's responsive. I believe Barton calls them inside-out and outside-in trades for obvious reasons. If a group of traders perceives that the current definition of "value" is incorrect, for example, and sells the market, pushing the price down, they are attempting to initiate a change in value. If another, larger group of traders perceives that market as now being cheap and buys size, pushing it back up into value, that is responsive since they are responding to a change in price. A responsive trader is like my mother - they love a sale.

No, for a few reasons. A lot of programs, some widely available, can filter for trades of a certain size and above - e.g., 200+ cars. Not too many traders can swing that kind of stick. So, say you're a big commercial trader and need to buy 2000 cars in x-y price range. If you bid 2000, other big traders are going to game you. If you lift 2000, you will sweep the book, maybe not get the execution you want, and might get gamed anyway, depending. There's a whole level to the game the big guys play with each other that we just aren't involved with - those big traders are hiding from other big traders, they couldn't care less if you or I ride their coattails. However, an algo can allow you to shove that size through diced up into random pieces - say, a 4 lot trade, 3, 8, and so on. So you wouldn't tip your hand with a huge bid or lift, and it wouldn't be so obvious as 2000 one lot trades done over a minute of time. It's like the biblical proverb of shoving the rope through the eye of the needle. (Camel is a mistranslation) In the cash stocks, they use those algos as well, and additionally will go to dark pools to do really large block trades.

Not only that, most people trading FX are doing so through a shitty spot broker, a lot of the fills you would get, they wouldn't. People don't even realize how much faster a real pro setup is (dark fiber connections especially), let alone a high end black box co-located at an exchange or liquidity pool. So if YOU thought it was bad, it was an abomination for people at an FX bucket shop.

I'm not sure I fully understand your reasoning. This is how I understand AMT as it applies to your statement. Forgive me, this is wordy, but I want you to see my thought process: Any time a transaction is recorded, there is a buyer and a seller. If there weren't, there would be no price activity recorded and the prices would simply gap higher (in an up move) as participants bid higher and higher trying to facilitate trade (i.e. attract sellers), or prices would fall to levels where trade has been done in the recent past. That's why short squeezes can be so dangerous, if one entity owns a large part of the market and won't sell, prices can spiral out of control as the shorts bid frantically. So, whether there is high or low volume on a move, you encounter those willing to sell since every transaction has to have participants on either side. I agree with you in that imbalance is more important than volume, because imbalance creates opportunity, but then you seem to invalidate that by saying high volume on a move means a lot of opposition and makes the move less attractive. To me it's just a measure of the extent of participation, and can be indicative of who is participating. If you have imbalance on very high volume, that tells me commercials are involved and the chances that they'll "cap" the imbalance are lower. In other words, the wider perception of the true value of a security has changed and been accepted by those traders who can take positions and truly move that price. However, if the imbalance occurs on low volume oftentimes your big commercial level traders don't perceive a real imbalance, and will often trade what they see as an improper pricing of the security, i.e. fade and push prices back into value. I always considered price an advertisement for activity period. Think about it, in a stock bull market, as prices are higher you find participants willing to pay these higher prices. That is why prices move higher and will stay higher - the common perception of value by those who hold positions (not day traders) moves higher over time. Prices move up and find activity, but it's confirming of the present trend.

If you are trading your plan and you are OK with the size of the position, take your hands off the mouse. Sit on them if you have to. Set your stop and take profit and let the trade go.

Geez, I would've taught you that for a drink and a little flattery. But in any event, from what I've seen of profile seminars, they are all very similar with a couple of exceptions. Cisco's MP method is different, and so is Alex Benjamin's. But in any event, Market Profile is a way of seeing markets, as is the Wyckoff Method or VSA. If you read about them all here, you'll see a lot of overlap between them. Focus on principles and the rest will come.

I have always found that fading the overnight lows and highs is generally a decent scalp trade. Even if you're not much of a scalper, you generally want to avoid being short close to the low on the first test because you can get a very healthy bounce from there that shakes you out before you go lower. Obviously, vol being what it is right now it's a harder play to do sometimes. A nice trade setup I found utilized the overnight highs and lows in conjunction with a composite or mash profile. If you open way below 3 or 5 day value, for example, and you test the overnight low and don't attract more activity, this is often a nice place to get long because moves back into value can sometimes carry all the way through it and one of those trades will make your week.

How do you use the TICK to play the open?

I trade with a sweaty jock strap on my head, is that a controversial technique? I swear, the shweddy balls smell helps me really see the market.

So, translated into plain English, you are asking "how you trade market profile when there's no standard shape?" This is actually relatively easy. Market profile is a tool used to display whatever market structure exists at the time. You don't have to expect a distribution to look a certain way to use it. All the market profile charts are is a tool that allows you to observe very quickly and objectively the "bigger picture." It allows you to determine relevance. The main questions I use MP to answer are this: 1. What is the market doing? 2. How well is it accomplishing this? 3. Under what conditions will the current market structure have changed? 4. If the market structure changes in X way, what can one reasonably expect? If it stays the same, what can one reasonably expect? To me, the third and fourth questions are the trickiest. They require you to integrate the information gained from one and two as well as construct various probability scenarios in the hope that, if one begins to occur, you can "catch on" and act appropriately to capitalize. I'll put some examples in my next post.

What kind of broker do you use? With a lot of the cash brokers out there, they'd rob you blind going for 9 pips on a scalp.

Of course time is important. Markets are made up of people, and people live their lives by time. When I conceptualize markets with MP, one thing that strikes me about TPOs as opposed to pure volume histograms is that, when you see prices consolidating in an area, is that less significant because you don't have increasing volumes? I would say no. The very fact that price is spending an extended period of time in a price zone tells me that there is a perception of value there - otherwise, the prices would move somewhere else to seek true value. When the market participants perceive a change in value, you will see volumes rise as participation increases due to more time frames jumping in. Of course not. There is no "secret sauce." Generally you can summarize the theoretical underpinnings of most methods and systems in a few sentences, and they all come back to the same stuff. What I like about Market Profile is that in order to use it you have to gain some sort of market understanding. This will take you further than the "if A, then B" that most systems impart. "If the 9EMA crosses the 18EMA to the upside, go long." That kind of thing.

While TPOs were used by Steidlmayer as a proxy for a volume histogram, this doesn't rule out the possibility that the TPO histogram is actually more effective than the volume histogram after all is said and done. Maybe it was better all along. At this point, it's hard to prove since one could put forth a "self fulfilling prophecy" argument concerning TPOs, but really, how large of a percentage of the market are Market Profile users?

This depends. Do you want to divide the sessions according to the domicile market in the cash, which the futures track? Or do you want to divide it so the American session is isolated? For example, the center of the forex market is generally considered to be London. The London markets open up at 2am CST and close at 10am CST. Or you could use the Eurex's European fixed income derivatives (the Bund, etc) since currencies are also an interest rate driven product, and Europe is the home of the Euro (surprised, eh?). I believe that the Bund opens at 1am CST but this could be different since we just had a the time change. The trading day in the United States generally starts up at 7:20am CST for fixed income and 8:30am for the stock market, so you can see how your divisions might differ depending on where you thought it logical to center it. To be quite honest, I don't think there's one right way to center it. Markets have grown so interdependent that some people, including Steidlmayer, have begun to go away from dividing sessions according to time periods. While I don't believe in doing this, I can see their point. If I were you I'd try all of these ways. See if something makes the chart pop for you. In the end, market profile is all about context and isn't all that dogmatic. It's all what you get from it.

RUMPLED: You don't have to tell me exactly what your indicator does, but I'm interested in how you identify trend and trend change. Do you do this in an unconventional way?

It looks like they're using a moving average crossover with some simple candle analysis. To put up a moving average cross you simply choose two moving averages, one with a higher number of bars averaged in than the other. I personally always liked a 9 & 18 EMA for basic trend analysis. Play around with it and see what you can do.

Probably nothing. Obama is a Chicago politician. Outsiders don't understand how things work here, but let me put it this way: The CME Group is a very important company in Chicago, and the people who run it are very, very well connected with the Chicago Democratic party. If any of you really think that Obama is a "new breed" of politician, I have some beach front property in Nevada I'd like to sell you. He will protect his friends and the people at home who supported him on his climb to the presidency. I'd put the chances of a hike in taxes on futures at 33%. But again, the CME would scream if they even tried, and Obama hears the voices of well connected Chicagoans. We'll see.

What are your criteria for identifying a change in trend? I don't remember seeing them listed.

This is actually incorrect. Before things started getting really hairy and illiquid, you could hit or lift with 100 cars oftentimes and be filled at one price. Where you find it's not all that liquid are in the other currency futures, like GBP.

Well, unlike what you'll find at forexfactory and elitetrader, most of the people here take trading pretty seriously and have a good idea of what they're talking about. I'm sure there are people in the spot forum that can help you. But just to give you a heads up, like any market, the spot currency market has its amateurs and professionals. Most of your pros trade for hedge funds and big banks, and probably aren't even allowed to post stuff on the net. You tend to have a seemingly very high number of amateurs due to the low barriers to entry. Forex is unregulated and as such it's easier to get an account from a broker. You can trade very small increments and not have to put up 2500 dollars margin for a trade. Also, the amount of leverage available to you is shockingly high in forex, which attracts the get rich quick crowd. But does this mean there are no forex pros, or that those pros aren't just as good as futures pros? No. I am involved in futures in Chicago, and let me tell you that most of your profitable pro traders down here are not posting. They either keep their methods secret or just aren't the type to go post on any message board. So it's really the same thing. A good board like this is nearly impossible to find - be respectful and use it for all it's worth.

Ah, you're starting to go down the rabbit hole. Welcome. Most trading systems seek to identify an underlying aspect of market behavior that is inherent to the market. But is it really an aspect of market structure, or is it just an arbitrary structure that we superimpose in order to make sense out of an environment that essentially has no inherent reference points? For example, dates: When we say this is the year 2008, what are we counting from? Not only that, how are we measuring time? We chose a fixed point in time, the AGREED UPON (not necessarily true) date of Jesus Christ's birth, and counted from there. Of course, now scholars say we may be off a few years, but does that really affect anything? No, we just needed a point of reference to anchor us. With that, we can tell where something is in relation to everything else. But we could have just as easily chosen another date: the founding of the Roman Empire, for example, or Alexander the Great's birth, or whatever. Also, how are we measuring a year? One revolution of our planet around the sun. But if we had ended up on another planet, maybe a year would be a much different amount of time. The same goes for days: one earthly rotation. All of this is like trading in that we find something that is essentially formless (time in our example) and impose forms upon it to make it navigable and manageable. In fact, Einstein's relativity says that nothing makes sense in isolation, only in relation to everything else. In other words, good reference points are hard to find. How does that apply to trading, you ask? I say not to get too attached to a method, even if it works well for you at the moment. Use it but do not grow attached to it because if our conceptions of what is "market structure" change, it may invalidate your system with a swiftness. In that Bo Yoder article he says that his method isn't working as well because of all the algorithms in the market. That should tell you something - what you think is basic market structure can change. There is no structure, just the opinions of the participants as a collective. This market at the moment is wreaking havoc with many people's trading methods/systems. I have watched multi-millionaire traders who have lost a boatload of money in the last year because they just can't admit their systems don't work at the moment. They'd have been better off taking a vacation and blowing their money. What these guys should have done is get back to basics and develop new systems. But here's a dirty little secret: A lot of big big traders are only doing what they're taught. They can't make anything new. So take heart, if you've designed a good method and know you can do it again, that's like gold, you just have to find someone to help you take advantage.

I dealt with this by keeping records of paper trades made during "the doldrums" for a few months until I had a decent sample size. Then, you go back and do your stats on the setup. If the stats are favorable, you try it live with half size and you keep your records to make sure you're sticking to the setup and that your live statistics confirm your paper stats. When you have some live stats to back it up, move to full size. Voila, more money. I've always tended to find that my "overtrading" is due to me swinging at anything that moves and not following my plan.

Let me start by complimenting your journal. This is really great, excellent job. I like how you always address and work on your weaknesses, no treading water. As for the quoted text, one thing you could do is go back over each and every setup and figure out what you were looking at specifically that you didn't take the trade. At this point, you are a little vague on what is keeping you out, but there may be one or two filters there you can incorporate into your plan. In any event, quantifying what is keeping you out of bad trades can do nothing but good for you. Keep it up!

I agree, but that's why I said "considering normal ES conditions" which will generally run 10-15 pts avg range per day. This is historically high volatility and really, a new trader shouldn't even be trading this market. Let's put it another way. If I put a trade on and take a profit of 1/3 the average day's range, I will generally go take a break, come back and really evaluate the action to see if I should trade again. No use in giving that back in choppy trade, for example. But if the action is nice I will look for another setup.

It's unfortunate for the rank-and-file at those banks, but really I know a few of them and most of them are so arrogant it's hard to feel TOO sorry. I try though. Besides, why should they be more special than any other corporate drone that gets laid off? As an aside, did anyone else laugh when they heard about Fuld getting laid out in the Lehman Bros company gym? That guy is such an arrogant ****, he deserves to be stripped of his wealth and put in a housing project.