Head2k

Something like this? I guess there was a lot of hints...

By those who sold I meant those who sold short during the congestion.Volume is very low during the test, that means there is no serious selling interest as price declines and approaches the previous congestion zone. Those who bought during the congestion are confident and they dont want to sell as price approaches their buy price. That might tell me to hold, or if I had already sold, to re-enter during the test itself, or the breakout of the next red line if I wanted more confirmation. Or it might tell me not to buy the breakout of the first red line and make the test my primary entry. Thank you very much for these inputs Db. I guess it will help me a lot in what to look for and which alternatives to incorporate to testing.

(a) I would recognize that those who bought in that congestion zone are not throwing it back, instead they hold and might be even adding to position. Those who sold in that congestion are taking a chance to get out even. In other words, price is being supported there as there is still sufficient demand.(b) That would tell me to hold.

I guess I should answer that it made a higher swing high

Today's hinge on NQ, 1 minute chart. The white line is not exactly in a middle of the hinge, but it represents an old significant support level (10/19-10/21). I entered (on a sim) at the lowest short red line, at a breakout of swing high breaching the supply line. Soon price stopped advancing, started drifting lower and took out my stop at BE. (Perhaps I rushed too much with moving my stop to BE. Anyway, I am in a phase of developing a methodology for trading hinges). I think the second red line was a chance to re-enter. Unfortunatelly I didnt take it. Notice how volume is building up when price approaches both lower red lines.

Hey Jon. I am a newbie myself and I think you are quite ahead of me in your learning curve, but assembling my plan it seems logical to me to manage your earnings/losses just as you manage a single trade. You might have an initial hard stop for a week to limit your maximum loss, you might have a trailing stop to limit your drawdown, and you might have a fixed profit target to fulfill your needs or expectations. You might even scale out, which would mean reducing your size after the first profit target is reached. I guess choosing a particular MM strategy should depend on your psychology the most. During my paper trading I found out I will probably have to have a daily and weekly hard stop and trailing stop, as I am prone to revenge trading. What I want to say is that you should observe yourself and find patterns in your behavior and then build an appropriate daily, weekly and mothly golas/MM strategy.

As you might remember I use AmiBroker. I coded the indicator myself. It is a VWAP + 1st SDs with custom starts. Unfortunately AmiBroker is the only platform I can programe in, as I simply bought it and read the manual

I think it is much better to start VWAP at specific logical moments rather than to use random starts. A beginning of a session is a logical place to start one. Then you can start some at significant highs, lows or breakouts. Simply places of changes in psychology / behavior. Then you can assingn better meaning to bounces, breakouts and price action in general. See attached chart.

I would say dont push yourself too hard. Take breaks. If you know you are too tired after midnight trade only morning session, take a break during lunch time and then watch the afternoon session, but do not trade it. Once you are more confident in your trading you can add to your trading time. Just an idea...

If I want to use something I need to understand it. If I think of VWAPs this way it is easier for me to think of implications of where is price in relation to VWAP, and I can assingn a meaning to bounce or breakout and yes, it makes me more comfortable with VWAPs. I read the thread you gave me a link to, concerning MIDAS method. This is basically a method of placement the beginning of computation into some significant places of shift of psychology and I really like it. Whether it will help me as a trader I dont know... I am a newbie and I still have to find my own way. But VWAPs definitely contributed to my market understanding and to organising data in a logical structure. Sure they will not make me a successful trader but they are a powerfull tool IMHO.

VWAP is Volume Weighted Average Price. So what does it represent? It represents the average price of all contracts traded since the beginning of VWAP computation. For traders who entered a position since then it represents the average entry price or, in another words, an average breakeven. You can call the sum of those traders a composite trader and you can distinguish composite buyer and composite seller. Now lets say price is below VWAP. That means that the composite buyer is losing and composite seller winning. Now lets say the price gets to the VWAP. Both buyer and seller are now at breakeven. Seller had paper profit before that, so it is likely that he is not going to cover at breakeven, because he had a chance to cover in profit and he didnt, so he believes even in more profit. And even if he doesnt believe in more profit, he wants at least that profit he could have had before. Buyer sees it from different perspective. He was in a loss and now he has a chance to exit at breakeven. So in this case VWAP is a point where seller wants to buy the least and buyer wants to sell the most. Hence the price bounces back down. Of course there is another scenario possible, and that is such a change of conditions or confidence that seller and buyer reassess their positions. Then VWAP is the last point where seller is not at loss so he will be eager to cover there, or if he is not confident he will place his stop there. On the other hand, if buyer is confident he will not exit at breakeven but will aim for some profits. I am not quite sure how to interpret SD's in a similar manner though. When taking SD's in account you dont consider one composite trader anymore but different levels of "majority of traders", or better to say contracts.

I dont think that the law of (expressed) supply/demand needs any kind of faith. It is logical law based on how markets work, or market microstructure. While both Wyckoff methodology and VSA are based on the same roots they differ in approach to these roots. Wyckoff points out merely principles and guides, while VSA tries for semi-mechanical approach based on bar-after-bar, and is more oriented on concrete signals. I think VSA is an attempt to transform Wyckoff to concrete semi or fully mechanical setups. Then bar-to-bar analysis and extra terminology for defining nuances is a must. But I think this attempt has failed, because it is simply wrong even in its idea. In the end VSA brings more confusion to Wyckoff than good things. All IMHO, of course. I am not an expeienced VSA practitioner nor experienced Wyckoff practitioner.

Nice post zdo. I am a rookie in trading but I feel it the same way. I have a master degree in civil engineering, yet I think education is not relevant. IMO what matters is open mind, logical thinking or common sense, and dedication.

Last week I bought BenQ V2400W for about 350 Euros. Not a big difference to your 280 for 20'' LG. I dont say the monitor I bought is some high-end quality but I guess it is good enough for me. The reason I bought 24'' wide screen was because I recently focus on quite fast charts so I want to have more history on the screen.

Jerry, tonight I am thinking of determining price levels where to act. That is key price levels where one can expect increased support and resistance. That is HUP's. The problem I cannot figure out is the scale I should focus at. You start computation at the session beginning, but in another thread you also say that you can start it later when scalping. Sounds logical. Your indicator pinpoints potential S/R levels within given time frame (or interval). Now if you have a fixed computation start the time frame increases with new data added to the computation. Now take Fibonacci, another way to pinpoint potential S/R levels. It behaves similarly. Lets say, in downtrend, you start on high so you have fixed beginning of Fibo range. As you add new data the range extends and you get new probable retracement levels. Within this major trend there is a lot of up and down swings and you can use Fibo at each of them, too. That is similar with using long term and short term HUP's. It is just the market fractality. Now my questions are: 1. Have you ever though about possible connections of market statistics and Fibonacci? To me it looks like 38.2 and 61.8 % levels could mark the first standard deviations in some special case of distribution and perhaps also a special case of data sample. (Might be complete off, of course, but it just came on my mind...) 2. With regard to above, have you ever thought about a logical placement of VWAP computation other than the beginning of a session? Such as major or intermediate swing high or low, or a beginning or end of trading range? If you did, what conclusions did you come to? Or how to trail the beginning of computation to obtain potential S/R levels of comparable importance, not with importance increasing with new data added? 3. What do you think of TRM (Trade Risk Management, that's a name of company) method based on Hurst analysis, which is basically a spectral analysis of price development, finding dominant frequencies and applying SD's as well? I think that all these methods must have something in common, some ultimate root. I guess one doesn't need to find the ultimate theory (the holy grail?) to be able to trade, but from (almost) purely scientific interest I wonder if you ever thought of this. And if not, at least please try to answer the question nr. 2, as it has more practical meaning

Blue, thank you for sharing this. I am a beginner, been around trading for about half a year, so I cannot give you any advice. But I think we have some things common. My background is in engineering, too. At the beginning of my trading journey I tried to apply scientific approach to trading, programming and backtesting mechanical strategies without knowing virtually anything about the market itself. When I realized that it was not the right way I was (and I still am a bit) tempted by the other extreme - pure tape reading or watching very fast charts to get the feeling of dynamics of the market. Yet, at least for me, it is not the right way either. I lose sight of the forrest and get sucked into every little move. I guess that is what happens to you, too, with those 40 trades. I think one has to find some kind of balance. To be scientific with preparation and deciding where to act and under which conditions. And to apply discretion when judging those conditions and price action around those key levels. I wish you to find this balance, as well as I wish to find it myself

I would not try to short after such a sharp decline, mostly because I would consider the real opportunity missed. IMO such a decline creates an oversold state. My bias (if any) after such a decline would be a rally or correction, not further decline. Depending how would this rally look like, I might look for shorts. But after such a decline I feel a problem with lack of overhanging resistance, that is, not many congestion areas representing locked-in traders above.

Try to go through Trading With Market Statistics thread series in Market Profile forum.

Both Avast and AVG are originaly Czech companies and thus they are very common in my country. I use Avast merely because it was the first one to offer a free product for home use, so I got used to it. AVG followed a few years later.

To reassume the subject of the last few posts I am attaching a 100 Volume Chart I started to use to judge the dynamics of NQ. I was thinking of the best way to observe relations between changes of price, volume and time, and this is the result. It is in fact a 100V chart combined with a 30 second chart. Every dotted vertical line shows an end of one 30 sec interval. So areas of dense vertical lines show little activity in time, and vice versa. Within each 30 sec interval I blend the volume candles and plot a time candle behind them. On the bottom I plot volume histogram for these 30 second intervals. In fact the histogram just shows spaces between the vertical grid lines so it is a kind of redundant, but I find it more graphic. The action displayed on the chart shows NQ on 09/19 and some extraordinary support being constantly hit until broken at 1750.

http://www.avast.cz/index.html Home edition is for free.

As I said I am at the beginning of my journey so I cant really say what is better. I can only say how I am trying to do it. When deciding what chart to use you must ask yourself what relations do you want to observe and what any particular chart provides.Volume chart provides nice "effort vs. result" picture, however it provides worse "effort in time" (activity) and "result in time" picture. Time chart shows result in time and effort in time, but not clearly effort vs. result. Anyway, all is observable from time chart with volume histogram as well as from volume chart with time histogram. One must only think about what he wants to observe and what are the best ways for him/her to see it.

I hope there is no misunderstanding. It is simple. Volume represents effort to move price. How price actually moves on that volume represents the result - in other words what were the opposing forces to that effort.On a volume chart if you see an upswing which starts to round out you can say that price progress on unitary volume is decreasing. That means the forces moving and opposing are becoming equal. If you are aware of time as well you can say whether this happens due to intensive tug of war or due to reluctancy of the "movers". It is about watching the dynamics, changes in effort and resistance to this effort. I didnt mean I can see at a glance resistance meant as a turning point. (But maybe it will come one day )

Standing limit orders act as resistance to price movement. Marketable orders move price. When there is a trade recorded it matches a standing limit order (passive buying or selling) with a marketable order (active buying or selling). I think of voume as of amount of willingness to participate actively, to move price. Because while limit orders are standing ready there, the volume depends on how many marketable orders arrive to match those limit orders. Therefore volume thows activity or effort to move price (in form of marketable orders). Now if price moves depends on the other side - the standing limit orders which present resistance to movement. So by judging price movement on unitary volume you can observe this resistance. Also you must watch all this in regard to time to distinguish activity x laziness, tug of war x indecision. I am in the beginning of my journey, but this is the approach I adopted.

I know you asked Db, but I will try to write an answer. Db can correct it. I am learning how to view volume myself, so I can at least sort what I have observed so far. I watch changes of volume in time. Little volume per time unit = low activity. High Volume per time unit = high activity. This is useful to watch in context or in relation to expectations. E.g. if resistance should be broken one would expect appropriate activity. If activity diminishes instead, the breakout is less likely. I watch change of price on volume (volume chart is the best for that). This tells me when price moves smoothly without resistance and when there is a tug of war. The time factor is important here, too. I dont watch single bars much, I rather switch to lower time frame and I watch swings inside those bars. For this I use volume chart with dense vertical time grid. Single bars are usefull when they have a logical beginning and end, like daily or weekly bars.