Soultrader

Another video during the trading day. This is the perfect setup: http://www.traderslaboratory.com/forums/chart-laboratory/324-perfect-setup.html#post688

This is a continuation of this thread: http://www.traderslaboratory.com/forums/trading-videos/323-tape-reading-part-2-traders-laboratory.html#post686 Overnight information is critical in understanding how a market will behave. In this chart and video, we had buying pressure below value. Price then fell below the value area during the trading session just to find buyers push price back into value. The perfect setup occurs on the pullback to the value low pivot. CLICK HERE TO VIEW PART 1 CLICK HERE TO VIEW PART 2 See attachment for charts.

Posted a new tape reading video for Sept. 11, 2006. Not an exciting morning session but a couple interesting lessons. http://www.traderslaboratory.com/forums/trading-videos/323-tape-reading-part-2-traders-laboratory.html

A brief video on tape reading from a live recording on Sept. 11, 2006. The first two parts go over one particular trade I had using the tape. In the third video, I explain one interesting pivot point play. Gaps fills will act as a pivot. CLICK HERE TO VIEW PART 1 CLICK HERE TO VIEW PART 2 CLICK HERE TO VIEW PART 3 Note: Part 1 and Part 2 is fairly big in size. Depending on your internet connection this may take 10 - 15 minutes to load. Approx length is 40 minutes combined. Charts created by Tradestation Presented by Traders Laboratory

You might find this thread relevant if you are learning to trade price action only. http://www.traderslaboratory.com/forums/stock-talk/322-box-theory-market-tactics.html#post684

"This experience did more than anything to convince me that the purely technical approach to the market was sound. It meant that if I studied price action and volume, discarding all other factors, I could get positive results." From How I Made $2,000,000 in the Stock Market What is the box theory? Nicolas Darvas said it best, "I started to realize that stock movements were not completely haphazard. Stocks did not fly like ballons in any direction. As if attracted by a magnet, they had a defined upward or downward trend which, once established, tended to continue. Within this trend stocks moved in a series of frames, or what I began to call "boxes." In the modern day trading world we call these "boxes" brackets or support and resistance. Price moves from one zone to another. Once prices break this zone, they will enter a new zone. When these zones pile on top of each other we have an official established trend. This concept is similar to a higher or lower value placement in market profile. As long as there is a continuation of a higher value, a trend is in place. When studying price action alone, this is an important concept to understand. Price action is king. Learn this method and apply it to your trading methodology and you will never become extinct. I have studied the Box Theory to apply it to my trading as well as tape reading. For a new trader, the concept of the simply law of supply and demand is hard to grasp. The market is an auction place. There is price acceptance in a new zone or rejection. Acceptance offers opportunities to fade the lower pivot level. Rejection offers opportunities to play the false breakouts. In tape reading, the box theory can be applied by understanding short term support and resistance points. Just like a stock will use resistance as support once broken, the tape acts in a similar fashion. Understand that the more time price spends at one particular level, the more transfer of hands and a possible reversal. Most traders focus on just price and indicators. Learn to apply time into your trading and this will give you a new perspective.

This is a chart posted inside my emini trading journal as well. Thought I would put it here since I found it relevant. In this example, price fell below value just to be pushed back into it. This indicates a single print tail in the overnight session. The markets are telling us that it wants to trade within or above value. Notice that shorting the break of the value low pivot is now a risky trade. Support exists at the globex low and at Fridays low. A break of Thursday's range must occur to see any significant move to the downside. Based on this analysis, I will be looking to to buy at the value low pivot and at the globex low when the market opens. Also, I will be extra careful of shorts.

Have you read Extraordinary Popular Delusions and The Madness of Crowds by Charles Mackay? Great book reflecting historical events of greed. One popular story is the tulip mania in Holland where people would trade their house for a couple tulips. Booms and Busts.... this cycle will always exist. It is in our nature. Extraordinary Popular Delusions and The Madness of Crowds

No they don't. Think of it as a trading facility. It helps traders who have issues with isolation if they are trading from home. Also, they have pool tables and such which makes it easier to stay away from trading at times.

Do you think market profile works better for commodities?

I use different strategies for long and short setups. The markets tend to move slower when price is advancing and faster on a decline. I find pullbacks in a uptrending market to be deeper than retracements in a downtrending market. One example is: in an uptrending market I use a 61.8% fib setup. While in a downtrending market I use a 50% fib setup.

The dow mini or YM is very similar to the S&P 500. A couple of reasons why I prefer the dow: The YM can be traded using a tighter stop than the S&P. My setups use a 10 points stop with the YM. When trading the ES, a 1pt stop is guaranteed to get stopped out. The liquidity is thinner compared to the ES. This makes it alot easier to spot volume on the tape without risking any slippage. There is also the psychological side when trading the YM. Greed plays a big factor in trading. Many new traders will refuse to take a 1-1.5 point profit in the ES just to see their stops get taken out. In the YM, a 15 point profit is alot easier to take than a 1.5pt profit in the ES. When buying the test of the lows or shorting the test of the highs, the ES tends move 1+ point before reversing. This hurts alot of new traders using tight stops. In the YM, price will usually stay within 6-8 points. Aggressive and experienced traders trade the S&P. For new traders, the YM is a good contract to begin with. Price does not move as rapid as the ES. Market profile works really nice with the YM as well. This is probably the main reason why I trade it.

It takes many years of market experience to get to that intuition level. Market understanding is a lifelong process. There is always something new to learn each trading day. If you want to read about intuition and trading, there is a good book I picked up a few years ago. The Intuitive Trader by Robert Koppel

Pretty sure it is. I would have to double check though.

Hello extradosage. Welcome aboard. Please feel free to contact me anytime if you have any questions about our website. Thank you for registering

I think you got it mixed up tradergap. The market is one big auction place of human emotions. Human behavior repeats itself. That is why price patterns still work to this day. Pivot points are also data derived from the past. You take the previous days close, high, and low to come up with daily pivots. This is still past data. Key support and resistance levels with high volume can act as key reversal points. Try learning crowd behavior and you will have a better understanding of market psychology. One of my favorite crowd psychology books is, The Crowd by Gustave Le Bon.

I can not give you an exact time it may take for you to learn the markets based on pure price action. I can give you an example from my own experience though. I learned trading while working at my old job at the office. Because I was unable to install any trading platforms, I would simply visit sites like futuresource.com | Futures & Commodities Quotes, Charts, News & Analysis to get delayed quotes and a 15 minute delayed candlestick chart. Obviously these charts do not have advanced technical analysis so the only thing I was able to look at was a candlestick chart. Absolutely no volume or any other technical indicator. The only way for me to update the charts and quotes was by refreshing my browser. So I would reload my browser every 15 minutes to obtain fresh information. This went on for approximately 4-5 months and in the meantime I began to try to predict price. Since it was a browser based chart, I could not see the actual price movement. All I could see was where price would be in the next 15 minutes. This pain in the butt method actually helped me learn price action immensley. I began to write down trades or predicitons on where price would be in the next 15 minutes. I started to realize that prices will move from one level to the next once support/resistance is broken. So I began to look for key support and resistance levels using a 5 minute, 15 minute, and 60 minute chart. I also noticed how overnight S/R levels acted as key pivots for the trading day. Eventually I worked on this skill set to study market profile and came up with my own trading style based on pivots and MP. I no longer use a 5 minute, 15 minute, and 60 minute chart. I use a 233 TICK chart and a daily chart for most of my trading. I have also applied more advanced pivot point trading techniques into my arsenal. But initially, I was kind of forced to learn the markets just by observing price. I am sure you have the luxury of real-time data. Start by taking all your indicators off. Apply a candlestick chart and a time of sales and just sit there and watch it all day. Enough absorption by your mind and you should start to recognize patterns. Force your brain into autopilot. Trading should be as easy as driving a car. First year drivers are usually reckless. In Japan, cab drivers are the best drivers. Why? Experience in a dense city. Commit at least 3 or more months understanding market action based on price. Trust me this will all pay out in the end. Good luck.

I would not necessarily add more weight to another. They are both important to understand market concept. The opening price shows any changes in market conditions from the previous days close. If the opening price is higher than the closing price, we have a gap up and shift in market sentiment. The greater the distance between the close and the open, the greater the change in market sentiment. You also need to consider if price has gapped above/below value and above/below the previous day's range. This indicates market imbalance. Therefore the opening price is fairly important as well.

tradergap, read through the posts on the forums and you will see that some traders here rely soley on price and nothing else. Trading indicators can be profitable but what are you going to do once they no longer work? Price is king. Market conditions change everday and that is why system trading must be tweaked constantly. Once you learn to trade price, you will be light years ahead of the game compared to other traders. I have also heard of that stochastic tactic but I highly doubt it is a good system to follow. If every single indicator in the world showed bullish signs, the entire world must be a buyer. Who is left to buy?

The financial market is one big auction marketplace. It is important to understand that price moves in relation to supply vs demand. Just because you think price will go higher and place a buy order, it does not mean all market participants on the buy side support your decision. In order to understand what other trader's are thinking, let's take a look at the possible scenario's. The Buying Side: 1. Those who are buying now. 2. Those who's stop orders are being triggered. 3. Those who have limit orders below the market. 4. Those who have buy orders placed above the market. 5. Those who are covering short sales. 6. Those who have sold higher and are buying back the retracement. 7. Those who have sold too fast and wish to enter again. On the Sell Side: 1. Those who are selling short. 2. Those who are liquidating their long positions. 3. Those who's stops will be triggered. 4. Those who have orders placed to sell below the market. 5. Those who have limit sell orders placed above the market. 6. Those who are dumping their stock because they bought higher. 7. Shorts who covered too fast and want to re-short. As you can see there are many reasons why one might enter the market with a long or short order. When both the buy side and sell side is evenly balanced, you will have a consolidating market. When confidence shifts towards one side, the markets will trend. Once you see the market as one big auction place, it will help you understand balance vs imbalance. Market understanding is a crucial element in trading success.

It doesnt matter which market you start out with initially. There is no single easy market. You may find stocks that are easier to trade than other stocks. Or you may find a futures contract that is better suited to you than other products. Find a market that interests you and learn it thoroughly. I think all traders need to have at least one market that they can call it their bread and butter.

I would be very interested in knowing about this as well. I do not trade currencies but since I am a part market profile trader this will be something I would like to learn.

Welcome to the club ant! Thank you for your compliments. The tape reading vidoes were not the ideal video since they took place on Sept 6 when the markets was absolutely dead. Its very hard to read about tape reading and learn it so I will do my best to make a video on Monday. Here is a couple things you should look in the tape. 1. Green vs red. Green prints show the transactions took place on the offer indicating buyers want to buy badly. Red prints show transactions on the bid indicating sellers just want out. A row of red prints indicates short term panic and vice versa. 2. Most of the tape is noise. What you want to look for in tape is when price approaches your key trading level. You want to see price rejection. For example, if the ES shows prints of 1298, 1298, 1299, 1300, 1300, 1301, 1299, 1298... Notice the single print at 1301 and a price rejection back down to 1298. If your pivot point was at 1300, this could indicate a short term revesal. 3. Watch for big players. In the YM it is relatively easy to see because 10 lots is considered big. In the ES it can be a little harder. Anytime you have red prints of 10, 20 lots this indicates selling pressure. This works well at key pivot levels. 4. Watch for the flow of the tape. A smooth rolling tape indicates market interest. A slow moving tape indicates a lack of interest. In a trend, if the tape is flowing smoothly this can be a confirmation of the trend. However, after a decent run if the tape starts to slow down like it is in traffic, you may need to watch out. The markets could chop around or reverse. 5. Learn to read tape by bracketing it. Pick any price level and just bracket. Once price breaks that bracket they will enter a new zone. I studied the box theory in Nicolas Darvas' famous book, How I Made $2,000,000 In The Stock Market and applied it to tape reading.

Taking it into account that you are profitable trading the emini S&P, I do believe specializing can generate enough money to provide a living. However, no matter how good of a trader you are, trading small lots can become a problem. A trader trading 1 lots will have a hard time living off 2 points a day than someone trading a 100 lot. The YM moves similary to the ES. On any given day the YM will have a 50 point minimum range. More common are ranges within 50-100 points. I do believe that one can trade for a living with index futures only. Of course there are days when the markets do absolutely nothing like on Sept. 6, 2006. I do think it is a matter of a traders satisfaction. I have no problem trading the dow only while others may find the need to trade other markets. As long as you are able to trade one market profitably, I do think one has the ability to trade any other market successfully. All that is required is observation of the underlying instrument to understand its personality. I think the problem with alot of traders is that they jump around too much from one market to another without truly being an expertise in one market.

I do not trade oil but take a look at this article by specmav. http://www.traderslaboratory.com/forums/general-discussion/202-oil-supply-demand.html