Soultrader

We will be scheduling our third online chat seminar with Leroy Rushing on Trading without a Trading Plan:Using Multiple Monitors for Trading. Leroy Rushing is a former Executive Risk Manager for several Fortune 500 financial institutions and is currently a full-time day trader and trading mentor for Trading Everyday. Schedule date is March 14, 2007 from 11:00am EST via our chat room. A transcript will also be saved for those who can not make it. See you all then!

Sounds like a good setup wsam. Total of 6 monitors? Quick question... where can I find a quad monitor holder for a reasonable price?

Do any of you pay attention to inside days and have strategies to play them? I havent take a look at them closely but I was putting some thought into it and decided to take a look. Perhaps we can add our insights to develop a strategy that we can trade off independently. (each trader should have a method that fits them) To me playing inside days reminds me of Raul's morning breeze strategy. Basically entering in the direction of the breakout from the previous days high or low. What I have noticed is that anytime price breaks out of the previous days range (assuming the previous day was an inside day) the markets tend to go in that direction for a good amount of points. (dont ask me what good amount is.. I have not backtested any of this) I want to look at some examples of the most recent inside days. Feb. 28 and March 2nd was an inside day. The strategy I have in mind is identical to the Morning Breeze. Play the breakout of the range. The chart below shows the break of the low from the 28th. Price declines for approximately 100pts before reversing. Now lets take a look at March 5th, the day after the inside day on March 2nd. The first arrow shows a fakeout when breaking the low. Would the trade been a loss? Im not sure.. since price did decline for 24pts before reversing. Depending on whether you scale out or move stop.. this trade may have been break even or even profitable. The second arrow shows a valid breakout causing price to decline 60pts. Now I had to go back to January 23rd to find another inside day. Let's take a look. Below is a chart for January 24th, the day after the inside day. The first arrow points to the opening drive up. We have a pullback that violates the previous days high by about 12 ticks then reverses for a nice trend day. Lets take a look at one final example of an inside day on December 26, 2006. The chart below shows price action from Dec. 27th, 2006, day after the inside day. Price gaps up and never looks back. How interesting. The following study is based on a small sample size. But I find this extremely interesting. Perhaps it is worth taking a look and devise strategies or be aware of inside days. Inside days do not occur often but when they do perhaps traders can take advantage of this. All thoughts and insights are welcome.

neustaju, Check this thread I just made: http://www.traderslaboratory.com/forums/f34/identifying-short-covering-day-traders-perspective-1329.html

A question popped up in the forums on "how to identify short covering?" so I thought I'de start a thread on it. Please feel free to share your insights. We all have our interpretations but this is how I define market participants. I have excluded participants who enter to hedge... as I do now know what category they fit in. Category 1 Long term buyers and sellers - these participants are looking to profit on a longer time frame basis using daily, weekly, and monthly charts. Usually known as commercials. Category 2 Medium term buyers and sellers - Although some may prefer to include traders who hold positions for weeks... I prefer to place swing traders in this category. Traders who hold positions anywhere from 1 - 10 days. Category 3 Short term buyers and sellers - Day traders and scalpers who trade electronically. Category 4 Floor traders Okay.. so out of these 4 category, as a day trader I am mainly looking for short covering by participants in category 3 and 4. Why? First Category 1 and 2 do not care about these intraday swings. They are looking on a bigger time frame. However, it would be wrong to completely exclude these groups as they are also day traders when placing a trade. The time I watch for short covering from participants in Category 1 and 2 is when we have a down trend day or we have had several lower value placements during the previous trading sessions. For example, if the YM hits a daily pivot and declines 30-40pts... I am not watching for short covering by Category 1 and 2 market participants. Their attitude is "who cares?". As a day trader we tend to go "Wow" when the dow rallies or declines 40+ pts. So who are the shorts that will drive the short covering rally? Category 3 and 4 participants. I am mainly concerned about short covering from day traders and floor traders. In other words, those who sold earlier... when will they start covering? For a short covering to happen the market must be in a decline. Ask yourself who are the traders that shorted at the top and when will they be looking to cover? This can be 30 secs ago, 3 min ago, 30min ago, whatever. The point is understand the psychology of the traders that need to exit in order to profit from this move. So how do I spot short covering? First, I am a hardcore tape reader. I will remember the 10-lots that appeared on tape on the sell side at the top of the move and look for the same lots appear on the buy side after a decline. You can spot these guys covering on the tape as the tape will start to become green and price decline will slowly come to an end. So what areas should you watch for? Let's say the markets rallied at the open, formed a double top, and then reversed. Now the shorts from the top or double top.. where will they cover? Perhaps at the 61.8% fibonacci retracement, perhaps at the open, or previous day low, etc... Knowing the reference point is important in my opinion. What I tend to do is to picture myself on the short side and looking for an exit. I ask myself "Where is a good place to exit?" I am sure the majority of the shorts are thinking the same thing. Pick a reference point and stare at tape... you will see all the shorts jumping on the ask to cover, cover, cover!! Short covering fueled rallies are ones I hate the most. It is such an amateur move since everyone is chasing. Another method I use by looking at volume delta. Basically throughout the decline, I am looking for volume bars that show more contracts being bought at the ask versus sold at the bid. Basically, you will have the early shorts who fear of losing profit covering first. Most of the time price will decline a little further and then you still start seeing the better traders starting to cover. Volume delta shows this clearly as you will start to find more volume bars that show more contracts bought at the ask as price declines. Eventually, most of the shorts will cover and the greedy ones will cover the same time the amateurs start chasing the market. Its just something that I look for... hopefully traders here can add their input as well. Happy trading.

Im using a different timeframe: 9:00am EST to 4:15pm EST I have the following numbers: VAH: 12169 POC: 12125 VAL: 12095 Im adding 9:00am to 9:30am because of the active premarket we are experiencing lately.

Good question. I will make a new thread on this.

Here is my setup. 233 tick chart with Heikin Ashii on the price bars using volume delta. Internals you see are: TICK, TRIN, ADV, PREM. PC Ratio is on a seperate screen. I also use a 30minute chart and two columns of tape.

Walter, Im getting an invalid symbol for TS. $ADD is not valid?

Totally agree. I never trust those darn Level 2. Just once in a while you catch something interesting .

Congrats Tingull!!! Good to here your stories on improvements and focus. Interesting trick on your mind there Tingull. I exeperience more fear after an entry (never had a problem pulling the trigger), hence the reason why I need to scale out. It's important to realize our weakness and look for a method or technique to overcome it.

hahaha.. true enough Kiwi. I am definitely going to look into the mini Nikkei sometime soon. Are you with IB as well? Im trying to find a broker that provides the mini Nikkei.

Looks pretty walter... but you are slowly starting to lose me I agree that there is great potential using the $adv for market direction and entry timings. I thought Ide take a look into the $ADV for its simplicity... now Im starting to see complexity Good stuff though walter... I will try my best to keep up.

I have heard nothing like this recently. But would like to confirm this 100% if this is true or not. If this is really the case.. this is seriously going to be a problem.

It was not until Markets In Profile that Dalton really woke my eyes up on trader confidence in market direction, especially at the opening. For all Mind Over Markets readers, I am sure we are familiar with the following: 1. Open-Drive 2. Open-Test-Drive 3. Open-Rejection-Reverse 4. Open-Auction The amount of confidence differs from each of the following opening types. It is important to understand the differences. What caught my attention was the Open-Rejection-Reverse type opening in which price exceeds the previous days low/high. However, price is rejected and returns within the previous days range. This phenomenon is a good opportunity to go with the reversal trend as price has a tendency to seek the opposite extreme. How many times have we seen the ER2 or YM break the previous days lows but rally in the afternoon to close near the high of the range? What traders can do is to go with this reversal trend as soon as price re-enters the previous days range. Now the open-test drive is a concept that I am very well familiar with and relates to an opening setup I use everyday. The open-test drives simply refers to price opening up and testing a known reference point to test for sellers and buyers. For example, price opens above value and tests the overnight high which is a few points away. Sellers step in and drives price back into value and possibly to test the lower end of value. My opening setup is very similar. When price opens and there is any reference point near it (daily pivot, VAH, VAL, weekly pivot, monthly pivot, previous day low/high, overnight high/low, etc...) look to fade this move at the pivot when confirmed on tape. Now let's go back to trader confidence. Dalton once again brings up a great question: "What is the market attempting to do, and what grade does it get for its effort?" This is where market profile really comes in handy. The picture of the profile tells it all. Let's say price opens and immediately declines and appears to be a downtrending day. The opening shows a open-drive. However, the 5th and 6th 30minute period is unable to break or test the low created by the 4th 30minute period. In other words the profile would look like this: A (open) A A A AB B B BC BC C C CD DEF DEF DEF DE D D Notice how E and F period are trading above D period. What does market confidence tell us? Is the market doing a good job trying to auction lower? Or are we seeing some kind of long liquidation but yet an accumulation at the same time? If we try to visualize a complete profile, we can clearly see value area starting to develop and a "b" shaped profile in the making. How is this information important to trader? Well if you were short from the A-D period you will know that the short risk becomes greater. In other words the potential for further downside movement diminishes. Hence instead of waiting for the markets to stop you out, it might be a wiser decision to exit according to what the market is telling you. Also, if the following day exhibits a "P" profile, this would indicate a short covering and a potential lower on the 3rd day. However, if the market balances on the following day... perhaps the market has potenitla to the upside? Of course as a trader there are many elements that you need to watch on top of this. Such as: volume at the lows of D period, any reference point at the lows, if D period lows become a single print tail, etc... Please feel free to elaborate on this concept. I think alot of new insights can be born.

walterw, On the first chart, I see a ES: $ADV. How did you manage to do this? I see that both the ES and $ADV are 4 tick charts? Thanks

I want to discuss some trading strategies based around stop gunning. The doldrums are notorious for this. Whenever we have price in a bracket, and it breaks out of the range.... the first thing you will see is stops getting taken out. When these stops are taken out, there is no demand or supply iin the direction of the breakout causing a swift reversal. Trading strategies can be designed just like pattern failures and breakout failures. It is usually a good trading opportunity to fade these false moves. On the other hand, if the market stalls and spends some time above the breakout point.... this can indicate a further continuation of the trend. We are simply not seeing sellers stepping in reverse the market. Hence, traders will gain confidence and we can see fresh buying. The breakout resistance becomes support. Now take the opposite perspective. Instead of being the trader who profits from reversals, is it possible to capture the momentum move from the stops being taken out? If other words, if price breaks upwards.. is it possible to enter and exit swiftly to capture this move? My assumption is yes... but only if you are good at reading order flow. I think floor traders have the most edge here as they can simply get in before the move happens. But their behavior to drive prices up/down... wouldnt that be reflected in the charts in terms of candles and price patterns? For example, if x amount of price bars hug the upper resistance... this can be a good indication of a breakout, etc... Please feel free to add your inputs. Thanks

I like to keep myself updated with new trading insights and stragies constantly. So I make it a habit to continue reading trading books. I was browing through amazon today and found an interesting book. (not available yet) Its called: "The Three Skills of Top Trading: Behavioral Systems Building, Pattern Recognition, and Mental State Management" by Hank Pruden. The review mentions alot on Wyckoff which grabbed my attention immediately. Do you guys have any favorite trading books or any book you can recommend? Ive read a good amount of books so I am looking more related on strategies, concepts, etc... Thanks

Check this out. I am starting to seriously get enlightened with designing trading strateges based off this. Thanks walter for taking this thread to the next level. This tool might be alot easier to read than the rest of the market internals. The next step for me is to figure out a timing on entries.

I would appreciate that waltew. I would like to play around with it myself. I was also unable to plot the $ADV directly on the tick chart. How did you get this to work? Thanks

Wsam, do you think its a better idea to run TS on a different hardrive? Internal or external? I have a couple slots open myself so might do some upgrading.

Im not familiar with it. Where is this exchange located? And is ICE the abbreviation for it?

Theres an interesting comment made by James Dalton in Markets In Profile. He mentions alot of trend following systems lose money because they are unable to determine the relative stages of the trend. Is the trend healthy? Is the trend getting old? Also he mentions that fund manangers using trend following systems follow price only. Since they do not view the actual profile of the markets, they are unable to determine if the trend is a continuation or a short covering.

Hi The Bear, Im not too sure as day traders are a rare breed here in Japan. The ones I know trade mainly equities. I personally do not trade it but have gained interest in the mini Nikkei recently. I think Kiwi may be familiar with it.

Hi, All you need is the NYSE data, OPRA, Cbot and CME mini packages, and maybe the Index Data Services. You need OPRA to get the PC ration. If you are trading the YM only, you wont need the CME packages. I prefer to watch the other contracts. Hope it helps.