i trade

Good point....the condition or context of the market, not only on a short term basis but maybe more importantly on the background or longer term, is often overlooked when testing strategies or an "edge". My truth be told.....successful traders realize that setups for both winning and losing trades look identical when looked at only in the context of short term market activity.....its the longer term background that can distinguish between them.

Speaking from a purely discretionary stand point...I think an important aspect of trading "an edge" (or you can say it's part of your edge) that's hasn't been mentioned is varying the leverage used depending on the underlying context of the market in which your "edge" is setting up in. Most retail traders either {a} use max leverage all the time on their entries which requires you to be amazingly accurate with every entry or {b} they don't know when to up the leverage and increase their position size when underlying market conditions warrant it. Everyone loves the poker analogy : picking up pocket 10's or picking up pocket aces, both hands you would want to play but then again 2 hands that you would probably play differently pre-flop not only according to the quality of the starting hand itself but also according to the context of the situation - are you 1st to act or last to act, has any1 limped, has any1 raised, how many chips do you have...etc , etc.

Well it wasn't so much what I did but more so a matter of what my broker allowed me to do! Here I am...newby S&P trader, maybe trading a few months. Had to be in around 1996 or 97 before the time of the e-minis...only the big SPOOS....and it was $500 a point vs. the $50 a point in the present day ES. Back then there were no electronic orders...all orders had to be called in to my broker who in turn would call them into the floor. Then I would have to wait for the call back with my fill so I could place my stop. Lucky me...my broker, a sole proprietor IB working out of her home in Florida, takes a liking to me and gives me the number directly to the floor of the S&P's so I can call my own orders in and handle it all my self. Great...saved me some time and it was cool at the time to call directly into the floor. One problem...my account was only $3 or 4k and here I am calling directly into the floor with my orders. I could have called in with an order to buy 10, 20, or even 30 cars at the market and they would have placed the order, who knows? With a 10 lot order my $4000 account could have been wiped out with less then a point move against me. Pretty crazy when I think of the damage I could of done financially to both myself and my broker. :doh: (Needless to say that account didn't last very long!)

Thanks! Yes....context is king...everything is relative to both the macro and micro inventory conditions of the market and also to any correlated markets to the one that you are trading. The majority of exhaustion in a down move comes when long holders give it up and cover. Sometimes the level where capitulation occurs might seem illogical because it is based on held inventory levels rather then a specific price level.

Cunparis I just wanted to expand on the exhaustion by sellers that you mention. First I want to confirm that we are talking about intensity occurring in the midst of a sell off. If this is the case...the important part you didn't mention, and the part that causes the most intensity, is the capitulation caused by the selling of long held inventory. Then as short holders see longs capitulating they start to buy to cover then new longs start buying to initiate. These 3 steps are all part of the process of the market transitioning from a down auction to an up auction and help to point out whether intensity will lead to change in trend or continuation.

FT...any comment or experience with the accuracy of the DTN IQ data feed when it comes to bid/ask volume data? Also, if you wouldn't mind could you post an intraday chart from Thursday and/or Friday of this current week showing cumulative delta so I can compare it to my data? Appreciate it!

Great call Fulcrum! Looks like we got that event at 3:40pm today?

I don't use forex correlation as a reason to enter or exit a trade. I use it as a guide so I don't over leverage myself with positions that are similar. ie: if I'm loading up short aud/usd then I want to be careful going long usd/cad.

Best correlation tables I have seen. Forex Correlation - Mataf.net

Been trading for a long time and I've never stopped to actually think about this. Please correct me if I am wrong. So in comparing margin power of ES to that of spot currencies: Roughly speaking, ES - $500 in margin allows you to control ($50 x index value of 1100 =) $55,000 in trading power. Eur/Usd - $1600 in margin allows you to control $100,000 in trading power. So $1600 in ES margin gives you $176,000 of trading power vs FX giving you $141,000 basis the Euro/usd. So as margin levels stand presently ES actually offers more leverage the FX does. I don't get it, why are they picking on FX? I agree 100% with regulating the industry to get rid of the fraudsters but why do they think they have to treat traders like a bunch of kids and tell them what is the correct level to speculate (or gamble as some do) with?

Vittorio..what did you want to see...a merged profile?

Order flow is what moves the market...no question there. Support / resistance is the main thing I use MP for. Actually I can boil it down to 3 main things that I glean from MP: 1) Shows me the areas where I want to do business and my bias for trading within those areas. 2) Helps me define my risk by showing me where the market shouldn't go if my trade idea is correct. 3) Keeps me out of noise. Idea: why not use MP as your back gound to enter trades and order flow to manage?

In a nutshell yes Blowfish. Most of what I use for order flow is similar to out of the box market delta offerings like volume breakdown.... just the basics. The only unique study I use is something I came up with and had a programmer/trader friend code for me, It's just a little different way at looking at bid/ask trades but has served me well. For me MP is the base and order flow/ volume is secondary.

I don't know about you but personally I'm not equipped to compete on a nano second time frame like UB. But that doesn't mean I can't track the footprints of the commercials and use them to my advantage.

Commercials...other time frame....composite operator.....traders from the beginning of time have been tracking the commercials. Look at Wyckoff and his tracking of the CO. But what came first the chicken or the egg. Do commercials trade around value or does value follow the commercials. Willing to bet its a little of both. In either case value = structure. " It was Tom Alexander who said that more time applied to studying the market in an out of context way leads you to nothing and gets you no further ahead. " Context = background = value on higher time frame. ""Answers are easy to find, it's the right questions that are hard to come by. Once you've figured out the right question finding the answer is just a matter of time."" Question to ask yourself: will the vertical movement in the foreground get absorbed into the background or will it change the condition of the background. Consider this from Steidylmayer: Successful traders realize that the setup for both winning and losing trades look identical when looked at in the context of short term market activity. It's the longer term background condition that can distinguish between them. Using the background as the basis for your trade setups = upgraded opportunities.

Yes...I use a 20 day profile to approximate the monthly view, a 5 day for weekly view, a daily, 30 minute for es intraday and 60 min for currencies intraday. The exact amount of days contained is not important as I merge profiles to give a clearer picture.

Agreed Hegh....only thing I would add is the 20 day profile. Oh yeah...and a couple of bar charts for reading vertical volume and order flow.

For intra day value on the ES, esp for scalping purposes, I use vwap and the 1st stand dev as a dynamic value area so in that case VWAP is contained within value. As far as daily or weekly profiles based on volume or TPO's, I'll have to slap a vwap on them and see but having vwap outside of value is hard to conceive. Since the range on ES has been lacking I've been much more active trading currencies. With currencies I look at tpo profiles alongside volume profiles and the poc in either case is always contained.

Updated report in: it seems it was UB and his crew! Seriously tho...UB must of been all over that!

Market Profile – The Hope and Fear of it all. I wanted to start this little thread and see what kind of feedback and conversation is stimulated. Everyone has their own style - I’m going to show you mine. Hope and fear…it’s perfectly normal to experience these emotions but over time I came to realize that I was experiencing them in a way that was detrimental to my trading results. I don’t remember where or from whom I learned this but here’s the idea: Hope belongs with the winners, fear with the losers. In the “old days” I had it all backwards. I hoped my losers didn't go any further against me and I feared letting my winners run, worried that they would turn and come back on me. Now I hope the winners run in my favor and fear letting losing positions run against me. I’m far from perfect, I’ll say without any hesitation that the biggest hole in my trading game today is not getting as much as I can out of my runners. I’m a scalper by nature, usually scaling in and out, so letting some run has always been an obstacle for me…one that I am slowly overcoming. But on the flip side of the coin getting out of a losing situation, especially when market condition has changed against me, is second nature. That’s where MP comes in. It gives me a sense of control and confidence in which my emotions, for the most part, are kept in check. This sense of control also gives me confidence in determining my bias and accepting my risk points (the correct risk points, not financially controlled stops). And that is the base from which I trade on. On a side note I didn’t realize how time consuming it can be to write a detailed post. As it is I have been so focused on trading lately that I feel like I don’t spend enough time with my family and have been barely getting by on 5-6 hours sleep a night so we’ll see how it goes. All though I have devoted an incredible amount of time, energy, and passion towards the markets over the years(trading on and off for over 10 years), during this past year I have transitioned into full time trading so it’s been even more intense. In 2010 my 2 major goals have to do with balance: 1) Developing more balance between trading and the rest of my life, and 2) refining the balance between scalping and letting my winners run. I’ve found that as I’m writing one thought can quickly lead to another. Bear with me as I try my best to communicate my thoughts in a rational way. I guess I'll just go about it from a general view point and then focus in on specific ideas and questions as I go. Another issue I've come across is that what I am seeing develop in real time, as profiles and value areas build, might be hard to explain visually after the fact. As the day wears on profiles and value are constantly developing and shifting especially as I merge profiles on shorter timeframes to put value into a clearer context. We’ll see how it goes.

Interesting stuff Frank...please keep us updated!

POC being the most widely accepted point of value is alway encompassed by the value area. It can be toward the top, bottom or right smack in the middle.

Sounds good C! Hopefully in the next day or 2.

P.S. I know I promised some charts...I will follow up on that. Been a busy week trading and family wise. I started to post over the weekend but I found myself going into detailed explanation of the way I trade the markets which takes some time.

Hey Corey, What do you mean when you say support/resistance is hidden? And I'm not sure what you are referring to when you say market internals? Horizontal movement = balance = value = efficiency = support/resistance. That's how I look at it. The balance/value area is the support/resistance....it's right there in the profile. And it shows me where to do business. Balance is relative to the timeframe you are looking on. You can have balance on a 60 minute timeframe, you can have balance on a weekly timeframe. If you are looking at balance on a weekly timeframe and you want to pin point entry and exit points drop down to a 60 minute profile to trade it. When value/condition is unclear to me on 1 time frame I look at another time frame until I find a clear value area that I can lean on. That becomes my backqround condition. Then as long as I can define acceptable risk and reward I drop down in time frame to manage the trade. As long as the market activity on the shorter timeframe is absorbed into the background condition of the higher timeframe then my trading idea for that particular instance will be profitable. If I don't have any clear information to work with then I don't do any business and I move on to something else to trade. Part of successful trading is knowing when not to trade. I don't pretend to know what is going on at every moment in the markets I trade. But I do know what areas I want to do business in and from there all I can do is define and accept my risk. Again I'll pose the question to you...what exactly do you want MP to tell or show you?