joshdance

Insulting me with a sarcastic "Market Wizard" user title which I have no control over makes about as much sense as if I were to call you "Mr. 40% Trader IQ" which you have no control over. It seems we agree on quite a lot, and even if we don't, that's what makes a market, so no need to prolong this discussion.

No one is saying that what you are doing does not work, and I do not think people are really misinformed. Yet, you are saying that other things won't work: That is an ignorant position to take, and you will be humbled for being so close-minded about what is most important in successful trading. And what's most important in successful trading has nothing to do with order flow. My charts consist of: footprint, 500V, DOM/TS, 3000/10000V, market profile, 30000/50000V, TICK, and then small reference charts of the 10y, spx, ndx, djia, euro, and dax. I don't have any candles, I only use hilo bars (see my thread "The Close of a Bar is Meaningless" to see just how much I hate traditional intraday candle views). Check the "Day Trading the Emini Futures" thread a few months back (one of my last posts there) for a footprint chart I annotated highlighting how I used it to make trading decisions. I say all of this to say that I am far from "traditional" in my approach, and I rely HEAVILY on order flow to make decisions (in fact, I really have no other way to really read the market). But you are saying that price information alone is not enough to form an edge so as to be able to put capital at risk. But large, huge investors do it every day, with more money than you can possibly ever hope to accumulate, and I guarantee you they don't give a rat's ass about order flow. It works great for you, it works great for me, but it doesn't have to work at all for everybody.

Yes, kind of like saying "we are in the present," when the sentence immediately becomes past as we are uttering it. But I think the point was that some traders will rely on something like an MA crossover for "confirmation," and by the time the MAs do cross as expected, the opportunity is largely gone, or even perhaps the market has already turned and momentum has shifted. This is looking at "the past," when signs of change are clearly presenting themselves in "the present," maybe the last minute or 30 minutes, via looking at price data, or volume data, or whatever one chooses. I suspect this is what we could call past vs. present, or then vs. now, or the like. Thank you Db, I really appreciate that. When some of the threads I was active in kind of fizzled away, I just lost interest in a lot of the discussion, though I certainly do miss reading some of the great posts here. I check in time and again, but I just don't post a lot.

Ok, I see what you are saying now.

The point being that we are all simply "traders"? If so, I agree to an extent; but some are certainly performing outstandingly, trading large size, and behaving in a professional manner such that they have earned the title of "professional," whereas some treat trading as simply a hobby, a game, and behave in ways that rightfully earn them the title of "amateur." Do you not agree?

Sorry if I was not clear. I simply mean a profile that is integrated into the DOM, like the attached picture. It allows the viewer to keep his eyes in one place when he needs to focus, instead of having several different places to look for information. I understand your point now. Though I don't use what you call "garbage," there are quite likely some very successful traders using these, so I think it's a bit unfair to lump all traders into a category. I can guarantee you that many "order flow traders" are only such in name and they think it sounds neat, and they still suck. I would just like to add that "what is" is always paramount, but "what was" often affects "what is," if for no other reason than the fact that people hold positions more than a day or two. And when their positions (as evidenced by "what was") are affected by "what is," often they act on "what was" and change "what is."

So, you pirated/stole it--nice. You talked about "professional traders" and that they never look at charts. My guess is that you really do not know any, but that you have heard this and it sounds cool. In fact though, I do agree that many do not, but no one who relies on a DOM only would use NinjaTrader either. The reason is simple: NT has no built-in profiling capabilities in the DOM, so all you have is price flicking up and down. Most pros at the floor use XTrader or T4 (in fact that's all you see at the CME), both of which have the ability to see where volume is transacting. This is an integral part of using the DOM, otherwise you have no good idea of the actual prints (a tape that can consolidate volume at price is useful, but a standard 80 to 100 line T&S is useless for prints, because they never show up as they are too fast, and is good for tempo/rhythm only). Pros may not trade off the chart in the sense that a typical retail trader would, but at the CME, NYSE, etc., traders there have access to charts up on screens all day long. You think they don't look at them to get a quick visual of how the day is progressing? I could not trade effectively without the DOM, but this notion that professional traders never look at a chart is silly.

Yes I think we are saying the same thing, except perhaps for the above. I have had many great trades where I got in, not quite being able to quantify exactly why, and also some very poor ones. Ditto for trades where I know the reason, both good and bad. The problem with taking a position and not remembering why is that for me personally, the result is confusion, win or lose. I do not have a quantifiable reason, so if the result is either win or lose, I have no way to really learn and grow from it; there is no feedback. I have had months where I traded on intuition alone, and done quite well, but sooner or later I lost that consistency. I think intuition is very important, almost necessary as a trader; however, without some quantifiable reason to get into and out of the market, my trading, personally, becomes little more than gambling and becomes very frustrating to me, because even after a great day, the next day it's back to "hope I read the market well today" instead of having a plan, good or bad, that I can then change or stick to based on what I observe happening.

I think "values" and "criteria" can be incorporated into a plan. For example, my plan says that if the market opens above X, I am looking to buy at Y. And I would prefer to see Z happen in order to do so. However, this does not mean that I won't buy at Y-1 or Y+1, once I observe the behavior of the market at the open. Contrast that with getting up in the morning, and buying if it looks strong and selling if it looks weak -- sometimes this will work, but it does not take into account context as you mention, nor does it take into account important prices that others will be making decisions based off of. Trading by the seat of one's pants is a good way to achieve inconsistency, and ultimately stalls improvement as you never know whether you got lucky that day or not--in other words, without some framework and plan it's difficult to gauge progress. Anyone can have a good week or month, but trading well consistently is the hard part.

So your realistic goal is a small account, very small risk, but 1.25-1.75% return average per trading day... Ok.

John, a couple of thoughts and questions. I'm curious as to how you use delta. It looks like perhaps you wait for delta to turn in the direction of the trade you are wishing to enter. Sometimes this works, but sometimes it means you're jumping in quite late and prone to getting caught holding the bag. For me delta is an interesting piece of information to look at, but it could certainly fall under the category of things you refer to as an "extra decision level." Generally speaking, I want to be long when delta is up and vice versa, as only market orders can actually move a market, but it's not quite that simple. In the quotes below, you also talk about watching momentum. So basically you have a context ('tactical ..'), a map, if you will, using price and/or volume history. But really that does not matter if the market does not agree with what you consider to be an area to watch for a buy or sell. So you watch for momentum using... tape/dom/other? Some people consider even that to be too myopic, much as you said footprint charts are seeing trees instead of the forest. In other words, many tools can be used to watch for momentum/order flow/whatever you want to call it, and as long as one knows where he is on the race track, then they all have a similar use--trade entry/exit confirmation. But generally if taking the other side when others are puking, you have not waited for delta to turn; or, perhaps, you wait for an extreme push and get in early, don't know until you answer the above. Not sure about this, can you elaborate?

In an effort to try to be as objective as possible, I watched the first 2 minutes of a video you posted in your other thread. You "slow down" the time and sales by accumulating volume at a price as long as the bid/offer stay there. I was shocked that you treated this as some sort of vast improvement or innovation..? Also, the fact that you are talking about taking more risk makes puzzles me a bit. The best traders are risk averse, and look for ways to reduce their risk. You are a man who is obviously proud of your software, and I admire that; it's your baby, so you have a particular fondness for it. But you have a certain arrogance that comes across, and it makes for good entertainment in the same way that those people on American Idol sing way out of pitch and then are shocked when they are told they are not getting called back, and they never realize that they are there purely for entertainment. You may have some success with your software, but you can not "track inventory" -- I am still amazed at how many people think they have found some key that lets them see who is long/short and from what price. The market provides you with this information: time, volume, price, bid, ask, and all order book information for however many levels you see (usually 10 on each side). That's it. You cannot see by a normal transaction any of what you say you can see. You may be able to take some good guesses, but a quick look at your generally flip-flop take on things makes it clear that you have no edge with this. The market does not provide enough information for you to be able to track inventory. You can, with some reliability, determine that smaller orders were in fact part of a larger order based on timestamp, but some of the world's brightest with Ph.D's are paid MILLIONS of dollars to work on algorithms designed specifically to HIDE their order execution so that they can NOT be detected by even other amazingly complex algorithms also written by genius millionaires, much less by a guy who thinks that accumulating T&S records is somehow advanced! Behavior of algos and humans can be detected, but you can NOT track inventory. The reason is very simple--humans and computers can use different order types to both accumulate and distribute their "inventory" -- and you have no idea which one is being used at any given time. If all buys were done with a market order, and all sells done with a limit order, you'd have it made, but it just isn't that simple.

After reviewing this trade and thinking about this, I agree with you here John. My intuition was not really 100% with me here and I was too early. Thanks for calling it to my attention.

John, thank you for your reply, I think you have some very valid points here. I only disagree about one point and so I will do that first -- not all shifts in momentum occur after a washout. Thus, the fact that I did not wait for one does not invalidate the entry. What was important was that my risk was managed, and I put myself into a position that had a reasonably good (by my belief system) chance of popping at least a point or two for a scale. One other minor difference of opinion -- you refer to cumulative delta (I think that's what you mean by bid-ask spread). It was not particularly "special" yesterday and it was actually up quite well off the low through much of the midday, so nothing for me personally to glean from that. Perhaps you can plot your chart showing what you mean because maybe I am not on the same page with you here. Other than that, I agree with you very much. I am not an avid user of the type of chart I posted, but I do use it if the information can be supportive and helpful. In this case it was extremely so. However, as with managing any small (but important) details, one has the potential to get lost in the trees and miss the forest. I do think I missed the tactical details on this one, but actually a mismanaged trade is the source of the issue. I sold 41.50 around 12:45 ET for the very reason that the market had failed to break above 42s and the balance was occurring between 38 and 42. Thus, tactically I think the premise was spot on at this moment. However, the mistake was covering too early, instead of waiting for 37s as I originally planned to do. In so doing, it made it too easy to look for a bounce at the bottom when in fact continuation began to become clearer. So tactically, I was on at first, and then lost it because of a mismanaged trade. John, I would love to hear more thoughts from you, specifically about: 1) Charting vs. Trading 2) Detaching from what we are trying to do.

I had 37.50-38.00 shaded already--as you can see on the left of the chart I took a 5 tick loss just above this area. I was looking to either be flat or buy around this area but I was just a bit early. Maybe a little impatient, but mostly just early. The real question as I review today is, should I have had a bit more short bias than I did? Market opens just above the high of a strong trend day prior, and sells pretty strongly back into range and balance. Later I actually sold 41.50 just before the afternoon drift downwards, but covered for about a point because I was not so sure of the short side. When in fact, the market had balanced on the low end all day to that point, and even as it went down afterward I was still more bullish than I ought to have been. It is Sierra Chart, a very very nice trading and charting platform. Today in fact I put a 5 range up, and a 20K volume, to see how I liked it. My primary charts are volume-based but for some reason when reading bar-by-bar like the chart I posted, I like to see time bars, as I can gauge volume and delta per time more easily than on a range chart. But, I will probably be experimenting with it some more and nothing's fixed in stone.