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.

DT, good to see you on this site. I posted this chart this morning at BMT and interestingly enough it is a very similar trade to what you took. It's not cool video (and not the cool accept that you have) like you have but it is annotated and shows another approach to the same basic sequence. I'll post it here because of the similarities.

You have a very selective memory if you say that usually your calls are spot on. I don't really care about calls, but I scratch my head when you write some of the things you do, like "if you'll recall this was my target area from Friday," as if that means something, or "it has ticked down since I posted that," conveniently omitting how you were short 6 handles and 2 hours early. Honestly, it does not matter, and I really do not care if you were to make brilliant calls or terrible ones; what baffles me is how you claim to have such great accuracy, when in fact you are frequently getting suckered in and are on the wrong side (particularly during slow midday times you do this). Hey, we all lose, we all get suckered, we all make mistakes--but you do this and then you sell software and claim how accurate you are, and perhaps you are, but going by your posts, you are not nearly as accurate as you would like to claim or think. From my own periods of winning, and losing, it is my belief that trading well is not really so much about being right, but about taking proper risk with favorable odds. It is clear to me from your posts that you are really focused on being right. After all, you are the "predictor," but trading is not really predicting--at least, this is my belief system. I am posting this because you sell software, and I feel anyone who might purchase should know that it is not at all universally accepted that "anyone watching the actual market" sees you are spot on, lest they think you are selling something that will have such a high degree of accuracy as you claim. I don't care about right calls, or wrong calls, but I do care about statements made that reference others (including myself), which are not accurate.

As always, anything is possible, but the market does not really care that much about a school shooting in rural Connecticut. A shooting in Manhattan outside the NYSE, maybe. Terrorist activities do not typically occur in places like this. Information like this only clouds judgement and diverts attention from what the market is doing. It is a terrible event, but it should not even enter your mind as far as markets go.

That's what makes trading interesting, and what makes it work at all -- one person sells to another, thinking the price is too high, and the person buying thinks it's too low. In the same way, one person's evaluation of odds or what is likely may be quite contrary to another's. For example, a break lower would have many traders looking short, but the context would have others looking to buy. And the context is, IMO, what makes the difference. Yesterday, a break lower meant look to sell, today, it means look to buy. Thus, a context-based approach is the only thing that gives any meaning to "low" or "high." So, at these prices now, some will see that we are trading at or near the high of value for the day, on a balanced day, and will look to sell. But others will see that a break below balanced failed, and a building of volume higher, so they will be looking to get long--perhaps here, perhaps lower. Or someone may have a super secret proprietary Super Flow-O-Matic that gives them their own context for understanding. So in the end, all we have is what in our own personal experience and methodology constitutes a "more likely" scenario. Because anything can happen, at any time (particularly in these headline-driven), our likely scenario is all we can really put confidence in.

I can certainly find some common ground and agree with these two things--I do not like "brilliant" ideas presented after they have played out as much as before, because hindsight bias makes it clear what the right thing to do was, after it has happened, but the challenge comes in real time, so I respect ideas presented before or as they play out. Of course, not all good trades can fit into an "idea" necessarily. Intuition, quick reads, and a sense of "now" all play a factor. But having a sense of context and a general premise on market mood can fit into the mold of "idea" so that information can be shared if one wants to do so, even if the execution of the trade is based more on things that cannot be readily posted. And secondly, I also do not sell nor will I ever sell anything; to those that do, I continue to question their viability, but it will be what it will be.

Trade premise worked out very well in this case, 12 traded and I got flat at 11.50. 08.50 holding was important.

Balance so far today. Based on the back-adjusted roll, market tested 07.25, heavy volume area from the 11/29 to 12/10 balance. Not a reason to get long in itself, but so far a reaction off of it. Based on the fact that the market is in balance and has broken below balance, if it can trade back up and hold the 09s, a buyer might expect a test of 16, or at least 12s. Said another way, this market so far today does not really want to go down, and if this is proven to be a test and success, then a trade back up to the top of value and prior balance for the week would be expected.

Look at the cash index attached pic. Not surprised at all the shorts. Human nature to want to be right and sell the top leads to massive stop runs like we saw going into 34 (60,000 traded in 60 seconds). Just buy and let the market pay you. No need to play chess when the market is giving you a game of checkers.

Note to Washington: get your sh*t together so these fickle markets can get back to normal. No progress, go down, progress, go up. Reminds me of how much I hated the greece situation where markets would go up or down on a speaker walking up to a microphone.

I have not seen the stop run yet. After I see that (08s-10s), or if it breaks down with authority, I would consider a short (though I'm done for today). Either way, the market is certainly overextended, but that is no reason in and of itself to fade strength like this. Sure it can work, but working in the land of "likely" says to just be long, as boring as it might seem. Logic, order flow, etc., are out the window on an emotional move up on irrational hope.