joshdance

Thanks N, all very salient points!

Thanks for your feedback gosu. The short was a bit early I agree. However, being up over 40 points from the close on Friday, with an ATR of around 30, near major resistance, in the midst of some of the crappiest economic conditions in memory, a short is warranted in my opinion. But, as you said, the direction was long from the open. For this reason after I chose to not buy, I decided to wait to take the short. The target of 84 was based on a few factors. I would have considered closing the trade at the low of the day near 87 as well, but 84 was my real target. The sentiment and order flow was bullish, but it was not the type of strength that would make 84 an unrealistic target IMO. After the stops were hit in the first half hour and sellers came into the market, it seemed to me that the bulls had put in what might be the HOD. And we wouldn't be having this discussion if I had left my stop alone. I would not have gotten 84; I would have been out at 91.50, as I would have moved my stop down after it broke 92 convincingly; then it bottomed out at 88.50 and I would have been out of the trade with a small profit. I would like to think I would have covered where I tried my long around 90, but I can't say for sure, so worst case is a 2.50 profit on the first trade. I outline my thought process merely to point out that my strategy was a bit different from yours, though I intended to buy early on but did not. You say this is "the strategy" -- in truth, it is "your strategy" .. as we all have different strategies. My error caused me to lose money, but it was not a fault of the strategy, it was a fault of the execution of it. As a side note, I use the 1m chart, but the one I posted is simply what NT uses to show my trades for the day, so it's not the same chart I trade from. I use longer term, and a shorter term chart as well. Thanks for your comments and I would love to discuss anything else further.

gosu, glad you made the exception and decided to post. When I said I've turned a corner, I meant a shift in perspective mentally; in other words, it's more clear to me what I should do. I did not successfully do what I should have done, but the seed has been planted. If you have any specific feedback regarding the trades (other than what I have stated regarding moving my stop) I welcome it. 1st trade target was 84; 2nd was 92; 3rd was new highs or at least 96; last was 93. MM, good suggestion-- reentry is not a strong point of mine and will need lots of work... Armchair quarterbacking always welcome..

One thing I have started to realize is that a well-placed stop precludes me from needing a perfect entry--I used to miss lots of good trades because I would strive for the perfect entry with a 4 tick stop, and you and others and experience helped me see that a 2-3 point stop is much more reasonable in most cases, and will keep me safe from the noise. Well, in the first trade my original stop was 2.75, the last it was 2 points, and in both cases they would have kept me safe. The first and last trades were based on solid entry criteria though I could have done better on the 1st trade. On the last trade, the entry was in my mind about as perfect as I can get without getting lucky. So, the location was not ideal in all cases, but not terrible either. Other two trades were okay entries, nothing great. I don't think it's so much nervous as emotional discomfort and wanting it to go in my favor enough for me to take the profit or move the stop and be safe. On a day like today with not much directional movement, it kept pushing and pushing in my favor (just look how many times 92 was hit before it bounced back up to get me), and just wouldn't go. And when it does that I think, "well, it's going my way but it won't break and feels like it's going to come get my stop." So, in an effort to avoid a full stopout of 2 or 3 points, I move it in to reduce the risk to 4 or 5 ticks, but then I move it into the danger zone, and then I'm tested and it comes and gets me. Though you recommend taking the 3 points on the last trade and calling it a day, I've done this kind of thing in the past and then watch the trade go 8 to 10 points in my favor. Granted, I'd rather have the profit than the loss, but I'm actually happy that I was disciplined and did not take the profit early on this one. I was undisciplined in that I moved the stop early and the result was bad--however, after having 3 losses, in the past I would have let my P/L dictate where I take profit, and in this case sticking to the trade idea had I left the stop alone would have made it a pretty good day. I think I've turned a corner in the stop loss department after today -- I see clearly where time and time again, moving the stop really damages my P/L. If I can take the emotional fatigue out of the equation, perhaps by going for a walk (started to do that but was raining here today ), then I see some very promising things for my upcoming trading.

Thanks N.. I think there's some truth that I don't have a good plan in some cases--but the two stopouts at the beginning and end were both in areas that I had planned on looking for trades. And I was in the first trade for almost an hour and a half. The last trade I was in for 15 minutes. The problem is essentially this: I patiently wait for the trade to work; the first one did not go in my favor immediately; the second one did. When I give a trade room to work, which I did, and then it goes in my favor, especially in the first one when it spends the bulk of an hour in profit, then I start to get antsy. The psychological wear and tear starts to set in after 15 minutes or an hour, both of seeing profit and loss. My stop in both cases was initially at a logical place; however, when it goes 3 points in my favor, then I get antsy and want to reduce my risk. So, I move the stop. So, I think it's a case (it feels like it anyway) of fear of losing a lot, when in fact I could lose only a little or breakeven. However, in so doing, again and again I have nickled and dimed my way to a losers, when in fact a correctly placed stop would have made it a winning trade. Attached is my chart of my trades; notice how close I was on each one (except the third one). Wanting to saves pennies cost me many dollars.

N, took a long 84.25 near the close, and instead of leaving my stop at 82, I moved it to 83.25 ... shaken out before my target of 93.. (well it's at 92 now). .... please tell me that you used to make stupid mistakes like that and learned?

wouldn't you expect it to sell off a little more than that below the IB low / LOD? Still looks down for the moment, considering selling 89 to 90 area if it comes back

Good plan ... either way I'm staying focused for one more hour, see if this thing will do something interesting.

stopped out at 89.75 :-/

I am long from 90, with my stop at 89.75 right now ... I would love to see a move beyond 94, and see some short stops start getting hit.. maybe wishful thinking, but risk is low in the trade right now. Bulls feel in control.

Yes indeed--I expected more than a 9 handle range after the movement last night! I think the short was a good try at least, but at this moment I think the prudent course is to wait and then go with the flow...

Hey N -- I actually shorted 94 earlier, and got stopped 95.25 after staying with the trade for a very long time. Still not clear at the moment... we had up, now range for almost 2 hours... going to wait a bit. Beauitiful bell on the profile eh?

Anyone who read my above explanation of the delta calculation versus the open interest calculation should find it clear that logically, they cannot be so easily interchanged over long periods of time. You may think you're seeing "inventory," but the very calculation of delta precludes it from being used as such. You can go buy a compass and call it a "santa claus finder" too, but it will only do its job, which is to point north. Likewise, delta will do only one thing: measure contracts traded at the offer less contracts traded at the bid. There is nothing in the calculation which has a notion of inventory. There is no "memory" from one trader to the next. That is what open interest is for, and it's calculated as such. For long term inventory tracking, use the tool that's designed for that: the commitment of traders report. That will tell you who's long and who's short. I use delta quite a bit, but I use it on short term time frames, from a second or two to an hour or two. But for long term tracking, why would you use something that does not calculate it correctly, when you have a perfectly accurate COT report?

Several traders have performed reliability tests, including Fulcrum. IQfeed is what I use and is generally regarded as one of the most accurate retail data feeds. My TT broker feed, for example, does not report the ticks accurately. What we want is a data feed which reports what comes from the exchange accurately. But I really don't want to go in this direction on this thread. This is not about data accuracy. It's not about advertising anyone's commercial methods, or any commercial data feed, or anything else. Let's assume we have an accurate data feed.

Fulcrum, I welcome your views, but I will post this which I wrote at another forum which explains why your using delta as a proxy for open interest is flawed in principle. I am not saying that you cannot be effective with it, I'm not saying you don't make money with it. I am simply saying that you are making assumptions about delta which, given its formula for calculation, are not correct, and thus invalidate it in the way you say you are using it. Here is my explanation below. Further, readers should note that Fulcrum is a vendor and thus should have a "C" by his name on this forum. While I do welcome your views, I do not want this thread to become an advertisement for the services and products you sell. You do very well at marketing yourself, but please don't do it in this thread. ========== For every transaction there are two parties. When the two parties are both opening a new position or adding to an existing position (such as when both are flat, or where one is long and buys and the other is short and sells), open interest will increase. The calculation does not take into account whether the orders are at the market, or limits. When the two parties are decreasing their positions, such as when a trader is long and sells and the other is short and buys, the open interest will decrease. Again, the calculation does not care about the type of order. However, when someone who holds an existing long position (A) sells to someone who's flat (B), for example, the open interest does not change. Delta would change, and volume would change. However, it's simply a case where one trader who was "interested" is now flat, and one trader who was "not interested" is now "interested" -- so, while volume will increase as there was activity, the amount of positions taken in the market have not changed--B is now long, whereas A used to be long. It's simply a transfer of ownership of the contract. Compare delta to open interest when A sells to B, and then B sells back to A. Volume will be 2, delta will either be 0 or 2, depending on the types of order used, but open interest will be 0. As open interest declines, the number of open positions in the market are decreasing. When it increases, the number of open positions, or open interest, goes up. At the end of the day, if open interest has increased, then the number of traders who have a position in the market has gone up. If it has declined, then the number of traders with a "horse in the race" has gone down. However, volume will always be positive. And delta will again depend on the type of order used. This is why delta is good IMO for a short term indication of who's trying to move the market, and then a comparison can be made if the price is reflecting that effort to move the market. However, delta will not say whether the number of outstanding contracts is up or down. Thus, I don't think we can say either is "better" as they measure different things. However, we can say for a certainty that delta is calculated in such a way that it is impossible to determine how many positions are being held long or short; and open interest tells us exactly how many traders (contracts actually) are holding positions. =========

:helloooo: Depends-- I usually don't get slippage on ES but sometimes get 1 or even 2 ticks. CL I would frequently get 1 or 2, and in some cases 4 or 5.

Thanks MM. My point in posting what I did is simply this: a tick/transaction specifies the price traded, time stamp, number of contracts traded, and whether the transaction occurred at the offer or the bid (in other words, who initiated the transaction). So why ignore this last piece of information, if one can find some use of it? While there are two parties to every transaction, it is not a mutual / symmetrical deal: one party actually initiates the trade, while the other accepts the trade. And while the reaction of price to volume is paramount, we may still find some useful information in the delta if there is some divergence between the degree of price movement and the degree of delta. In my read of market movement, I find the frequency of transactions important (time), the price traded (price), the size of the transaction (volume), and who initiated the trade in the first place (delta). All other information for a traded instrument we can construct is derived from those 4 pieces of information.

Sorry if it was not clear by the context. Delta = volume transacted at the offer - volume transacted at the bid (iow, market buy volume minus market sell volume)

I am prompted to write this post because I have read this a couple of times over the last year and have thought about it again today: (emphasis mine) Basically, dB was responding to someone talking about "selling volume" if I recall. dB says that it doesn't matter who initiated the transaction, what matters is the effect of volume on price. In principle I certainly agree that the effect on price is paramount. And I'm not one to question dB, as so much of what I learned about Wyckoff came from reading his posts. However, look at the attached chart, the last two bars. I have the delta for the bar overlaid on top of the volume. A quick glance reveals very clearly that contrary to what might be assumed if the delta were missing, namely, that there were probably more contracts bought at the market (executed at the offer) than sold, that in fact sellers pushed aggressively for two minutes, yet price rose. Now, if the delta for those bars were green, it may not really change the fact that demand was higher, price rose, and there was more participation. However, as this is market-generated information, and is a piece of information included in the transaction, isn't it worth at least noting? For me, it would have given me super high confidence in a long, as opposed to just a medium level of confidence in a long at that point (I was on another computer with no delta reading available). In other words, at this point it seems that sellers have not only been unable to hold the offer (passively), but they have tried to push (aggressively), and actually gotten pushed back. Meanwhile, the passive buyers are clearly very very strong, and this is before the aggressive buyers have even really stepped up to the plate. What do you think?

I see -- well, I completely agree with you N. What I mean is that if you only see the tape, then you will literally never see many of the transactions that occur in a sub-second time frame, because they literally never print on your T&S window. Likewise, if you look at a static volume histogram it will not really give a true picture of the intention of the market. So, I like to watch the tape (and find that my 500V chart does well on ES), and I like to have the volume histogram on my 1m chart so that I can see how much volume actually came through, without which I can only guess. When I see a burst of volume and the tape flowing, a quick glance at the 1m volume build and build puts an objective number to it; sometimes I see a strong move up, and the tape starts to fly, but a look at the volume traded shows that it really wasn't very significant at all. Either way, I like to know how much volume just occurred.

You mean volume per bar, not volume at price, when you say "volume histogram" right? I'm confused a bit as the volume on the histogram updates instantly--what's important to me is not necessarily at what price in the 1m bar that volume is being traded, but that over that bar's high to low range, there's buying or selling interest. Perhaps I'm not understanding what you're saying? While I watch T&S and place a lot of emphasis on the speed of transactions and in some cases large orders, I have found it impossible to determine reliably an accurate measure of volume. As several hundreds or even thousands of transactions can whisk by in 1 second or less, the tape will not show this, and a quick glance at the 1m volume will say very quickly what it actually is. The profile is of course great for seeing volume build, but as you say only really early on... after a few hundred thousand contracts trade, it's not really useful for seeing short-term, sub-minute or sub-second volume. Even at the extremes, as in yesterday's midday low, it shows volume traded at those prices, but it doesn't really give an accurate picture as to how much at a glance. It's often this type of volume which indicates a more substantial reversal (as opposed to simply a normal retracement). Again, perhaps I'm misunderstanding you just a bit regarding this, would love for you to clarify if I'm not on the same page as you are. As for the trade explanation, thanks so much--perhaps your upper left comment is the most important--something to the effect of "was looking to get short in the absence of buying strength" ... that really sets the tone for the whole thing. You had a short bias with good reason, and when buying failed, you got on board at a very logical place. I was not trading at that time yet but it looks like it was a very logical trade. I'm not at my normal computer and so was forced to watch the market yesterday on a 15" laptop screen. While I would have preferred more real estate, I must say that the market was still in pretty clear view. I had a 1m with volume, and a 500V, and T&S/DOM. No profiles, no vwap, no delta. I really do wish I had delta in a case or two, but really in some cases that throws me off more than it helps. Sometimes net positive delta and flat price can mean a move down is imminent, but sometimes the market buyers win and it pushes up. And while I missed the structure of the profile, I found the simplicity of watching price levels and volume alone to be refreshing. Sorry for the rambling, hope your day is a good one (or if you're in London hope it has been already )

N, in your chart here you say that you saw volume enter the market based on the profile. Also, as you are using a volume chart I assume you can see the bars forming more quickly. Have you also used time based bars with a volume histogram? As the market pushed lower a few minutes later before the nice reversal up, I was watching a 500V chart to see inside the 1m bars, but the volume was clear to see on the 1m chart with the volume histogram. I missed a buy limit fill by 1 tick based on what I saw here FWIW. So, on your profile you see the volume build. Then what? It did push up above the newly formed POC, which to me would seem bullish. I was asleep at the time you took your chart screen shot (or just waking up), due to some holiday hour changes for me, so I did not see the market at the time of your shot, and also I do not have IRT on my mobile computer so did not have access to the forming profile. Also, if I may ask, what was your trigger for the entry at 72? It did pull back to the developing POC, which was around 72--was the fact that it was going lower, and pulled back there, a determining factor?

ha! :rofl: ..........

You and I agreeing 99% is a first, I can live with that!

Actually you might be surprised that on my screens right now I have 3 CVB charts, and 1 time-based chart. I find them all useful. As to a "tick chart" (as opposed to a tick-based chart like CVB, range, etc.), I also do not see any advantage to using them over a constant volume chart. The assertion of some that "95% of ticks are 1 lots" or whatever it was is absurd. I do disagree a bit on aggregation of ticks by the CME; what I will say is that depending on how the CME chooses to report transactions, a tick chart will differ. After the 2009 changes, for example, tick charts were different, as previously a 100 lot market order was reported as 1 transaction, even though in fact multiple transactions could have occurred. Now, however, a 100 lot market order is reported as 1 tick if it's matched to a 100 lot limit, or 100 ticks if it's matched to 100 separate 1 lot limit orders. Either way, a constant volume bar chart will not vary, and I see no reason to use a tick chart over a CVB one.