ant

Thanks so much for your thorough response. I plan on reviewing it and following up on your suggestions to see if those markets appeal to me too. Some more questions if you don't mind... You mentioned that you only trade electronically, aren't all the agricultural markets traded in the pit? Why do you prefer silver over gold? They seem to be highly correlated to me. What is your average holding time for these agricultural trades? What do you use for your technical analysis? I like the point you made about trading the EUR/CHF, but I have to be honest with you that the Forex market turns me off because of the "bucket shop" reputation that the Forex brokerages have. That's why I've been sticking with the currency futures. I don't want to pay the spread. Do you use Oanda for forex? Thanks again for your post. Antonio

Hey Raul, I agree with you that this website is attracting good people willing to share. I certainly gravitate to your posts as well. I do have a few questions for you, or anyone else, and apologize if this is off-topic for this thread. I currently daytrade the ES and swing trade the Euro. I also plan on adding some more markets to my trading repertoire. These markets include 30-Yr Bonds, Crude Oil, and Gold. I also follow the YM during the day because it is highly correlated with the ES, but I trade the ES. Someday I will try trading the YM instead. Anyway, here are my questions... Do you plan to stop trading Crude Oil? If so, why? Do you daytrade or swing/position trade? When you do trade energy, do you trade the pit-traded or electronically-traded contracts? Would you recommend only dealing with electronically-traded futures because of slippage, etc? What other markets do you trade? Do you trade agricultural commodities? What other markets would you recommend trading? I would like to hear from folks who have traded markets other than the index futures. I only plan on daytrading the ES and Bonds, and swing trading (i.e., hold up to a week or so) the other markets. By the way, is the 10-Yr Notes better to trade than the 30-Yr Bonds? I think following other markets to swing trade when they are about to move is a good way to enhance my trade plan without requiring too much more effort. Thoughts?

I believe trend following systems will always make money over the long-term. It takes a special type of trader to be able to withstand the drawdowns that comes with this strategy though. It takes deep pockets and trading a basket of markets to be successful. As I understand it, a lot of big trend followers, such as John Henry, are experiencing some big drawdowns now. But there are always good trends somewhere and a trader needs to find them. Look at metals and energy. Market conditions are cyclical and eventually it will be more favorable for trend followers. Opportunities always exist, but may be harder to find. Hey, volatility is not that great right now for us index futures daytraders, right? I do believe that the trendiness of markets is not what it used to be. Perhaps its because of crowding at these breakout points that everyone and their grandmother sees. Just my 2 cents...

I absolutely love the way the market decides to test the opposite end of a range after encountering price rejection at the other end. Makes a lot of sense because the market's job is to facilitate trade, so when it couldn't find buyers/sellers at today's low, it decided to test the upper limit. Doesn't happen all the time but enough times to make it worth noting. Thanks for pointing it out James.

epiktetos, See the Trading Indicators forum for the latest Market Profile indicator. I implemented your feature request. Antonio

Looks like today was a 3-I day in the YM and ES. A 3-I day is characterized by an initiative tail, initiative TPO count, and initiative range extension. According to Mind over Markets, there is a 94% probability that the YM and ES will trade above today's value area. See chart below.

namstrader, Let me know what differences you're seeing and I'll review my value area calculation. Let me know the UVA, POC, and LVA, the market, and timeframe. EDIT: The link below describes the most common way to calculate the POC and value area. This link is from the website that James provided above that generates the Market Profile levels. I've updated my Market Profile indicator and now my value area matches their levels exactly. Also, note that the "delta1" website caclulates the value area for the YM for trading between the hours of 9:30am to 4:15pm EST, even though RTH start at 8:20am, which also contributes to the differences in the value area. I'll post the latest version of my Market Profile indicator at some point. Calculating Market Profile Value Area and Point of Control

I agree that divergences can provide powerful signals when used properly (e.g., divergences should be ignored in strong trends) and I certainly look for them as price approaches key reference points. I don't have a problem with indicators provided that the trader does not make decisions based on those lagging indicators. However, using indicators to see what is already in the chart is not a bad way to use them. In other words, using them as a "crutch for the eye" is one way of putting them to good use because sometimes it is easier to see pattern formations in an indicator then in a chart, but keep in mind that those signals/patterns are already present in the price action. For example, how does price behave when a divergence is being formed? Well, in an uptrend, the subsequent upswings get shorter and shorter indicating a loss of momentum. Another way to put it is that price goes up less points on each subsequent upswing or it takes more bars to cover the same distance as the previous swing. You really don't need an indicator to see this. I primarily analyze price action and use market internals (Tick, volume, bid/ask) to look for divergences. Basically, I trade market development and market structure using the Market Profile graphic. The problem I see with traders and indicators is that traders tend to spend way too much time focusing on which indicators to use and tweaking indicator parameters thinking that the "perfect" indicator and indicator settings will be the key to a profitable trading. This is the wrong path to successful trading, IMO. Most traders use indicators and most traders fail. If you want to succeed you need to do something different then the majority of traders. Most traders, I believe, use indicators because they want green light/red light signals and don't want to think for themselves. Once I removed indicators from my charts, I started to focus on more important things, such as reading price action, understanding how the markets I trade move, focusing on risk/reward and money management, determining whether buyers or sellers are stronger, and identifying where the longer-timeframe players are jumping into the market. The point I'm trying to make is that indicators only "indicate" what is already in the price and one should learn to read price action before starting to rely on indicators. I believe that when traders learn to interpret price action, traders will realize that indicators are useless for the most part. I believe focusing on market-generated information, instead of indicators (which are a derivative of price), is essential for developing a robust and sound trading methodology that will withstand the test of time.

Sweet! Nice job James!

A picture is worth a thousand words... If the uptrend is to continue, then the previous day's value area should provide support. I would not want to see today's low being taken out. Will look to buy pullbacks...

Good question James. I think we have initiative selling tail and initiative TPOs, but no initiative selling range extension. So I don't believe that 10/11 was a selling 3-I day. The ES is in a very tight, 5-day trading range and am expecting to see imbalance (breakout) soon. I will be monitoring market internals at the bracket limits.

The ES traded primarily within the 4-day bracket that had formed. The reference areas that came into play today in the ES were (see chart below): The single prints of 10/9 at 1355-1356. The upper bracket limit around 1362.75. The single prints of 10/4 at 1351.25-1350.75. So the key reference areas for tomorrow, 10/12, are (see chart below): The upper limit of the bracket at 1362.75. The high volume node of the 5-day composite at 1358.25-1359.50. The single prints from today between 1353.75-1351, which also includes the lower limit of the bracket. The high volume node of the composite of 9/27 to 10/3 at 1348.25-1346-50.

Nice post Raul!

Let's take a look at how the reference areas worked out today... The ES opened and traded down to the high volume node of the 3-day composite and reversed on weak market internals, which formed Tick and volume divergences. The ES then traded to the upper bracket limit at 1363.25 where a responsive trade could have been taken with the middle of the distribution as the target. (It's amazing how often these Market Profile S/R levels get hit to the tick.) As the ES traded to the middle of the bracket, internal divergences formed again. Towards the end of the day, the upper limit was tested again. See the chart below for an illustration of the day's action. Note that the ES is now in a 4-day trading range and the key reference areas for today will also apply tomorrow, 10/11. See the second chart for an updated composite profile.

The key reference areas for the ES on 10/10/06 are as follows... The ES is in a 3-day trading range from 10/5 to 10/9. See the composite profile in the first chart below. The upper limit of the bracket is 1362.75-1363.25 and the lower limit of the bracket is 1352.50-1353.25. The high volume node is 1358.50, which is near the middle of the distribution. I am expecting the bracket limit(s) to be tested tomorrow. If a bracket limit is faded (i.e., a responsive trade), the target will be the high volume node (or middle of the distribution). However, I will keep in mind that if one of the bracket limits is rejected, the market may trade swiftly to the opposite side. It is important to note where the ES is in market development. In the longer-term, the ES is in an uptrend. See the second chart. However, if the ES were to trade below the lower bracket limit, the next downside reference areas are the low volume area/single prints of 10/4 around 1351.25-1350.75, and below that is a key reference area between 1346.50-1348.25, which contains the high volume area of the composite of 9/27 to 10/2, the high of 10/3, and a low volume area on 10/4. Note that the key reference areas to the downside are well-defined. Next, I look at the daily profiles for the ES in the third chart to review the market structure. It is noted that there is a buying tail on 10/9 around 1355-1356, which is also near the POC of 10/6. This is also a key reference area. As always, my approach will be to monitor market internals as the ES approaches any of these key reference areas.

No, I don't think that's realistic. That's a return of 6% to 8% a day and a return of 120% to 160% per month! Perhaps less than 1% a day is realistic.

I trade market development and market structure based on the Market Profile graphic and my goal is to identify trades with excellent trade location and excellent risk/reward. When a market is in a trading range, I would say that entries are more important than exits. For example, I would not want to enter in the middle of a trading range because that offers poor trade location. However, for a breakout trade, I would say that the exits are more important because these are the trades that can lead to a stellar week, month, or quarter. My goal with breakout trades is to ride it as long as the trend is intact. I do not want to exit too early. I do hold breakout trades overnight since these are the best trade opportunities the market offers, IMO. With a breakout trade, the goal is to just "get the trade on." Trade location will improve as the trend progresses.

Hi Johalber, I suggest posting some of your losing trades with charts here, along with your rationale for the trade, so that we can review them with you. Perhaps we can all learn something from this. I think as long as you take a loss while following your trade plan and learn from your losing trades, then you're on the right track to becoming a consistent and successful trader. However, I would be concerned if I were taking more losses than expected and I did not have a good grasp as to what was going wrong with my trades and I still continued to trade with real money.

Hi rayk, If I recall correctly, I believe that may have been mentioned in Alex Benjamin's presentation, Market Profile 101, at the CBOT site.

Epik, That version of the Market Profile indicator does not generate the composite profiles. I have another indicator for that. I'll try to enhance the indicator to display the Market Profile graphic for a specified number of days and post it. Thanks for the suggestion. Regards, Antonio

As far as I know, this indicator cannot be supported by TS2000i or any TradeStation version prior to 8.1 because of limitations related to making updates/calculations on every tick. Sorry.

I use Market Profile the same way Soultrader does. Market Profile uses 30min intervals because that is roughly how long it takes for new information to be absorbed by the markets. Market Profile can be formed in one of two ways, using TPOs or Volume. I would only use TPOs for regular trading hours (i.e., US day session) because of the thin volume during trading at other times. For 24 hour markets, like the CME Currencies (Euro, Yen, etc.), I would actually use all 24 hours but use a Market Profile using Volume (similar to the LDB), not TPOs. I would also compare the daily Volume Profile against the Market Profile using TPOs because sometimes they differ in a meaningful way. For those who use TradeStation, the Matrix provides a Volume Profile. Very useful, IMO. See example of the Matrix with the YM below.

Market Delta is 3rd party software that provides interesting ways of viewing bid/ask information. This information could be useful for analyzing market behavior as price approaches a key support/resistance level. For those that use TradeStation, I have created a simulation of Market Delta. Note that TradeStation provides a snapshot of the bid/ask so it won't be accurate most of the time. Therefore, I have provided an option in this analysis technique to use upticks and downticks instead. Although the bid/ask info is not completely accurate in TradeStation, you can determine whether it is good enough or if using upticks/downticks is preferred. This Market Delta indicator defaults to using upticks/downticks, which I find useful. For example, in the first chart below, a downswing is highlighted in the ES on 8/29. In the second chart, you can see that the simulation of Market Delta using upticks/downticks highlighted the net selling. Additional Information about the Indicator Attached is the code to simulate Market Delta. Note that if you apply this indicator to a chart and then refresh that chart, all of the Volume info at each strike price is lost. This code does not save historical information. The code supports four color gradients that are controlled by the Threshold inputs. The default Threshold settings are appropriate for the ES on a 5 or 15 minute chart. Setting the Type parameter to '1' will use upticks/downticks, setting that parameter to '2' will use bid/ask. The DisplayDelta parameter indicates whether the net selling vs net buying delta is displayed below the bars (see example below). This code can be easily modified to display Volume at each strike. This is a Paintbar indicator. From my observation, the footprint is updated in real-time in a timely manner. Experiment and play with it and see if you find it useful. Make sure to spread out the bars so that the data and bars fit neatly. I have tested this primarily with the emini S&P. This indicator was originally posted to the TradeStation Forum where other traders are making enhancements to it. MarketDelta.ELD

Good call Soultrader! Glad you pointed that out since it helped me too.

The key reference areas worked out well today. See chart below. The ES found support at the buying tail of 9/26 and then hit resistance at the high volume node of the 3-day composite. Although the ES paused around yesterday's single prints, it blew right threw it shortly thereafter. The ES offered two nice trade opportunities today. Soultrader, I caught a nice piece of the action today but then had to go to work, unfortunately. Glad you got yours too!