steve46

Sir Your thought process is reasonable...I guess the question to ask is...based on your conclusions, can you find a good entry? At this point in time, I think it is clear that bullish participants have the upper hand...If you agree, I assume you will look at these tests as opportunities to get long. If you disagree, you will view the market differently. Personally I like to let the market show me what it wants to do...Ask youself, at each test area, how did the market act? Did participants come in to defend that area and move the market up....or did they sell it down? For me the answer seems clear. It may help you to look at longer time frames as well. In terms of actionable data, you need to develop a rule set that works in regard to the idea of value. Professionals like to take advantage of price fluctuations above and below value (what we would term wholesale and retail value). If you can determine the range of prices that constitutes wholesale and retail value, you will have an edge over other participants. You may want to start by using Market Profile or Volume Profile data as a base for that judgement. Also you can simply take the extremes of your local distribution. These are prices at which you are likely to find significant swings high and low. Now I have to get back to work. Hope this helps I hope this helps.

Sir or Madam The SPX is a cash index...we are concerned with futures SPY is an ETF (exchange traded fund) that tracks the S&P 500 stocks...again we are not concerned with this type of product. We are talking about the futures market If I may, I suggest you take a moment to do some research about these products. I am sure that as you learn about them, the differences in pricing will become more understandable. Thanks

For Mead and others interested in the "price/time-based" pivots concept As mentioned in a previous post, this week's open was 1240.50 So here are on Tuesday and look at what price did. In the overnight Globex we tested down below that price point, then markets took it up (defended that point). As you can see we are trying to move it up now in front of the Fed Announcement. If you knew this was going to be the case, you would have a tradeable edge wouldn't you? knowing there was a tendency to defend that price, you could have looked for a long entry with some confidence. I will leave it at that. Now I need to get some sleep Take care

Jim I have some time before the bond opens so here goes; Most institutional desks have orders to execute and also inventory of their own to deal with. So they have "books" of orders (now mostly electronic instead of paper stacks) that constitute "business' that has to be taken care of within a certain time frame. I can only speak for myself when I say that we don't daytrade. In my office we establish positions based on moves to what we believe to be extreme areas of a distribution and these areas represent either "wholesale" or "retail" value. At wholesale areas we are accumulating inventory, and at retail areas we are either adding inventory or selling it back into the market depending on our assessment of market status (trend). In answer to your second question, see the last sentence above. We look to make money either side, but in a trending market we are trying to "go with" the flow, whereas some participants (hedge funds and commercial speculators) are also insterested in opportunities that involve shorting the market in order to move it to specific levels (associated with options investments, or with automated or "programmed" execution of different types). Understand also that the longer term "investor" we execute for is generally looking to make money on the long side so there is a general bias. In answer to question three (3) there is always a conflict between long and short participants as outlined above. Hedge funds and various commericial speculators all have their agendas and programs designed to fit a niche. At this time the retail participant is largely out of the market and on the sidelines. This is probably because in recent years, they took significant losses as the markets fluctuated in response to the real estate fiasco Finally, institutions do not go after stops...if you think about it, there is no reason to be concerned with where a retail participant trading a couple of contracts (or equity shares) has a stop...local floor traders however DO run stops to see if they can generate momentum based moves...and again if you think about it, it is pretty easy to see where the stops are going to be placed. For the few retail participants in the game, generally speaking the stops are closely positioned. Depending on the market, there is a tendency for price to take out recent swings high and low by a few ticks (this is called "shaking the tree") then resuming the primary trend. I hope this helps you

You are welcome Mead and I should mention that this is the second such "setup" that I have posted. If you go back to my third post, you will see that this happened (test of the weekly open) previously, and I posted the chart showing that test and the move up from there.....there is a reason why institutional traders use these prices as "pivots" as opposed to what retail traders call "floor pivots" which in my opinion are obsolete. Anyway if you have the time, I suggest you go back and re-read the first three posts. You will see that there are a number of time based pivots including the yearly, quarterly, monthly and weekly opens, highs and lows. Each one becomes more important as that time period comes to an end. Notice also that the "close" isn't even mentioned in my posts....except for end of year performance figures, its not considered important. Good luck to you

Sir, the weekly open I am referring to is on Monday the 6th December The test of that open occurred on Thursday the 9th December The premise is that as we move through the week, institutional participants are motivated to defend that opening price (established on Monday). The closer one gets to the end of that week, the stronger the motivation to make sure that we don't close below that opening price The charts I posted show that as price tested the weekly open (the previous monday's open) participants decided to come in and defend that price point. In fact, price moved up significantly from that price into today's open. I assume that if you had known this was possible, you might have elected to establish a long postion. That position if held to today's open would have netted you approximately 20 points or $1,000 per contract. and in answer to your question, I am only interested in what happens between the open on Monday 6th December and the following Friday. If price tests that open, what interests me is how the market reacts to each test (if in fact there are multiple tests). As I recall the low of that week was 1217.25 and there were multiple tests of 1221.25. Each time the market defended that price successfully. That tells me that there is an interest is moving the market higher. It makes sense to me in that I know that institutional traders get paid more (bonuses) if the market continues up rather than down...you see. I am not saying we couldn't have a downturn due to news or some other adverse event. Frankly, I have to ask, do you care if the market turns down from here as long as you were able to secure some profits on the move up that I outlined? As of today, the weekly open that I will be monitoring is 1240.50 (the open at 6:30am PST in the US market). So we begin the process all over again, looking to see how the market reacts to tests of that price point. I hope this helps you.

Hello Mead The chart I operate from primarily is a 30min futures chart (continuous 24 hour display). The attached Esignal is my backup data. It shows the open on Monday 6th December at 6:30am PST (US time) at 1221.25 If by chance you use Esignal and choose "weekly" display for a 24 hour chart, the price you will see is based on 12:00 midnight (1223.25). That could be the problem you are having....For me the open is when the bell rings on the NYSE Exchange at 6:30am PST on that Monday.... I hope this helps.

Here you go boys and girls Couldn't resist posting one more chart showing the 20 pt move off a test of the weekly open on the 9th... The move started at 8:30am PST and continued through the next day and into the Globex overnight session. The time of this post is 5:45am PST....so this mark-up move happened as participants in Asia, and Europe decided too act. I am loving this.. One last thing....clearly this site has a troll problem....I think someone has to get up off their butt and do something about it. Ask yourselves why a professional would come here and share anything of value, and have to put up with the crap posts you read just above....? Figure it out folks otherwise you are going to be reading posts mostly from psychos or vendors wanting to make money off of you.

Just for grins, here is one last chart showing another test of the weekly open This was 12/09 and at 8:30am PST, the market tested down to the weekly open at 1221.25 to the tick.....and then never looked back as participants marked it up from there. Personally if there was one idea that I would suggest paying attention to its this. It takes money to move markets and the people with money are the big institutions (its not the freaks with the silly names on this site). As we get closer to the end of the week (and year) this is one idea that becomes very important.....Check it out for yourself..... My workday starts shortly so I have to stop now. Best of luck to you.

Jim I appreciate your comment, but its not possible. As mentioned in my last post, I simply don't have enough hours in the day to continue and still do a decent job for my employer. What I will point out for you is the following. There's a significant group of traders who don't use indicators of any kind. They trade price and time. Specifically in my third post I show what the main "pivots" are on a yearly, quarterly, monthly and weekly basis. I also showed an example of how time comes into play when the weekly pivot is tested (just look at the chart attached on my third post). Because pay is tied to performance, these participants are likely to put money to work (significant amounts of money) to try to move markets AT SPECIFIC TIMES. Also there is the idea of buying at wholesale levels (below value or at the low end of a local distribution) and selling back to the market at retail levels (above value or at the high end of a local distribution). Again this is a concept that can be used to back up your trade decisions. If you are looking for more information I would investigate Auction Market Theory, Market Profile and especially the concept of Volume Profile. And last I would suggest you look into the concept of "reading the tape" meaning learning to interprete the "Time & Sales Strip" along with the NYSE Tick (set to 2 or 3 minute display).

Hello Hard to change old habits. I find I am still up and drumming my fingers on the table even though it is Saturday. My thought is that "retail" day trading (where the participants are not professionals) is a cyclical pursuit. In the previous decade with the assistance of technology, markets became accessible to everyone. Your average Joe saw the possibility for easy money and jumped on board. The economy happened to be expanding, and happily some folks found themselves in the right place at the right time...called the "SOES bandits"..... a few enterprising folks took advantage of the fact that at that time, markets were slow to update the spread. They exploited that inefficiency and made money...it was only a matter of time before those opportunities disappeared....I remember the days when it seemed every dentist and insurance agent had an account. One might say that the Forex markets are in a similar place today in terms of development. Today the US market and economy is in a recession and the demographic has changed. The average retail trader is older, wiser and unfortunately poorer person, who may have absorbed loses in the market downturn and is now more concerned with trying to re-acquire lost savings.. Many of them have already tried daytrading and found that they simply couldn't overcome expenses. I imagine things will swing back in the other direction in time....

Okay so I been thinking about this and it appears to me that I have about oh, two weeks before I have to go back to work (trading the Euro and Bond Markets) and along about that time, I would have to call it quits posting, simply because the work load gets to be too much (I just don't have enough sleep time). I think we have covered quite a bit of material and unfortunately if I go too much further down this road, my employer is going to object..... I think the best thing to do is to pull the plug now and wish everyone a Merry Christmas (or just Happy Holidays if you aren't into the Christmas tradition), and with luck it is my hope we all have a better more prosperous New Year ahead as well. Steve

Alright so tonight I will post a corrected chart (I mislabeled the demand area in the previous post) and also talk a little bit about "price action" First, in the chart displayed below, I corrected the lower "demand" area so that it properly displays the size of the imbalance (the range of prices where an imbalance exists). Why is this important? Well for one thing, this represents the (minimum) size of the stop loss you have to accept if you want to put a position on. Next, notice the way price "leaves" an area of supply or demand. What we want to see is a display of momentum. The way we categorize moves from either supply or demand is (in order of strength) 1. Gap up or down (away from the supply/demand area) 2. Wide Range Bar(s) with parabolic arc up/down from the area with minor retracement 3. Stairstep move away from the area with periodic retracement Looking at the chart you can see aspects of each type of move (except gaps), representing significant imbalances (more buy orders than sell, or vice versa) At the end of the session, notice that price tests supply three(3) times. This is testimony to the fact that the imbalance (buy orders overwhelming sell orders) was significant. The last test was at the open of the Globex overnight market As an aside, I think its important to note that for traders trying to learn this method, it is going to be psychologically difficult to take the trades. Most professionals consider the supply/demand boundary to be a "key reference area". The way it works is that we "read the tape"...(the time & sales strip and the NYSE Tick)...as price tests the boundary of a key reference area, the "rollspeed" (display) of the T&S changes, as well as the size on the bid/offer....then as price reaches equilibrium the market "rolls over" and the TICK "pins" or displays a local hi/lo reading...thats when the professional "pulls the trigger" (as the market stalls and price reverses). Its a difficult process to describe and even more difficult and time consuming to learn, but once you do, it makes trading the reference areas (like supply & demand) pretty much a walk in the park. Hope this helps Good luck

Kiwi, MidKnight; Thanks gentleman for your kind words. I hope you find something of value in the comments or the charts. Good luck

Here is an anotated chart showing the ES contract from the Globex open, to the open of the Asian Markets (the mark down phase), followed by the DAX open (and the mark up phase) and the US open. Note that that US opens, probes down past the weekly open, finds no sellers and then the rest of the day is uneventful as we grind up into the end of day balloon. If you can read the tape, the open is a walk in the park. Why? Because if you prepare by referring to the larger time frame (see the next attached chart) you know that price is likely to test previous demand (support). The actual process consists of two steps. Step one is you see the possibility of a retrace and test of a level. Step two is you read the tape when price tests that level and you react to what the tape shows you..In this case we saw price test and bounce. If you handled it correctly the rest of the day consisted of risk management. A couple of final comments to put things in perspective. Off the open, we had plenty of opportunity, if you wanted to get short it was there for you (see the third chart) when price tested supply. On the move down, again you had plenty of opportunity if you recognized where the demand was (look at the "buying tail" notated at the bottom of that chart). Everything in trading is about recognition. You have a limited amount of time in which to recognize opportunity and to act.

Its nice of you to say so, Good luck in the markets

Okay so we can see now if/how people are thinking about this. Blowfish, the reason I posted that we look at intraday cor/convergence on multiple time frames is precisely because of what you just observed. The relationship that we look for can (and does) appear periodically and then disppears, at least thats how it looks to most participants....Actually what we find is that the tradeable relationship "cycles" in and out of existence depending on several factors (one of which is stationarity). So what we (and many others) try to do is determine what the cyclical nature of that occurence is....for the various spreads. As I mentioned in a prior post, there is an equivalence to time and price, that can be exploited.

Blowfish Thanks...at least one item of comment that I can respond to... We do a lot of whats called "cross border" spreads in my group. I see you are already clear about the requirements for correllation and convergence, so I would simply add that to make it work, we have to monitor intraday correllation from 1 min to 60 min time periods. For folks new to this, what we want is to see are significant "waves" or patterns of change in relative valuation above and beyond what is termed statistically "trivial"....If/when we find that relationship with a pair, we trade it. There are other issues relating to notional value (for contracts denominated in different currencies), to currency volatility, and although there's no expicit gamma, to the "appearance" of it from time to time in the position. Like most things in life, there are people who do this very well and others who think they do, and end up being some bigger fish's lunch. Best of luck to you

I guess the question to be answered is do I have enough time to correct all the useless urban myth that you two have posted? and do I care? I would say the answer is no...So my comment is simply, between the misinformation, the bullshit attitude, and the useless crap....I wouldn't know where to start.... I will be ignoring you completely....I would suggest others do the same...

Okay so that first short entry came within a tick of a 10 point profit before reversing and in the attached chart, you can see how price "telegraphs" the change as this market goes from short bias to long bias (just my opinion). From my point of view the important thing to note is that it happens just prior to the open of the US market. This is a common occurrence as professionals look to position themselves PRIOR to the open, and at wholesale prices if possible (the low of that reversal bar/candle is at 1216.25 which most professionals would define as "wholesale level demand" for this distribution).

Here is a follow up to the previous post, showing the short position's progress. As can be seen this short would have hit the first profit target.

Here is a chart showing today's open, the placement of supply and demand at the extremes of a local distribution and a possible short opportunity. The idea is simple. In order to make a dollar in this business you need to prepare in a logical fashion. You begin by identifying the extremes of a local distribution. Most of the time this is the local high and low. You then identify supply and demand. These are areas where an imbalance exists (or more properly "has existed"). You look at how price leaves those areas for a clue as to how price is likely to move on the open.... As you can see I have identified the opening (horizontal lines) half hour time period. I believe this is a critical time period. In this instance I would want to get short either above or as close to the top of that period as possible (and vice versa for a long position). and now the price action. As you can see price opened and tested the high. This happens all the time....knowing this you prepare for a test of the high and on the failure you have plenty of time (and several places on the chart) to short the market. I show a preliminary profit target and the secondary target is demand near the bottom of the chart. If it works, it works, if not, you move on to the next opportunity.

I have no such concern when I transact in the markets and like most of my colleagues I never take a postion based on short term considerations. It seems to me that you need to broaden your education. There are many participants in the financial markets, each with their own agendas and time frames....I suggest you take the time to learn more about this before putting money at risk. One resource that you may want to investigate is Auction Market Theory. Good luck

No, I'm not say that at all. Read my posts. Its simple and straight forward. There are yearly, quarterly, monthly and weekly "opens"....those are pivots and (some) institutional traders will try to defend them, and to exceed those pivots in order to obtain a bonus at the end of the year...I show a simple example in my thread "An Institutional look at the S&P Market". Its a fact that we all have our own perception, however you have the option of adapting to new data. I suggest you think about how you might adapt yours to this data.. The significance of time is also very straight forward. As an institutional trader I have a limited amount of time to get my business done. As time runs out I have to make decisions in order to reach my goals. Its very simple. Good luck

Time & Price are equivalent. If you know how to use time, you gain an edge over participants who only use price and vice versa. As I have already stated in previous posts, there are a number of participants who transact based on "targets". These targets must be hit within the space of specific time periods, if not then those people lose money....as we move through time, the importance of each period becomes apparent (to those who pay attention). There are a number of ways to use time in financial markets. On the simplest level, retail particpants are famous for entering trades "late", while most professionals try to get in "early" While that is clearly an oversimplification of things, it illustrates a basic tenent, that retail is usually 180 degrees out of sync with what really works in markets and a significant reason for that is the lack of understanding of the significance of time.