Dogpile

Notice the 15-min 'Structure' which takes you out of the lower timeframe 'noise'. There is generally support/resistance around the VWAP level. When VWAP is below previous day VWAP -- the odds are that the market will resume its trend back down. It is important to monitor the 're-testing' action after this signal -- if price does not break lower in convincing fashion, then its likely the 'down auction' is over and a new 'up auction' may begin. Thus the play is to short for the test down and then monitor how price responds. http://bp2.blogger.com/_5h-SWVGx6Ms/RqIT0-vXazI/AAAAAAAAAVE/OzuqegzYhY8/s1600-h/July+20+ABC+Patterns.bmp

Notice the recurring 'Structure

Blowfish, I think you miscontrued what I said. I never said volume was wrong or unimportant, I believe the opposite is true -- I just said that the PVP, at a given time of day, is not necessarily useful as a proxy for POC.

<<I have noticed that POC and PVP come withing few ticks in most cases. >> I believe you mean in retrospect. Yes, at the end of the day they often might be quite close. But during the day, when you are watching price in real-time and while the market is building the distribution, the PVP will very often change multiple times. There is always a PVP -- there is always some price that is the highest volume price at that time. This price is just another price -- this has nothing to do with a market that is 'in balance'. Price is not thought of as being accepted because it hangs out there for an hour or two.

<<If POC is a "very much useful thing", surely PVP must be also since market profile is a subset of the more general distribution function.>> Hey, I am open to anything so I am paying attention to what you are doing with PVP. But as of now, the very reason PVP isn't important to me is because it is like it is being treated like a POC --- but if you think this is the case, then I don't think you truly understand why POC is accepted price and PVP isn't. PVP is just a number that has an outside chance of eventually become the POC. The vast majority of times, the PVP will not end up being the POC. Treating it as kind of a 'junior POC' and trading with that in mind is simply a concept that is not consistent with Market Profile logic. Do you see why? To me, price is moving until it is 'accepted' -- through time -- and then it is a POC. Therefore, PVP is just another 'unaccepted' price. Trading with the belief that the PVP is 'like' a POC is a serious mistake in my opinion. Again, I am studying what you are doing and hearing other peoples methods definitely helps me understand things more deeply because I am forced to try to understand what the logic is behind your and others approaches. I am all ears though re the PVP if you are going someplace with it that is NOT treating it like good market profilers treat the POC.

Ok, this one is a set-up for a 'coil break'. Title: Bollinger Band Squeeze Play (Lifted Partially From John Carters book 'Mastering The Trade') Settings: Use 15-min Chart Both 2.0 Std Dev Bollinger Bands narrow to the point of being 'inside' the 1.5 Keltner Bands Statistical Set-Up: This set-up defines a market that is in tight 'balance' and poised to break hard in one direction or the other. A market 'in balance' is a market profile concept which means that buyers and sellers have agreed on the current price level. The Bollinger Band Squeeze play is when the market has become balanced for a period of time that is long enough such that a big move might be forthcoming. While the chance of a breakout to the upside or downside is considered to be 50/50 -- the reward of catching a directional move makes the trade have a high reward relative to the risk of 'stopping-out'. You must use a stop as the market can fake one way and then go the other way. Pattern Filter: You must be able to draw a well-defined Triangle (converging trendlines). If you can't draw a triangle, then the chart set-up is probably too wide-and-loose. This visual pattern is a crucial variable to the set-up. http://bp3.blogger.com/_5h-SWVGx6Ms/Rp6PSEAHGQI/AAAAAAAAAU0/tjPrtvhgLNk/s1600-h/July+18+BB+Squeeze+Play.bmp

I have spent a good deal of time thinking about the PVP last few days and I just don't think its something that can be considered significant. I will wait for jerrys forthcoming material but as of now, I think watching PVP is a total waste of time. That said, watching for 'price acceptance' via POC is very much a useful thing. ---- Here is an idea I am using VWAP for... Note that I am combining a 'pattern' with the concept of 'statistical value' -- Personally, I think this is a powerful combination. The concept of the ABC is that stops are gunned above the last swing high or swing low before the primary trend continues... This gives a nice clean 'pattern entry' for traders to find a low risk spot to enter a trade. But the trade becomes especially good if can combine the visual pattern recognition with a statistical tool -- enter the VWAP. Here is todays NQ chart. Note that today the market auctioned down and then built a sideways congestion. This is generally difficult action to trade and can chop a lot of 'overtraders' up. In my chart are the 2 ABC patterns of the day -- so just 2 entries for this set-up occured all day. Also note that you can learn a lot by watching the action after an ABC pattern plays out. Does the market immediately go to another new low (ie, after the first ABC up) -- or does the ABC just lead to more congestion (the 2nd ABC up). Note that a market profiler would see that todays profile was not trending -- it was stalling. Lower prices were not attracting increased selling -- lower prices were beginning to shut-off activity. The failure of the 2nd 'ABC-up' to lead to a new low signalled that the market was stuck in a coil and a breakout one way or the other was next (a different set-up than an ABC is required for that). http://bp0.blogger.com/_5h-SWVGx6Ms/Rp6CyUAHGPI/AAAAAAAAAUs/vo9P_qWvf7Q/s1600-h/July+18+ABC+Pattern.bmp

This thread is to chronicle a few set-ups... Comments welcome. I use a combination of: 1) pattern recognition 2) market profile based 'value' concepts to filter trade ideas... Set-Up 1: Pattern: A-B-C Pattern Filter: If Current VWAP > Yesterdays Closing VWAP -- Look Long but only if ABC forms BELOW Todays VWAP Level If Current VWAP < Yesterdays Closing VWAP -- Look Short but only if ABC forms ABOVE Todays VWAP Level I am not going to spend time on exits as those are too complex... Just Entries and Initial Stop Levels http://bp2.blogger.com/_5h-SWVGx6Ms/Rp5_v0AHGOI/AAAAAAAAAUk/tDK8HkaaCyk/s1600-h/July+12+ABC+Pattern.bmp

Jerry, doesn't chart 2 have PVP < VWAP? I see a longer volume bar on the screenshot you posted creating a PVP < VWAP. If so, this would signal a long bias for Newbie... but only above the VWAP with a stop under 60.75? is that where Newbie is right now?

just be aware Darth that the Small Stakes book is not a beginners book. the concepts in there are pretty advanced -- despite the title saying its Small Stakes. poker is a funny game statistically. the 'variance' in your results is high relative to the win rate. often times, a few hours of playing will show a profit or loss based on just a small number of the hands you played. did you make a flush on that big pot? did your Aces (AA) hold up or get cracked by 97 offsuit? the nice thing is a lot of the time you can take solace in studying the hands you played and seeing if in retrospect you played them well. if you consistently play hands well and minimize the 'tilt' factor, you can clean up at small stakes games. I suggest you start at the very lowest online stakes you can find and play at least 20 thousand hands before you even attempt to move up. The free games probably won't teach you much. But if you can't beat those, you can't beat money games. You should clean up over time if too many players are playing too many hands. In the short-run, say over a few hundred hands, poker is a luck game. Over the course of thousands of hands, skill wins. Over tens of thousands of hands, skill dominates.

here is my take for ES: ES opened at Fridays POC/VWAP level. The market was thus opening 'in balance'. We had a push up away from this level and ES formed a balancing POC at 63.50 -- a level above the prevailing VWAP. the market attempted and succeeded on a breakout away from the established point of balance near 1pm EST -- this had the effect of forming a morning high after 3 up days. This 'pattern' had me looking short. the market then offered 2 'shallow bear flags' on its push down. Price quickly fell and location now was FAR below VWAP and the earlier established POC at this point. Location was therefore difficult for any more shorting. I did notice during this time that the PVP had now formed 'below' the VWAP (for ES). I was curious on this new concept that jperl outlined so I watched this with interest. jperl's advice would have been to bias trades long (if near the PVP price) since PVP was below the VWAP. The problematic thing was that Dow, Rus & NQ all had PVP's above their VWAPs. So ES was kind of an outlier. So I would ask jperl and others what they do in this situation using their process? I had my own opinion today -- but was curious what jperl thought of todays action.

nelo, please post how you used VWAP today to bias or enter trades. I would enjoy hearing how people are using it to trade.

nelo, I understand all of that. I guess I just think of POC movement as secondary. I trade patterns while using the context of 'value' as a filter for my trades. I don't really care if you label POC 'abrupt' or not -- it is really not important what adjective you use to describe its movement. I understand how it moves -- I just think of it as a level of value and balance once it is established. Today you had a period of balance, a break away from balance and then an establishment of the second distribution. I couldn't care any less if everyone calls this movement 'abrupt' or not. Call it abrupt, don't call it abrupt, compare it to VWAP, don't compare it to VWAP -- whatever. To me, what matters is that you understood that one price had been accepted -- and that price diverged away from that level which led to another balancing. What is more interesting is -- look how NQ today went down and tagged Fridays closing VWAP. VWAP might be another powerful pivot for me -- but I will have to track it for a while before I use it like I do other key pivots (15-min EMA, last hour high & low, POC etc...). I use statistics for their tradeable tendencies. This helps give me a way to bias my trades. It is the pattern though that is important. Simple number-crunching of VWAP, POC, PVP or any other statistic is not going to leave you with an edge versus all the computer-powered algorithms of the world. You are not going to 'out-compute' the futures market. That said, I find the concept of Market Profile types of 'value determination' as very powerful ways to help give you confidence that the pattern you are seeing does have a statistical bias helping it to move in the direction you are trading.

jperl or anyone, would you happen to have the EasyLanguage code for PVP?

<<POC or PVP is not a continuous function of time even on the same day. >> this is part of the POC's appeal, IMO. the market has an interesting habit of touching old POC's. Since VWAP is moving with time, the VWAP does not develop the clean pivot prices like a POC does. I see what you are using PVP for, I personally favor the technical pattern as it relates to a point of 'value' -- whether it be POC or VWAP. PVP is not as interesting to me in this regard. But I am interested in seeing where you are going with this nonetheless -- it might provide another angle upon which to understand some nuances of market behavior.

jperl, ok, thx for PVP explanation re. skewness -- that makes sense. I see what you are doing now with PVP. You are assuming that the PVP was an earlier point of 'balance' and that monitoring VWAP relative to PVP will keep you on the right side of a directional move as price diverges away from the earlier established 'balancing point.' This is an interesting specific strategy variation on classic market profile. I clearly see why this could be a very useful visual reminder for traders on how to bias their trades. This is really particularly applicable to the afternoon session where the market has more 'trendiness' than the morning session.

Blowfish, I meant its not abrupt in that it takes a good period of time for the POC to build. You are watching it and it is ever so slowly forming until it does. You are right that it basically gaps from the previous days level to the current days level. However, I would hardly call that abrupt. Its not like you expect the market to build the same POC on consecutive days. You know its going to build a different POC so you are fully cognizant of the fact that it is going to gap to the new level. 'Balance' is consistent with a consolidation pattern. When the market is consolidating, it is generally not moving much -- it is just churning -- this is the real-time action that is NOT abrupt. I see from the perspective you took that you can call it 'abrupt' -- I just don't think that is an accurate depiction of how a POC builds -- which is inherently slowly. But you do have a point.

I am trying to understand the logic here. the VWAP is a very logical. the PVP seems irrelevant to me. why is the PVP a meaningful number? seems like a marginal difference as to what it might be at any given time... btw, if newbie were a pattern guy, he could have gone long off the A-B-C corrective pattern down (a lower low) pattern that lead to a re-test of the morning high.

mathematically; Ace-Seven is about a 2.9-1 underdog vs Ace-King Ace-Seven is about a 2.5-1 underdog vs King-King those are the odds you would need given each hand. so long as your opponent doesn't hold AA, which would be rare since you hold 1 ace -- then you should ALWAYS call so long as you are getting 2.9-1. this is because when your oppenent has KK QQ JJ TT 99 etc..., the odds are in your FAVOR and you would be a noob for not calling if you KNEW he could have one of these hands at least some of the time. when he does have an ace with a bigger kicker, you will be 2.9-1 but you are getting 2.9-1 so this has breakeven expectation. you could do all the math and come up with a precise number based on all the hands he COULD have but this is not really all that important. in general, so long as you hold an Ace, you are never more than a 3-1 underdog -- except against AA. but the times he actually has AA is offset at least somewhat by the times your opponent is bluffing or by the times he has a pair that is under 77 -- in which case you are not much of an underdog and again would be a noob for not calling. you can see that math is based on what your opponent could be holding rather than what he is holding -- since you will never know what he actually is holding. you can take these concepts and come up with a number. you have to make estimates on what % of the time he is bluffing in that particular situation. I have made some calls where I felt very strongly that I was beat but the odds were close based on the size of the opt --- and magically some of the time -- your opponent is bluffing and you win that 1 big extra pot -- which can be the difference between winning and losing overall. but in my opinion, the real crucial factor in poker is, how do you handle a bunch of bad beats that happen in a series. waiting for KK for an hour or two and then getting nailed with it by a noob is tough mentally. now what if you are dealt QQ the next hand and lose again to the same noob. now you make a straight and lose to a full house on the river. these things happen and the question is do you tilt off another stack holding AQ, a good hand on its own but a bad hand in most all-in situations.

<<I've been bad beat heaps of times by people who will call an all in when I have wired kings and they have only an Ace high with a 7!>> I know what you are saying but for others reading this: the answer to calling with A7 vs KK depends entirely on how much money is already in the pot and the ratio of what the all-in call amount is versus the amount already in the pot. It is CORRECT to call an all-in with A7 vs KK even knowing you are way behind if there is a lot in the pot and it is incorrect to call an all-in with A7 vs KK if there isn't much in the pot. think this way, if you and I were to flip coins and we each had $100 in our stack. if there was a $1 ante in the pot put in there by somebody else, it would be technically CORRECT for us both to put our entire stacks in because the reward is greater than the 50% odds of each of us winning. we should do this all day long and split up the $1 ante (1% dead money 'overlay').

I highly recommend reading the books by Ed Miller: for newbie: start with 'Getting Started ni Hold 'Em' by Miller once you have read that a played a while: read 'Small Stakes Hold Em' by Miller (this book is considered the bible for online players). there are a ton of parallels between poker and trading. most especially regarding bankroll and going 'on tilt'. 'on tilt' refers to how you much more poorly you play after you face serious adversity -- bad luck or a series of events where you think it is unbelievably unlucky. I can't tell you how important this is in both poker and trading. Every single person in the world will go 'on tilt' to some degree -- the question is how much. It is much much better to face this 'tilt' situation at a small stakes poker game than it is when trading futures. you need to learn to control this or you will blow out your account -- either poker or in trading. honestly, you would be amazed how your breathing and heart rate change when you have lost money. the issue with poker is, how much worse do you play when on tilt versus how much do you win when others go on tilt. poker is actually a 'cleaner' game than the markets. after a hand is over, you can see the other persons cards and then go back and calculate precisely what % of time you would win the hand and what % you lose and therefore can see in retrospect what you SHOULD have done and compare that to what you did (cost of a bet versus the payoff -- called 'pot odds'). you can't do this in trading -- but the concept is the same.

<<Oh - by the way - are you parents supportive of your current trading activities?>> hmm, it wasn't clear for a while but I think they have become supportive at this point. In general, they have been supportive parents. re. letting me down, I think they just didn't understand or maybe didn't believe me when I told them what had happened and how it went down. it didn't really make much sense so it must have seemed that I was leaving something out. but in fact, it really didn't make any business sense -- a nasty downturn in the industry brings out the 'end of the world' callers. doom & gloom was rampant at the time. a new guy was brought in to run our unit and his policy was that everyone should do business based on the belief that the economy wasn't going to come back anytime soon. the goal was to cut costs fast cause business was all going to go to get much worse and there was no upside case -- just the certainty of a non-stop downside for the forseeable future. 2002 was an absolutely brutal year to be in the financial services industry. the aftermath of 9/11 had some people thinking that the bottom must be in as it's hard to believe it can get any worse than that. but the vertical short squeeze at the end of 2001 set the market up for a non-stop downside churn in 2002. it hardly even upticked and we were actually fundamentally recovering from the 2001 recession -- the market didn't care and stocks just went down and down. then Enron and Worldcom scandals broke and that caused more gloom and doom. everyone was under a lot of pressue and you could feel it. the right thing to do during this time is to have people take pay-cuts and rationalize your business. the wrong thing to do is to assume that it will never get better again. well, our managers didn't do the right thing. what are ya gonna do? our business was in fine shape. yes, it was down -- but it was down off of super-inflated levels. so the right thing to do is re-set the compensation to the new level of business (lower costs). my employment contract was designed with this in mind and my bonus was reduced automatically as it was calculated based on my units revenues generated for the firm. but anyone can make up a forecast and say, 'you know what --- your business is going to go to shit this year and you and your associates aren't worth keeping on because there is no hope.' it wasn't based on reality, it was based on a bad forecast. no discussion with our customers. no discussion with us. just a pink slip and a refusal to honor a written and signed contract. 'we will see you in court'....

wow, this is getting heavy... but I am certainly game. (1) What did you really think/feel about them as human beings? no-backbone wimps hiding in a big corporate ladder that had reverse darwinian process -- the best people left and the people that stayed the longest eventually elevated themselves through attrition. I really didn't know them on a personal level -- they were based in a different location and flew in for meetings. (2) What did you really think about them as financial people ( ? traders/investors? they had failed themselves so not much... they had made multiple boneheaded moves over the time I was there. (3) What did you really think/feel about how they conducted their business? What can I say other than I didn't respect them. They fired a group of 'value managers' at the low of the growth/value cycle (2000). Ironically, a key reason the value group underperformed their Russell Value Index was because Worldcom had become a huge weighting in the index they competed against and they refused to buy it and thus they underperformed in the short-run. classic. (4) What did you really think/feel about how they treated you? These all have the same answers. History has proven me and my group correct and them wrong. I had a contract in writing that was reneged upon and I had to fight a huge corporations team of lawyers. Honestly, the company went through some mergers and those were very difficult times for the industry as a whole. There were subsequent lawsuits which I am legally bound from going into. Clearly, I feel they treated me and some other hardworking people unfairly. There was no logical financial reason behind it, there were a lot of politics. I won't go into the details but let's just say that once a manager attempts a power play that backfires in front of the 'higher-ups', it sometimes gets easier to just terminate people rather than own up and admit to some professional misjudgment. (5) What did you really think/feel about the amount of money they were making? I have no idea how much money they made so I have no opinion. I don't care about that really. I made a lot so I never cared how much they made. (6) What did your parents, wife and family think/feel about those bosses and managers? None of these people knew the bosses/managers. Parents were not so supportive when I told them the story actually -- that did really piss me off. Taught me a valuable lesson with how to support my children when the chips are down. Wife thought it was total BS. Remember, we had a child due in one month. gotta go for now... look forward to where this is going. this might be extra therapeutic to get other peoples opinions of something that has been buried for a while.

<<mentally, emotionally, physically and even spiritually?>> I received a few private messages so I know at least a few others can relate to the topic I presented... I figure if I open up a little, maybe it can help somebody else also. mentally -- I know I have obsessive behavior. I always have. In school I tended to crank at one subject and totally blow off the others. in sports growing up, I shot a basketball hundreds of times a day almost never taking a day off. I learned to play poker years ago and read 15 books on it and typed up notes into computer files on many of them. I have little kids (2 & 4) now and have become somewhat anti-social as my kids are a huge focus for me. my parents think it is unhealthy to treat our kids as the 'center of our universe' but I happen to disagree. I believe this obsessive behavior personality is what makes me effective at the things that I focus on but the extremely narrow focus comes with the price of stress when I enter a period of 'below-trend' results -- when I try so hard and don't do well -- this can be quite painful. Also, many times at the end of a trading day, I am so mentally exhausted that I can hardly communicate with my wife. that said, I do work out multiple times a week and this is very therapeutic for me. nevertheless, I find myself very stressed out a lot. Its like my head is just muck and I get severe headaches. I do drink quite a bit of caffeine so that probably doesn't help -- but I feel I need a jolt in the morning or else I will probably not have the focus and energy to work hard. physically -- I could stand to lose a few pounds but I do get good exercise. I was very athletic through college and have never had any physical problems. emotionally -- well, don't really want to go there publicly. will save that for a shrink someday. spiritually -- hmm, not sure how to structure an answer to that. tell me what kinds of spiritual feelings are typical of professional traders? thanks for any help. One note, I do have a bitter taste in my mouth (and probably always will) about getting laid off years ago. It was quite a b.s. situation in retrospect -- I worked my ass off, performed very well and got laid off anyway because of the 2002 market meltdown and the short-sightedness of some of the senior managers. 2003 would have been an incredible year where all my hard work would have paid off but I got chopped off at the knees in February of that year (the market bottomed right then). I may have deeper emotions that haven't been totally explored on this subject. I made a lot of money at my old job which allowed me time to learn how to trade for a living so that isn't all bad. But the entire situation is one big source of jaded resentment towards the idiots that were my bosses. I took a year off as my 1st kid was born right around then. I had zero interest in getting another job. This is when I took up poker and obsessed about that. ok I got some of that out -- hey this is helping already.

okay, jperl -- I still think we are just playing a game of nomenclature here but I will try to learn something new rather than fight this. I do not think of 'averaging-down' as necessarily buying more lower --- only when you actually decide to do so is it averaging down. You are calling 'scaling-in' some kind of intelligent version of averaging down. By your definition, I agree with you. Blindly averaging-down is so ridiculously bad that it is not worthy of much discussion. Intelligent, well thought-out averaging (what you call 'scaling in') --- does clearly have merit if you believe you are right on the pattern but you do not have as much confidence in the precise entry. An alternative method which is essentially the same as what you are saying is to take 1/2 a position with a stop but then re-enter with a full position if you decide you still like the set-up. the advantage I see in this is that you do get out of the market and sidestep all of those out of the blue relentless program trading swings that can run you over. the 'scaling-in' concept and the use of a stop are not mutually exclusive. I think this is what brownsfan was saying and I agree.