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Dogpile

MP Question: How many 30-min bar touches before you call it 'fat profile'?

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ok, trend day should be 'elongated' on 30-min. Fat profile shows lack of conviction in the directional auction.

 

ie, today (June 6) -- S&P futures have touched 20.75 and 21.00 on 6 different 30-min bars. I call 6 touches as a 'fat profile' and say that the market is balancing if it touches the same price on 6 different bars. What do you use as your 'line in the sand' as to what makes for an 'elongated profile'/trend-day and what doesn't? (FTR, I don't base any trades on this directly, just context for other set-ups). I am not saying 6 touches means anything specifically, just seems like electronic markets have a tendency that when they go down --- they go down quickly... and so hanging around for 6 30-min bars is sign of possible longer-term, patient buyers coming in to nibble and offsetting some others long liquidation.

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the reason I think this is important is what it really means for the following day.

 

in my view, electronic markets may go up either with hard, momentum based 'dogpile' action or they go up in creep mode as buy programs just hit over and over again.

 

but electronic based markets are different on downside. they generally do not go down in slow, creep mode -- they generally just freefall quickly. we did have a day about 2 weeks ago where market went down really hard with single prints... then chopped around and formed a somewhat 'fat' profile (a 'b' profile) -- and then it had a 'price spike' down late in the day. but all this did was set up a great buy for the next day as it gapped up and ran hard -- you were offered asymmetric location for a buy late in the day on the hard push below the point of control.

 

Now beware, you must have a good entry technique with a very reasonable stop loss point as the market did form a 'b' profile on the day before it crashed on February 27th. But having a good short-term entry/stop loss technique will get you out of the market when it breaks hard lower but will also allow you into the market for the majority of times that the market squeezes back up...

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The answer to your question - for what in essence you are asking is when does the profile change from a responsive to an initiative style - depends on the type of trader you are. Let me make a comment that for the longer term horizon trader what Pete Steidlemayer referred to as the other time frame trader 5 points in the S&P is just a bid/offer spread.

Let us assume you are a day trader and a scalper at that and my comments are purely for the S&P for it differs depending on product.

 

To look purely at the TPO and try to set a rule of when does it become a fat profile is not sufficient.... for volume as well as time together with the value all in relation to previous as well as current pattern make up the market profile..... BUT...... the short answer to your question is 8 TPOs and to be on look out once 4 have formed

 

Looking at the slightly longer term profile of composite days then the moment that you get 22 is time to be aware of the possibility of change. And once you reach 42 you should be monitoring in ultra-short term mode because at 48 that is about the point of time that change occurs.

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once you get to 4 TPOs then you are looking for the possibility that the trade alters from responsive to initiative. if it does not occur by this time then the chances of a trend day are lessened and so from 8 TPOs you are then effectively looking at a new IB distribution that frequently becomes a late running profile. ES on Fridaty Jun 8th was just such a clssic one in that respect.

 

Back in 1986 Pete Steidlmayer wrote about needing to wait for the first 4.5 hours in ES to pass before establishing a trade and as per usual I contend nothing has changed over the years

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<<for what in essence you are asking is when does the profile change from a responsive to an initiative style>>

 

that wasn't what I was asking but a thoughtful response nonetheless.

 

I was just trying to derive the value where buyers and sellers agreed enough where it is a price that can be used in the future as a spot where more activity might occur (a re-test). To me, it is useful to know that price returns to its previous days POC 75% of the time as I can use that information as 1 bias/tendency to mix in with other tendencies to create an effective overall strategy.

 

I generally expect a morning reversal (responsive activity) and afternoon trendiness (initiative activity) as a default rule. Clean trend days these days (like Thursday) are so rare that I think most investors are far too overly-concerned on catching these. What do you think? I try to be realistic whenever I see dogpile type of action. The odds are strongly against a trend day every day --- Thursday had a nice 'shock event' of the bond market collapse/climax that supported a trend day. Most days do not have such unusual circumstances.

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trend days occur 15% of the time data back to 1982 and it does not matter which start or end date always 15%

 

The reason why price returns to prev POC is because markets are mean reverting in nature

 

As for Thursday you can assign the bond market if you like as the reason but the MP was already set for the move. IE it would have done the move regardless of the bond market but the bond market move possibly reinforced and generated possibly a faster move than might have occurred without the bonds

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I think of trend days as a day where no price is 'accepted' by both buyers and sellers -- that is, any day that has a 'fat' profile is not a trend day...

 

I use 6-7 TPO's as measure of acceptance. by this measure, 15% is too high. by your measure, 15% may indeed by consistent over time. I just don't know what your definition of a trend day is so 15% does not have much trading application to me. Are you saying that the market builds 8 TPO's at a given price 85% of the time? Doesn't sound right and might not be what you are saying. I am trying to combine your previous post with this one. Maybe you can elaborate what the 15% number means in terms of a trading strategy application??

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