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ant

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I don't trade full-time right now, but my style of trading would average about 2-4 trades a day since my method tries to capture the major swings of the day. However, sometimes the market I trade, emini S&P, doesn't generate any trades, which brings me to my question. In order to trade for living, is it required to trade more than one market? For example, over the last week or so, volatility has really dried up in the ES and there have been few trade opportunities using my trading strategy. Specializing only in one market makes sense, but if you're trading for a living, you need to trade to generate income. Seems like this could be a real problem if the market one follows hits a dry spell for weeks, months, or longer. Thoughts?

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Taking it into account that you are profitable trading the emini S&P, I do believe specializing can generate enough money to provide a living. However, no matter how good of a trader you are, trading small lots can become a problem. A trader trading 1 lots will have a hard time living off 2 points a day than someone trading a 100 lot.

 

The YM moves similary to the ES. On any given day the YM will have a 50 point minimum range. More common are ranges within 50-100 points. I do believe that one can trade for a living with index futures only. Of course there are days when the markets do absolutely nothing like on Sept. 6, 2006.

 

I do think it is a matter of a traders satisfaction. I have no problem trading the dow only while others may find the need to trade other markets.

 

As long as you are able to trade one market profitably, I do think one has the ability to trade any other market successfully. All that is required is observation of the underlying instrument to understand its personality.

 

I think the problem with alot of traders is that they jump around too much from one market to another without truly being an expertise in one market.

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I am sure if you are good at one market, you can easily switch to a different market if it hits a dry spell. Money is made only where the action is. Gold was a very good market to be trading a few months back.

 

I don't think you will have trouble with a dry spell if your speciality is index futures.

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Should new traders start out by trading stocks, options, forex, or futures? Are the personality different for each market?

 

It doesnt matter which market you start out with initially. There is no single easy market. You may find stocks that are easier to trade than other stocks. Or you may find a futures contract that is better suited to you than other products.

 

Find a market that interests you and learn it thoroughly. I think all traders need to have at least one market that they can call it their bread and butter.

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It won't hurt to learn a couple though. Trying to trade 100 stocks on your radar screen is tough but I know some traders that do.

 

Just learn a handful of different markets. That way, you can always move towards where the action is.

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The markets I have started to follow, besides the emini S&P, are the 30 yr Bonds, Euro, Crude Oil, Natural Gas, and Gold. I also look at the emini Dow to identify divergences between the Dow and the S&P, but I've been trading the emini S&P only. I plan on trading only the electronic markets, not the pit-traded markets. Any thoughts on applying Market Profile principles to these markets? I wish there was another market, in a different area, with the volatility and volume of the S&P. Why do some traders prefer the emini Dow over the emini S&P (besides the tick value of $5 vs $12.50).

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The dow mini or YM is very similar to the S&P 500. A couple of reasons why I prefer the dow:

 

The YM can be traded using a tighter stop than the S&P. My setups use a 10 points stop with the YM. When trading the ES, a 1pt stop is guaranteed to get stopped out.

 

The liquidity is thinner compared to the ES. This makes it alot easier to spot volume on the tape without risking any slippage.

 

There is also the psychological side when trading the YM. Greed plays a big factor in trading. Many new traders will refuse to take a 1-1.5 point profit in the ES just to see their stops get taken out. In the YM, a 15 point profit is alot easier to take than a 1.5pt profit in the ES.

 

When buying the test of the lows or shorting the test of the highs, the ES tends move 1+ point before reversing. This hurts alot of new traders using tight stops. In the YM, price will usually stay within 6-8 points.

 

Aggressive and experienced traders trade the S&P. For new traders, the YM is a good contract to begin with. Price does not move as rapid as the ES.

 

Market profile works really nice with the YM as well. This is probably the main reason why I trade it.

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You should learn a handful of markets. Trying to trade a market with no action is no a wise move. Stick with the hot sectors.

 

I think at a certain point one can jump into several markets. But until he can trade one market successfully he needs to specialize.

 

Perhaps one can learn to trade stocks and index futures as a hedge. But this is also somewhat advanced.

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I don't trade full-time right now, but my style of trading would average about 2-4 trades a day since my method tries to capture the major swings of the day. However, sometimes the market I trade, emini S&P, doesn't generate any trades, which brings me to my question. In order to trade for living, is it required to trade more than one market? For example, over the last week or so, volatility has really dried up in the ES and there have been few trade opportunities using my trading strategy. Specializing only in one market makes sense, but if you're trading for a living, you need to trade to generate income. Seems like this could be a real problem if the market one follows hits a dry spell for weeks, months, or longer. Thoughts?

 

Quick question, what markets are you looking at besides the ES at this moment? Do you do well in a fast market?

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Hi Carter,

 

I primarily trade the ES, but also trade the Euro and Yen occassionally. Every night I develop a trade plan for the next day that I rarely change during the trading session. My goal is to capture the 2-3 major swings of the day, and if I can get in near the high or low of the day in the first hour of trading, even better. My daily routine is to determine whether the market is in balance (trading range) or imbalance (trending), identify the support/resistance levels using daily and composite market profiles, and then devise a trade plan. During the trading session, I monitor price action and market internals as the market approaches these key reference points. If the market is in a bracket I will look to fade key levels on weak internals, and stay away from entering in the noise. However, I am always alert for a possible breakout. If the market is trending, I always go with the trend and only buy pullbacks in uptrends and short rallies in downtrends. My trading style does not require me to be fast but I always use stops in case the market goes against me. Earlier this year, I removed all indicators from my charts and started to focus on trading market structure and market development using Market Profile. This was the best thing I did for my trading.

 

Antonio

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Very professional approach Antonio. Well done! Not many traders are able to follow their trading plan. It seems like you also adjust your plan accordingly to market conditions. You seem to have a method that works for you. Believe it or not, trading is very simple. However, in order to get to that level of simplicity takes tremendous work. I am not familiar with the currency market but judging from your trading methodology, you should have no problem trading interest rate futures as well.

 

You are also right about the indicators. Alot of traders step into a whole new level of trading once they realize that technical indicators are pointless and useless. Trading is so much more efficient without them.

 

Your methodology interests me alot and would love to hear more about it if there is a chance. I am more of a scalper using market internals and tape. I also don't really devise a trading plan but just trade market action based on where price is relative to the opening,etc...

 

Regards,

 

Carter

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Carter,

 

Below is a chart containing examples of what I look at each day. Keep in mind that I have the benefit of hindsight here... :)

 

On the left side of the chart is a composite profile for 8/16 to 8/31. You can see from the normal distribution that a mature, short-term, balanced area has formed and imbalance is expected. While the bracket is forming, I would focus on fading the extremes of the bracket on weak internals. As price approaches the extremes I would monitor market internals and look for divergences between price and ticks/volume, etc. on a 1 min or 5 min chart. I would also look for divergences between the S&P and Dow, look at bid/ask info, and identify high volume nodes and single prints as key reference areas. I am always looking for a confluence of key reference areas.

 

On 9/1, the market broke out of balance, but the higher prices were rejected, and the market traded back into the balance area. Within the next two days, the market returned to the lower limit of the composite profile and bounced off it. As the market traded, it left clues behind (i.e., it "tipped its hand"). So here is what I saw today and what I'll be looking at tomorrow...

 

Today, 9/11, the market traded away from the high volume node of the previous 2 days and tested the lows of the composite of 8/16-8/31 and 9/7-9/8. This set up a high probability trade to the long side. Notice that the market will test one extreme, and if rejected, will often test the opposite extreme. This happens enough times to make it worth watching. In fact, this is one of my favorite trades. Notice where the market stopped today - in the single print area of 9/6 and 9/7. That is, on 9/6 there were single prints around 1314.75, and on 9/7 the market bounced off that area. Today it did the same.

 

So what are the key reference points for tomorrow... The ES closed at 1312. To the downside, the key reference area is around 1309, the single prints from today, the high volume node of 9/7-9/8, and the high volume node of 8/16-8/31. To the upside, I will be paying close attention to how the ES trades around 1314.25, the high of today and 9/7, and the single prints of 9/6. I'll stop here, but I hope this gives you some idea of how I trade.

 

ES_.jpg.efb0a1470fa4849678f3cff4bfaca6f1.jpg

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Very interesting Antonio. You are a pure MP trader :) I trade without a mp chart but use the concept of market profile into my trading.

 

The way you derive your key levels are very similar to the way I get mine as well. I really think trading with MP and price levels is one of the best methods of trading. The information and analysis is pure.

 

By the way, I noticed that chart is from Tradestation. What indicator is that? It is a commercial hack or is it located in the TS forums? I may want to take a look at it.

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Good stuff Antonio. Market profile is indeed a good trading method.

 

I am no market profile master as I do not use it in my trading. I want to ask you a question regarding your methods.

 

You can see from the normal distribution that a mature, short-term, balanced area has formed and imbalance is expected.

 

What do you mean by this? Are you referring to the initial balance? Or are you watching a profile chart of several days?

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Carter, I meant that almost an ideal bell-shaped curve formed with a well-defined high volume node centered almost in the middle of the distribution. This part of the analysis is subjective since the markets doesn't usually create "perfect" bell-shaped curves. In general, the market profile of a balanced market resembles a bell-shaped curve.

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Soultrader, I created several Market Profile indicators for TradeStation and WealthLab since they weren't available without paying for them. As an engineer, this part comes easy. :)

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Soultrader, I created several Market Profile indicators for TradeStation and WealthLab since they weren't available without paying for them. As an engineer, this part comes easy. :)

 

WOW.... I have been dying to get my hands on MP for Tradestation. Is there any chance I can use it for my platform with your permission?

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Carter, I meant that almost an ideal bell-shaped curve formed with a well-defined high volume node centered almost in the middle of the distribution. This part of the analysis is subjective since the markets doesn't usually create "perfect" bell-shaped curves. In general, the market profile of a balanced market resembles a bell-shaped curve.

 

Just realized I need to study more of market profile. I know of a bond trader who trades using a MP chart only. Is this what you do as well? Or do you combine both a candlestick or bart chart with a market profile chart?

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Just realized I need to study more of market profile. I know of a bond trader who trades using a MP chart only. Is this what you do as well? Or do you combine both a candlestick or bart chart with a market profile chart?

 

Although I've studied Candlestick charts before, I prefer using bar charts. I find candlesticks to be too bulky and the bar charts provide the same info anyway. I use daily and composite Market Profile graphics during my nightly preparation. During the trading session, I'm looking at a bar chart with the S/R levels already plotted on them and a graphic of the developing daily Market Profile. I also look at volume, Ticks, breadth, TRIN, and bid/ask info.

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ant, I have a question regarding market breadth since you mentioned it. Has it been effective in your trading?

 

I used to watch the AD line but did not find it any help. What market breadth indicators have helped you in your trading?

 

Thanks

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WOW.... I have been dying to get my hands on MP for Tradestation. Is there any chance I can use it for my platform with your permission?

 

Soultrader, I can post the Tradestation ELD code for the Market Profile study, but it is an invalid file type for posting to this forum. The files will be password protected though. :D

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ant, I have a question regarding market breadth since you mentioned it. Has it been effective in your trading?

 

I used to watch the AD line but did not find it any help. What market breadth indicators have helped you in your trading?

 

Thanks

 

Breadth is basically the difference between the NYSE advancing issues and NYSE declining issues. During the trading session, I use breadth primarily to help confirm a trend day like today. Sometimes, I also use it on higher timeframes to look for divergences with price, but not often.

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