Ideas for Struggling Traders

[steve46 12]

Market just opened and we are going to see a "buy the rumor, sell the fact" situation setup for us (classic human behavior at work). In this case the rumor is that the government will give the Big Three Auto makers a provisional bailout to keep them in business until President Obama gets into office. Then they dump the problem in his lap.

 

So the way this works is participants have been positioning for the announcement all along the way. When the announcement hits they will want to find a place to bail (where will that be)

 

Look at the longer term chart 81 minute candles and see that price has moved up on declining "up" volume twice. Clearly, the first time it rolled over, and we are awaiting today's "verdict" and the next move. I believe it will be a test of a new high (related to MP value area high) followed by another roll over. The only "fly in theh ointment" is that again, selected institutional players are marking the market up a specific points (using federal money). So at any time, then can enter to artificially create an updraft.

 

Here is the chart...lets see what happens.

[HAKUNA 10]

Steve,

Very interesting

 

On this link: http://www.nasdaq.com/asp/EconodayFrame.asp

 

there is wholesale report etc, but these are not released before their alloted time,

or are they known to the insiders.

 

you mentioned the home sales for yesterday, was this info. known to some, like your team for example prior to release.

 

Today once again the market turned at 10a.m EST and shot up, can you explain that in context of any report.

Thanks

[steve46 12]

Hakuna;

 

Your inquiry seems genuine so I will try to say a few more words on this subject although frankly I don't what more one could say that would help you.

 

First, if you looked at the site Briefing.com, they offered a comment about the potential of today's report to move markets (low potential). Nevertheless, it is often the case that markets move at 10:00 on released news OTHER than what is scheduled. What news would that be? Well, today was the day that the announcement was made that the federal government was going to bail out the big three auto makers. This market has been moving up on that rumor. and today was the climax move (in my opinion). The general rule of thumb for this kind of action is "buy the rumor, sell the fact". Market has been moving up on the rumor, and smart money was already in position and ready to take profit on the report that it was "fact"...

 

That move happened in two stages and culminated in the high today at 908.75. Then as the players took profits, predictably the market rolled over....Of course its not over till the fat lady sings, so we could still see a late day rally.

 

I think the important things to take away from my comment are that 1.) Smart money usually positions itself on the longer time frame. Look at a chart using 60 minute or 81 minute candles. You can see the move up as the speculators tried to obtain and hold onto their positions, waiting for the government to confirm what they already believed would happen. And 2.) At the open, the short term speculators (and locals) will often try to drive the market down, then wait for the news to mark it up, trying to entice those on the sidelines to enter the market. At the top of that move, they like others, want to get off the train with their profits.

 

I attached a chart with abbreviated volume so that you can see how price moved up on increasing volume at the beginning of the month. Long term specs got in position. The first move happened and then volume dried up as some of them took profits prematurely. Then it picked up again on the news that the government would probably bail the automakers out. Match volume to the move. When it increases as the move trends up you see agreement, when it decreases, even though price continues up, it is a sign that the move might be comming to an end.

 

I hope some of my comment helps your understanding

 

Steve

Edited December 10, 2008 by steve46

[steve46 12]

Hello Folks

 

I am done for the day, so I will post a note about today's action and go get a life for myself.

 

First of all, we anticipated a move up early today, not because of the economic report, but because of the news that the government has decided to bail the Big Three Automobile manufacturers out temporarily. In my opinion, smart money knew this long ago and they were positioning themselves for this "news". As you can see in the chart the first move from the open was down (this often happens on days when an obvious positive news event is scheduled). Experienced intraday participants waited to find favorable entry. You could have seen this by monitoring volume using $ADD, $VOLD, $TICKI and other sources. Then at 10:00am EST the players reacted to the news and the market trended up in a two stage move. The first high was 904.75. the second high tested the weekly R1 at 909. At 12:15 EST the market started to roll over as the speculators took profits. Price then tested the previous day's low. Charts attached

 

By the way, for MP traders, the previous day's value area low was 892...Surely its just a coincidence that price tested there before reversing at 10:00 EST.....:>

Edited December 10, 2008 by steve46

[TradeRunner 10]

Hi Steve

 

By the way, there is a good reason why the test of the trend line occurs during the night...can anyone guess why that is usually the way it happens?

 

why are trend lines tested during the night? Is it because of the affect of other markets that are open in Europe and Asia? So traders in those markets have half an eye on the affect they are having on ES and can see that it is approaching a potential turning point - in this case trend line and monthly pivot.

 

and what is the idea behind using 81min candles?

 

Thanks

[Kiwi 16]

Yes, markets around the world follow each other to some extent and the overnight markets everywhere are even more affected when they are drifting without news.

 

No, its not the overseas traders trading ES that determine the effectiveness of various potential s&r its the traders who are buying and selling es in response to worldwide movement. They may be overseas but they are most likely to be in institutions or situations where the US markets are their concern. So they are also paying attention to s&r when they trail world activity.

 

If you look at the aussie spi which is a tiny market compared with es you will see that it still trades to its own resistance points during night trade as it follows first europe and then the US but ... its not because the US is stopping to avoid pulling spi thru s&r is it?

 

Having said that there are likely to be major horizontals for the ES that will hold significance to a good proportion of international traders and when approached my result in reversals. But they are rarely dominant in discussion or decision.

[steve46 12]

Hello Kiwi

 

I hope I can get this in before the time limit closes me out. While the markets do follow one another to some extent, one has to understand that the folks in NY generally control the action here in the US. That is to say, that the funds generally have someone who is executing in the overnight markets. The purpose of executing in the overnight market is (generally) to establish a position that is held into the next RTH day (or longer). If the trader needs to move size, they generally do not execute in the US (globex) market but will switch to the DAX and to the Nikkei (for reasons of liquidity). For this reason, you may observe that significant moves occur at specific times (for instance at about 3am EST). Generally speaking for big money to enter, markets have to be fungible and have sufficient liquidity to move a minimum size. That is why the SPI (and others) don't see big swings in the overnight.

 

As to why the 81 minute chart...well I like to have at least one bar that opens at or near 9:30am EST. With the 81 minute chart I get pretty close and I have a chart that shows me a longer term view that I can use to my advantage. Generally speaking I like to look where others are not looking. Sometimes it is a waste of my time, other times I find valuable information.

 

For instance, I like to scroll through longer term charts starting with 570 minute candles. I usually go from 570 to 285, to 142, to 81 and to 30. I like to see how the view of the data changes in relation to the 200 and 80 period moving averages. By "view of data" I mean I look for places where I can see wide range bars (candles) forming. If you know how to read volume, it helps to show only RTHs with volume. Because the volume is condensed, you can more easily see how up and down volume confirms trend or (by lack of volume) indicates that a trend is nearing its climax. In my recent post I show one example of that kind of chart. In regular (24 hour charts, you see a jungle of data and it becomes difficult to note patterns in volume)

 

I attached a couple of charts with volume. Note the instances where price continued to climb even in the absence of significant up volume. Then, boom price collapsed and the down volume came in big.

 

Sorry to ramble on here. Hope some of it helps

 

Good luck

Steve

Edited December 10, 2008 by steve46

[HAKUNA 10]

Thanks Steve,

I am starting to understand what you have trying to point out regarding news and how those who are privy to that use to their advantage.

[Bearbull 10]

Steve,

 

Thanks for clarifying your position, realise which angle your are coming from, it does not clash with Wyckoff but could provide an added edge to many who know how to interpret and employ the knowledge in advance in the market prior to everybody getting on board.

[Shamal 11]

Interesting insights Steve, always willing to pay attention to what the big boys are upto.

Look forward to your further input on the subject.

[steve46 12]

Thank you for the kind words

 

Today is a very easy day. Lots of nice safe places to enter. The chart shows price testing the previous day's VAL, taking it out and then coming back to retest. I LOVE entering on the re-test (as many of you know). Notice that the first move was down (surprise) and then boom up we go......testing all the way...oh what fun it is to ride in a one horse open sleigh....(You are lucky that you can't hear me sing this mutant version of "Jingle Bells")....Merry Christmas everyone...

 

Here are the charts (up to the current time).

Edited December 11, 2008 by steve46

[steve46 12]

and this chart shows the test of the previous day's VAH

 

As you can see, we test and head back down (at least temporarily)

 

For thos interested in MP the previous day's VAH was 903 and price tested up to 903.25 so that would have been a nice short entry. I happened to be busy posting so I missed (apparently I haven't learned my lesson about his). Oh well, I am sure I would have spent the money badly....Alright then I am done for the day. It is a nice day here in California...no fires...floods....or earthquakes....so I am going to find something else to do...Good luck to everyone.

 

Steve

Edited December 11, 2008 by steve46

[Shamal 11]

Do you primarily trade from 2min charts or do you use still lower timeframe like 1min or seconds.

 

Do you use volume to guide your trading, I mean on each bar.

[steve46 12]

Do you primarily trade from 2min charts or do you use still lower timeframe like 1min or seconds.

 

Do you use volume to guide your trading, I mean on each bar.

 

Thanks for your questions Shamal

 

I have been doing this a long time, so frankly I could use a variety of charts, it wouldn't matter much to me. Remember that charts are a visualization aid. When I was starting out, I learned from a man who never used charts, he simply "read the tape". If you are unfamiliar with the term, it means that you simply read price as it runs across a display (used to be that traders actually read from a tape that came out of a machine showing only price).

 

What I prefer to do is to look first (the previous evening) at long term charts (570 minute down to 15 minute). I scan these to get an idea of where we have been, and we we might be going.

 

Then I do my numbers (I figure my Market Profile numbers for the next day, I look at the pivots, and I put in horizontal lines to show the previous day's high and low.

 

The next morning before the market opens I look at the overnight charts, that is to say, I look at a chart with 5 minute candles that shows the overnight market (Globex) and I take notice of the way the market moved. Did it move up aggresively or just consolidate....are we near any important price points, pivots or MP prices? Are we above or below the previous day's Value Area High or Low. I take notice of news, and scheduled economic reports, earnings, and other items that may move the markets. From all this I make a plan.

 

On the open I watch two charts, a chart showing 5 minute candles and a chart showing 729V (constant volume) candles, and I execute my plan.

 

When I am filled I continue to watch the same charts but I add a special volume EFS from Esignal called "BidAskAnalysis.EFS" which shows me how many execution happen at the bid vs the ask. I use this on my constant volume 729V chart. I change the time on my standard chart from 5 minutes to 2 minutes and I look at standard volume. I look at volume levels (absolute volume) and I evaluate the way buying and selling change as price wiggles around. Becauses I have been doing it awhile, I can see whether there is enough volume to sustain a move, or whether the move is losing energy and is going to reverse. Its just another way of "reading the tape". I also look at the $TICKI which tells me when programs are executing. Finally I have the $VOLD and $ADD on my screen (you can see them in prior posts) and I watch to see whether they support my trade or not.

 

Now, having said that, I suggest you (any trader for that matter) do not put all that on your charts.....it is too much (in my opinion) for a newbie to monitor and you will just get confused. Simplify and choose just one or two elements to start. I recommend $VOLD and $ADD (if you have Esignal).....I suggest using $VOLD on a 13 minute chart and $ADD on a 3 minute chart. $VOLD is the difference between up and down volume on the NYSE (shows you general strength or weakness) and $ADD tells you whether players are selling or buying into that strength or weakness.

 

I hope this helps.

 

Steve

[Shamal 11]

Thanks steve for details , great info.

 

couple of questions:

 

Do you calculate pivots on the globex (high, low, close of 24hr market) or US open session (9.30a.m-4.15p.m)

 

Also the trading activity prior to 9.30a.m is pretty thin, so how do you gauge aggressive moves of that period.

 

As I watch the globex chart today on ES, notice rapid fall from 860 to 830 followed by consolidation. between S1 and S2, pivots based on globex high, low , close of yesterday.

Plus today also reports on PPI, Retail Sales, Business Inventories, Consumer Sentiment due.

 

Look forward to your take on this

[steve46 12]

Standard Pivots based on RTH (regular trading hours US open to close)

 

This is a news driven emotional market that is potentially volatile. Reports like PPI, CPI and others move markets because they are likely to offer bad news. Professionals know this, and from experience they know which reports are likely to discussed on US financial TV shows. So they position themselves prior to the reports and then take the position off after the report is released.

 

You could see that happen in the last hour of yesterday's market. and in the overnight Where the Asian and European players took it down further (they have their own news to "work" as well). It is quite a game. You can get started learning about the reports by going to http://www.briefing.com. Read the background material on each report and learn it as quickly as you can.

 

As I have said in previous posts "Event Trading" is a very lucrative part of this profession, and if you learn the rules of that game, you can make good money.

 

Good luck to you

Steve

[steve46 12]

I am all prepared for the open so let me continue to say a few words on event trading

 

First, take a look at briefing.com and note that all the important reports are released BEFORE the open. Be assured that the pros know this and position themselves before the reports.

 

Next know that the Bailout for US automakers is in trouble....also know that this is predictable (I can talk about it more later)....Then take a look at how the professionals position themselves in the market by looking at the 81 minute chart. See how volume ramps as money flows in during the prior week and they mark the market up.....put two & two together folks....

 

I (humbly) suggest that you can be an observer or you can learn the game and make some money from it.

 

Now, there are so many vendors who offer to teach people the game (trading), when in my opinion, they don't even know what the real game is......Well I will stop right here.....there is an old saying "a word to the wise should be sufficient....."

[steve46 12]

UAW reps to speak on TV just as we fill the gap....Watch what happens on your charts folks (9:58 EST)....reports to hit right at this time as well

[HAKUNA 10]

Steve,

I see your logic now,

 

o.k 81minute chart on ES (RTH), presume this is because there are 405 minutes of trading and therefore 5 bars per day.

 

When you say volume ramps up in the past week, does this money professional money marked up the price by buying and were then unloading to the public on the past 3 narrow range days as the highest vol (dec 1-8) came in on the 9th and prices did not go up much, then even more vol on the 11th, but no cigar, ie. distribution

 

As for today, reports came out at 10a.m, prices drifted down somewhat, then up again above the support S1 (pivot number of RTH you use, incidentally the lift off was from S1 at 9.30a.m), prices struggled at resistance of yesterdays low 870 and are now once again at 860., so how are we to read the effect of the reports and how did the pro. take advantage here.

 

would appreciate your comments

[steve46 12]

Markets consist of many participants worldwide. Those who have been involved on the professional side know how it works. They "work the market" on several levels. One level is longer term multi-day strategies based on the known scheduled "events". Other players are interested in tax strategies based on the tax law of their jurisdiction (their country), and finally there are "small time players" who try to make money on the small opportunties that play out each day (intraday).

 

Today has been an up day for the most part. Having said that, there have been plenty of opportunities to short the market and pickup some money.

 

Here is my intraday chart. Be advised that I only use the 1 min chart because it is easier to annotate. To execute I am looking at (constant volume charts) as well as 15 minute candles.

Edited December 12, 2008 by steve46

[HAKUNA 10]

o.k see your execution via 1min, and the opportunities,

and understand the general comments on various players,

 

my question was regarding the previous comments made for the past week, re. big players positioning themselves, was what I observed on the 81min chart correct or not.

 

also how did todays reports affect the prices and how did the pros position themselves prior to that.

[steve46 12]

Hakuna

 

I think my teaching skills are insufficient to explain to you in a way that you might understand

 

For that I apologize. Perhaps I am not the person to help you. I can suggest a book by Ben Warwick titled "Event Trading".

 

and there may be other members who can put things in proper perspective for you. I am so sorry that I don't seem to be able to make myself understood. I will continue to think about your question and if I can come up with a comment that helps I will bring it to your attention.

 

Good luck

 

Steve

Edited December 12, 2008 by steve46

[Bearbull 10]

This is precisely the reason, the thread "Trading the Wyckoff Way" was closed down by Db. There is no claim made there, that, that is the correct and only way to trade. In wyckoff world the composite man is the market itself.

You came in with your angle on professional/dumb money and how they position well ahead of everybody etc .

 

Yes everybody on this website is savvy enough by now to realise there are different players on different timeframes in the market.

Yes they know markets can be manipulated and are being manipulated.

Yes you have stated many times over, you have a trading team who have been taking advantage of economic reports prior to their release long before the normal dumb traders and that you all have been doing this successfully for countless years.

 

Nobody is denying any of this. All that was pointed out to you on the wyckoff thread was that any potential intentions of the professional via their inside knowledge or, imbalances between buying/selling pressure via order flow has to be translated into action via a trade, an exchange of buy and sell contract and this turn has to materialise on the tick chart. Trading based on Wyckoff methodology is only is concerned with that aspect but does not claim that any other way of looking at the market is wrong.

 

Here you directed folks to have a look at 81min charts and volume, then specific questions were asked based on the observations of that volume and price actions and also on recent report releases.

 

However instead of providing specific answers with specific examples, you have brushed it aside as you did on the wyckoff thread.

 

What does this achieve? You have already managed to deprive anybody interested in following wyckoff's work and any meaningful discussion on a thread specifically setup to do just that and here you keep coming up with general statements which sound cosmic and profound at first glance but when specific questions are posed, why not come up with specific concrete examples. Not pointout, look there the market tested the low and prices rose, and pros took profit, that is all reflected on the chart and could have been detected by those who would have other tools including knowledge of Wyckoff method.

 

We know info from the briefing.com works for you and could for many others but was it necessary to engage in long drawn out arguments on the Wyckoff thread on that subject.:doh:

[steve46 12]

I think you are way off base, and certainly off topic.

 

I suggest you think for a moment before posting

 

We aren't having a problem here. YOU are having a problem in your head with something that happened on another thread.....

 

No one is restricting you from learning about Wyckoff. If you want to learn about that approach, I have a post dedicated to that approach on this thread. It provides resources that you can pursue at your convenience. If you have a comment about that, we can talk about that.

 

As regards DB's Wyckoff thread you probably should post over there and express your opinion to DB. If his thread is closed, perhaps you should sent him a personal message. Alternatively you could start a thread of your own.

 

Thanks

 

Steve

Edited December 12, 2008 by steve46

[Kiwi 16]

Bearbull, your early paragraphs are a (deliberate?) misunderstanding of Steve's very useful addition to that Wyckoff discussion. Two people nominated Steve's initial post for best of the month. If there had been more openness then there might well have been even more learning.

 

Your second to last paragraph is an incorrect attribution of responsibility. Closing down or deleting a thread was not Steve's action. And in that thread he was not asked about specifics - he was shut down. And he responded politely to that. The debate was hardly long or drawn out - sadly it was never really started.

 

So saying Steve was responsible is pure bs.