Ideas for Struggling Traders

[nycdweller 10]

Where can I find Dbphoenix's illustration of the 5 second chart? Thank you.

 

Good post, very much in keeping with the essence of Wyckoff Methodology and consistent with many of the other posts in the Wyckoff forum.

Infact Dbphoenix has illustrated this quite beautifully on 5sec charts.

[steve46 12]

Never thought I would say this but for the time being I will be standing aside (from intraday trading).

 

For me, these markets are like shooting fish in a barrel.....You get on short (since we are in obvious down market) and you hold to EOD. Unfortunately I don't like what this is doing to our economy, I'm talking worldwide....and frankly I don't need the money. So I asked myself "when is enough enough?" and the answer is this week was "enough"....I am done until after the election. Believe me, I don't want to discourage anyone from taking profits out of this or any market, but if you have other sources of income I have to ask you, "doesn't this feel just a bit like kicking a guy when he's down?" and especially if you have a long term view, wouldn't this be the time to start looking for good long term investment opportunities in American companies.

 

My belief is that this market has not found a bottom yet, and that bottom when it does happen, will coincide with a political decision to make a fundamental change in our banking system. Along the way, I intend to pick up some bargains buying for my longterm portfolio.

 

I wish everyone the best of luck

 

Steve

[steve46 12]

I will post these last intraday charts for those who want to see just how easy it can be

 

First look at the open, then scan left to the overnight bars (arrows). The Globex overnight hit a high of 1009.50...That is a particularly important price point on my MP charts. Also it is (just by itself) a landmark that often gets tested on the open.

 

As one can see that is exactly what happened. Market called to open at 1001 and immediately tested up to 1010. It failed to take out the monthly S2 and the 80 period ema. Retail traders would have been tempted to use the Daily Pivot as support....nope...sorry, as I have said in earlier posts, I fade the Daily Pivot precisely because I know that retail is on that one with tight stops right underneath. I know once it fails there, the train is headed south.

 

For the next 4 hours, it was quite an interesting fight to see who would take control. I won't say anymore on that subject, except that there are too many private funds with money ready to drive it down. This one was very predictable. If you got on early and you could control your emotions, you had a profitable day....Personally I don't need the practice.

 

The second chart is long term monthly. As can be seen, we look to test previous lows in the area of 800 down to 767.

Edited October 9, 2008 by steve46

[steve46 12]

Well today is Friday Oct 24th, and we are limit down at 855.25

 

At 9:30 the limit extends and we should see 795 or thereabouts. Which is right where I suggested we might trade in my previous post.

 

This might be a capitulation scenario and if so, we might see a move to test below the previous multi-year lows.

 

For those who haven't seen much in the way of limit down days, I suggest watching instead of trading as it would be a bad idea to get locked in today. Think of it as a trading "field trip"....

 

By the way, I am mostly in treasuries these days as I am retired, but I have been buying (GE, IBM, and others that have been discounted recently) and I will continue to be a buyer today on weakness.

 

Good luck everyone

Steve

[steve46 12]

On the open today we visited 835-840 briefly. Not much going off at those levels except for Posner who bought 1k and then had to argue about the fill (lol). So...buyers came in to mark it up from there with Solomon a big buyer at 850 and later at better prices. I bought equities on weakness off the open and then shut down until the turn. I will be back at the close buying on expected weakness at that point.

 

Good luck everyone.

 

Steve

[BlowFish 10]

I use RTH (reg trade hours) for everything except Market Profile. Regular Trade Hours are 9:30am to 16:20pm EST

 

I use several Market Profile charts as follows

 

1. RTH chart (see above) for my RTH trades

2. Overnight chart (16:30pm to 9:30am) to identify specific opportunities (sorry that is the best I can offer you)

3. Longer term charts (Weekly and Monthly) and again I use these to identify specific opportunities

 

Steve

 

When the market gaps the MA's will take a time to catch up (i know ema's do so a bit quicker than sma's) Do you just wait for this to happen i.e. carry on as normal?

 

Great thread btw. Should be linked from the "best of TL" if its not already.

[minoo 11]

Steve

 

http://uk.youtube.com/user/tradersaudio

The above URL has interesting recording of the 24th Oct open at the pits, after the limit-down

Could you please give some tips & comments on the Squawk, to some of their terminology & lingo.

 

My market internal charts were extremely negative right from the open though the pit soon traded the Bids up

 

I also had noticed on the tape there was massive flow of huge green contracts before the market open (ie when it was limit-down)

You also commented in another thread that bid/offer spread at the open was huge

 

I am quite new to this event & Squawk so could you please use the time axis & price action of the chart as cross reference in any explanation

 

I look forward in learning from you

 

Many, many thanks

 

Regards Minoo

[steve46 12]

When the market gaps the MA's will take a time to catch up (i know ema's do so a bit quicker than sma's) Do you just wait for this to happen i.e. carry on as normal?

 

Great thread btw. Should be linked from the "best of TL" if its not already.

 

Yes I carry on as normal....Doesn't take long for EMA's to "catch up" as you have already pointed out.

 

I appreciate the kind words....Hope you find some value in the "ideas"

[steve46 12]

Steve

 

http://uk.youtube.com/user/tradersaudio

The above URL has interesting recording of the 24th Oct open at the pits, after the limit-down

Could you please give some tips & comments on the Squawk, to some of their terminology & lingo.

 

My market internal charts were extremely negative right from the open though the pit soon traded the Bids up

 

I also had noticed on the tape there was massive flow of huge green contracts before the market open (ie when it was limit-down)

You also commented in another thread that bid/offer spread at the open was huge

 

I am quite new to this event & Squawk so could you please use the time axis & price action of the chart as cross reference in any explanation

 

I look forward in learning from you

 

Many, many thanks

 

Regards Minoo

 

Sure, first you should take some time to get familiar with the rules for limit markets

 

Here is a link to the CME rules

 

https://www.cme.com/trading/files/EquityIndexPriceLimitGuide.pdf

 

Then you may remember from my post just prior to the open that the markets had hit the overnight limit of 855.50. This means that there is not sell activity lower than that AND that a pool of offers is building up on the other side for the open

 

As you listen to squawk, notice that Ben is trying to get an "indication" to his subscribers. An indication is a preliminary idea of where the markets will open based on the best bid/ask. Also if you read the rules you will notice that the limit extends down at the open (again I posted this right before the market actually opened). Depending on the pool of orders waiting to be executed, this means that the market could have continued down to approximately 795 or so....

 

Ben tells the crowd that the open is indicated at "850 even offer" then he says that the pool bids 840 saying "850 even bid at 840 offer" so the market is expected to open 10 handles wide (850 x 840)....Now to those of us who have seen this before it tells us that bidders expect the market to continue down. They are willing to take the risk of buying inventory (contracts) but to do so (to take that risk) they want a 10 point margin or premium in their favor. In other words if you wanted to get long at the open (if you want to lift the offer) you are starting out 10 points underwater. This is one way of looking at it....Frankly the way I look at it, is that this market could have continued down and so when I see its 10pts wide, I am standing aside until the smoke clears.

 

Also notice that Ben says he has "paper at the offer". The market opens and Ben says "40 even offer, I'm 40 even offer". This tells you that there is going to be a move down at the open supported by institutional paper.

 

Then Ben says "paper sells" off the open and "45 bid", 47 bid comes in", and "48 evens are trading". He indicates that the Dow opens 600 pts lower. About 10 second later, he sees Solomon come in to buy ("Solomon a big buyer") and he calls that move up " "48 evens are trading" "50 even offers coming in" "50s are trading"...."locals have sold up".....Notice this very important comment

 

"Locals have sold up".......To me this means that locals are now net short (the term is "short in the hole") and it is a sign that if you were willing to risk it, you might get long with an appropriate stop and try to establish favorable long position. Get your chart up and take a look at where this market was based on Ben's call (note the elapsed time at the bottom of the Youtube display) where was the market at this point? Remember that this market is several handles wide so IF you were to get long you are starting underwater here...... I wouldn't do it, but I am showing you what the situation is...

 

Now Ben talks about the argument about the "high print" and this is where I will take a moment to refer back to my comment at the time (Posner did business with Joey and unfortunately they didn't call the transaction in). This is mostly a distraction from the real business of the open...we can talk about it at a later time.

 

Now (about 4 minutes off the open) Ben tells the crowd that the "board is late" telling us that the recorded data is out of synch (slow). Also, he tells us that price is trading back to the 50 handle. At this point the market trades down to "47 bid at 51" (4 handles wide)..and it is whipping around pretty good. Right about 5:47 mark, the market is trading "53 bid at 57" and again this tells you that the market continues to be 4 handles wide...Ben also indicates size saying "51 trades 50 times" meaning that he saw a 50 lot trade go through. Then at about 6:20 after the open he says "Paper comes in bid on 100" and that tells you institutional paper has come into the pit, and that they are "on the bid" for 100 contracts (bidding 54). He goes on to say that Solomon (institutional) has been a buyer. What is important is that Solomon keeps coming back and they are lifting the offer (listen to Bens comment on this from 7:30 to 7:50 minutes after the open) "Oh even bid Oh even bid, Solomon a big buyer"....."Solly just paid up for 64"....

 

I am assuming you can follow this on your own and compare to my notes...

 

Hope this helps.

 

Steve

[minoo 11]

Hi Steve

 

I never had such an detail reply in my life from an trader

There is enough material to keep me busy for a week here; and I am sure someone can make a whole thread or blog out of this

 

The insights & explanation are given in such depth that I am totally blown away; Every time I read it I learnt something in the past I couldnot quite catch

A market historic moment and we all get a chance to learn from Veteran trader (When are you going to author a Book man)

 

Squawk I have heard it before but your interpretation has open up a third dimension to my market internals

 

Its like the eyes have looked at it but the mind never saw it, till ofcourse now & more to come. What more can I say man .... .

 

A new chapter in the life of a trader begins here, more humble & more fun I guess. Earning & Learning to trade is an life long business.

 

Many thanks for making us hear and see things off the floor and pits

 

My respect and hats off to you man

Minoo

[benl 10]

Squawk questions check out the link below...

 

Steve great job of breaking it down and thanks a million for the time and energy spent doing so. We are currently working on some tutorials for the squawk and some of the most familiar setups. I'll have those out soon and I'll let you know when I do.

 

As I listen to this clip the first thing that comes to mind is how insane busy it was right off the open. I can't remember the last time the market opened with a 10 handle bid/offer spread. I can say with confidence that it's been a while. So this probably isn't the best example of what the squawk is really like on a day to day basis, but it is a great example of what a high energy trade to the upside is like.

 

That having been said the best thing to listen for hear is the bid offer activity. It was such a high energy one sided trade, either all bids/buyers or all offers/sellers and mostly buyers. Listen to me when I'm screaming bid, bid, bid. Listen as I scream prints and trades higher and higher. Wow that was fun, maybe you can hear it in my voice a little.

 

This has been the most intense market I have ever seen in all of my 17 years on the floor. The market is looking for value in a big way and still can't find it. I expect to continue to see the crazy swings continue for a while.

 

http://www.tradersaudio.com/faq.html is a link to some mp3's I've put together to help clients with questions about terminology and other squawk information. Hope this helps.

 

Ben Lichtenstein

[steve46 12]

Minoo;

 

Thanks for the kind words.

 

Ben;

 

Appreciate you showing an interest here. I don't think its an exaggeration to say that Traders Audio offers serious traders a lot of value, and all they have to do is invest a little time learning the lingo and become good students of human behavior.

 

Best Regards

Steve

[brownsfan019 17]

Ben - I don't want to invade Steve's thread, so if you are game, please start a thread for those interested to discuss things w/ you. I personally have never found any value w/ the squawk and would love to see how you can parlay your service into winning trades. That's not meant to be a dig but rather the speculation you probably hear or see, but the group here is very open-minded and I'm sure an educational thread on how to USE the squawk would be great.

[steve46 12]

Well my interest in continuing the subject is limited...but I do want to make one final comment;

 

What I heard on the YouTube version of the squawk is what I have heard many times before during more "normal" sessions. If not for the limit market, I would have been looking to do business for several reasons including

 

1. Paper coming into the pit

2. Specific Brokers coming in on the bid or offer (returning on the same side)

3. Locals short in the hole

 

Like most, you would need some time to learn to see the moves, and to have the confidence to act...So do we all...Its just one tool out of many that you might use...

 

My real point is...its never going to be so clear...so black & white that you have no risk...No resource (that I know of) will provide that to you...The effectivness of this or any "aid" will always depend on the skill with which you use it.

 

Thats it for me...I leave the rest to you folks.

 

Steve

[brownsfan019 17]

Good point Steve. I'd like to see if Ben could create a thread that discusses ideas of how people use the information he presents to trade off of b/c it is rather difficult/confusing if you just jump into it w/o any initial guidance. Kind of like putting something together w/o the manual - might eventually get it, but could be a lot quicker using the manual.

[benl 10]

We are currently working on a squawk forum.

 

Ben

[steve46 12]

Well here we are some short distance after the election and the markets are getting ready to test the lows set in '02 and March of '03

 

I have several charts the first of which is a monthly showing a history of the S&P over a 10 year period. You can see the cyclic nature of this market as well as the secular (bear) trend we are in now.

 

The next chart displays 570 minute candles, and here you can see a nice short signal early in October at 988.

 

Based on these two charts alone, a newbie would have done well trading the short side exclusively. That is the "Idea" that I am presenting for this post.

 

If you are a newbie and you have a small account, not much experience....and so on....you would do well to concentrate on the short side and try to build both your account and your confidence.

[minoo 11]

Steve

 

Their seems to be some noise from the bulls today

Or is it to be expected as lower low been put in around the 2002 low

 

Thinking of retiring my Inverse-ETF's and trickle into some High Yeilders

 

Your comment would be much appreciated

 

Thanks Minoo

[steve46 12]

Hello Minoo

 

I'm sorry to be replying so late...generally speaking I don't have time to post during trading hours.

 

My ability to predict isn't that great so I will refer you to those who are better at it.....I simply react to what the market decides to do on a daily basis. Personally I would not be in either of the issues that you mentioned.

 

For me, I learned that the best way is to make money and buy good quality bonds with it. I own a lot of (old) treasury bonds and notes. So far that has worked for me. The one thing that I did do long ago is buy inflation protected "Tips" when they first came out. I always look hard at new issues because they tend to be mispriced by the issuer and that was true in this case as well. They aren't that good a deal now, especially since we look to be heading toward disinflationary times (prices going lower).

 

Also as mentioned in a previous post, I had "extra" money and went into the market to buy distressed equities during the last several weeks. I may take a beating or I may make money on it. All I can tell you is that I now own a lot of good companies at bargain prices. I bought a lot of Citi today for instance. Now we will see if this administration can get us out of trouble.

 

The best of luck to you

 

Steve

[TradeRunner 10]

Hi Steve

 

Thanks for a great thread.

 

I have some questions regarding your approach to backtesting:

 

Trader A (your approach)

• Wants to develop a profitable system to take advantages of trend days.
  
• Defines and identifies trend days in an instrument using historic data
  
• Statistically tests properties that could be used to identify trend days
  
• Finds that property X, Y and Z leads to a high probability of a trend day
  
• Builds a trading system around X, Y, Z
  

Trader B (using traditional backtesting methods)

• Wants to develop a profitable system
  
• Picks some properties from a large set of market properties {A, B, C,…X, Y, Z}
  
• Picks properties X, Y, Z and runs a backtest on historic data
  
• Builds a trading system around X, Y, Z
  

 

Is Trader A’s method a fair summary of the approach you take?

 

Testing my understanding is it true to say:

 

Trader A

• Has defined the behaviour to take advantage of so has fewer market properties to test. In other words is more focused in the research
  
• Tests both correlation and dependency so will find significant properties for the defined behaviour
  
• Is vulnerable to changing markets but understands why the systems works so can change with the markets
  
• When the market changes would have to wait enough time to statistically understand the change
  

Trader B

• Tests correlation via the backtest but not dependency and might select market properties that only work on historic data. So for example the backtest may have worked with properties A, B and C but these properties are independent of trend days.
  
• Is vulnerable to changing markets but might not fully understand why the system works so is in a weaker position to fix it
  

[steve46 12]

Hello

 

As regards the frequency of trending "days", I think we can say the following. One would think that trend days are in the minority. On an intraday basis, this may be true. If however you look at a daily chart, one can see that trending days appear in clusters. Think about what that might mean to you if you trade intraday.

 

My priority is to learn to handle variation in the day to day action, so that I can catch as many "runners" as possible. I define runners as trades that capture more than 10 points.

 

Now if you want, you certainly can backtest (I prefer "characterizing" the market but that is up to you) and if you are observant you can develop ideas (rules) that help you anticipate trend. Personally I like to work with Market Profile, because it "tells me" based on "day type" when a trend day is likely. Now I am somewhat restricted in what I am willing to say about that in this forum, but I would suggest that you will benefit from reading about "day types" in Dalton's book "Mind Over Markets". Starting on page 19 of that text one can learn for instance about the importance of the "Initial Balance". Dalton suggests that a narrow initial balance tends to be easy to overturn, resulting in range extension and by definition a trending day. In contrast a wide initial balance might suggest a market that is going to auction back and forth.

 

Having said that..I refer you to my posted method for scaling out of trades. If you were to forego all that backtesting and simply embrace the idea of finding favorable trade position early in the morning, you'd make money on the first 10 points AND you would have additional contracts left in case the market continued in your direction. Also you'd be assured of obtaining profit on both trend and non-trend days. As I have mentioned before, my own P&L improved significantly when I adopted that approach. In other words instead of backtesting with the goal of anticipating trend, I backtested (and this time the word "backtest" is accurate) to determine whether my position sizing and risk management program were efficient at producing profit in both trendy and choppy environments. That is why I adopted the scale out method that I posted. One way to look at it, is that if you trade the S&P market, I already did the backtest for you...(although it was done years ago and frankly I don't think I have the original results anymore).

 

I hope my answer helps. I realize I went off on a tangent here, but what I am trying to do is save you considerable time and effort. Please let me know if my approach to your question "works" for you.

 

Steve

Edited November 23, 2008 by steve46

[steve46 12]

By the way, Trader B does have a real problem with his backtest results. Because the data distribution is non-normal, he may see initial results that do not accurately reflect future fluctuations in volatility. The biggest problem in my opinion, is how do we deal with multi-sigma moves. What I learned about this, is that multi-sigma moves occur much more frequently than parametric statistics would suggest. It is precisely because we don't at present have a way to anticipate multi-sigma moves, that I adopted a way to maintain a presence in the markets (just in case).

 

Again I realize that I have kind of run through your question. I hope you see that I am trying to in effect "cut the gordian knot" by addressing what I believe to be the primary concern for traders (capturing big volatility/big profit potential days).

 

The bottom line is big volatility offers potential for both big profit and big loss. One way to manage it is to obtain an early favorable position, get some breathing room right away (book some profits) and then hold on as long as possible. So far I have never found a better way to handle it.

 

Regards

Steve

[steve46 12]

by the way Minoo, the afterhours spread on C (Citigroup) is 3.05 x 4+

 

and today (Sunday) we know that the treasury is probably going to bail Citigroup out, probably by limiting the liability they will have for the bad paper they own.

 

My opinion (as you might guess from my previous post) is that Paulson & Bernanke will try to keep Citi out of BK (I think it is likely that they are in technical BK now). My bet is that Citi will bid up from here tomorrow. We will see. Either way I am holding that position to its conclusion. It is the most speculative of my purchases during this last month. The way I figure it I have earned the right to take a little extra risk every so often..If it works as I expect, it will be a sort of Christmas present to myself.

 

Best of luck to you

 

Steve

Edited November 24, 2008 by steve46

[minoo 11]

Monday News on Citi from the East

Read all about it

http://news.asiaone.com/print/News/the%2BStraits%2BTimes/Story/A1Story20081124-102862.html

 

I Sincerely hope that you have bought some insurance / option with this high risk speculation, Steve

 

My good friend use to say 'If I make it we all will drink to it 2gether, if not I will down it all myself'

 

Best luck to you my friend

Minoo

[minoo 11]

Steve

 

Worth noting in the monthly chart which shows Rising trendline support from the past bear market lows

 

I got out of my bear-stance (above post) and cautiously put on the bulls horn once the globex-only low was traded on Friday,

But am keeping the stops as short as the bears-tail

 

I have posted some more in 'Charting the past Bears' thread below & also Suri's reply

http://www.traderslaboratory.com/forums/f2/charting-the-past-bears-4622.html

 

 

Enjoy Minoo

http://greatday.com/v.html?2139407MRpn8

Edited November 24, 2008 by minoo