Day Trading the E-mini Futures

[joshdance 10]

This recent move downward was due to the discontinuation of QE2 with no mention of QE3, not the shitty economic data we experienced.

 

Based on what empirical evidence?

[sdoma 10]

Based on what empirical evidence?

 

If you're expecting me to throw pages of text, charts and graphs at you in an attempt to prove that I'm right, you are sorely mistaken as your opinion means very little to me. The reason it means very little is that, instead of actually taking the effort to write five sentences explaining why you disagree, you simply say "based on what empirical evidence?"

 

What are you, a freshman in high school who just joined the debate team?

[TheNegotiator 13]

Come on. I don't think this is the place to have a heated debate about the underlying causes of what has happened. Remember we are talking about day trading the E-mini futures. It is interesting though. Maybe we could start a thread on "Current reasons for major swings in global markets".

[sdoma 10]

Sorry, my government monopoly electrical utility just told me, after a month of trying to get a hold of them to start my electrical service, submitting multiple support tickets and trying in vain to get through their automated phone system to talk to a person, that there is a fourteen business day waiting period so they can do my background check (!). A car dealership can access this information in 5 minutes, and a multi-billion dollar a year company needs 14 days.

 

Not that you should care about my problems, but you can maybe see why I am half-cocked already.

[TheNegotiator 13]

Lol(seriously though, sorry). I know how frustrating these types are. My advice is always aim low with your expectations for any company etc you need to phone up- unless of course you're interested in buying something(which they don't have a monopoly on).

 

Oh well, at least the markets aren't mind-numbingly dull today!!:crap:

[joshdance 10]

What are you, a freshman in high school who just joined the debate team?

 

I'll take the high road and simply say that it's my opinion that the reason for the fall in the markets cannot so simply be stated, and other reasons so simply ruled out, with a simple sentence which has no reasoning behind it.

[joshdance 10]

Negotiator, keep the charts coming. I look at them all, and have similar charts for crude oil. I would post some of that here but this is about the eminis .. perhaps I'll start another thread.

[TheNegotiator 13]

No harm in posting a chart on oil if you think it's relevant.

[joshdance 10]

Here is a weekly profile on oil. Very clearly, two weeks ago we had a double distribution, and last week we filled that space in. Yesterday and today, buyers asserted the value quite quickly above last week's value. I am actually short at the moment but only looking for a move to retest last week's high or value area, in the low to mid 86's... The volume on the day has been quite low, so it's hard to say if we will sustain this value above last week's.

[TheNegotiator 13]

Yeah of course it's difficult say for sure based on a day like today. Interesting that you look at weekly profiles. Do you think that you prefer this to looking at overlapping areas of balance?

[joshdance 10]

Yeah of course it's difficult say for sure based on a day like today. Interesting that you look at weekly profiles. Do you think that you prefer this to looking at overlapping areas of balance?

 

I don't know Negotiator--can you demonstrate somewhat of a process for identifying the overlapping areas of balance? Do you take a long term profile, and then split the profile further? I'm very interested in what you have to say on this.

[TheNegotiator 13]

Hi josh,

 

I mean really just drawing a profile around short term ranges more than anything. Like I have been in my charts so far. I'll take a look later at drawing a chart up in IRT for you. Really though it's about looking for where profiles are nicely developing and when price closes outside of that balance.

[joshdance 10]

Hi josh,

 

I mean really just drawing a profile around short term ranges more than anything. Like I have been in my charts so far. I'll take a look later at drawing a chart up in IRT for you. Really though it's about looking for where profiles are nicely developing and when price closes outside of that balance.

 

Thanks Negotiator. I do this sometimes when drawing the profile.

 

What I like about drawing a weekly profile, for example, is that it's a clear delineation and shows areas of value from one trading period to the next. Same as with daily profiles, how yesterday's value area or POC has a significance to traders as the daily period is a clear delineation of trading. In fact, you allude to the importance of this when you mention that price must close outside of an area of value to indicate acceptance of a new direction away from that value. The concept of a close is only relevant when discussing time, as without time price cannot "close".

 

However, I think there is a large benefit of ignoring time for the purpose of drawing profiles to get another perspective and see the larger scope of things. If you are able to post the chart you're referring to, could you do so for crude oil so I can get an example of something I'm actively trading?

 

The area that I have a little bit of internal conflict with is this: if I draw the profile around the range of prices, then the significance of the volume profile becomes dependent on the range of prices. As an example, perhaps the volume concentration is heavily skewed to the lower part of a range of prices, and below that range is another range whose skew is to the top part of the range. By drawing separate profiles based on the price distribution, I diminish the significance of the volume distribution and limit the scope and perhaps overall significance of the volume profile. This is why I believe it may be useful to profile a very large range of prices, and then narrow down the volume distributions from there into smaller, more manageable ones.

 

By the way, while the POC is statistically "jumpy" as a measure of value (it is not continuous in a multi-modal distribution), I find using the profile in conjunction with VWAP to be very helpful. I use both the current day's RTH VWAP, as well as the globex VWAP (particularly early in the RTH session), and find that the continuous nature of the vwap as a measure of value can be quite useful as another way to add meaning to the profile.

 

For example, today on oil I longed the globex VWAP for the session (also at the round number which helped), and felt more confident knowing that besides being in a very bullish scenario, this area was near the low of the established volume distribution for the day, and was a "bargain," being the area near the VWAP. Several reasons to buy yields a higher probability trade.

 

Would love to hear your thoughts on the above.

[TheNegotiator 13]

Hi Josh,

 

So I attached a crude chart. Bear in mind I don't trade crude, but this is what I would construct it off. I used RTH only.

 

I do see your point about delineating a whole day or week etc. and I know people use it and like to do so. The reason I use a single day session is that it is the smallest "delineated" block which can define activity so to speak. What I am looking for is balance areas within trading activity. So actually you could just use all the data from exactly where balance begins to exactly where it ends. This is an example of a heuristic I suppose.

 

When I am talking about balance and price closing on a day timeframe outside of a balance, I am generally looking for this as a confirmation to a change in behaviour of the market. It may have in fact already become imbalanced before it closes outside of the range and often this is the case. Responsive activity is less likely to appear in the face of strong and direct movement of the market. So the closing outside the balance range is more about confirming that opposing trade hasn't entered than anything else.

 

As for closing prices only being relevant when discussing time, yes I'd agree totally. So it depends on the timeframe you trade as to what is relevant to you. I feel any 'natural' timeframe such as day/week/month/quarter/year is potentially relevant to anyone.

 

Your example about the two profiles being merged misses out the how of the profile formation. In context, one profile being bottom heavy then continuing into a new profile which is top heavy is just showing imbalance-balance-imbalance(-balance) and by combining them it actually 'increases' the importance of the accepted area. Whatever you are looking at, you still need to view the distribution in context with how the auction has occurred.

 

As for VWAP as a reference of value, I do also monitor it. The thing about the POC/VPOC is that it shows very clearly where most trade occurred at a given point in time. The significance clearly varies depending on the level of balance exhibited. So when a POC/VPOC of identified prior significance is approached, it can either still be viewed as significant and rejected, ignored as value is perceived to have changed much more, or it can again be accepted as current value. Either way it can be a useful point of reference to see how the auction is progressing.

 

In all I would say that there are various ways in which people use profiling to help them understand the current market conditions. There are always going to be different things and ways one person looks at the same thing from another person. This is what I hope to achieve in this thread. Collective understanding of sorts.

[TheNegotiator 13]

Yesterday wasn't as active as recently and if you look at the range and the upward 'grind' you'll see this. At the close there was relatively high volume put in right at the top. This isn't necessarily prohibitive but also not great either. Currently we're sitting around the mentioned 1200 area. It will be important to note the way in which we open and if we break yesterday's low, can the profile and close gaps be closed.

[joshdance 10]

Thanks for your crude chart negotiator. That's pretty much the picture I have when I consider ranges on the daily time frame.

 

Do you trade based off of the type of chart you are posting here? I assume not and that these are just "maps", but just curious. And do you consider globex hours when profiling? I notice you have RTH on the left side of your screen.

[TheNegotiator 13]

Thanks for your crude chart negotiator. That's pretty much the picture I have when I consider ranges on the daily time frame.

 

Do you trade based off of the type of chart you are posting here? I assume not and that these are just "maps", but just curious. And do you consider globex hours when profiling? I notice you have RTH on the left side of your screen.

 

More or less they are part of what I look at, but clearly I need a more detailed look into the action. Short timeframe and volume charts, plus DOM help with this. Market statistics and other products are other things I'll look at. I do look at the overnight profiles too but give the volume less weighting and I do leave it out of the long term profile. I will look at what happens though and particular price areas which we have been affected by.

[TheNegotiator 13]

So yesterday's reaction at 1218.75 got me thinking. I tend to leave lines of importance marked on my chart even when I change the length of the long term profile. We hit a pretty important level from before which had been virtually ignored on the way down. I've added the two different profiles next to each other

[TheNegotiator 13]

Whether you like them or not, sometimes they are just there.

[TheNegotiator 13]

Okay so looking again at a wider view of the ES to find some important reference points, this is what I have for you. Just a note that the prices/areas I have selected are not exclusively what may or may not be references or indeed reversal points for the market. There are others in there but I wanted to note down some points which may or may not have been obviously important from the long term profile.

[TheNegotiator 13]

What might we be able to garner from the activity so far this week? Well, we started at the top of the range (and formed a channel yesterday). Monday we were happy to close on the high but both Tuesday and Wednesday, although we did test higher in both sessions, range was small compared to recent activity and the close was near the open - forming doji candles if you like. Now there are a couple of mechanical type influences to consider before drawing a conclusion that we are potentially running out of steam on this move up. Firstly, this is non-farm payroll week. I think that people will be watching closely before committing to more bullish positions. Secondly, from a point of view of range, we could be settling back into a more normal magnitude although a couple of weeks ago this happened too so that remains to be seen.

 

Any views?

[TheNegotiator 13]

Here's a look at the overnight action.

[Xiao si 10]

Bad news seems to always follow the technicals....looks like a big bearish flag to me. Should be some volatility tomorrow night anyway.

 

Cheers,

 

 

 

XS

[TheNegotiator 13]

You mean the daily chart that I posted the trend channel on?

[sdoma 10]

For the last few days, all I've seen is volatility in the stock indexes getting crushed intraday. This isn't to say that the markets aren't volatile relative to the last year or whatever longer term time frame you wish to choose, but in the short term it's decreasing quite a bit. There has been some drift upward, but it's really just a balancing market. I don't know about the SP500, but in the Dow we've retraced half of the move down that began on 7/22.

 

I have to continually remind myself of this while I trade, so I just stick and move and don't get married to anything. I am waiting for it to break out of this balance, of course, because of the sharp movement this could produce.