Day Trading the E-mini Futures

[goodoboy 10]

Clearly we want another crack at the 40.25 area today, judging by overnight action. Although this might be better suited to the bigger picture discussion thread, I'll mention it here for now. These levels are important right now either way, but what strikes me about action over the last couple of months is that we just don't have enough of a reason to trade either way with any conviction right now. European fixes seem to be crawling along at snail pace, qe3 is still at the 'will they, won't they' stage, elections are not too far off and frankly, I think that quite a few market movers will have gone on holiday. The fact is though, markets are moving and therefore testing good levels frequently = good for day traders.

 

Anyway, here's an non-annotated chart for all those interested:-

 

 

Thank you so much for posting this. Good study material.

[goodoboy 10]

I post this in the wrong forum thread. Sorry.

 

long 1335.25, stop 2pts, buying with the trend from strong move up over night. Bought off retracement. Out 3.5pts

 

I bought this as soon as the bell open and retraced back 1335 area with 2 point stop just at the pivot point of 1333.25.

[Predictor 11]

Nice work. I use volume analysis (and order flow and some other things) in my trading. I'm not willing to share the details of my methods in public. But, I can say they don't fully agree with market profile but there are some good ideas there. One needs to look at whether the market is trending or ranging to really understand volume analysis...

[Predictor 11]

I'm still seeing some signs the market may move higher. I'm long again based on evidence but close to my daily loss limit. I try to be aggressive when I think I'm right.. cut back when I'm wrong.

[TheNegotiator 13]

Nice work. I use volume analysis (and order flow and some other things) in my trading. I'm not willing to share the details of my methods in public. But, I can say they don't fully agree with market profile but there are some good ideas there. One needs to look at whether the market is trending or ranging to really understand volume analysis...

 

Okay, but so you know and like I mentioned to Ronin, this thread is for explaining/discussing trading ideas specifically and generally so others might benefit. If you can only share "I bought here, I sold there", this is not the thread for you. Thanks.

[Predictor 11]

Neg, I understand. I'm watching AAPL right now. Its moving up. I use volume analysis, order flow analysis, and correlated markets. I look to identify day structure and look for patterns that indicate trend versus mean reversion.

 

I find that just using volume levels doesn't provide a big edge but they are useful for setting targets and stops, and sometimes scalping.

 

One of the things I'm watching is AAPL dragging down indices... if AAPL can base then there are several other sectors that are strong. Futures order flow is still troubling. As for understanding volume, again I suggest to look at how it acts when trend vs range...

 

Caution against shorts here based on order flow. We have buying interest from 28.50 up..

 

... I also read the tape using specialized tools. So, I'm watching a lot of data but most of all, I'm not reading single market charts like most other traders.

Edited July 25, 2012 by Predictor

[goodoboy 10]

Okay, ask yourself this. What does high volume mean and what does low volume mean?

 

.

 

IMO, high volume means that buyers and sellers thinks the area where high volume occurs is fair place to buy or sell.

 

Low volume means that buyers and sellers thinks the area where low volume occurs is not fair place to buy or sell.

 

Correct me if I am wrong please

[Predictor 11]

The market can't be understood with such simple notions. They aren't useful. I find it more useful to WATCH and see what actually happens.. don't go from what you read.

 

In range markets, it is not uncommon to find low volume at the extents of the range and higher volume in the middle but that isn't going to be true in all cases nor when understood in all time frames.

 

I think about how the limit vs market order traders interact and how previous activity was formed. Someone has to provide liquidity for market traders to trade against... this is important and the interaction of the market traders vs the limit traders is important. The interaction between how the market moves in relation to the open trade is important.

 

It is also critical to distinguish between new activity versus previous/recent activity to understand volume dynamics.. I learned all this from just studying the market. not any market profile crap..

 

IMO, high volume means that buyers and sellers thinks the area where high volume occurs is fair place to buy or sell.

 

Low volume means that buyers and sellers thinks the area where low volume occurs is not fair place to buy or sell.

 

Correct me if I am wrong please

Edited July 25, 2012 by Predictor

[Predictor 11]

In my opinion there are 4 distinct players in futures market

 

1. Institutions -> Sit limit at extents of market and trigger programs to enter.

2. Liquidity Providers -> Push market around 1-2 points to trigger stop losses

3. Day Traders/Locals -> Drive market to institutions

4. Equities bots -> Unique behaviors.. can overrun institutions or be stopped by them.

 

Each has a distinct method of working/trading... I don't believe there are enough retail traders in futures to even make a difference, just my opinion.

[goodoboy 10]

All I can tell you is that I wasted 4-5 years going to different rooms, trying different styles and trading other people's ideas. Finally - after watching and trading for a long long time, it started to make sense. I have 3 setups plus I'll take trade when I know what is happening and not worry about a "setup".

 

I think if I had not spent so much time in rooms etc I might have shortened the path. On the other hand, maybe that was necessary for me to get it?

 

No one can tell you what will be your path to success. The only person to do that is you.

 

If you can last - you'll do okay. It takes an incredible amount of persistence.

 

If I had to do it again - I would trade much longer on SIMULATOR until I developed a real feel for my setup and had a record of success in different markets. Then I would transition to live with strict money management rules and stop trading the moment (if) I broke them and go back to sim as a penalty. Trade the smallest size possible and build your account slowly and add a contract after you make 2x the margin. Also - take 1/3 or 1/2 of your gains out of your account EVERY week to get a paycheck. Treat it like a business/job and it becomes more real.

 

SIM can save you money. When I started it wasn't available.

 

Thank you for the comment. And good advice. I agree with what you are saying and will consider the following

 

1. Use simulator until I find a setup that works for me.

2. Don't leave simulator until I can atleast make consistence profit (atleast 3k in profits) with a bit of confidence. I think this is a good challenge for me.

3. While using simulator use real emotions decisions cause the longer I stay in there, no real money made:). I like this step

4. Keep listening, learning, thinking and having fun.

5. Once live account trade, trade one contract until I make 3x margin.

 

Most importantly, keep posting trades here with evidence of why I took the trade. This will keep me discipline.

[TheNegotiator 13]

IMO, high volume means that buyers and sellers thinks the area where high volume occurs is fair place to buy or sell.

 

Low volume means that buyers and sellers thinks the area where low volume occurs is not fair place to buy or sell.

 

Correct me if I am wrong please

 

Pretty much. High volume can be seen as accepted price and low volume is rejected price. Put that together with auction context, experience and monitoring of what happens at these prices (amongst others) and you find that often you'll be picking some pretty nice areas to trade.

[Predictor 11]

Again.. not in my opinion... I actually had success with every technical method except for market profile before I realized it was just a graphing method and not a trading method. Market profile tries to represent what a "floor trader" sees in his mind. I only "got it" after I got the ability to understand volume on my own.

 

It may look like this in hindsight but remember every trend starts into a low volume area. One has to understand whether we are talking about new initiated trade vs previous initiated trade in understanding volume. The understanding of this may give someone a much different perspective of what is going on. Likewise, it is important to understand how price and open trade (open volume) interact. How are liquidity providers interacting with market orders.. these are types of things I keep in mind.

 

My recommendation do away with any market profile conventions and instead actually study what happens. You will learn what is happening vs what a book says should happen.

 

Another example.. selling volume doesn't mean that the market will move lower nor buying volume higher. Sometimes selling volume will drive market higher.

 

Pretty much. High volume can be seen as accepted price and low volume is rejected price. Put that together with auction context, experience and monitoring of what happens at these prices (amongst others) and you find that often you'll be picking some pretty nice areas to trade.

[Predictor 11]

I am up in a good deal of profit now from my last long position. AAPL continues to move up and was already beat down. Most other instruments are showing a strong rally. Because of this, I believe that new highs above 40.25 could be in play. However, it is important to keep an eye on risk...

[Predictor 11]

Again, I use specialized tools for understanding the action in the market beyond price. I don't believe price is meaningless. I believe it is extremely useful but is most useful when understood in relation to other variables.

 

I don't claim to understand it all. For example, I don't understand why the volume in ES has been so unidirectional lately. We've seen just very one sided order flow up and down lately and that's a bit unique and may be causing me some problems.

 

Sometimes high volume will attract high volume. This is especially true late day where one will see huge orders going off on both sides and not even moving price. My interpretation is that some large institutions don't even use price in their trading. They are just looking for the liquidity to execute against. That was evident in the algorithms that were used during the flash crash.. So if we have an institutions wanting to short vs another wanting to long, we will get high volume without much meaning on the price.

 

All the indices are green. When an index is above the open then buy programs will often trigger.. We may also see some stop runs shortly.

[Predictor 11]

DOW has broken out to new highs. NASDAQ has broken to new highs. I track highs/lows carefully. Some negative orderflow present in ES from 38 to 37. I except this to reverse quickly and new highs to follow but if it doesn't I will look to protect profits.

 

If AAPL keeps moving up then equities buy programs should kick in and drive the ES higher... some locals/institutions have started to short...

 

Shorts getting more aggressive. May take profit soon.

Edited July 25, 2012 by Predictor

[TheNegotiator 13]

Again.. not in my opinion... I actually had success with every technical method except for market profile before I realized it was just a graphing method and not a trading method. Market profile tries to represent what a "floor trader" sees in his mind. I only "got it" after I got the ability to understand volume on my own.

 

It may look like this in hindsight but remember every trend starts into a low volume area. One has to understand whether we are talking about new initiated trade vs previous initiated trade in understanding volume. The understanding of this may give someone a much different perspective of what is going on. Likewise, it is important to understand how price and open trade (open volume) interact. How are liquidity providers interacting with market orders.. these are types of things I keep in mind.

 

My recommendation do away with any market profile conventions and instead actually study what happens. You will learn what is happening vs what a book says should happen.

 

Another example.. selling volume doesn't mean that the market will move lower nor buying volume higher. Sometimes selling volume will drive market higher.

 

You are welcome to your opinions and that is good. I am pleased you are sharing them. Why if you had success with each technical method were you trying different ones out all the time? Proponents of market profile don't try to claim that it is a trading method just as you pointed out. I'd also say that most of the profiles which are posted here are volume profiles and thus have little to do with the original market profile. Mostly, I use volume profiling to identify areas of balance/imbalance, acceptance/rejection and so likely good levels and also profile shapes again to determine balance or lack thereof. Simple mp principles can be very important in some cases and not very important in others. Like for example open type. If a level is tested followed by a strong directional move, that tells me something. As does a movement back and forth through the opening print. You can throw the baby out with the bathwater if you like, but these are not just mp principles, they are auction principles. An example of something which is a bit less useful is the value area. I don't especially like it or find it useful in the majority of cases with how I trade. Something which seems rather less sensible but nevertheless works, is the principle of single prints. Why should the 30 min TPO's be more useful here than anywhere else? They shouldn't. But when looking for a strong directional move in a given day which doesn't get retested, it shows the move very clearly in general. If you look at it, it works. Should I care why it works? Maybe. But the main thing is that the market I trade shows me regularly that it is interested in the extremities of these prices (in a spike).

 

So my recommendation goodoboy is look for yourself and see if it resonates with you and shows you what you need to know to trade the markets successfully. Predictor has his opinions and methods, Bakrob has his, I have mine. What I know is that in the hands of a trading god, a moving average is the golden goose, while in the hands of an idiot, the holy grail is a sure fire way to lose everything. There's more than one way to skin a cat, so just try to find yours

[Predictor 11]

Over 3,000 sells were executed into 36.50 without driving it even 1 tick. Market pop 3 ticks. 36.50 is important to hold. The market is getting tenuous here but if price moves against those market orders then they'll be forced to cover...

[Predictor 11]

I'm out. Shorts have regained control. I could have saved about 4 ticks on that one. We may go higher but I have to protect my profits now. Today.. I took a small loss.. from a big loss to a small loss is I guess pretty good. I was at break even at the highs. I pushed that trade far enough.

[goodoboy 10]

This looked to me like your 'basing' type pattern. Although I would say that despite turning from just above the 30.25 level, I would have thought the proximity of yesterday's close and vpoc would have pulled the market down just a tad more.

 

 

For some reason the 1330 did not move for like one hour and this price correspond to the chart you provided that was very interesting area. I am thinking buyers and sellers were equal at this price. Does that sound about right?

[goodoboy 10]

 

 

2. Liquidity Providers -> Push market around 1-2 points to trigger stop losses

 

 

Each has a distinct method of working/trading... I don't believe there are enough retail traders in futures to even make a difference, just my opinion.

 

Thanks for info. Why would #2 happen?

[Predictor 11]

Well push may be the wrong word... the LQ providers can take on so much inventory. Depending on whether they want more or less inventory will determine how they adjust their books.... They are pretty big and can absorb a lot of market orders.

 

As observed today... there was a lot of selling at these most recent highs but they just took them and market is now moving higher. I was probably out of that 1 by 1 tick.... sometimes it happens

 

They aren't the only traders sitting at limit though. The limit orders influence market strongly and this is something that few people understand. Institutions also sit at limit and define ranges...

 

But obvoiusly the LQ providers want to drive price a bit so they can get flat... this is why you will often see the market move up just a point or so before dumping. There are other dynamics involved... including the dynamic between the instiutions and scalpers.

 

Thanks for info. Why would #2 happen?

[TheNegotiator 13]

For some reason the 1330 did not move for like one hour and this price correspond to the chart you provided that was very interesting area. I am thinking buyers and sellers were equal at this price. Does that sound about right?

 

Yes pretty much if you are talking about the area I have highlighted on the chart:-

 

[Predictor 11]

The dynamic we're seeing now is short sellers driving into resting limit order institutions and then those short sellers are forced to cover... This creates the typical pullback pattern in trends. So its not enough just to look at if there are a lot of market orders being executed but the context is important. I was looking for that push drive myself but I just missed it by 1 tick.

 

When too many traders get one sided then by the mere fact they need to clear creates reversals.. just like puts in options.

[Predictor 11]

Renewed selling. House passes Ron Paul Bill. I support many of Pauls' ideas. Lets see if market responds.

 

Market looks to be topping here. A break of 36.50 will create a run. Correlated marktets have turned negative. I expect new lows shorlty. No more trades for me though.. late day is more random.

 

Short... last trade of day... looks too good to pass up

Edited July 25, 2012 by Predictor

[TheNegotiator 13]

The dynamic we're seeing now is short sellers driving into resting limit order institutions and then those short sellers are forced to cover... This creates the typical pullback pattern in trends. So its not enough just to look at if there are a lot of market orders being executed but the context is important. I was looking for that push drive myself but I just missed it by 1 tick.

 

When too many traders get one sided then by the mere fact they need to clear creates reversals.. just like puts in options.

 

Okay, 1st off did anyone say that solely identifying areas of high and low volume is sufficient to trade off? I absolutely agree with you that context is critical.

 

Renewed selling. House passes Ron Paul Bill. I support many of Pauls' ideas. Lets see if market responds.

 

Market looks to be topping here. A break of 36.50 will create a run. Correlated marktets have turned negative. I expect new lows shorlty. No more trades for me though.. late day is more random.

 

If the short sellers were hitting institutional buy limit orders on the pullbacks, why all of a sudden do you suspect a break lower?

Edited July 25, 2012 by TheNegotiator