Trading Pullbacks Intraday

[DionysusToast 10]

  johnw said:

Would you consider going long on a falling cum delta .... some people would call this 'ease of movement'

 

I guess it depends on the instrument because CD theory does not hold up on all instruments in my experience. In any case, I would not go long in this case on the ES. Although I used to, i just got my ass handed to me most of the time.

 

On the ES, if delta is falling and price is rising or unable to break through a particular price to the downside, then you could surmise that someone is sucking up all that market selling and therefore price will hold and eventually climb.

 

In reality on the ES, is that most of the times this goes on for a prolonged period - say 10-20 minutes, then what will usually happen is that you'll eventually break through to the downside if delta is still dropping but price isn't.

 

Similarly with iceberg orders, of the price has been moving aggressively down for an hour and we see an iceberg order on the bid and 3-4000 contracts trade there, what normally happens is it'll eat it's way through the iceberg.

 

On the other hand, if price has been moving up for an hour and it pulls back and we see an iceberg on the bid, I presume this is the point it's going to continue up (as long as delta didn't put in a bid downside move with the pullback)

 

Not sure if this makes sense.

[DionysusToast 10]

  phoenix01 said:

Where did you get your commutative delta indicator for ninjatrader? What version of the gom package is it and would you be willing to share it?

 

Thanks

 

I use GOMI - I know the older version is on Ninja Forum but I use the newer one from BMT.

 

GOMI has decided to put this software on the $50/elite version of BMT and I have to respect that decision by not sharing it.

Edited December 4, 2011 by DionysusToast

[jtrader500 10]

  phoenix01 said:

Could you give more details on how to trade pullbacks using cumulative delta and how it can help you stay out?

 

How I use the cumu delta in the short term is to look at it on a 2min chart.

To me, in the very short term, it is pretty good at giving a slight edge when you see a pullback in price and the CD stays pretty flat. Always remember that the last printed CD bar is the most important and each bar after decreases in importance because of the fact that the further back in time you go, the more variety of players are in for different reasons, and the margin of error increases.

I let volume and multiple retests to dictate where i want to trade then I find out why we are battling here (see what technicals line up, VA,PLOD,Open, etc) then I rate my risk/reward according to where we are located in reference to the lastest major swing highs and lows to determine what size to put on. And ONLY then do look for divergences, NYSE tick channels and so on to say that I want to get short this level.

Now the most important part is that I use ONLY orderfow to time my entry, I use the summary tape from jigsaw trading that puts the shredded orders back together.

In order to use indicators to trade from, you have to very very confident and persistent to be consistent. I may have a down day once every 2 weeks with this method, are they are extremely small.

Let me give you one piece of advice that if you use it, will allow you to keep your stops so small that you can be wrong 7 out of 10 times and still make money. And EVERY institution looks at it this way.

 

When you are looking to enter a position using orderflow, the lowest risk point is to NOT to look at when the big money start buying off of a low (which most people do). But concentrate on the exact point when sellers run out of steam on each timeframe. (I use a 2 min and a 15sec chart). If you wait for confirmation from seeing 2 or 3 ebbs and flows of buying and you have already tested the low 3 times, there wont be a pullback close enough to make the R/R worth it. All this being said, my MAIN rule is that the bigger the move to try to countertrend, the more tests and fakeouts I have to sit through before I enter. I keep my trading chart with just price, volume & t&s, and on another screen I put all the S/R levels and fun stuff on. Once I pick a level to trade, there is no reason to look at the cluttered chart.

Hope this helps someone, Thanks

[joshdance 10]

  DionysusToast said:

Indeed - for the ES, this is the way I look at it...

 

Price goes up 20 ticks, delta goes up 10,000

Price goes down 8 ticks, delta goes down 1000

Price goes up 20 ticks, delta goes up 14,000

Price goes down 9 ticks, delta goes down 2000

 

To me, in an uptrend, this is what you want to see to give you the confidence to go in on those pullbacks.

 

Now - maybe you then see:

Price goes up 40 ticks, delta goes up 30,000 - be careful, there might not be anyone left to buy soon.

 

If we are seeing delta go down 3/4000 on the downswings & up 10,000+ on the upswings, I just keep going long. Once I see a down move with a big swing down in delta, then I'll consider shorts.

 

The problem though - it's not always crystal clear. You need to watch it for a while to figure out. It takes a bit of experience to figure out the 'murky' ones.

 

Here's a picture of - well - right now....

 

 

You can see that after the move down to 1246.50, we put in a goof move up which was also a good move up delta wise. Pullbacks are fair game to me once this has happened.

 

The fact that the pullbacks are of equal size does not go unnoticed either. It gives you an expectation of where to look for the next one. It's not a guarantee but in a situation like this you don't want to go long after it pull back 3 ticks. Nor do you want to jump in on a move after it has gone up 6 ticks - it's too late then.

 

As always - actual activity on T&S DOM give you your in - it may just be as simple as getting to a point where marker sellers are no longer interested in the current prices, that's where you jump in.

 

Another way to read that is: look how many market buys it takes to move price up (quite a lot) relative to how many market sells it takes to move it down (relatively few). In other words, little movement in price up, despite decent amount of buying. Offers holding well. Price about 60% of where it was earlier, and delta same level. Potential good short. Just another perspective.. this is how I use delta.

[DionysusToast 10]

  joshdance said:

Another way to read that is: look how many market buys it takes to move price up (quite a lot) relative to how many market sells it takes to move it down (relatively few). In other words, little movement in price up, despite decent amount of buying. Offers holding well. Price about 60% of where it was earlier, and delta same level. Potential good short. Just another perspective.. this is how I use delta.

 

OK - I will tell you why I read it the opposite way - mostly this is because I use the DOM too....

 

On the pullbacks, we do indeed see less participation from market orders to create a relatively large down move.

 

This is because on the move up a 'liquidity vacuum' is created. As the market moves up, there is little liquidity building on the bid side - active buyers are buying with market orders on the way up.

 

So - the pullbacks inevitable get a lot of 'bang for their buck' - the price move is decent for the relatively lower number of market sell orders because of that lack of liquidity on the bid side.

 

In terms of why I go long at these points, it's more to do with the way the ES moves. People jump on board one way and run it, then they do the same in the opposite direction. Usually for a lot longer than we think it will go. Once they get their teeth into it, they continually run through these pullbacks. People who enter new shorts in these pullbacks are nervous, especially if the trend is now obvious. Hence, we have sellers with itchy trigger fingers and buyers well aware of how far things can be pushed.

 

This is my take on it.

[joshdance 10]

  jtrader500 said:

But concentrate on the exact point when sellers run out of steam on each timeframe. (I use a 2 min and a 15sec chart). If you wait for confirmation from seeing 2 or 3 ebbs and flows of buying and you have already tested the low 3 times, there wont be a pullback close enough to make the R/R worth it.

 

And herein lies the big challenge.. how do you know when sellers run out of steam? Well, there are good indications, but you don't know until it actually reverses. On ES yesterday for example, it was a grinding down trend day, and many times sellers looked like they had run out of steam. However, the critical component missing was that buyers never took control and pushed it up significantly. So sometimes, when it tests the low 3 times, it will just blow right on through the 4th time... with no real confirmation, it winds up becoming a dangerous guessing game.

[DionysusToast 10]

  joshdance said:

And herein lies the big challenge.. how do you know when sellers run out of steam? Well, there are good indications, but you don't know until it actually reverses. On ES yesterday for example, it was a grinding down trend day, and many times sellers looked like they had run out of steam. However, the critical component missing was that buyers never took control and pushed it up significantly. So sometimes, when it tests the low 3 times, it will just blow right on through the 4th time... with no real confirmation, it winds up becoming a dangerous guessing game.

 

There is only one way to know when a pullback is done, when the liquidity is hit.

 

That is to become proficient in reading the Tape and/or the DOM.

 

This is not something that can be done with indicators in my opinion...

[joshdance 10]

  DionysusToast said:

There is only one way to know when a pullback is done, when the liquidity is hit.

 

That is to become proficient in reading the Tape and/or the DOM.

 

This is not something that can be done with indicators in my opinion...

 

Is it possible that during the trading day today you could turn on your recorder and record your DOM and tape, and point out later on some things you see that fit the bill?

[DionysusToast 10]

Actually - there's 2 ways - if sellers are keen to move it down more, they might jump on board with market orders to the downside of course.

 

But that usually leaves you with a late entry

[DionysusToast 10]

  joshdance said:

Is it possible that during the trading day today you could turn on your recorder and record your DOM and tape, and point out later on some things you see that fit the bill?

 

I can - but how do TL generally feel about people that sell software posting up videos - I actually have my own DOM & Tape and I don't really want to appear to be here for the purpose of pimping my software.

 

I have a link I can point you to - but again it's on my web site - same deal I am sure.

 

Is this a pimp friendly forum?

[joshdance 10]

  DionysusToast said:

I can - but how do TL generally feel about people that sell software posting up videos - I actually have my own DOM & Tape and I don't really want to appear to be here for the purpose of pimping my software.

 

I have a link I can point you to - but again it's on my web site - same deal I am sure.

 

Is this a pimp friendly forum?

 

You are labeled appropriately with the "C", and people/vendors are always posting links to videos, etc., so I think it's okay. What people have responded to negatively in the past is people who sell stuff who try to pretend that they don't.

[DionysusToast 10]

OK - I have an annotated recording of the DOM from a couple of weeks back - but it's DOM only.

 

I am due to do another one in the next few days anyway - with chart, T&S and DOM together as this is what people want to see....

 

See if this makes any sense... Tape Reading - Depth & Sales

 

Cheers

 

Pete

[joshdance 10]

  DionysusToast said:

OK - I have an annotated recording of the DOM from a couple of weeks back - but it's DOM only.

 

I am due to do another one in the next few days anyway - with chart, T&S and DOM together as this is what people want to see....

 

See if this makes any sense... Tape Reading - Cumulative Delta

 

Cheers

 

Pete

 

Thanks Pete, will give it a look later--happy trading this morning.

[joshdance 10]

  joshdance said:

Thanks Pete, will give it a look later--happy trading this morning.

 

Pete, after having looked at this for a bit, I can certainly see some value. With an instrument like ES though, it would be too easy for me to get caught up in the minutiae.

[DionysusToast 10]

Well - the tool itself isn't important. Could just be regular DOM/Time&Sales.

 

You are absolutely right that you can get caught up in the 'noise' but it's not a tick-to-tick type of analysis, it's analysing over time. You can't ever tell with 100% certainty whether the next tick will be up or down.

 

When you first start using the DOM in anger, you can barely spend 5 minutes watching it before your brain switches off. It's a fairly large commitment you have to make because like a lot of things with trading, there's just some random guy on the internet telling you it's of great use.

 

When the market does pull back you'll have some vague idea of how far it'll pullback. At some point, if it is a pullback, you might see it 'stall'. Not all pullbacks end the same way but there are some where the signal is loud and clear. Sometimes you see orders going through but price no longer reacting to it, sometimes you get to a level and no-one wants to trade it 'this time round' - it may be in the middle of a candlestick but suddenly this level is like the plague to traders. It's not a 100% signal, it certainly doesn't work all the time but it works enough of the time to provide an edge.

[jtrader500 10]

This is what I am currently in the process of doing now is taking my tape reading and finding a visual way to read historic DOM with T&S.

No, I am not any kind of vendor, but I found this, this weekend and cant wait to try it.

It shows (all in one indicator chart) the bid and ask depth and the vol traded in the middle, so you can see on any time frame, where the depth was thick and the next test it was ligher and so on.

it is at. innovative -trading -solutions- online . comm

Thanks

[DionysusToast 10]

JTrader - have you tried the footprint charts that come with the free GOMI indicator package for NinjaTrader?

 

I think if you want to visualise it, then say a 15 minute footprint chart gives a very good indication of where the liquidity is.

 

 

I don't use it myself but I do use his cumulative delta. When it comes to looking at order flow info I am only interested in the here & now. I have an idea what I expect to occur and the order flow tells me if it does.

 

So - I think there's 2 things at play.

1 - Where do you expect the pullback to end

2 - Can you confirm that it is ending

 

To me - the CD/Footprint charts/proxbars/OFA etc are all part of number 1. Only the actual current trading activity is part of 2 BUT you could argue that the footprint charts show you that as well.

[phoenix01 10]

Lets assume that we are really good at spotting range bound markets and we wait till the market makes a strong move in one direction. (Lets say 2-3 strong candle breaking out into a new high for the day). Then we get a pullback in price to some point but higher than the pervious low. A signal appears, for example a hammer candlestick. What can we as intraday traders look at to confirm that firstly this move is a retrace not the start of a reversal and that the low of the hammer is the end of the retrace?

 

Sorry for those who dislike candlesticks, i would be interested to hear what you use to intensify turning points.

[wrbtrader 10]

  phoenix01 said:

Lets assume that we are really good at spotting range bound markets and we wait till the market makes a strong move in one direction. (Lets say 2-3 strong candle breaking out into a new high for the day). Then we get a pullback in price to some point but higher than the pervious low. A signal appears, for example a hammer candlestick. What can we as intraday traders look at to confirm that firstly this move is a retrace not the start of a reversal and that the low of the hammer is the end of the retrace?

 

Sorry for those who dislike candlesticks, i would be interested to hear what you use to intensify turning points.

 

Hi,

 

Please post a chart example of that type of price action you're trying to describe because at first glance I've vision several different types of price action scenarios that fits the generic price action you've described.

 

If you can't find a chart example...it's probably something you shouldn't worry about.

[phoenix01 10]

  wrbtrader said:

Hi,

 

Please post a chart example of that type of price action you're trying to describe because at first glance I've vision several different types of price action scenarios that fits the generic price action you've described.

 

If you can't find a chart example...it's probably something you shouldn't worry about.

 

Iam talking about generally trading the first pullback after a strong momentum wave up for down. Wasn't meant to sound like a specific case. For example the ES may have a strong directional move at the open, how can one trade the pullback to this move. Or the market may range at the open and then we get a strong breakout, how does one trade the pullback?

[wrbtrader 10]

  phoenix01 said:

Iam talking about generally trading the first pullback after a strong momentum wave up for down. Wasn't meant to sound like a specific case. For example the ES may have a strong directional move at the open, how can one trade the pullback to this move. Or the market may range at the open and then we get a strong breakout, how does one trade the pullback?

 

You've essentially answered your own question in your prior message post...try using Japanese Candlestick analysis to look for trade signals in those price pullbacks considering it seems like you're already familiar with using Japanese Candlestick price actions. Start with the Hammer patterns in those pullbacks.

Edited January 4, 2012 by wrbtrader

[joshdance 10]

  phoenix01 said:

Lets assume that we are really good at spotting range bound markets and we wait till the market makes a strong move in one direction. (Lets say 2-3 strong candle breaking out into a new high for the day). Then we get a pullback in price to some point but higher than the pervious low. A signal appears, for example a hammer candlestick. What can we as intraday traders look at to confirm that firstly this move is a retrace not the start of a reversal and that the low of the hammer is the end of the retrace?

 

Sorry for those who dislike candlesticks, i would be interested to hear what you use to intensify turning points.

 

I would ditch the candlestick "signal" as the type of signal may vary greatly depending on what time (or other) frame you're watching.

 

Generally, you would want to see pretty good participation (volume) in order to push the price higher or lower right? And, if it retraces, you would expect that it would not go very far back into the range it just broke out of, if buyers or sellers are serious about taking it OUT of that range, right? And, if it retraces, you would probably want to see progressively decreasing interest (volume) as it retraces further and further, right?

[phoenix01 10]

  joshdance said:

I would ditch the candlestick "signal" as the type of signal may vary greatly depending on what time (or other) frame you're watching.

 

Generally, you would want to see pretty good participation (volume) in order to push the price higher or lower right? And, if it retraces, you would expect that it would not go very far back into the range it just broke out of, if buyers or sellers are serious about taking it OUT of that range, right? And, if it retraces, you would probably want to see progressively decreasing interest (volume) as it retraces further and further, right?

 

I understand what your saying and iam trying to read that information through volume and CD. How do you read the volume/interest? However without candlesticks, how do you decided this is point i get, its going to stop around this area.

[joshdance 10]

  phoenix01 said:

I understand what your saying and iam trying to read that information through volume and CD. How do you read the volume/interest? However without candlesticks, how do you decided this is point i get, its going to stop around this area.

 

Did you do this yet? :

http://www.traderslaboratory.com/forums/e-mini-futures-trading-laboratory/11074-advice-day-trading-es-futures-4.html#post131797

 

Take a look at the Wyckoff forum section of this web site. Start there.

[phoenix01 10]

  joshdance said:

Did you do this yet? :

http://www.traderslaboratory.com/forums/e-mini-futures-trading-laboratory/11074-advice-day-trading-es-futures-4.html#post131797

 

Take a look at the Wyckoff forum section of this web site. Start there.

 

Yes I've spent week at a time looking at time and sales and a simple chart of the ES. Its just erratic, sometimes you think you've noticed something and then it falls apart the next day. You were right i should stick at it for longer. Is there something that i can look at to aid my analysis? Volume by price?

 

Also I've noticed between platforms that time and sales can be very different, on ninjatrader zenfire the trades generally seem to be split up and smaller and on other platforms it seems to be grouped together and you see far larger order more of the time. Or am i simply missing the point and it doesn't matter.