Steve's Basic System for Retail Traders

[BlueHorseshoe 10]

Blue Horseshoe

 

Its not a donchian channel...and yes I have a logic that is similar to what you suggest. The general outline is about right....I want to trade inside out or from the outside toward the middle and ultimately to the other side....

 

As I have stated there are two distributions and what sets them apart is not only the characteristics of each distribution but the way that price acts as it probes and tests the various levels...for example...when we have trending price action, several things are in play...for one, as we get to the extremes, longer time frame participants are more likely A. transact at or near the high/low....in contrast if we have a balanced market, we are likely to see a smaller distribution, and price will act differently within that distribution...

 

Another issue to resolve is as regards to "value"...with the 5 day distribution, if short time frame players are controlling the action, then it is more likely that "value" (as in "previous day's value area high and low") can be determined by the range extremes.....in contrast, when markets trend and are "imbalanced"...it is virtually impossible to accurately determine value...

 

The simple logic I have developed shows me who is in control helps me to decide whether to stay with a favorable trade anticipating continuation, or to get ready for a reversal

 

Best of luck to you

 

That makes a little more sense - I must have read the 'donchian' part in someone else's post rather than one of your own. In an imbalanced market, isn't "value" more likely to proceed in the direction of the imbalance, rather than counter to it? In an strong uptrend, isn't the probability greater that "value" today will be found to exist at a higher price than yesterday?

 

Would I be correct that because the BBs are just a visual aid, and not system critical, the system hinges upon knowing how the blue price distributions are created?

 

Cheers,

 

BlueHorseshoe

[steve46 12]

That makes a little more sense - I must have read the 'donchian' part in someone else's post rather than one of your own. In an imbalanced market, isn't "value" more likely to proceed in the direction of the imbalance, rather than counter to it? In an strong uptrend, isn't the probability greater that "value" today will be found to exist at a higher price than yesterday?

 

Would I be correct that because the BBs are just a visual aid, and not system critical, the system hinges upon knowing how the blue price distributions are created?

 

Cheers,

 

BlueHorseshoe

 

These are good common sense questions...first, it seems to me that the question of determining value is critical if you want to consistently stay on the right side of the market...and again this is only one man's opinion, but it seems to me that it is easier to determine value in a static (range bound/balanced) market where the majority of participants have had the opportunity to "vote" as to what fair value is (and is not)....in contrast, in a trending market you have both short time frame and longer time frame participants, and I think it is correct to suggest that a trend continues, it is the longer time frame participants who start to dominate that "voting" process because they are the ones who are likely to come in to buy or sell at the extremes...

 

The distributions are very important...the process takes a significant amount of my time to create so I need to find a way to approximate them....so that I can show others how to do that without having to go through a lot of math..until then what I can say is that I am using data from both a 5 day and a 10-20 day time period...one data set represents the actions of short time frame participants....the other represents the actions of longer time frame participants...I create them and merge them into one set of lines on my screen...the blue rectangle represents the intersection of the data sets....the result is that I capture significant swings and areas where both long and short term participants are likely to act...while the distributions are important, the logic of what to do (to look for long or short entry) is just as important...

 

and finally to really make it in this difficult business I think a person has to develop what I call "local knowledge"...meaning you need to become familiar with how your target market trades...this afternoon was a good example...I know based experience, that long term participants were mostly standing aside today...(they took care of busines yesterday)...and today it was short term players trying to take some profit, and near the end of the session you saw just that, as traders rode the market up in the afternoon, then marked it down at the end of the day (classic short term profit taking) in anticipation of Bernanke's comments. That strong mark down move happened because participants believe that his comments will probably be disappointing to the market. Clearly some were "taking a shot"....positioning themselves short in advance of that event.....

 

Hope this is of help

[steve46 12]

Here are the pre-market opportunities for today's distribution...

 

Couple of things I really like about this as follows

 

As the process of developing each distribution evolved, I learned a lot....interestingly I direct the readers back to the first page, where "Predictor" (with his vast knowledge of statistics) suggested that this simply wouldn't work....lol...is that right?...

 

I think a person would have to be blind, deaf and dumb not to realize that this stuff works..

 

The entry opportunities are shown...yes you would have to get up (or stay up last night) to trade...clearly this isn't for everyone...

 

I've included my worksheet...this is what I keep in front of me as I trade...notice that it shows two (2) sets of numbers....one called the "5 day" reflecting the actions of short time frame players, and the other, the "10 day" reflecting the actions of the longer time frame player....the more I do this, the more I see that it really helps me to break things out this way..

 

Its been a long (profitable) night I am going to get some sleep.

 

I hope everyone has a nice weekend.

Time Based Pivots Friday August 31 2012.docx

Edited August 31, 2012 by steve46

[steve46 12]

LOL, here is what was happening while I was posting the previous note

 

Pretty cool...

 

 

Oh well, I am done..

[wrbtrader 10]

Onesmith,

 

Maybe you didn't read what steve46 wrote earlier in a reply specifically for you.

 

..."Specific pattern" is simple two (2) words....not "catchy" at all....very descriptive and it means what it says...this "specific pattern" which I have characterized as algorithmic in nature, has been posted again and again here on this site....in Negotiator's thread on trading the ES contract...in fact others have commented on it...if you find the concept interesting I invite you to do your own research by reading that thread...

 

Basically, he say he discussed the details in Negotiators thread on trading the ES contract. Also, he seems to have said that if you're interested in reading the details on that "specific pattern"...he doesn't want to provide you a direct link nor does he want to regurgitate the info in this thread for you. He wants you to do your own research via reading Negotiators thread on trading the ES contract.

 

...I'm not willing to go into all the details of how I create the distributions....I don't have the time nor the inclination to go through a year (or more) of statistics but those who have a background will be able to figure it out I am sure...and the rest of you should go get a basic stat text and start getting a background (if you find it interesting)...

 

In addition, he has clearly stated he will not go into the details of how he creates the distribution calc lines we see on his charts. Yet, those with the background will be able to figure it out on their own.

 

Simply, its seems to me this thread is really aimed at those that have been following his commentary elsewhere in someone's else thread (Negotiators) and/or aimed at those familiar with distribution calc and statistics. Therefore, if you're not willing to read the other thread or you lack an understanding in distribution calc/statistics...this thread is not for you and you should stop expecting him to spoon feed you this information especially since he knows (its very obvious) that you don't have a sincere interest.

 

P.S. steve46, please correct me if there's anything wrong with something I've said above. By the way, thank you for the hints or clues involving distribution calc/statistics and I'm fully capable of digging into this further on my own.

Edited August 31, 2012 by wrbtrader

[steve46 12]

Onesmith,

 

Maybe you didn't read what steve46 wrote earlier in a reply specifically for you.

 

 

 

Basically, he say he discussed the details in Negotiators thread on trading the ES contract. Also, he seems to have said that if you're interested in reading the details on that "specific pattern"...he doesn't want to provide you a direct link nor does he want to regurgitate the info in this thread for you. He wants you to do your own research via reading Negotiators thread on trading the ES contract.

 

 

 

In addition, he has clearly stated he will not go into the details of how he creates the distribution calc lines we see on his charts. Yet, those with the background will be able to figure it out on their own.

 

Simply, its seems to me this thread is really aimed at those that have been following his commentary elsewhere in someone's else thread (Negotiators) and/or aimed at those familiar with distribution calc and statistics. Therefore, if you're not willing to read the other thread or you lack an understanding in distribution calc/statistics...this thread is not for you and you should stop expecting him to spoon feed you this information especially since he knows (its very obvious) that you don't have a sincere interest.

 

P.S. steve46, please correct me if there's anything wrong with something I've said above. By the way, thank you for the hints or clues involving distribution calc/statistics and I'm fully capable of digging into this further on my own.

 

You are one of the few who seems to have paid attention to the details...you have summarized my comments accurately. I am very appreciative...I expect at some point to find a way to approximate my distributions so that the work doesn't take so long to do. When I have that in hand I will offer it to you..

 

Thanks very much.

[SpideySense 10]

You are one of the few who seems to have paid attention to the details...you have summarized my comments accurately. I am very appreciative...I expect at some point to find a way to approximate my distributions so that the work doesn't take so long to do. When I have that in hand I will offer it to you..

 

Thanks very much.

 

 

LOL Steve,

 

As you might have guessed, I enjoy your work and your response to some of those who deserve a little smacking around. They really do make it easy. But you do stir it up unmercifully with some of your phrasing.

 

Perhaps you intended it but possibly not so I'll point it out.

 

"You are one of the few who seems to have ..."

 

I suspect that lots of people, especially those who don't participate in the repartee, have paid attention. Even some of the challengers. But using "You are one of the few" does seem to inflame the urge to confrontation when compared with something like "I really appreciate you and others who ...." or something like that.

 

Of course, if you intended the barb, then please carry on and ignore my suggestion; as most suggestions are to be ignored or quickly forgotten anyway.

 

Cheers

[TradeRunner 10]

Onesmith,

Basically, he say he discussed the details in Negotiators thread on trading the ES contract. Also, he seems to have said that if you're interested in reading the details on that "specific pattern"...he doesn't want to provide you a direct link nor does he want to regurgitate the info in this thread for you. He wants you to do your own research via reading Negotiators thread on trading the ES contract.

 

Looks like Negotiator didn't get the memo...

 

Why is it an algo pattern exactly? Please explain this in a detailed way otherwise it's just not useful. A rule for this thread is that people should explain statements and ideas so it can benefit others. Thanks.

 

But that's ok because he asked Steve nicely so I'm sure an explanation will be forthcoming...

 

I have explained the concept many times sir....but for you....once more as follows

 

Clearly about 2/3 to 3/4 of volume is automated....of that a significant percentage uses a technique whereby they intercept order flow and act on it in a number of ways....including adding volume to bump the market in a direction (to activate other bots) or to ghost orders (to probe in order to activate stops)...the result of these many different programmed actions is a characteristic pattern that shows up as a move up or down, a slight retracement and then a retest (or series of retests of the same price point depending on the time frame)....I have posted many examples of this here in this thread...by all means do your own research...

 

You can see all that in candles? Looks like a HH followed by a LH to me and these where happening before "algos" came along. Negotiator wasn't happy with the explanation either...

 

1- I don't believe you have explained it before.

2- I don't believe that was an adequate explanation.

3- Posting a few arrows on a historical chart after it has moved does not show that you nailed the market. I'm not saying that you didn't btw.

 

Just to recap. Steve has started a thread to "help" retail traders but

 

1. He hasn't explained "algo pattern" in this thread or Negotiator's

2. He is not going explain the distribution lines (fair enough)

 

What are you trying to accomplish with this thread Steve?

 

TradeRunner

Edited September 1, 2012 by TradeRunner

[steve46 12]

Sir (or Madam)

 

I appreciate your pointing it out...I'll try not to let it happen again.

[steve46 12]

Interestingly most of the folks who contact me and say they have benefitted do not post...

 

They lurk and read the posts and occaisionally send me PMs to ask questions...

 

Based on that experience I have an idea of who it is that I want to help....and what I want to publish....

 

It may not be what you (traderunner) want to see...and if that is the case I invite you and anyone else who thinks as you do...to point & click somewhere else...

 

 

Good luck to you

Edited September 1, 2012 by steve46

[TradeRunner 10]

It may not be what you (traderunner) want to see.

 

Steve I'm here to read you not to be helped or expect a trade-able system to be detailed here - that is not your modus operandi.

 

 

(It's the weekend; do you ever sleep!)

TradeRunner

[steve46 12]

Do I ever sleep?

 

Here is a post from Negotiators thread;

 

http://www.traderslaboratory.com/forums/e-mini-futures-trading-laboratory/9773-day-trading-e-mini-futures-693.html Reference post 5539

 

I actually make a living trading....I work the overnight market and try to trade at least some of the RTH session...the result is that I am regularly sleep deprived...and THAT is why I do not offer to provide detailed citations for previous posts or as wrbtrader puts it... "spoonfeed" those who think the information is incomplete...I simply do not have the energy to do it...

 

Your question about sleeping leads me to ask myself if this is a good idea...I will think about it and decide whether to continue...

 

Thanks for you comments..

Edited September 1, 2012 by steve46

[steve46 12]

Alright well, we'll go one day at a time here

 

Here is my "working" distribution for Sunday's Globex Open...this is the distribution that I

would use for the next RTH session as well..

 

Notice that for the ES chart (on the right side) near the top we have an "up" and "down" arrow right next to each other....for me this means that depending how price acts at this price point, we will assume that either long time frame participants (up arrow) or short time frame participants (down arrow) are in control of the market...

 

For those unfamiliar with the logic (taken from Market Profile Theory) when longer time frame participants come into the market, they are more likely to buy or sell at the extremes....In contrast, the so-called "short time frame" participants are more likely to buy support and sell resistance...thus creating range bound behavior (or engaging in profit taking" at or near the top of a range).

[steve46 12]

NQ 5 & 10 day distribution for Sunday's Globex market

 

It will be interesting to see how the distribution handes the holiday schedule

[BlueHorseshoe 10]

NQ 5 & 10 day distribution for Sunday's Globex market

 

It will be interesting to see how the distribution handes the holiday schedule

 

Hi Steve,

 

The general concept that you're exploiting has now become pretty clear, I think, even though you haven't gone into details about how the distributions are calculated. It seems sound to me.

 

Can you tell us a little about execution?

 

For instance, on a pullback that meets your criteria, what process do you follow? Could you show one or two specific entry prices on, say, a one minute chart, rather than just the arrows pointing to a bar? I think this would be very helpful.

 

Would you be able to discuss a few failures of the pattern, and say whether you think these failures were in any way predictable, or were unavoidable?

 

I'd also be very grateful if you could discuss a little about how this concept could be applied in a few other markets (if it can) - how does it need to be adapted (if it does) to trade something like oil or the euro?

 

Many thanks,

 

BlueHorseshoe

[steve46 12]

I refer everyone to post 90...sure there is plenty I COULD do, including mow your lawn and wash your windows....lol

 

I will do what I can

 

As for execution...skilled folks don't get into that UNTIL they finish doing a "characterization" of the market (I started a thread on that subject).

 

I suggest readers take a moment to look at that thread, then begin by reviewing previous price action for their target market....its relatively easy to do and the return is can be significant. If you do it correctly you won't need my advice as to how to execute...

Edited September 2, 2012 by steve46

[johnw 10]

Hi Steve46,

 

If I have understood correctly you use 10 day and 5 day periods to harvest your lines.

What made you use 5 day instead of say 3 day for the short term

 

cheers

[steve46 12]

I took the time to evaluate the data over a significant sample size and determined that 3 days was insufficient to produce a valid distribution for my purposes...

[steve46 12]

Hi Steve,

 

The general concept that you're exploiting has now become pretty clear, I think, even though you haven't gone into details about how the distributions are calculated. It seems sound to me.

 

Can you tell us a little about execution?

 

For instance, on a pullback that meets your criteria, what process do you follow? Could you show one or two specific entry prices on, say, a one minute chart, rather than just the arrows pointing to a bar? I think this would be very helpful.

 

Would you be able to discuss a few failures of the pattern, and say whether you think these failures were in any way predictable, or were unavoidable?

 

I'd also be very grateful if you could discuss a little about how this concept could be applied in a few other markets (if it can) - how does it need to be adapted (if it does) to trade something like oil or the euro?

 

Many thanks,

 

BlueHorseshoe

 

A simple example and then I have to go back to work

 

Here you see the market has opened and tests below one of my distribution lines...finding no sellers, price comes back up through that price point....looking at today's distribution (on my worksheet) I see that once price closes above this price, I can look for longs....now I leave it up to the reader whether to simply take the long at this point. or to wait for their own setup to occur....trader's choice...

 

I hope this helps

[steve46 12]

Very gratifying to see the distribution work so well.

 

As seen in the 10 min chart we began with price opening near the midpoint, moving down to find sellers....what is encouraging about this move is the retest of the midpoint (blue rectangle)....the obvious setup is the test and failure (short entry) back at the border of the midpoint rectangle...

 

(For those who may be new to the thread, the general logic is that (in our experience) price will tend to move from the the outside toward the midpoint, or from the midpoint to the outer extremes....and of course less frequently, from one extreme to the other. Along the way we have pivots (lines) and arrows provding guidance as to where to look for long and short entries.)

 

As price continues to move south we see that a short entry would have produced a nice profit right away...as price moves south, the trader using the distribution can see that his next opportunity exists at or near the lower extreme of the distribution...and in this example we see price move to that extreme, fail to take it out, and reverse at the low of 1396.75 (our worksheet for this session calls for a long if price cannot close below 1395.25)

 

The second long opportunity occurs when price retests the 1401 area...again using our worksheet, we see that closes above 1400.50 signal us to look for long entries...and as with all entries, our primary target is favorable excursion back into the midpoint (blue rectangle) and ultimately to the other side of the distribution....

Edited September 3, 2012 by steve46

[steve46 12]

As usual I am beat...and need to get some sleep...from midnight on, we had nice entries available if you were willing to stay up and watch the charts.

 

The distribution did its job and the logic shows me who is in control

 

I invite folks to go back to the beginning of the thread and read the very intelligent (lol) comments published by folks here at TL.....gives you quite an insight into the psychopathology of our fellow humans. (I particularly enjoy the ones about what statistics "cannot" do....)

[steve46 12]

and to close out this process...this for bluehorseshoe

 

I can create a distribution for any liquid market...it just takes time to gather the data and do the analysis..its a matter of skill mostly and willingness to do the work. Interrestingly now I am getting inquiries from folks who want to "assist"....right....

 

So does it work for other markets? The attached chart shows the NQ. Direct your attention to the 10 min chart on the far left....notice how cleanly it respects the levels....it works just fine...

[steve46 12]

they'll be no change in the distributions for tomorrow..

 

For the overnight session, we expect rotational trade as Asia and Europe wait for the results of the Euro Policy Meeting (Thurs)...on the domestic side, we know that longer time frame participants will hesitate to take significant positions prior to the employment numbers on Friday. Many of my old colleagues simply take tomorrow off (especially those who use Market Profile)...and wait for the data to normalize....absent significant news or a surprising econ report, we would expect the short time frame participant to control the action until Wednesday...

 

Good luck in the markets

Edited September 4, 2012 by steve46

[steve46 12]

Drawing towards the close of the RTH session this is how price acted in the context of

our previous day's distribution

 

As with previous examples, price action remains the same, as price moves to test for sellers, and finding none moves back toward the midpoint (blue rectangle). Based on price action at various "test points" we see the market dominated by short time frame players, with long time frame participants standing aside to wait for Euro and domestic news, scheduled for latter in the week.

 

This in our opinion continues to confirm that the distribution is working even during abreviated holiday sessions...

[BlueHorseshoe 10]

and to close out this process...this for bluehorseshoe

 

I can create a distribution for any liquid market...it just takes time to gather the data and do the analysis..its a matter of skill mostly and willingness to do the work. Interrestingly now I am getting inquiries from folks who want to "assist"....right....

 

So does it work for other markets? The attached chart shows the NQ. Direct your attention to the 10 min chart on the far left....notice how cleanly it respects the levels....it works just fine...

 

Thanks for taking the time to provide a proper reply to my questions Steve.

 

BlueHorseshoe