Beyond Price Action

[steven46]

I am done for the day

The important issues for retail traders are as follows

1) Select the time frame that works for you (15 min is recommended for retail)
2) Do your prep
a) Analysis of which setups worked best (and which failed) during the previous week
timing of entries is also part of the analysis. Once you document the times when
entries occur, you will start to see patterns, for example, in the S&P futures, it is common
to see trends move originate at or near 7am (PST/US time)
b) Timing of (high impact) economic reports (most important reports occur at 5:30am PST/USA time)
c) Create trading plane to include both long and short scenarios
3) Review the previous sessions (ETH and RTH) prior to trading

Most of this is about discipline, and repetition is key to your success

At the open, prompt recognition of "day type" is critical. Generally I can identify the
type of day (trend or trading range) within the first 15 minutes). After that I adjust
my trading plan and wait for the right entry

Attaching today's chart below

 

[steven46]

This chart is what I recommend for traders who may be struggling to find an edge
On the left, we display 30 minute candles and ETH (Globex) market.
On the right, 15 minute candles and again the ETH market
We anchor our VP/POC starting at the London Open.
We look for evidence of a specific type of setup called "Test/Fail", where institutions
signal their intent to either continue a previous trend move or (more likely) reverse
and take profit into the "Overlap" period, where Euro traders close books. This one
trade when structured properly, can make the day, especially if the trader is able to
recognize the opportunity early, and stay with a position. Experienced traders know
that price is likely to "continue" to trend as long as each close is below the 1st SD.

What I find most interesting is the emotional response of less experienced traders
who watch me do this day after day, and still have trouble staying in a trade long
enough to get to either the 10pt or 20pt profit targets, even after I explain that
these are common targets for both automated programs and skilled professionals.

Good luck this week

 

[steven46]

This chart shows (part of) the method I use to determine both initial volatility
and the point at which I will anchor the FRVP (Fixed Range Volatility Profile).
Anchoring the VP at the point of initial volatility allows for significant sample
size to accumulate in advance of London Open at Midnight PST/USA time.

For UK/EURO traders this is particularly important. Without the proper sample
size, the indicator (which I use to determine statistical skew) is less reliable, and
thus you lose your edge. It's attention to details like this that are the difference
between having a system that can be used to make a nice living, and one that is
essentially like flipping a coin (or worse).

By the way, observant readers may remember some few posts back, where I advise
struggling traders to learn basic probability & statistics. Here in the States, it takes
about 20 weeks (at a local Community College or University). As anticipated the first
reader to respond asked if I were serious. At the time, I responded that having made
a recommendation I had no further comment. The truth as I see it, is that retail traders
are at a disadvantage. The analogy I use here is to ask traders (who like American Baseball)
to go to what we call a "batting cage", and try to hit a fastball thrown at 95 mph, about the
same velocity as that of a Major League Pitcher. Generally it only takes one (1) such experience
for them to understand what it is really like to compete against professionals.

 

[timsk]

. . .By the way, observant readers may remember some few posts back, where I advise
struggling traders to learn basic probability & statistics. Here in the States, it takes
about 20 weeks (at a local Community College or University). As anticipated the first
reader to respond asked if I were serious. At the time, I responded that having made
a recommendation I had no further comment. . .

Hi Steven,
If you're referring to me - I never asked if you were serious. It's obvious to one and all that you're very serious! What I actually said was: "I don't doubt that having a sound understanding of statistics is likely to be helpful to all traders. That said, I presume you don't expect beginners or experienced traders alike to take a minimum of one - and preferably two - 20 week classes in statistics simply in order to be able to understand your methodology?"
That's very different from questioning if you're serious and so, on this occasion, I'm afraid you anticipated incorrectly. Just sayin!
Tim.

 

[steven46]

In my view, this should be obvious, but for the sake of others let me just state
the obvious.

Wherever professionals are competing it is unlikely that amateurs will prevail
This is especially true in the financial markets.

Rather than lose you own money, trade a simulated account, until you can prove
(to yourself) that you can make a consistent profit.

 

[steven46]

The attached chart shows an example of a "Test-Retest" setup

 

[steven46]

As seen in this chart, the prior session high profit target was obtained
just prior to the US open. Once again, close to +10 pts for traders
using aggressive entry and holding

Typically this next bar (prior to the open) will be a profit taking pullback

 

[steven46]

Profit Taking on the Open

 

[steven46]

And this chart shows the transition, shortly after the US open
from ETH (Globex) to RTH and from 15 min to 5 min Candles

This is the framework that I use. As was previously mentioned
I recommend that retail traders stay with the 15 min time frame
as it will keep them out of trouble, preventing them from sustaining
early losses

Notice that this allows me to take a short entry (below the red POC)

 

[steven46]

This will be my final post today

As can be seen in the chart attached. The POC/VWAP
relationship has changed such that we now have a
developing long bias (and 2 bar reversal in progress)

So far this morning we have a successful short entry
followed by a potential reversal and long entry above
the dots (as we transition to the current session VWAP)

Good luck everyone

 

[steven46]

Getting to sleep early this evening so I will post this "End of Session"
chart.

I want to point out the following

1) It helps to use ETH charts. As seen in the attached example, it is often the case
that we can extend lines from the previous to the current session, and when combined
with knowledge of the statistical skew, you have a significant edge right from the open

2) After the opening short entry, we thought price might reverse. It did not. Instead price
created several continuation entries. The continuation entries were created after price tested
one of two (2) "Key References" (the VWAP and the 20 period EMA).

3) There's no proprietary "magic" indicator here, and like every skilled trader, we use the basic
tools to frame the market, and then we adjust to what we see. This is about solving a problem
within a constrained time period. You watch the market unfold. You make note of how the market
reacts to tests of specific points of reference and you wait for specific setups so that you can enter
with the odds in your favor.

Due to previous obligations, there will be no posts tomorrow