Wednesday, 22 October 2014


After a lot of work I have finally integrated order flow bars (called volume imbalance in MarketDelta) and the Steidlmayer dynamic Market Profile into my trading pictures.

The dynamic Market Profile is very much the same as the splitting into distributions that I have been doing for years. Adding the order flow bars is as close to perfection as I can get I think. I use my original EL pictures and filter them with the order flow bars. I've been trading a lot of ES over the last 10 days to validate what I'm doing and it has gone rather well. Identifying key turning points and the order flow is very clear. The added activity of the HFTs was an added bonus as their presence and direction was pretty easy to see during those few days last week when things were crazy with volatility.

The chart below of the FESX shows a clear read of the order flow. The red arrow shows the trend resuming.

I'm hoping to get the ebook finished over the Xmas period and it will be going into the full details of what I have been doing.

Monday, 6 October 2014

The Book: Update

The Book has been going and going. Sometimes I think it's like that play by Becket, "Waiting for Godot" that I saw years ago.

These markets are in a transitional change and I'm not just dealing with Market Profile which is relative easy but showing the new dynamic MP that Pete Steidlmayer is still developing and then wrapping the Order Flow bars around it all.

Things evolved and need to re-write and more importantly, re-video, a lot of material. I've had to discard a lot.

We have several main influences of change including:
1. The Algos - both HFT and also a lot of retail and semi-professional algos
2. The disappearance of the Locals as exchanges went electronic. Customer order size means that instead of trading with a local, customers are trading with customer counter-parties
3. Extended hours trading has become more important as Asia grows
4. More severe and constant legal insider trading and market manipulation by the FED and ECB

I'm just a tiny pimple in the scheme of things, trading my short term time frame, reading what "they" are doing and trying to join their action. The Book will show how I track that  action using the tools I've mentioned in the second paragraph above. It took a while to get the degree of certainty that I now have and I won't release anything unless it really adds value to what people are already doing. Trading needs to be more certain. I read the order flow like a Google map except that I have no idea of the destination, just the "now" of what is happening. Reading the now lets me understand how the next bar or two will react to the now. After that it's all trade management.

So the Book is under way again in it's final form. Mostly embeded videos so you will be able to see what happening. After all, Order Flow is a moving thing.

Wednesday, 1 October 2014

To The Moon Alice!

Today's trade reminds me of that oft used phrase by the Great One in the Honeymooners. All I had to do was see the LONG and be able to hold it, or at least some of it. The BUY was clear in both context on the MP and the order flow.

Monday, 22 September 2014

Better to Be Lucky than Smart?

There's that sayin g. It's sometimes true as it was today. I got long in the DAX. I was a bit bored I think and realy should have waited until after Draghi's speech, but I didn't. Then I got lucky and there was a sweep: a big order, relatively, came in and took al the offers. The VI bars were green on the offer and zero lots on the bid. The market then distributed. Chart below is not the chart I traded from - I was using my scalping chart of 50v. Same methods just very sensitive chart. The dynamic profile popped from the POC so the move was building. I guess that's what triggered the large order. I was luckier than smart but I guess you have to put yourself into the position to be able to be lucky.

Friday, 12 September 2014

Pink Floyd

A great group from the past whose great hit was "Another Brick in the Wall" 

Well, today's pic is just another brick in the wall of trading. As you all know by now, my day starts with "envisioning". Envisioning is based upon the past charts and the overnight activity. I then start with an idea of what is happening - this idea will be revised and adjusted as the market unfolds. The pic below gives a view of the usual first trade of the day. It's my favourite trade as I usually execute it very well. Trading markets that have an "overnight close" has an advantage as they usually open out of balance and that move into balance is a great opportunity. The Russell is a similar market. Although it trades overnight, the volume is then is very thin and the future is used to hedge in the RTH. Opportunity.

Monday, 8 September 2014

Dynamic Market Profile

Markets are still in transition. The customers trade bigger size. The pits and locals are gone. Markets are trading almost 24 x 7.

I split legacy Market Profile into its distributions to find the information I need. But now I also use dynamic market profile. Pete Steidlmeyer has been doing a lot of work to resolve the trading issues he was having with the legacy Market Profile that he invented. His solution is dynamic market profiles and volume analysis through using TPOs that breakout as a way of organizing the markets. The bonus in this methodology is that the trader can specify the periodicity of the bars that the TPOs are based on. The default is still the 30 minutes but any number can be used. I'm currently using 6 minutes. Information about the dynamic market profile can be found here.

I have adopted the dynamic market profiles as it splits into distributions what were the legacy Market Profiles. Using these dynamic profiles and order flow analysis of the volume delta and other volume information available I now have the same or better order flow information that I had on the floor and I have that for more than one market at a time.

Wednesday, 3 September 2014

Regular Stops are Dangerous to my Wealth

Using anything but a drop dead stop would cost me a lot of money. A tight stop assumes that I know where the market is going in the future rather than working on the basis of the mathematics and probabilities. Discretionary trading is the finding of moments when the trader can see what is happening with order flow and can therefore deduce what happens next. Deduction is not prediction! If I see that the buyer is in control then I KNOW that the price must move up as supply at existing prices is removed. Its as simple as that. The next challenge is to see when the buyer stops buying. Exhaustion. When he stops buying there are two possibilities: selling comes in and the price goes down or sideways chop as no one does much. Putting am arbitrary stop loss that gets taken out by the normal oscillations of the market is not the way to deal with this information.

My trading is far from perfect but I make money when I stick to my plan which is based on my testing. I lose when I do something impulsive.

Trade management is critical to CP. It's the maths.