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DrPepper
Registered: Oct 2008
Posts: 515 |
05-16-09 02:28 AM
Where do you get the value area numbers?
Is that the only aspect of market profile you utilize?
You refer to we, the people who taught you and your office. I am just curious if you would tell us a little about your trading education and experience?
I am enjoying and learning from your thread so far.
Thanks.
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stevesbg
Registered: Feb 2009
Posts: 300 |
05-16-09 04:43 AM
In answer to the question "why the Dow Cash rather than the S&P Cash?"....I was taught this approach based on the Cash Dow and I did my own research based on comments by Art Collins. One could use the S&P cash as well. I am used to this method and prefer it.
I work in a small professional office, and prefer not to comment on them or identify them because I believe it would not help traders trying to learn from my comments. I can say that I execute orders from a daily book of business, and I manage mutiple accounts including my own.
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stevesbg
Registered: Feb 2009
Posts: 300 |
05-16-09 05:05 AM
Quote from DrPepper:
Where do you get the value area numbers?
Is that the only aspect of market profile you utilize?
You refer to we, the people who taught you and your office. I am just curious if you would tell us a little about your trading education and experience?
I am enjoying and learning from your thread so far.
Thanks.
Market Profile numbers are computed from the previous day's data. The are more accurately referred to as the "Previous day's Value Area High and Value Area Low". They are not the only Market Profile numbers I use, however they are (in my opinion) the most important.
The "Value Area" is that area where 70% of trading occurs. The upper and lower bounds constitute the Value Area High and Low. These limits are automatically calculated by most software. On Esignal for instance the Value Area is shown on the right side of each Profile displayed as a magenta colored line. The top of the line is the Value Area High, the bottom of the line is the Value Area Low.
For those interested in learning about Market Profile I recommend starting by reading "Mind Over Markets" by James Dalton. Once you have that background, a student should probably continue on to read and study "Markets in Profile, Profiting from the Auction Process" also by James Dalton.
Additional resources include Brett Steenbarger's blog. Link is as follows
http://traderfeed.blogspot.com/2007...in-trading.html
I hope this helps.
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stevesbg
Registered: Feb 2009
Posts: 300 |
05-16-09 05:50 AM
Now for today's action
First we have option expiry. That means that the first and last hour will display most of the volatility. So we know that in order to make money we HAVE TO get on the right side early. We can't miss an entry. So with that in mind we start with the pre market
The overnight market moved down first on weak economic news from Europe. Then just prior to the open, the Globex moved back up to open at 889.
The previous day's value area high & low are
VAH = 894
VAL = 886.50
1. So we opened "in value"
2. We look for price to test one or the other extreme
3. Because of options expiry we expect to see what professionals call a "gamer's day" or a "pinball day" meaning we expect price to swing back & forth early and to chop around at midday.
As can be seen from the chart price opened in value and tested down to VAL at 6:41:50. Price hits the VAL exactly "to the tick" and reverses. The trade runs north to a high of 892.50 for 6 pts
At 7:13 price retraces down to touch 886.50 again. Our policy is to take the second touch long with smaller position size. This one takes only one tick heat down to 886.25. This one moved north to a high of 895.50 for 9 pts.
At the VAH the reversal trade occurred and took 1.5 pts heat. That trade moved south to a low of 876.75
As always, the management protocol is to establish the trade and scale out at 2, 3, 5, 7 and 10....we leave bullets to run to end of day if necessary.
 snapshot-40.png
This has been downloaded 273 time(s).
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stevesbg
Registered: Feb 2009
Posts: 300 |
05-16-09 06:00 AM
Okay so I have a couple of comments and then I may fold my tent depending on the reception
First, clearly a trader has to have a systematic approach that provides some confidence. The emotional aspect of trading is very important. New traders have no confidence therefore they need to see (to observe) how it works, what it feels like to do this job in a variety of conditions. New traders also need to know how to manage a trade once they are filled.....how to hold through the heat (drawdown)......how to manage their emotions.
I like Market profile as a basic system approach. One could start by reading the literature and taking a few classes from the exchanges. The software is not hard to learn but it does take some screen time.
Developing a sense of how to act when a postion is filled....how to manage a trade....how to manage emotions and how to manage an account takes time. I think the best way is to find employment in a professional office. Unfortunately that is very difficult to obtain, so as an alternative I guess the only thing left is to try to find a good room. Some of the folks affiliated with the exchanges are possible choices. I like Dan Gramza for instance and there are several others.
Decent software is available from Investor RT, Esignal, and WindoTrader, and there are plenty of others.
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stevesbg
Registered: Feb 2009
Posts: 300 |
05-16-09 06:08 AM
As mentioned previously I prefer to take signals that occur when more than one system fires off at the same time. This is called "confluence". Examples of confluence are when price hits a Market Profile number AND a pivot, or when price hits a Market Profile number and we get a confirmation from a MACD indicator (as seen in some of my charts). I have also used Bill Blau's Ergodic indicator (I have my own system for that as well). Finally I have used the Dow Cash with support and resistance lines in place for additional signals.
Simply put I figure that if a signal occurs "in confluence" with another system or systems it provides better odds of success. Why? because it is likely that more traders are involved AND depending on the type(s) of indicator(s) used, size players may be involved thus providing additional momentum.
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