Friday, 30 October 2009

Ran Out of Bullets

The pre-marker preparation is hugely important.  I need to know where the levels are that I may need to do something about – put on a trade, take a profit or scale in or out.  I use Market Profile for my levels as MP is a diagram of the volume for the day.
I first split the Profile into its distributions. My software displays the volume Points of Control (POC) as well as the Value Area Highs (VAH) and Value Area Lows (VAL). I also use the extremes where relevant. You can see that the POC of 27 Oct stopped the market on 29 Oct so knowing that it was there was important.
Next, I try and visualize the type of day that may unfold. For example, for today, 30 Oct, I envisioned a normal day with possible high of around 2845 and a low around 2790. I also Noted that there are single prints beginning at 2791 and that if selling order flow is revealed, it is likely that the market runs down to 2760.
I am writing this part of the blog before trading begins on 30 Oct. I will continue after the market has revealed itself.

WOW!! This really went according to plan. Again, as an early bird trading from Europe - about 9.30 GMT, 4.30 am on the U.S. east coast, I went short near the VAH of 29 Oct. as the selling showed itself. Looking at the charts below:
There was basically a failure at the VAH, then a lot of what looks like chop in the MP chart until the market got down to around 2800 at the VAL. Looking at the range bar chart on the left, you can see the benefit of using range bars as the chop is not there, just the steady down move. I have divided the MP chart into the two distributions we have had so far today. My vision from before the market opened was ful filled and exceeded
. As soon as price hit the single prints of the 29th, it went right down the zipper in a relentless but orderly trade. I took profits as usual but ran out of bullets at 2760. I was not too happy as I watch the market continue downwards. Order flow on both my indicators were clear so I tried to correct my mistake and went short again as 2742 was broken with double prints. The market finally started going sideways and I covered the whole piece at 2724. Fantastic day. In retrospect, I should have held onto the last 1/3 until the 2730 ish area where some buying came in. K. was in the trade but got out wayyyy too early at 2790 but I was very proud to see she used another technique to re-enter on confirmed pull backs which she did at 2780, and 2738 taking 10 ticks out on each trade. I'll talk about this style of trading more in another post.

Without that envisioning it was a much harder day as K. discovered. Seeing this vision takes a bit of time and experience. But there are ways to correct yourself as K. did.


1 comment:

  1. Are the volume breakdown indicator and cumulative order flow indicator standard indicators on Multicharts as I dont recall seeing them on there. If not, can you provide the ESL language to them?