Monday, 19 October 2009

Tools of the Trade

Click on Chart to enlarge
Now let's get down to details. Charts! 
I put the minimum amount of information I need on my charts. Anything that is on a chart will distract you.  So, the distraction MUST give you valuable information or it just takes away your attention from trading or puts doubts in your head. Remember, we are trading the order flow so that is the information we need to capture on a live real time basis. The charts above are what I trade from. Range Bar chart on the left, Market Profile on the right.

The cyan lines on the Market Profile chart are the support and resistance lines I draw in every day before trading begins. Th ese are the areas where I expect to put  on or take off trades. 

On the Range Bar chart, the dotted yellow lines of the Keltner Channel around the price provide a "normal" channel, so I notice abnormal vertical movement. There are two exponential moving averages through price so I can see the centre of value. Below that is an indicator that shows me where we are in the trading sequence. It is based on the now famous CCI. I started using it in about 1981 when Don Lambert made it available to CompuTrac, a technical analysis group I was a member of.  Below that are the two indicators I use to show me order flow. The first one is a volume breakdown. The lowest one is the cumulative average of that volume breakdown. Are the balance of traders buying or selling. That's all you need.


  1. interesting - on your chart it looks like there has been buying going on all day according to that 2nd lowerst indicator, yet prices are falling. I have only started to read your blog, so i hope there will be some clarification later on, or maybe i´m just misunderstanding smthg

  2. I think you are falling into the trap of trading a single indicator rather than trading price using all the available information.

    The day was one of distribution by the strong hands. Price was always moving downwards, below the EMA, Long CCI showed momentum was always downwards. Yes, it did look like volume was "going up" but if you look at the bar by bar action you can see more of the story. large traders are more sophisticated and I look at the whole story but through price and development of the Market Profile which also gave the game away. I'll talk more about this as the blog develops.

  3. Hi. Just started reading your blog. Very interesting. I was wondering, what charting software are you using for your indicators on the left?

  4. This is great stuff...I'm just going over all of the old posts...Just wondering if you would be willing to go into more detail about the exact settings you are using on these indicators...

  5. Jeff, all the settings are in the blog, either in posts or my answers to comments. I'll go over them again in the webinar.