Friday, 20 November 2009

Did the Market Bark?

I remember when I was a teenager, one of my favourite characters was Sherlock Holmes. There was one particular story called "The Curious Incident of the Dog in the Night-time". The "curious" thing was that the dog did not bark.

The analogy I'm drawing from that is in trading it's important to notice not only what is happening - what you see - but also to notice what does NOT happen.

Let me give examples. You see a bar that looks like BUYING volume. You see high volume at the offer price and the market either goes nowhere of goes down. The usual formula of BIG VOLUME BUY = PRICE GOES UP did not happen. Curious. You look at your momentum and you see that in fact the momentum is down or stalled or your MP shows you at a resistance, either a VA resistance or a high volume point. You don't buy as the order flow looks "curious", the market in the next bars goes down quite a lot. You just saw a large iceberg order. A strong hand selling but hiding his selling. This has become a feature of electronic markets. On the floor it happened too. A large institution would spread his order between different brokers, sometimes even passing them to unlikely ones so the large trade was not visible.

Another example is when your setup is almost there but not quite. One of the requirements for some of the setups for me is position direction and levels of the 2 CCIs. In the small screen shot here you can see the selling trade that failed because the longer CCI did NOT penetrate the zero line causing me to quickly exit the trade and quickly reverse as the BUY setup was triggered.

Its OK to be aggressive and enter when the setup is almost there but be ready to bail when what you expect to happen, doesn't.

Today's trades finished a nice week of trading with different types of days of different shades of green.

Click to enlarge


  1. Hi ElectronicTrader,
    Stumbled across this blog as a result of post you left at Traders Laboratory. I noticed you were London based and being London myself, I thought I'd head on over to your blog.

    I think the idea of teaching your daughter to trade is a great one. Kind of a like a personal Richard Dennis experiment! I studied Market Profile for sometime and I have to say, I do like the concept - it seems to be working well for you.

    Keep up the good work and keep posting to the blog