Friday, 11 December 2009

Is this Range Extension?

 I have spoken about using Market Profile for support and resistance as well as for the context of my trades. You can see this in a number of posts as well as in my answers to some of the comments posted.
What Pete invented was a different way of organizing market information and we all seem to use it differently. It took me a while to work out how to use it for the very short term trading that I like.
There are different things that the Profile tells me. I look at those different things at different times in the trading day.
When the market opens in, for example, the Dow Euro 50, I look at the opening range in relation to the previous overlapped Profile. I am looking for not only support and resistance but for high volume areas, typically Value Areas, as I know that price should progress through these areas fairly easily. I try and lean against something in the Profile so I can then look at my range bar chart to see if the order flow and momentum indicates I should do something in the area I am looking at.
Again,  there are no “rules”. Pete Steidlmayer described traders as “information processors” and that is exactly what we are. We look at all the available information, give more weight to the “appropriate” parts, and make a decision to do or not do something. We are continually processing information while we are looking at our screens. This why it is critical to focus on what we are doing and not allow any distractions. The other side of the coin is that we must take breaks to refresh ourselves.
 Again, quoting Pete, no one can operate at 100% efficiency 100% of the time so we must set up our information engine in a way that allows us to operate at, say,  70% efficiency and be ready to go to turbo mode when 100% is needed.
What all this boils down to for me, is the requirement to setup my charts with only the necessary inputs so I can get only the required information without overload and duplication.
I know some great Market Profile traders who use no other information. I am not one of those, as I need to get a higher percentage of winning trades. What Kiki and I do gives that high win rate while at the same time providing the benefits that Market Profile provides – context, scale out targets and the information needed to build strategies as the day unfolds.

I woke up today to see the ES already motoring so immediately switched to the Dow Euro 50 (ET) before the open, ready to buy if the order flow continued from yesterday. I have made a small tweak to the CVD to make it the same as the CVD I programmed in MultiCharts. It works better for me. Looks like U.S. traders are having a very quiet day unless they caught the ES trade before they went to bed - about 2.30am in London.

Click chart to enlarge


  1. Hello Boss,

    Great post.
    know oneself and adapt information to fit ones demeanor.

    Feeling guilty on keeping your wisdom to myself. Changing that now.


  2. Interesting post. I'm attemping to follow along
    with your VB & CVB settings in MD. You mentioned a tweak to your setting to match multi charts? Thanks.

  3. I wonder how you trade Localtrader... do you spend the entire day in front of your monitor or do you have an alarm at key level like support or resistance.
    How is your trade execution...? when the market is swift I fail sometimes to enter my order. Actually I have them entered, but I have to modify them.

  4. Great post Tom, thanks.

    Being relaxed and focussed over a long time has always been a challenge for me.

    Regarding the CVD it would be great if you could explain a bit more, how you incorporate it in your decision making process. Can it be seen as an indication for longer term accumulation/distribution? What do trends, overstretched trends or turns tell you together with other tools?

    Thanks, this blog is great and lead already to profitable trading - on the simulator :-)

    Wish you all a great weekend.

  5. Love your blog. I have a question about high volume areas. You say you look for high volume areas and that price should move through those areas fairly easily. I thought that prominent POCs or high volume nodes are usually thought to attract price but also to be important support/resitance, that it slows price down rather than being easily penetrated?
    Thanks for all the great insight,


  6. Thanks Rino.
    See tonights blog for the tweak to the CVD settings.
    timokrates, I don't look at longer term on the bar chart. MP is where I look at the context of the trades. The volume indicators tell me whether the orders are buying or selling and whether momentum is likely to be up or down. Very short term as I am only looking to ensure I can make my first scale out. I then monitor the trade and require the conditions for my entry to still be there or I get out.
    Anon, by High Volume Areas I mean the value area. Price can move through the value area prety easily if its a normal distribution, and I try and split my profiles into normal distributions.

  7. Daniel, read the posts and comments on how I anticipate the closing of range bars and how I use stop limit orders with a negative stop factor. I'll go over this in the webinar.

  8. Just hope this is not a sales pitch for Market Delta, thye are annoying charts... no need for most if it

  9. Mark, I first started using charts in about 1969 when they were done by hand. I first used a computer for charting in about 1980 as a member of CompuTrac technical analysis group. Since then I have probably used every charting package that came into existence, always moving to a package that provided something more than I had. MD now is that package.