Thursday, 28 January 2010

How to Start with the Context

Happily, watchers of the blog are now getting more interested in Context but somehow still don't quite get it I think. Kiki had the same issue in the beginning. There was a comment yesterday about a trade from Otto:

Fist of all thanks for this great blog and all your sharing!

at 16:19:29 we had a long @ 1086.50 (if im correct...) i was thinking that we had some room to Yesterdays val @1090.50. We had already 1090.50 high.

But trade didnt get far.
Was it a valid trade? was context correct?

My answer was:
Otto, I would not have taken that trade as you were near the top of the developing VA which was resistance.
 OK, let's get a bit more specific.

I use VAH, VAL, POC, DVAH, DVAL and single prints to lean on to make trades. The EMAs are also areas I lean on. The areas that are visible before I start to trade, I mark on my Profile. The others such as the DVAL, DVAH and EMAs I watch as I trade.

There are setups that come along nearly every day that I trade. An example is the ES RTH Gap Trade. There are more. You find them by observing and by replay and by scouring charts. I'm not going to do everyone's work for them as it has no value unless you find them for yourself. Besides, if you don't want to put in the effort, it will be reflected in your results.

Its vertical price movement in context that I trade. I don't trade indicators. Indicators just give me information about vertical price movement in context. I focus on that.


  1. I have my own rules, but I am curious to know how you usually decide to hop back in on a day like today when you run out of bullets. I took your chart and added an 11 EMA which seemed to work very well.

    I'd like ot hear how you use Mom dots as well.

  2. Regarding the VAH, VAL, POC, DVAL, DVAH, are they volume based, TPO based or both? Thanks for a great blog.

  3. Best trading blog on the internet. I thought it couldn't get any better. Then comes the last series of posts... thanks EL and Kiki.

  4. Tom (and Kiki),
    thanks for the very informative blog. Most helpful for me is when you talk about your trades, why you take or reject them, what you think gonna happen based on market structure. I agree that context is one of the most important things to find a good trading location but it is also the most difficult thing for beginners. Especially when you have to evaluate which levels are the most important (e.g. is it the VAL, DVAL, VAL of a split distribution, weekly VAL?) Even when you know all the basics you sometimes do not see the forest for the trees and finally miss the big picture. Experience isn't gained over night but your comments help a lot. I appreciate that very much. Hope you keep on posting charts with your review of what happened in the markets during the day. Thanks, Jo

  5. EL,
    do you mind selling if the CCI 6 is oversold or buy if it's overbought?

  6. Thoroughly enjoying your blog and as I use mp myself with a combination of a multi timeframe setup I couldn't agree more as to how context is everything. I'm curious today after the 1tick ibh did you or would you have waited till $ fell back into value before initiating a short - believe we had 2 tests of the vah from below and your 33ma piggybacked it. thanks again for the writeups and look forward to seeing annotated charts again.

  7. Anon, I re-enter on a pullback with order flow & momentum in my favour.
    Anon, I look at both TPO and Volume PP. That's why they are overlayed.
    TrueB, glad it's useful.
    Jo, yes, Kiki has/had same issues
    Mpe, I use the 6CCI to measure short term momentum and compare to loner term momentum of 45 CCI.
    Anon, whether to wait for re-entry or not depends on what else is going on there and what the previous overlapping Profile looks like. No set rule.