Thursday, 25 March 2010

A New Suit

One of the rights of manhood that I went through, was as soon as I had a bit of money from working, I wanted to go to my father's tailor and have a suit made to measure.

It's interesting how the process works.

The tailor was a friend of my father, another immigrant, who had been a professional of some sort - lawyer, accountant - in his previous life, but his profession was not portable to Australia. He noticed that other immigrants were starting to make more money and could pay for high quality made to measure suits. So he hired a real tailor - the guy who actually cut the cloth and sewed the suit - opened a small work room and started a bespoke suit business.

There was one problem. The tailor to be had seen what a suit looked like finished - everyone has, and he had seen a bolt of cloth. Problem was that he didn't know the process that turned the bolt of cloth into a well fitting suit.

Needless to say, this guy went on to a 50 year career making bespoke suits for local businessmen as well as Sydney's rich and famous. He reverse engineered what had to be done by pulling apart completed suits and figuring out what he needed to do, so his working tailor at the sewing machine could do his part,

Here is yesterday's ( Wednesday 24th March) ES chart with FloBot trades. It was a normal day where scaling out really paid off as there was no follow through. The all in and all out traders did even better. These normal low range days don't give you much but you can do better as a discretionary trader. The day needs to be traded with outside in setups. Its harder to identify these trades early but you can look at what happens at support and resistance areas. If you see a turn in the order flow at these areas with over bought or oversold condition (depending on a potential LONG or SHORT), with a switch in momentum through the CCIs, you have a trade. Once the day has graduated to 3 rows of TPOs and perhaps range extension, you have more information and can trade  into the direction of the range extension but from the other side of the VA. These are high percentage trades. Once the Market Profile has developed more you can trade in both directions but being aware of the extra risk in trading against the range extension direction.


  1. Not sure if this has been submitted for the flobot indicator. ELT indicator. Some people might know this as an emergency locator transmitter, but for your purpose it is electronic local trigger! for me, both are similar as pulling the trigger is the hardest part, and I do need to study to figure out how to get to the locator in order to get proper execution! Thanks

  2. The question is, Tom, how do you recognise normal low range days prior to entering the trades and not get killed with stop losses?

    Thank you for the chart.

  3. Thank you very much, Tom

    This post is great, it made me understand a lot of things I read in the blog.

  4. Would EL take this trade? Would love to get your opinion on it.



  5. dumb question, but the trades in the chart look like inside out...but you mentioned above the day needed to be traded outside in?

    thanks EL

  6. Hello Tom,

    one question
    How do you define range extension,
    from Initial Balance or do you use something else due to overnight session?

    Thanks, very helpfull post!

  7. Sorry Tom. The link I posted doesn't appear to work. How about this one? The trade is at the close of the last bar.


  8. Hey Tom

    Great post, what driven said above is a big issue for me, too.
    It is often hard to determine the type of day,
    and there is a lot of beeing stopped out on initiative trades.
    Could you give some hints, on how to avoid getting chopped up.

    This whould really be very helpfull.

    Once again, really great post and blog!

  9. driven, as I said, you can't early on so you lean on support or resistance and go with order flow and momentum.
    AaronP, I'd take it but be ready for a bounce which could happen off this picture.
    jr, yes, they are FloBot inside out trades.
    Anon, yes off the IB a la Dalton and Steidlmayer

  10. Tom,

    perhaps I missunderstood something, but if you have a range extension from Initial Balance and market reverses, is it not logical to look for a test of the opposite site of VA.
    Like Imbalance>Balance>TEST(mentioned range extension above)>Imbalance(opposite site).
    If there is follow through or not.
    So what I do not understand is, when you say,
    to look for a trade at opposite site of VA in
    DIRECTION of prior range extension, because as mentioned above is the probability of a test of the opposite extreme not higher?


  11. Thanks Tom. As you mentioned, it didn't work out, but it's nice to know that the setup itself was valid. One thing I did notice was how fast the bar was drawn, and how much selling came in. As soon as I was filled I was worried about it being the weak longs throwing in the towel, which it ended up being. How do you take into account the speed and order flow levels of the bar in order to avoid this type of situation?



  12. Anon 09:59, On most days, except trend days, you get rotation retracement and it is these trades I try and take - outside in - back to the range extension direction.

    AaronP, see Monday's post.