Monday, 26 July 2010

What are "They" Doing

The focus of my trading is always to try and discover what "they" are doing. If I can figure that out, the rest is easy.

But who are "they"?

For me, "they" is what is left over when you take the differences between the buyers and the sellers. The nett nett of trading activity is the "they". It's the "they" that move the market. And "they" are quite clever in hiding what they are doing.

My first weapon in attempting to capture the "they" is my range bars. The range bars get rid of the noise and reveal more of the order flow. It reveals acceptance and rejection of price. If you have some of MarketDelta's inside the bar stuff then you get a more macro peak at this activity.

Next, I use the volume breakdown to discover if the trading is panic trading so I can see if I can fade it at the appropriate support or resistance level.

Of course I then have my beloved 33EMA, the one indicator I can't live without. The centre of the universe, the barometer of value.

Then of course Market Profile. MP shows value developing and moving. Acceptance and rejection of value. Selling above value and buying below value, or not. I can't imagine anyone being successful without MP.

Putting it all together, I see the whites of the eyes of the "they". Once I can see "they" I can join them. I trade with the "they" as its what "they" are doing that matters.


  1. what charts do use the 33 EMA on? ES, 6E, 6B, etc....? Does it work better on a say 5 min then a 15 min chart?


  2. Can you go into more details how you determine if a move is panic or if it is "they" (to use your term)? You mention that if it is a panic move then you fade it, I assume this is because a panic move does not have continuation whereas if it is a move by "they" then they must have planned it and will continue the move by buying or selling more. It would be helpful if you shed some more light on how you decipher the moves for yourself as they are taking place. Thanks.

  3. EL,

    I was wondering, why the 33EMA on (6?) range bars? As in, why do those setting in particular indicate value?

  4. Nice piece, thank you. One problem I always have is how to distinguish between a pullback to the 33ema or if it really will go through the 33ema this time around. That often causes me to hesitate missing the trade. I look at the direction and steepness of the EMAs and vb for a clue. What are some of the clues you are looking at to distinguish between a pullback or a trade through the 33 ema? Context and MP only or else?
    Thank you.


  5. You should do a post to people that simply says - DO HOMEWORK. I find it funny when people ask why this why that... Some simple Excel could show them that your reasoning for it is pretty clever - people just don't want to work.