Sunday, 17 January 2016

It Just Got a Lot Better - My New Tools.

I thought the beginning of 2016 would be a good time to share where I am now in my trading. Let me be clear, the basis has not changed. I trade inside out trades by trading the pullbacks in the trens as well as outside in trqades fading overbought and oversold conditions, all in a Market Profile context.

Lets start by talking about where Pete Steidlmayer is now. Here. Pete talks about trading the swings between accummulation and distribution. He tracks VOLUME. Now that actual live volume is available, he says that TPOs are outmoded. While I don't totally agree with that as I believe that Market Profile provides both support and resistance information as well as a big picture information of where value is moving, I do agree that we now are able to rtrack volume on a much more granular scale.

I tried using Pete's Volume Strips that he refers to in the video when they first became available, but I did not "see" the order flow clearly at all.  I then tried to use Pete's Cap32 software and had a guide with me for a week. Sadly, this did not add anything to my seeing order flow. Perhaps it was just me.

What began to provide me with more information was firstly cumulative volume delta and then MarketDelta's Volume Imbalance charts. Finally, the order flow was becoming visible.

What I have now done is to capture both the order flow and volume information to trade the same way I did before in order to more precisely see my entry and exit points. You still see the CCI to measure trend as well as Keltners and Bollingers to identify overbought and oversold. What is additional is the inside the bar trades and the Volume Profile (VP) to understand the order flow in each swing and to identify, more precisely, my entries and exits (stops and targets). These changes to my chart have provided a huge improvement, especuially in the types of markets we are trading in this modern eara where:
  • there are no floor locals - everyone is an electronic local
  • Algos make up for a great majority of the trades and volume that takes place every day in most markets
 So lets talk a few specifics. The VP identifies whether a pullback is a probable entry point or not. The VP also allows me to use tighter and better stops. To achieve this, I use multiple VPs on my chart as the swings develop.  The inside the bar information you see allows me to fine tune entries and to better identify exits.

The final piece is the buttons on the right I call GEL. These buttons allow me to hybrid trade and use specific rules in specific context whwre a set of pressed buttons are only valid for the particular trade I am attempting. They reset to zero after the trade is entered.

The Volume Profile is available from PureLogic. I'll provide more info on this great tool in subsequent posts. You can see the Volume Profile on any bars you select and shows, for that selection, VA, VAL VAH, POC, VWAP and Standard Deviations plus a lot more.You can buy it here.

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