First Trade of ETH ES Today: a Classic

 The great thing about charts is that patterns keep on repeating themselves. If you discover a high probability picture to trade and just keep trading it you could make a good living off just one setup. Today's trade below is just one of these types of pictures I love. Mike Valtos loves this trade too but for slightly different reasons: https://www.youtube.com/watch?v=kDa3_a4Bezk&t=134s

I took the trade marked "Z". The green and red horizontal lines are my FavFib which you can find elsewhere in this blog. Those lines were put on the chart BEFORE the ETH session started. Apart from the fact that the FavFib was there, the trade was qualified due to its internal order flow characteristics. You can see a similar looking bar at "A" but that bar has different charterisics as you can see from comparing bar markers above and below each bar.

With good risk management, that one trade might make you Done for the Day.

"It's like déjà vu all over again"

"It's like déjà vu all over again", so said Yogi Berra and he was right.

A lot has changed or rather evolved since 1979 when I joined CompuTrac, the then leading futures trading group led by Timothy Slater. The number of futures traders in the world was minute compared to the millions we have today. My co-members were men like George Lane, Marc Chaikin, Walt Bressert and many of the other names you see today on names of of indicators in most trading platforms. CompuTrac’d Prof. Jim Schmit programmed what was the first day trading charting program. We used to run forests of Apple II computers to churn out our charts.

Today, I am told, we have a million users of Ninjatrader and some 10 million using Tradingview with millions more using a countless number of other charting and trading platforms. It seems that the big explosion cam with the so called “prop firms”, a great misnomer as far as I am concerned because they are anything but prop. It all started with Top Step (another misnomer as the top step in a pit was where the brokers stood so they could hand signal orders with their booths - locals were deep in the pit looking up at the brokers). Then Leeloo entered the game. I thought all the prop firms were quite predatory as they are even more now. But on the other hand, you can de risk yourself and get to CP sooner using these companies as long as they pay as promised.

Its interesting that the explosion in these “prop firms” was triggered by the heavy handed behavior of Leeloo. Darrel Martin was a Leeloo customer who had his profits capped after he made $300,000 trading Leeloo evals. He got mad and started Apex Trader Funding and began under cutting the eval prices the others were charging and the rest is history.

Trading “prop firm” eval accounts needs different techniques to trading your own money. Your focus needs to balance the prop firm metrics of draw down, renewal date and consistency within the other constraints (rules) that are also placed on you. Once you pass and have a sim paying account you need to fit a different set of constraints.

My take on how to trade once you have paying sim accounts is to get as many of them as you can and restrict your trades to very high win rate setups that only go for relatively small profits per trade. Trade the accounts in groups so that one catastrophe only impacts no more than, say, 25% of your accounts. There surely will be “catastrophes” whether due to technology or black swans or negligence so a plan is important.

Orderflow in context is what shows exactly what is happening in the market

 I'm seeing a lot of posts on X and videos on YouTube with people "trading order flow" but most seem to be trading indicators that show winning trades some of the time. While I am in favour of indicators that help clarify context, using indicators as the trigger for the trade is trading indicators and is not order flow trading.

The chart below has lots of great information that is more than enough to reveal great trades. Using software to monitor the market gives me preserve energy and not need to to stay in 100% focus all the time. I can take it a step further and have the software trigger the entry and then manage the trade manually. Some algo entered trades will be scratched immediately as I see something that the algo was not prepared for but that's OK. I would rather that than miss a great trade.

 

One Trade and Done for the Day

 Imagine finding one setup that happens at least once every day with a profit of at least 2R and that is profitable over 90% of the time and when it losses it costs 1R.

Then add a trade copier to the chart so you can control both the accounts that the trade goes into as well as the size of each entry taking into account the volatility and the R size you are using.

The end result of this is you can sit in front of your workstation for less than 30 minutes a day and with just one trade you are DFD.

The markets we are experiencing give as more opportunities than I can handle so making this type of change makes a lot of sense. The methodology I am using is that I ave currently at least three setups that meet the criteria I describe in te opening paragraph above. Which one I will use depends on the volatility of the three markets I am currently following at the window I want to trade.

Chart below shows one such trade that appeared at about 7.30pm EST. Both order flow and distance from the mean gave the perfect setup that I have severely back tested for the NQ. I use the MNQ for charting as it has significantly more volume than the NQ. I use my trade copier to switch the 2 lot MNQ order into significantly larger size in NQ. A 6 lot NQ provided a trade profit of almost $1k into each account. DFD.

 

 

Consistent Profitability with Just one Order Flow Trade

 There are myriads of ways traders get to CP. One of these ways could be by finding just one good setup that repeats itself many times a day in the periodicity you prefer to trade.

The chart below is the MNQ 39 Range using Orderflows footprint software. It has a long list of hard wired order flow conditions, each of whican be both alerted and signaled with colored triangles and other objects. You can see some bars have a very large triangle either below or above that bar. The large triangles show Delta Breakouts, one of my favourite metrics. Delta Breakouts are exactly what it says on the box:: there is a price breakout with a large delta.

Now imagine adding some other order flow conditions to a bar that has a delta breakout, say multiple delta imbalances and say a volume metric. You now can trigger a bar with these metrics. The next job is to look how far the bar(s) after your trigger moves and where to put a stop loss - testing. You now have your one setup to learn to trade in your goal to get to CP.

 

Surviving & Prospering in These Volatile Markets

 I think we are in the 17th year of this blog. WOW, how time flies when you are having fun. About 25 years since I came off the floor.

 What has changed a lot is the technology and the numbers. Volumes have exploded. New markets have appeared. Volatility has exploded. I remember trading the SP future - the original one in the very early 1980s. It was worth $250 a point and my target for a trade was half a point. Initially no intra day data and I had my broker on speed dial to make a trade if I was off the floor. Then Jim Schmidt, the original coder for Computrac introduced software to chart (not trade) intra day data through a 300 baud dial up connection. Broker still on speed dial.

The big change came in early 1990s when the German DTB funded electronic only trading through dedicated terminals. I traded Eurex on one of those.

Now we have almost instantaneous connectivity to the markets almost 24/6 and click a mouse to make a trade based on analysis either done by a computer or done in our heads based upon a visualization we have created of the live market on a screen.

Trading has become a lot simpler, not easier.

 To become CP, traders set up a workstation showing fairly detailed order flow information. They can then take a blank piece of paper, select a market, and look for one very repeating pattern with a setup, a trigger and an exit. They then buy a straight to funded account with a so called prop shop (one that actually pays) and if they have done everything right they can earn a living. But still a lot of traders can't get CP :-(

 

Where should I exit using orderflow?

 One of the many trading challenges I had and still have to an extent is to choose an exit. This has become even more important than just leaving a lot of money on the table since a lot of traders are trading through the so called prop shops where there is a trailing draw down. You can blow an account with a trailing draw down if you are making profit but are continually exit after the price pulls back from a peak profit.

One tool I use is the info I can get from the order flow on a footprint chart.

 The chart below shows a trade I took today near the beginning of the European session for NQ. The bars are renkos to get rid of some noise and to give a little more smoothness than range bars. 

If you look at the bar that the left red arrow is pointing to, you can look down and see that the bar had an extremely high volume in comparison with the previous bars. The other feature of that bar that is important is that the POC of the bar is in the wick. So we have a high volume bar with what must be a high volume POC. Now when you look at the right arrow pointing to the down bar that ended that swing, you can see that the bar touched the POC of the bar I have just described and that the POC stopped the up move. So watching my long position as it came up to that level it was clear that the POC was stopping the up move. You could play it a number of ways depending on what was important for you and your trading style: get out so the trailing drawdown is not invoked with the idea to re-enter if the POC broke, or if you held multiple lots you could scale out of some here hoping for the POC to break and trade it up to one of the bands above.