Titty Tuesday

Hello Tweeps, just a quick review of todays trades on my side and why I took them. In full disclosure I'm leaving out about 70% of the trades I took today because I definitely over traded today especially in the early going, and would take 4 pages to go through them all, so I just picked out my 4 best trades for the day. (which really should have been my only 4)

Side Note: Red horizontal line is opening price, yellow horizontal line is IB's, purple horizontal line is ydays high, shorts r red type, longs r green type

Trade 1: Long 99.45 (10:09)
My Thinking: We had just had some range extension to the upside, it was a pretty poor high, and we were holding above the open.
Result: 2 scales, best out was IB high, closed it when we extended range & dropped back into IB
(Yes I could, and should have flipped and got short when we dropped back into IB, but this play presented itself several times as we will see)

Trade 2: Long 99.50 (10:59)
My Thinking: Basically same ideas as trade 1, and I flipped a couples times before this trade when we broke under the open, then back above, then back under.....but at this point I asked myself those 3 key questions, what have done, what are we trying to do, how well are we doing it, and I couldnt really answer long on that last question (mainly because of a very, very, poor high on the last range extension and we kept dropping back into the IB), so my internal bullish/bearish was starting to change even though my best trades where to the long side at this point.
Result: Same as trade 1 (And yes, I should have flipped it again when we dropped back into the IB)

Trade 3 Short 99.88 (11:16)
My Thinking: We finally get a lil selling tail, aka not a poor high, and dropped straight back into the IB. This was the same play we hit yesterday re: trade 5 (except it was a long), if its gonna go, it shouldn't keep dropping back into the IB.
Result: Great trade, closed out the runners at 98.15 because we couldnt stay out of ydays range for 173 ticks

Trade 4 Long 98.17 (12:35)
My Thinking: The same reason I covered the short from trade 3, and was the entire post of Blog post 2; couldnt hold ydays range (failed breakout) so theres only 1 thing to look for, return to that days value. I tweeted about this 1 as it was happening, basically saying you have to look long unless we drop back below 98.13 (which it held to the tick on the re-test a couple min later)
Result: I actually ended up adding to this trade when we held 98.13 on the re-test, so this was actually my best trade even though it was for less tick. Closed it out at 99.45 which was the VPOC for the day for 128 ticks, this was about as textbook as it gets.

Here is the chart:

Monday Funday...not

I've been trying to figure out the best way for peeps to learn, & really the only thing that I could really come up w/ is to just go over the trades I make for the day, and then explain why I took each trade. If anyone has any suggestions feel free to comment below. So, lets review Monday fundays action:
(Side Notes): red horizontal line is opening price, yellow horizontal lines are IB's, long are in green, shorts red, trades are # in order of when I took them

Coming into the day, given Opex on Fryday, and a 3 dollar gapdown, I thought we would be in for a good day w/ large swings & some nice trading opportunities, we still got some high % trades today, just not much of a range, (only 1.76). I took 5 trades today, and you'll notice that in the first 4 I was stopped out flat on half, or took a loss, mostly because I was expecting to much.

Trade 1: Short at 97.31 (9:22)
My Thinking: We pretty much had an opening drive down w/ basically the open being the high of the day at that point, I actually though we were just gonna head straight down & test Frydays lows, but we stopped about 20 ticks in front of it. So as we climbed back up to approach the open, I knew I wanted to try & fade the opening price on a re-test, because its a high % trade w/ a opening drive open, & I would know quickly if I was wrong.
Result: Got 2 scales off, w/ best out of 30 ticks, then stopped flat

Trade 2: Long at 97.18 (9:37)
My Thinking: No real market profile logic on this trade, just more of a "pattern recognition" trade. On trade 1 I again expected us to go test Frydays lows, and when we couldnt even make it back down to todays current low (96.53), re-tested the open a 3rd time, and then took the long looking for an explosive move higher through the open. Because I was looking for a quick explosion & didnt really have an area that I was leaning on, it was a 1/2 size trade w/ a wider stop.
Result: Again only got 2 scales off w/ best out of 42 ticks, then stopped +.10 on the rest (didnt want to see it trade back through the open)

Trade 3: Short at 97.31 (10:30)
My Thinking: If we were gonna run to the upside, we shouldnt have traded back through the open, which is what I got short against, hindsight 20/20, should have been a little more patient on this trade.
Result: 10 tick loss

Trade 4: Short 97.32 (10:47)
My Thinking: My vwap held to the tick, made a 4th lower low, & traded back through the open again, so I hit the bid looking for us to freaking go test Frydays low.
Result: Got 2 scales off w/ best out of 72 ticks. Once we broke the IB, and came 2 ticks away from Frydays low, I was lickin my chops for us to puke, but no, we got back into the IB (shouldnt have happened if we were to puke) so I covered the rest after a second attempt out of the IB, then back in.

Trade 5: Long 96.54 (11:36)
My Thinking: This trade was a gift from the market Gods, after no interest in anything below the IB, & coming 2 ticks short of Frydays low (re: blog post 2, failed breakout ring a bell?), the odds were pretty good the low of the day was in. I almost jumped the gun again on this one and was thinking about getting in 1/2 size at 96.75, but just before my patience was about to run out, we came down & tested the IB low one more time to tick, which is where I got long at, looking for a trip back to todays VPOC at the minimum (cant remember what it was at the moment like 97.27 or something)
Result: Trade was closed just in front of IB high, for +130 ticks

Aight well here is the chart to help visualize, tweet me or post on here if you have any questions

Previous Days Range 2/2

So basically what I do when we approach a previous days range, is consider a couple of different thing.

1. Are we in a gap opening? Gap higher? Gap lower?

2. Are we gapping in or out of the previous days value area? If we are gapping out of the previous days value area, we have better conditions & odds for a breakout. If we are gapping in the previous days value area, we have better odds for a failed breakout.

3. Where are we in relation to todays open? Above or below?

4. What type of open did we have? Open drive? Open test drive? Open rejection reverse? Open auction?

5. Who is in control? Other timeframe buyer? Other timeframe seller? Local?

6. Basically the same three questions FT-71 says you need to ask yourself all the time, What have we done, What are we trying to do, How well are we doing it. 

So while the concept is simple, if its a failed breakout, fade it, if its a breakout, go with it, the execution in real time is almost never simple. The ABSOLUTE KEY for making this play work is you have to be able to flip your position on a dime, and quick, you can have NO BIAS going into it or you will get killed, you have to be happy wither it fails or breaks. You have to be willing to admit your wrong really quickly, some days I flip my position 3 times in a matter of minutes before I get a nice trade off. I'm almost always looking to fade initially, because almost always the odds are better for a failed breakout, and return to previous value or balance, but I'm always just as happy if I take a quick loss, flip, and we breakout. So lets go over a harder example of a day I had to flip multiple times before I got a good trade. 

(the green lines are on the bars where the trades were placed)

Trade 1-short 97.50, got 1 scale off, then stopped flat

Trade 2-long 97.52, 0 scales, stopped flat

Trade 3 short 97.40, I think my best out was 100 ticks here

The Previous Days Range & Why It's So Important/How I Trade it 1/2

Soooo, why is the previous days range so important? There are several correct answers to this question;

1. The previous days range mark the outermost extremes the buyers & sellers could push us either way (duh, Captain Obvious).
2. When we reach these prior extremes, we know 1 of 2 things is going to happen; we either breakout and search for new value (p.s. value & balance are interchangeable), or we reject the breakout, and return to previous value (aka, auction failure)
3.Usually (barring "poor high/low", think time) the extremes form some kind of excess (think $9 coffee) and where excess is formed, is where we want to do business, because therein lies the greatest opportunity.
4. When a breakout happens, this tells us that the market is out of balance, and the upside/downside is unlimited.

The trade ideas I'm about to present seem and are easy in concept, but the execution is where it can get tricky.
So, lets start off w/ a easy-peasy example, & was actually a trade I took on twitter in the NQ last Thursday.

MP Basics

Whats up Tweeps? I've been getting lots of request/questions on twitter about this topic so I'm officially starting the blog back up to try and answer questions, help people with their trading, and (hopefully) make more money. I'm certainly no English major, nor tech expert so bare with me on the formatting/spelling/wording because their is a reason I went into a business where I deal with numbers & not words or grammar. So without further adieu, lets jump right in.

First off, before we go over examples, lets go over a few very primary things central to Market Profile.

1. "The" market, any market; whither it be a car dealership, grocery store, or the futures & commodity market,  are in existence for one reason, to facilitate trade, to bring buyers & sellers together in the same place at the same time to "do business." 

2. The market is always looking for balance. Why? Because when we are in balance the most trade is facilitated, creating hvn's (high volume nodes) & satisfying the sole purpose of the market. If the market is not facilitating enough trade, then it will move either to 1 extreme or the other in the hopes of facilitating the most amount of trade.

3. The market will continue to move in one direction until price is perceived as either unfairly too high or too low. 

4. Price needs to go too far in one direction before value can be found. For example, lets take your hometown Starbucks; their selling cups of coffee as fast as they can make them for 2 dollars a piece, good price right? So to increase profits, Starbucks raises the price to 3 bucks, still a good price, and they still sell the coffee as fast as then can make it. The same thing happens at a price of 4 & 5, but now Starbucks starts to get a little greedy, & they raise the price to 9 dollars a cup, not such an artractive price, the customer (the buyer) no longer finds value in a 9 dollar cup of coffee, traffic in the store drops 75%, and where buyers used to lineup to buy, then no longer do. Starbucks (the seller) is forced to drop price back to where the customer found value in their coffee, all the way back down to 5 dollars. The point being that there was no way to know at what price the customer wouldn't find value in the coffee until the price went to high.   This is a very basic & crude example, but you get the idea.   

5. Time....one of the more forgotten aspects in trading, but it is the ultimate controlling factor. I could do a whole blog post on time, but the most important thing about it is its relationship to price rejections & auction failures. When you get a clean rejection of a price, or a clean breakout, esp in crude, price aint gonna stay there for long, usually not even a full second. When you hear me say something about a poor high or a poor low, this is the principle I'm referring to. It's usually because we fiddle-farted around, lazily walked up to an area of interest, then lazily moved away from the area, its because of the time factor that makes it a poor extreme. Buyers weren't standing in a line outside the door, clawing and scratching to get their 2 dollar coffee, because if they were, thats when u get the really fast moves, and the greatest opportunity. Highway to the Danger Zone!

http://www.youtube.com/watch?v=V8rZWw9HE7o

-Mav

P.S. this is only Part 1, Part 2 coming later tonight, with charts & the real goodies