Dec 092017
 

For the first time in several years, my ES/NQ day trading was not profitable for the year.  I actually was profitable going into October but then I made some mistakes.  First, I was off from work for a few weeks so I had more time to trade.  This means instead of being super selective, I ended up taking more trades (over trading).  This combined with the low volatility made for some bad results.  I also had some bad luck in there were a few big winners didn’t work.  I’m not making excuses, I mismanaged my trading and gave back the gains for the year.  This motivated me to take a pause and reflect.

Over the past few years I had been making money day trading ES (and sometimes NQ).  But I never made a lot.  And the trading was interfering with family time.  As a reminder, I can only trade the last 2 hours of the regular session which corresponds to 8-10pm my time, and only on days when we don’t have any activities.  Which lately, is seldom.  Kids have homework, wife wants to watch a movie, I exercise, have private music lessons, etc.  This allowed me to be very selective and only take the best setups when I was around my computer, but it also meant only a handful of trades per month and sometimes zero or one.

So this combination of not having time for trading ES, the low volatility, and bad results in October all combine to tell me I need a break from futures trading.  So I stopped trading for the rest of the year.  It was very tempting to continue and try to get back above zero, but I think it’s best to stop.  My results over the past few years are still positive so I can stop here.

What this means is I’m going to focus on trading activities that can be done outside of market hours.  After 10pm the kids are in bed so I have more time, and I have more time on the weekends.  So I’m currently looking at swing trading stocks and stock options.  I will try this for 2018 and see if works better for me than day trading ES.  I think a lot of what I learned from my day trading can be applied to swing trading.  For example I can use volume profiling to help time entries.  I could possibly time my entries as I would for a day trade, but hold it for a swing trade.  Or maybe I’ll just find a good level and put in my limit order so it can fill when I’m not around.

I also realized that my blog contained hundreds of posts from “a long time ago” and are not really relevant to today.  I was also made aware that I should avoid posting real trading results if I am selling indicators, to avoid legal issues, etc.  So for these reasons I’ve temporarily removed my previous posts while I decide what to do.  I may add back posts that would still be useful today.

Speaking of selling indicators, some of the indicators that I developed for analyzing order flow will not be as useful for me trading stocks.  Currently I’m using IB for stocks and will not have access to unfiltered tick data.  As a result, I’m considering making these indicators available for a small fee.  First I have to migrate everything to Ninjatrader 8.  I’ll write more about that in the future.

Happy Holidays & Good Trading!

 

May 172010
 

The data in time & sales is the only data we have that is generated by the market in real time. The time & sales shows:

  • time
  • price
  • volume
  • bid
  • ask

In my opinion the time data is often ignored yet highly useful. Moves start and end with a flurry of trade activity. If you watch the time & sales when trading then you’ll see this, often called “flooding”. At the beginning of a move if you’re long you want to see a flood of buying. Ideally you want to be in before the flood to avoid slippage and getting in at a higher price, but at the same time this flood can give you confirmation for your trade.

At the end of the move, all the “laggards” will be joining in, thinking that the move will continue forever. Using the long as an example, the late-comers will be buying in. And the high price will attract sellers. The result is another increase in the trade intensity. Only this time it’s a sign of exhaustion.

Exhaustion doesn’t always mean the move is over. The market can simple pause and take a breather, or even pullback a little. It can then either continue the original direction (up in our example) or go into a correction. This tool alone cannot tell you which is going to happen so it’s important that you use it with other tools.

I also find that there will be an increase in the trade intensity when stops are taken out. This often happens immediately before a reversal.

So how do I use this tool? I use it to alert me to potential buying & selling exhaustion. I do not use it as a signal to enter trades. My trading is based on discretion. I look for a confluence amongst all my data, and the pace of tape is just one piece of the puzzle. I typically don’t even look at the chart. Instead I rely on the audio alerts.

The following video and chart explains some of these concepts. For the indicator to be responsible, a very fast tick (or volume) chart must be used. It’s important to point out that I do not trade off this chart, I’m only showing it here with my chart markers to illustrate how the indicator can be one element in a decision making process. Please make sure you understand that I am not looking at this chart while trading. This has been a source of confusion before and I want that to be perfectly clear. Since I trade using multiple charts, the reasons for my trades cannot be seen on this chart alone.

The image below shows the signals & trades that I discuss in the video.

Click the image to see it full size

SETTINGS

This indicator only works on a fast tick chart (does not work on minute or any other chart time).  I  I suggest putting it on its own chart and not on your main trading chart that way you can trade whatever timeframe you want.

There are 3 settings you need:

  1. The tick bar size.  This is basically the increment size for the reading.  If you use 100 tick it’ll increment by 100.  So a 1 tick would be most accurate but I prefer 100 so that I can read the price action on the chart.
  2. The period is the number of seconds in which to look for the trades.  If you put 5 seconds it’ll display the number of trades in the last 5 seconds.
  3. The threshold is the required number of trades in the last period in order to give a signal (turn orange and display the paintbar).  There is no single best parameter as it depends on the market and the activity.  I just eyeball it so that it gives me a few signals but not too many and then update it every week if needed.

Available for NinjaTrader 6.5 & 7.0: PaceOfTape NT65 v1.0.4 & wav file for alert (unzip and place the wav file in C:\Program Files\NinjaTrader 6.5\sounds)

Available for Multicharts (Thanks to Richard):PaceOfTape MC Source

I hope to make it available for other platforms in the future. If you’re a developer and would like to help make it available for your platform please let me know.