Jan 082011
 

This was a tough week so let’s review.

Over Christmas I wrote up a new trading plan, practiced it with market replay using days from earlier December and practiced live a few days during the holidays. I was not prepared for the large volatility of the US markets this week. My 4-6 tick stop was consistently hit. The markets were so busy & fast that I split my attention between ES & ZN and as a result I didn’t trade either of them profitably. I often missed good setups.

Originally I added ZN because in December ES had many days where it just hoovered at the VPOC and there were not any trading opportunities. My idea was, when ES had no potential for a trade, to set alerts and then focus on ZN. It was a good plan and still is. The problem is I gradually shifted into trading both full time. And that was a mistake.

European Morning: Primary = Bund, Secondary = Stoxx
US Morning: Primary = ES, Secondary = ZN

So that’s the first correction I will make: If my primary market is moving and has potential setups then I will ignore the secondary market. The secondary market is only to be traded if the first is very slow and far from potential trading areas.

I was profitable on both Bund & Stoxx yet negative on both ES & ZN. I think this is because the European markets are much calmer and I only took a few trades on Stoxx (when Bund was quiet). Whereas the US was very volatile.

Fortunately I noticed this after just a couple days into it and I started trading less in the US session. I traded a little on simulator and did a lot of observing. This was at the suggestion of someone on twitter and it did help me. By not being in every trade I was able to observe with an open mind.

Here are the results:  Note that this only includes trading done per my day trading plan.  Swing trading & one non-plan trade are not included.

Note: Slight error in the excel, for Bund & Stoxx PL/Contract are shown as euros but it is really ticks with euros in the cell below.

I actually did a few mini-swing trades that paid off well and made up for my daytrading losses. So I finish the week positive $324 total.  To be completely honest I wasn’t ready for the major volatility that we had and I’m just happy to have finished the week positive.

My focus for the upcoming week are:

  • Focus on my primary market and not miss any trades
  • Focus on trading near CLVNs.
  • Use the composite volume profile HVN for my target.  I want my targets to be at least 1.5x my stop and preferably 2x.
  • Come up with an alternative to my “stop or target” idea.  Study how I can scratch trades when it’s not going my way instead of letting my stop get hit.  For example sometimes it goes 3-4 ticks and then stopped me out.  I am not sure I want to scale at +3, I’d prefer to just get out if I see weakness (or strength on the other side) and then look for a re-entry.
  • Not fight a strong trend unless there are signs of exhaustion.

I hope your trading went well & have a nice weekend.

  25 Responses to “Results for Jan 3-7 2011”

  1. Yes, focus on one or at most 2 mkts. Btw. don’t switch from one to another (eg. frome ES to TF) – stay with one or two mkt through low and high vola phases. It is like dating too many girls – you will never really come close to one and in the end they all will dump you.

  2. Markus – When a market is just really slow then I get bored. In december there were several days where ES was dead and while everyone was complaining on twitter I was making money on ZN. I think the key is not to trade them at the same time and that’s where I failed this week. It wasn’t intentional, it happened gradually and I didn’t realize it. My weekly review on the weekend is really helpful because I can look back and see what I did wrong.

  3. And another thing which came up to my mind: Why are you not trading only the Bund and the FESX. You have been profitable in them for about 3 months and the commission (which is really a factor) is much lower.

    Cheers,
    Markus

  4. Markus – good point. I think the reason I do well on bund & stoxx isn’t because it’s the bund & stoxx but rather it’s because I trade them in the european morning when markets are calmer. I also take some ES trades during this time and do well. It’s when the US opens that all hell breaks loose. 😉 From what I’ve observed with the Bund, it behaves differently during the US session and the German cash markets close at 5pm whereas with ES I can trade it until 6pm and then again at 8:30pm-9:30pm (I go for one trade during that time).

  5. I emailed FT71 a question this morning regarding Webinar 4. I thought it would make sense to post it here too since it relates to your point about scratching trades when it’s not going your way instead of letting your stop get hit

    Here is my email…

    It is stated on slide 6 under the “What you should expect” heading that:
    – Your trades will likely be more effective and you will be less likely to get shaken out

    Some quick background before I get to my question…I am religiously doing my homework and my confidence has improved markedly. I am still not consistently profitable but I am able to identify my mistakes and methodically eliminate them. I anticipate being consistently profitable in the next few months by continuing my diligence and paper trading. I use a three contract entry on ES and a 6 tick initial stop. I scale out my exits.

    I think I have a huge opportunity to improve the management of my positions when I make a entry that is incorrect. I am working on identifying such mistakes before my 6 tick stop is reached and try to get out for less than this full stop. This is really tough! At some point, it would be great if you could talk about how to identify and exit incorrect entries.

    This brings me to my question. When you say that you will be less likely to be shaken out, it feels like I am not fully understanding something. I know that you are not using a hard stop such as my 6 tick stop. But, I also know that you recommend that we use hard stops due to our indirect connection to the exchange. I am rarely shaken out if the move goes against me less than 6 ticks. But at 6 ticks, I take the hit and am out as a hard rule. So my question is how do you avoid being shaken out while maintaining responsible risk management?

    Michael: It would be great if we could discuss this issue on your blog

  6. After entering a trade, here are a few methods that I use to warn me that the trade was incorrect and I need to exit early if I see the trade going against me:

    – Is volume breakdown confirming my trade? Often, when I make an incorrect trade (on ES), I can see on the 5000 volume chart that Volume Breakdown is moving against me even if price has not moved too much. If find it particularly helpful to watch VB filtered for trades with volume >99. I also watch if there is divergence in this indicator for trades >99 and trades <50.
    – I have a few proprietary indicators that I ideally like to confirm my trade. I feel more committed to the trade if these indicators provide confirmation but do not exit if confirmation is not provided
    – I tend to enter 1 or 2 ticks before reaching a CLVN. This gives me a stop that is 4 or 5 ticks beyond the CLVN. If we get past the CLVN by more than 2 ticks then I get concerned and look to exit the trade for less than my full stop (at this point, I often get greedy and try to exit at BE or minus 1 tick; but then end up getting stuck with my full 6 tick stop – something to be improved)
    – Am I seeing confirmation on the footprint chart? For example on a short trade, confirmation to me means that there is a lot of volume at the bid near my entry point and we are not able to push through this point with much volume. Ideally, we then print a lot of volume at the ask below this level.

    My current thinking is to enter with a limit order 1 or 2 ticks in advance of a CLVN and then exiting early if I don't get confirmation. I am finding this better than waiting for a CLVN area to be reached, then waiting for confirmation, then entering with a market order.

  7. I got my bids and asks mixed up in my above post. I should have said:

    – Am I seeing confirmation on the footprint chart? For example on a short trade, confirmation to me means that there is a lot of volume at the ask near my entry point and we are not able to push through this point with much volume. Ideally, we then print a lot of volume at the bid below this level.

  8. Great posts. I see a lot of similarities in what I do or things I’ve tried. I have asked FT71 several times about some of these points and I have never gotten an answer. I think he wants to keep certain things private and I respect that.

    You mentioned entering a tick or two ahead of a level. I’ve tried to do better but I’m not sure I succeeded. 😉 I also “follow” rena trader on twitter and he usually enters with market if touched at a specific level (he’s not using the volume profile). He uses wide stops, sometimes very wide like 5 pts on ES. I was trying to avoid that and use tight stops but if I just get stopped out then what’s the point. So I think there is a lot to learn from how he manages his trades. He takes half off at around 6 ticks and puts stop at his entry – 6 and has a “free ride”.

    Now I believe FT71’s approach is different. I believe he scratches a lot of trades until it finally goes his way and he’s in at a great price. He used to be a scalper and he has the skill to do that. Several times now I’ve entered and been stopped out only to see price then go on to hit my targets. Yet he never takes a big loss. So the only explanation I can find is he scratches until he gets it right. So this is my idea for next week. I’ve studied his entries and I’m starting to learn things about how we trades. I believe him in that it’s more “art than science” and that it takes a lot of practice to learn to do that.

    I’ve been trying the footprint to see if that can help. I see a “setup” and enter. Then I see the other side take control. Do I sit tight and hope my stop isn’t hit? or do I scratch and then look for another “setup”? I’ve been doing the former and it’s not working for me so I think I need to either do the latter OR just use a wide stop. I’m not giving up on tight stops yet so I’ll try scratching. Commissions will have a big impact but I’m not as worried about that as long as I can be profitable, because commissions can go down quite a bit as one trades volume (in the future).

    Finally, one thing I’ve noticed is the market often doesn’t make big reversals until there has been exhaustion. I’ve learned this from barry of eminiwatch. His better momentum indicator shows it well but we can see it also on delta, cumulative delta, footprint, or just volume. So often there will be a minor reversal without the exhaustion but it’s not the big trade. Yesterday at the low is a prime example. There were two bouts of exhaustion leading up to it. I wasn’t trading at that time but I have studied it today.

    Thanks for the comments, I’m enjoying the discussion. It seems we are relatively close in our journey.

  9. It is interesting that you mentioned the trade at yesterday’s ES low. This trade worked out perfectly for me. I identified the 1257.5 CLVN in my homework. I got in at 2 ticks higher at 1258. The trades had an MAE of 1 tick and we never hit the 1257.5 CLVN. I scaled at 5, and 8 ticks and then exited at 24 ticks (ie at the 1264 CHVN 1264 as per my plan). This was definitely the trade of the week for me. As it turns out, I could have (should have) re-entered long at the 1262.5 CLVN for the ride to 1269 but I never did.

    Contrast this to the trade downwards from the open – which was also identified in my morning plan (ie my plan was PERFECT!). But my execution was far from perfect. I entered short at 1272, thinking that my stop 6 ticks above at 1273.5 would be safe since it was above the 1273 start to the low volume zone on the composite. But I was stopped out 2 ticks from the 1274 top. ARGH! This happens to me more frequently than I would like. But increasing my stop to avoid this sort of occurance means that I need to improve my ability to exit incorrect trades early or I will suffer larger drawdowns.

  10. Tartan – so it seems we agree that we must recognize when the trade isn’t working and scratch it and look for a re-entry. Have you studied the items we’ve listed (delta, footprint, etc.) at your entry to see what could have told you to scratch and look for a better entry??

  11. Michael I am in the same path of trying to master small stops (4/6 ticks) to gain size in the future. I believe it is easier and safer to go for 1-3 pts daily with size and have a reasonable income than to go for +5 with less cts to achieve the same results. And in the long run, using wider stops requiere a very high win rate as one full stop can wipe out lots of hard earn profits.

    Now I am working on my entry skils as you, and trading 2cts being target 1 the same size of the stop, and being risk free (I let the stop the same or move 1 tick to cover comm if the trade is working), but at least if I entered on a reaction of an important level getting 1pt will protect my capital. Then u decide how much for the 2nd one, but capital preservation WHILE learning entry skills is KEY for me.

    Then, I am documenting every trade with MFE for the trade and MFE for the day for that trade (to estimate HOW MUCH I missed after I got out before that trade being stopped out).

    So with time I will have information to know my real win% with this approach as well as the impact of moving to 1.5 or 2 times my stop to set target 1.

    All of this with live trading (we all know in sim we do not trade as live) and including trades in plan and off plan (as I believe I will always have of both and they should be part of your statistics, but I mark as u which ones were In Plan, so I can filter them if I want to)

  12. Gonzalo – I did what you are doing with T1 (1st target) at same as your stop and then T2 is extended. I did this for many months and I think it is not a bad solution. But I got to thinking. If I’m going for say 10 ticks on T2, do I really want to take T1 at +6? I guess that’s when I thought I could get more. Now getting 6 ticks per trade is sounding really good. 😉

    but the more I think about it, the more I think if one can read order flow then one can stay in the first contract until there is a sign to get out. Then T1 could be 2-3 ticks or it could be 8. I believe this is possible and will take time to develop. who knows it might not work but i’m giving it a shot.

    lots of great ideas here everyone, thanks for sharing. keep them coming!

  13. —[Michael says: Now I believe FT71′s approach is different. I believe he scratches a lot of trades until it finally goes his way and he’s in at a great price. He used to be a scalper and he has the skill to do that. Several times now I’ve entered and been stopped out only to see price then go on to hit my targets. Yet he never takes a big loss. So the only explanation I can find is he scratches until he gets it right.]—

    I have been observing FT71’s real time twitts since Sept. 2009, I have not observed what you have believed in his twitts, and if you watch all his webinars carefully, he has been consistently advising traders not to scratch the trades, he has stated he prefers to be stopped out than to scratch a trade before it has a chance to be played out. But that is not a rigid mechanical rule, since he is exceptionally competent in DOM reading, if he sees market condition has turned with high degree of certainty from DOM reading, he will not only scratch but also reverse the trade. For traders who don’t have the ability to read the DOM, he advises them to plan the trade, decide in advance how much money they are willing to risk for that trade to find out if the trade idea for that trade will work out, instead of scratching it.

    My personal experience has been a very positive one when I followed his advice. I used to scratch a lot (and still do, I am not 100% there yet), that had resulted in over-trade and running up the commissions expenses, by focusing on planning, I am now much more selective in my trades, I take fewer trades, and try not to scratch any of them, that has improved my trade performance, the savings of commissions alone adds up quite considerably when I look at the commissions column on my monthly brokerage statements.

    Unfortunately, DOM reading is not something we can learn on our own, we really need to sit next to someone who can read the DOM and to be taught by the person. I am still not able to read the DOM with any degree of confidence, but I am compensating this with reading the T&S and footprint, I can’t describe it, but after I spent a lot of time with T&S, I am developing very good feel of sensing whether price is turning against my trade, or not very healthy, or neutral, or healthy, when I sensed it’s going against my trade I still scratch my trade, it often saved me from getting stopped out, but I also missed good winning trades by scratching them, so this is a very touchy subject, right now I am doing my best not to scratch any trades, and focus on better planning for trades I am going to take each day and stick to my plan for each day.

  14. Speaking abstractly, if a trader wants to trade for big targets, but also use a tiny stop, then they may actually need to combine two methods: the method to spot the trading zone, and the scalping method to attempt entries until they find the runner the first method predicted. This way there’s some structure to what’s going on, rather than fuzzier concepts like “scratch-and-reenter” (when?-and-how?).

    I don’t know much about your entry method, but in general I can say that it’s tricky when traders decide to scratch a planned trade if they perceive weakness. What makes that idea dangerous is that they came up with their plan disregarding that kind of perception, so they might be invalidating their approach.

    Usually they come up with their plan by looking for their criteria on historical charts, and noting whether it won or lost, period. So, they don’t realize how many of the successful past wins (that made their plans so attractive in the first place) looked really weak and scary in real-time right before they worked out. How many times per day do I get that sinking feeling like I’m about to take a loss, only to see the market take off in my direction? Lots. How many trades feel really strong before price swoops down and forces me to give up? Lots as well. So maybe that applies to your plan, and maybe it doesn’t, but it trips up a lot of traders.

  15. @kt_ny: Just like you can get a feel for the T&S, you can get a feel for the DOM. After all, what is the DOM but a T&S plus some dynamic size information? It just takes time and focus (and of course, a belief that you can do it). In fact if you’ve shown aptitude at one, it’d be a real shame if you didn’t master the other just because you thought you needed someone to show you about it in person.

  16. —[Michael says: I see a “setup” and enter. Then I see the other side take control. Do I sit tight and hope my stop isn’t hit? or do I scratch and then look for another “setup”? I’ve been doing the former and it’s not working for me so I think I need to either do the latter OR just use a wide stop. ]—

    This happens when we entered from the middle of a rotation, not from the “areas to do business” as we pre-planned from our homework. This also happens when we are scalping.

    —[Michael says: one thing I’ve noticed is the market often doesn’t make big reversals until there has been exhaustion. I’ve learned this from barry of eminiwatch. His better momentum indicator shows it well but we can see it also on delta, cumulative delta, footprint, or just volume. So often there will be a minor reversal without the exhaustion but it’s not the big trade. Yesterday at the low is a prime example. There were two bouts of exhaustion leading up to it. I wasn’t trading at that time but I have studied it today. ]—

    Try to start to look at market from the new perspective: it’s an auction process! First identify if market is in a balanced mode, or imbalance (i.e. trending mode). In balanced mode, market rotates from one edge of balanced range to the opposite side of the range and back, and continues the cycles until OFT steps in to cause the imbalance, which is to say, a trend day, after which market again enters a new balanced range, and this pattern just goes on and on and on.

    The edge of a balanced range is what you referred as “exhaustion” and the starting point of “big reversal”. In between the range there will be smaller rotations, these rotations often are more than 4-6 ticks in size, so if you mechanically use 4-6 ticks stop, you might get stopped out quite regularly only to see market continued in you original trade direction after you have been stopped out. Hence, the much better alternative is to trade from the edges when market is in balance, identify these edges as “areas to do business” and only take trades in such areas.

    Yesterday’s low and high are perfect examples of such balance range edges. and if you pay attention to FT71’s twitts, he has pointed out on Sunday (or Monday, I can’t remember the exact day) that market is expected to be in balance until Friday NFP number, which was 100% correct. What was unexpected was that Friday also was in balance, market had been balance since the end of Monday and just rotates up and down and up and down within the new balanced range set on Monday. If you can learn to look at market this way, you will find it’s a lot easier to trade in the right direction, to trade in the right levels, and your stops don’t need to be much wider than 6 ticks, although 4-6 ticks stop would still be very challenging, but not impossible.

    Jim Dalton on Friday morning also pointed out that market had been in balance all week and that the low of Monday and high of Thursday per-open high WILL BE re-visited, this is almost a 100% certainty if you studied Market Logic and practiced it you will be convinced without a slightest doubt. Dalton also expected the low has a higher odds to be re-visited first, he was right, yesterday market revisited Monday’s low then rotated back up, and we now expected the next high odds move is to revisit the high from last Thursday’s pre-open.

    Because not everyone is willing to put in the time and effort to study and understand the auction market theory, market profile, and market logic, FT71 has shared his simplified approach of using the composite volume profile and daily volume profile to identify these “areas to do business” and to plan the trades by hypothesizing scenarios at those areas of opportunities, but what I have discovered is that without the concrete knowledge in auction market theory, market profile, and market logic, it is very difficult for us to have CONFIDENCE in our hypothesis, and in our trades, that is why I found that “Simplicity” has its own imperfections, I am making things complicated now for the purpose of attaining the true “Simplicity” in the future.

  17. —[Richard says: After all, what is the DOM but a T&S plus some dynamic size information? It just takes time and focus (and of course, a belief that you can do it). In fact if you’ve shown aptitude at one, it’d be a real shame if you didn’t master the other just because you thought you needed someone to show you about it in person.]—

    I use Ninja Trader DOM, it only shows the orders, not the traded volumes like it is the case with X-Trader, so, it is not “T&S plus some dynamic size information”, because it has zero T&S information in DOM.

    T&S shows me the actual prints, the volume that had “printed”, DOM shows the real orders plus a lot of algos and “bluffs”, a DOM reader is a person who has mastered the skills to read from the DOM what are the real order flows and what are bulffs, by pattern recognition, these patterns can then be taught by such person. You could spend years and still never recognize these patterns, it’s like reinventing the “wheels”, or just copy the design of wheels that have already been invented. is reinventing the wheels an easy task or even possible if one has never been shown what a wheel is like? or is copying the blueprint of a wheel a much easier task? you tell me.

  18. kt_ny: I agree with you that all tasks are easier if someone knowledgeable is helping. I disagree that you can’t learn to read the DOM unless you have personal help. By my statement about “T&S plus some dynamic information” I was mainly trying point out that the DOM is a close cousin to information you already know how to process. Ok, so the DOM you use doesn’t have as much T&S flavor as someone else’s… you can still put the T&S window beside it if you like. So, I dunno…

    I mainly wanted to boost your confidence about your own ability to pick up an interesting skill without someone holding your hand… I don’t feel like I accomplished that so I’ll leave it alone. Sorry.

  19. kt_ny – FT71 has said that he could not trade the way he does if he had to pay retail commissions. he said that in one of his earlier “free” webinars/chats. So if his expectancy is 2.5 pts/contract then retail commission would be about 0.10 pt which would make his expectancy 2.4 pts/contract. I don’t see why he couldn’t do it paying retail commissions.. unless he’s scratching a lot of trades. If you believe he doesn’t scratch then how can we explain this discrepancy?

    Second point is you’re absolutely right that I’ve not limited myself to trades at CLVN and as I wrote in my blog post under the focus point list, that’s what I want to focus on this week. Towards the end of the week I was constantly looking at my composite and asking myself “where are we in the rotation? where did it get rejected last? where are we going?” and it helped a lot. So I think everything you said there makes sense and I really want to improve in this area. If one misses the CLVN it is very difficult to sit for an hour or more waiting for the next one but I think the patience would be rewarded. I kind of got suckered into other things like fading yday high/low, naked vpoc, and yday LVNs. those might work for a scalp but they’re not going to get me the bigger R:R I’m after.

    You mention market logic. I believe this was taught by Dalton but I haven’t found it. Is this something you recommend?

    Richard – I agree with you that one can learn the DOM on their own but it takes time. I read the “no bs day trading” book (which I highly recommend for anyone interested in the DOM) and he says to just watch the DOM only for several months and “like any other job you’ll just get it”.

    I mainly watch the footprint to see what printed and I watch the DOM to look for pulled orders. I find this combination is interesting but I can’t say it gives me an edge yet since I’m just barely above breakeven. But I’m still practicing.

  20. Michael, market logic is the real “meat” of MP, it was taught by Stedlmayer in early years, and Dalton was the only one who had been teaching it every year in his seminars until last year, I believe Dalton now also is retired and no longer teaching the seminars, he is over 70 now. Dalton had an introduction and an advanced market logic course, and he used sell these courses on audio tapes, they are no longer available now, replaced by his “Field of Vision” DVD course, which I believe is an introductory level course only.

    Dalton’s two books contains most information of market logic, but they are very difficult books to study, most traders opted for shortcuts by paying thousands of dollars to people like Tom Alexander who promised them an easy path, but as FT71 had pointed out in his ET posts, these fakers don’t have anything that is not already in Dalton’s first book which costs less than $50!

    It takes very hardwork to master the market logic, I have gone through the audio courses 4 times (which is what Dalton suggested) and are on my 5th and 6th round of studies now,

    Dalton’s blog contains real treasures on market logic, but unless one has mastered the bulk of the market logic, they can’t see the insanely valuable information Dalton is giving for free in his blog posts, the Friday’s test of 1258 area was timely called out by Dalton well in advance.

  21. —[Michael says: I read the “no bs day trading” book (which I highly recommend for anyone interested in the DOM) ]—

    I have read that book too and watched hour long video of he showing how to read the DOM, but that information is very outdated, there were valid before the DOM is dominated by the HFT algos, now the patterns and behaviors of DOM is vastly different than what he described in that book: he used to be able to pin point these few contracts adding and pulling off the DOM, you won’t see that today, it’s all algo and adds/pulls very fast, very difficult to get a hang of them.

    Richard, thanks for your encouragement! you are correct in theory, but try it yourself, or tell me a person that you personally know who has mastered DOM skill (I mean who can consistently trade off the DOM profitably) on his own, and you may be surprised how impossible this task is!

  22. [ Michael says : If one misses the CLVN it is very difficult to sit for an hour or more waiting for the next one but I think the patience would be rewarded. I kind of got suckered into other things like fading yday high/low, naked vpoc, and yday LVNs. those might work for a scalp but they’re not going to get me the bigger R:R I’m after.]

    Michael: Something that I am noticing is that some CLVNs should not be faded. I can’t quite put my finger on it but I am thinking that there is a dynamic between what is going on within the composite profile and what is going on within the shorter term profiles daily, 2 day, weekly etc. So a rotation that maybe should happen when strictly looking at the composite is overwhelmed by one of these other dynamics. I am still figuring out how to deal with it but something that I am finding is that I need to be more selective on the entry if we are at a CLVN (ie at an extreme) but within balance on another timeframe.

    Something that I am doing when we get to a CLVN to look if we are well within the volumed-based value area for the day (ie balanced). If so, then I often skip the trade or at least think a lot harder about taking it. So, this is by no means a rule but is simply something to watch.

    I know that FT71 says not to use value areas and I agree with his concerns. But for me this is a very quick check and often stops me making poor trades. Check it out for yourself. I plot the 24 hour value area on my chart using the TPO indicator within InvestorRT with the “volume based” setting checked. This indicator shades the volume based value area at behind each bar. It does not show value area in a traditional manner (ie as a shaded areas withing a profile). See http://www.linnsoft.com/tour/techind/tpo.htm. This link is somewhat dated as the indicator has been enhanced since it was written – you can now plot based upon volume as opposed to TPOs.

  23. kt_ny says: Dalton had an introduction and an advanced market logic course, and he used sell these courses on audio tapes, they are no longer available now

    I have a copy of this audio course but have not gone through it yet. I am going to check it out based upon your recommendation. Thanks!

  24. You know, I also read the no-bs material since it wasn’t that expensive, and I can’t say I’ve seen the patterns described in the book too often. One exception, which I’ve been doing for years now on both stocks and futures, is grabbing at the last available contracts at a price level.

    On stocks, in 2006 I actually did do the “just watch the dom” (actually L2-screen) thing for a few months, with only minimal trading. I mainly watched breakouts, trying to see patterns to help me guess whether a breakout was going to get stuck or not. I’d record my screen and re-watch as needed later. And, I do think I gained some insight in that time that still helps me today in the futures. DOM-watching is a part of all of my entries and exits, but not the most important part. So, I don’t know what level of mastery to say I have, and I don’t call myself a DOM-trader.

    I keep it simple and only focus on the sizes on the best bid and offer (where whatever bluffing happens is a higher-stakes game since they are at risk of being taken up on their false offers). Probably the main features I watch for are: (1) does a large size hold and get refreshed as trades happen (2) when small size shows, how eager is the other side to grab up the contracts and clear the level (3) does large size get repeatedly pulled only to show up again at a better price — I think no-bs talks about that pattern as well come to think of it.

    I can tell by your posts that both Michael and kt_ny are intelligent and dedicated market students, so I know you can get at least as far with it as I did, if you want to. Especially if you have some skill at making sense of the time-and-sales flying by, which shows you have the memory and focus needed to track and remember the important numbers.

  25. Richard – Thanks for the summary on what you watch on the DOM. “Entering with the edge” is probably the thing from the book I use the most. It’s good to be reminded of what to look for because one can easily get overwhelmed by the DOM and get sucked into it. 🙂

    Tartan – I think if there is confluence between a CLVN, micro-composite CLVN (MCLVN) & today or yesterday profiles, then the CLVN is a good trade. If the CLVN was an HVN yesterday then I’m more careful with it. I really don’t like the mechanical value area as it will be completely off on a trend day or double distribution day where there is not a clear balanced profile. But if the market is balanced then I agree a CLVN in this balance area is not providing confluence with recent price action and then I’d be more cautious.

    I keep reminding myself one needs just 1 good trade per day. Got to be patient and wait for it. Friday is a great example: There was a great short at 74 and I don’t know how i missed it. The next good trade was at 69.25 and that didn’t work so the next one at what ended up being the low.

    kt_ny – Yes there are algos on the DOM but that no bs book is just a couple years old so is it really that outdated? And wouldn’t the algos be doing the same thing as humans do only faster?

    I don’t want to debate about the DOM actually, I think it’s not the most important. It’s just another clue in the puzzle. I’ve used the DOM to place my entry & exit orders and manage my trades for 2 years now and have become used to it and even get a bit of intuition as to when the other side may be stepping in. So I continue to use it. But for someone who hasn’t used it much I don’t think it’s necessary.

    I’m surprised more people don’t talk about the footprint chart. I’ve used it on & off for all of 2010 and I think it’s useful but takes a lot of practice & experience to use it correctly.

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