Futures Trading Analysis
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I wish I could benefit from this sort of thing, but it makes no sense to me at all.
One cat ... many ways to skin it
12:55 and same action taking place as at 12:25 = heavy.@dbphoenix: In principle, there is nothing I would disagree with in what you have written (not just what is quoted above but that entire post). Nothing more to add.
What new aspiring traders forget is that for efficient operation of markets there has to be contradicting opinions. Put 10 traders in a room and ask them why something happened and you will get 10 different answers. It does not matter if those traders agree with each other or not, but what matters most is that they are at peace with their justification for their opinions.
I only wish that aspiring traders read the opinion of traders in this forum with an eye to help them form their own 'hypothesis' about the workings of markets instead of comparing two seemly different opinions and thinking one of them must be wrong!
Trying to get to the 'fundamentals' of how markets operate, as @k p is trying to do, is akin to trying to understand the 'fundamentals' of how people think. I don't think we will understand that in my life time, nor does it matter for trading!
All the best.
Regards,
Monoid.
Wouldn't that be nice.
Thank you for that example. I was hoping you could expand on the order flow concepts using this attached example. My plan called for observing behavior at the 4428/29 level off the Open. It called for going long on confirmed S at that level. However, my current tactics could not get me in until 4442. This increased the price risk substantially and decreased the size I would commit to the trade. What is some obvious information held in the attached T&S that could have helped me take a higher info risk position earlier?
I have filtered the T&S to show trades of size 10 and up only. I don't know what size is suitable, but just went with something to reduce the data. Also, trades of the same Time and Price have been combined.
Some observations and questions:
1. There is a very large order of 111 shown as a Bid Trade at 8:31:11. Holding all other things constant, this would mean that the immediate sentiment at this particular time was bearish, given that large size occurred at the bid?
2. Most of the trades after this are shown as Ask trades. So sentiment bullish?
3. The top 3 trades have decent size (relatively), and all 3 occur consecutively at the ask. The 111 Bears unwind. So further bullish?
4. Other ways of looking at this info? How to use DOM?
https://www.sierrachart.com/image.php?l=1431536639923.png
One cat ... many ways to skin it
Yes, there are, and why can't people understand that?
I've tried your way and it doesn't work for me.
I've tried Handle's way (though not exhaustively) and it doesn't work for me.
I've tried Monoid's way (what I understand of it) and it doesn't work for me.
I've tried NoDoji's way and it doesn't work for me.
What beats everything else for me is following the SLA rules. I demo all sorts of things on a regular basis partly due to curiosity and partly because doing so keeps me sharp. In fact, I probably do as much replay as anybody. But the SLA tells me what I want to know in a way that nothing else does. Today, for example, I took 5 BE trades before I finally entered one that stuck. And that can be irritating. But, as Donna says, if one knows exactly what he's looking for and knows exactly when to do with if and when he sees it, then the rest is automatic. Or should be. There's nothing to think about. Just take the damn trade.
The fact that what none of what these people do works for me doesn't mean that they're all lying. At the center of it all is most likely risk tolerance. In any case, I can't imagine anyone calling any of these people poseurs.
Of course, this is ET . . .
In this business, you never stop learning. Let me put it another way. If you stop learning, you're on your way to going out of business. Wall Street is a tough teacher but also a good teacher. If you have any weakness -- arrogance, laziness, stinginess, cowardice, procrastination -- the market will zero in on that weakness and make you pay dearly.
-- Richard Russell
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And here we test this level again. Three times. What magical attraction is there to 37?
I find this very difficult to communicate, game. I think the only way I could really do this justice would be to record a live screen and narrate it as it is happening, or record it and annotate after the fact.
I can say I do not think or use the term "sentiment." Size on the ask could be bullish, but if it is being absorbed, it would be bearish (which is easier to see in real time than it is to explain it after the fact). If size is hitting the offer, and the market then easily ticks down several ticks, that is not at bullish.
I do think DbPhoenix's "are buyers willing to pay the ask?" is front in center in my mind when I move to the DOM/T&S. As is how easily does the market tick up or tick down.
My suggestion to you, game, is that if this is something you want to explore, put your charts away for at least 3 to 6 days (no peaking, ever), and commit to 60-90 minutes in the morning, and 60-90 minutes in the afternoon of just watching the DOM.
After you get a good six to nine hours of live DOM watching under your belt (during which you should make some sound observations, and start recognizing certain behavioral patterns) then I would suggest you repeat this process but this time check a 30 minute chart prior to the open and write down the PDH/PDL, ONH/ONL, PDRTHH/PDRTHL, and then whatever range you see heading into the open. Then close your chart, but keep your list of price levels in front of you, organized so that you don't miss one, forget one, or get lost, and again observe the live DOM, but with special emphasis on watching how price behaves at, near, and around these levels.
Wyckoff's Studies in Tape Reading may be a good accompaniment to this exercise, i.e. it might be a good source to work your way through at night during the course of your observations.
I guess that at some point though, regardless of making this about who is right or wrong, someone will be right or wrong because price will either go up, or it will go down. There might be buying, hence demand, hence price goes up, and it might only be traders having to get out of their shorts, and not the so called demand that we assume might happen as result of positive sentiment. So price might go up only 10 points, it might do this on low volume, it might not even clear an important swing high, so all of these might be reasons to suspect that the demand isn't genuine, and yet, if this rise happened at an important level, giving confidence to someone to take a long, he might have gotten something out of that 10 point move.
What I'm getting at is that I'm not really trying to understand the fundamentals of why traders do what they do, I'm just trying to find out where to place my trade. If I wait too long to get into the long, not wanting to be a sucker, I'm now further away from where the uptrend started, so any entry higher is that much riskier as price can retest the level and that retest can hold and launch the ultimate move. But of course, if I start buying too soon, then I might be that sucker caught on the wrong side of the trade when more buying doesn't really show up.
So I'm more than happy to just completely leave out any of the fundamentals since its impossible to know every reason for everyone buying, and it probably doesn't help much anyway when placing a trade. But there are after-all genuine moves and artificial moves, and knowing the difference might very well put you on the correct side of the trade, or at least prevent you from being on the wrong side. So its a matter of how much information is too much, and how much understanding about the market is enough to help you place a trade.
Now I'm just gonna go back to lurking in this thread.
I think he should just use Youtube...tons of videos of live trading sessions on this particular topic and some of them live recorded trades with the explanations of DOM, T&S, Order Book and Market Profile or what some folks (old timers) still refer to as "tape reading".
Youtube is an excellent resource for most of the trade methods discussed, debated, argued, analyzed about that we see shared here at Elitetrader.com but it sucks when you find something interesting and the guy/gal is talking in another language I don't understand...not many like the latter.
Unfortunately, in today's market environment, the big concern now about tape reading is that it now involves algos.
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