Iâm kicking off this journal with two objectives in mind â¦..
1. To encourage further discussion about the practical application of Market Profiles.
2. To get me back in sync with the markets (hopefully) and determine if my old techniques still work. The discipline of updating a journal will help keep me focused on a day-to-day basis.
Background
Iâve been investing/trading for over 25 years â professionally (OPM) for the last 5 years. I have traded equities, options, and futures. These days I stick with the latter. I trade global markets and all 9 asset classes as and when. I am primarily a position trader using systems I have developed over the years. But when time permits and the market conditions are suitable I also love the cut and thrust of trading intra-day.
I havenât day-traded since 2002 due to workload, and the fact that the markets have been fairly pedestrian. But now I have some time on my hands and the equity markets look set for a roller coaster couple of years. So itâs time to find out if Iâve still got it.
As part of my trading plan I will be PAPER TRADING for the month of February. If I meet certain objectives then I will go live March 1st.
Market Profile
I learnt Market Profiles 10 years ago but I am not a purist by any means. Iâve long since forgotten most of Steidlmeyer and Daltonâs vernacular, but the concepts are firmly ingrained. If you need a backgrounder on Market Profile I strongly recommend you spend an hour reading the excellent thread created by They â http://www.elitetrader.com/vb/showthread.php?s=&threadid=9727. There are plenty of links, references, books, software and wisdom contained within.
Personally I find the concepts underlying Market Profile and Auction Market Theory to be very compelling. It provides an intuitive and robust picture of what the markets are doing on a short term basis. It took me a long while to figure out how to incorporate the theory of MP into a trading technique. They way I use it may not be exactly what itâs originators had intended but it certainly works for me. Iâm sure other traders use MP in a completely different manner and are successful also. I will introduce the enhancements that Iâve made to MP in due course.
One last point, MP is no panacea. It is not even a complete trading methodology. In my case it is only one aspect of my trading technique â albeit a critical one. I primarily use it to identify support and resistance and for understanding short-term market action.
Trading Techniques
Iâll go into more depth as the thread develops but Iâll start with how I prepare for each trading day. Firstly I download 1 minute data from eSignal and process it through a Matlab program I wrote to create the TPO brackets and crunch the numbers. I then paste the data into Excel and manually format it. I then examine my MP chart, and cumulative volume profile chart (both in Excel) and identify the key levels and my current trading bias. I then add these levels as lines on a 5 minute chart and map out a rough strategy for the day. A typical strategy would be if the market opens here Iâm going to place a buy stop at this level with a stop loss here. Iâll then look to take some profits here and then see how the market behaves. Typically Iâll have at least 4 scenarios depending upon where the market opens, and recent action. I write these down in my journal, wait for the open and then send the orders. I always like to try and predict what sort of day it is likely to be as a mental exercise. After a while you actually get pretty good at it and it can help your trading immensely.
Of course anything can happen at any time so you need to have the flexibility to adjust your plan for the day according to what develops. But Iâve found that MP really has helped me understand the market action and I tend to get surprised less and less.
Incidentally, you may well ask why bother using Excel rather than one of the many MP packages available. Two reasons: 1) I get a really good feel for the markets by posting charts manually everyday, and 2) Most of the MP software I have used is underwhelming. I have the eSignal add-on but I still use Excel.
Tone for this Journal
I like to have a plan for each trading day. MP is a great tool for that. So thatâs the style my posts will take â forward looking. I wouldnât waste anybodyâs time with a journal that says this is what I did yesterday â not much value in that. Occasionally Iâll post a historic chart it serves a real purpose.
I do not intend to post all my levels every single day. I donât want to spoon feed anyone. There are plenty of good sites that post UVA, LVA, POC type stuff everyday. Besides, I do things a bit different and I donât want to have to explain why my UVA is 2 ticks different than eSignal every other day.
What I will try to post on a daily basis is key things to look for in the near term and how Iâm likely to play them.
Iâm GMT+8 so Iâm mainly focused on trading and ETâing the morning action. I analyse the ES, YM, ER2 and NQ daily. Iâll post whatever is most interesting among these 4 markets.
Lastly I have nothing to sell, promote, flog, push or otherwise proffer. Nor am I thanklessly altruistic. I am motivated by sharing ideas and knowledge and I like to teach and learn in equal proportion.
Let me reiterate â I am paper trading Feb 1 â 28.
Bon chance,
bolter
1. To encourage further discussion about the practical application of Market Profiles.
2. To get me back in sync with the markets (hopefully) and determine if my old techniques still work. The discipline of updating a journal will help keep me focused on a day-to-day basis.
Background
Iâve been investing/trading for over 25 years â professionally (OPM) for the last 5 years. I have traded equities, options, and futures. These days I stick with the latter. I trade global markets and all 9 asset classes as and when. I am primarily a position trader using systems I have developed over the years. But when time permits and the market conditions are suitable I also love the cut and thrust of trading intra-day.
I havenât day-traded since 2002 due to workload, and the fact that the markets have been fairly pedestrian. But now I have some time on my hands and the equity markets look set for a roller coaster couple of years. So itâs time to find out if Iâve still got it.
As part of my trading plan I will be PAPER TRADING for the month of February. If I meet certain objectives then I will go live March 1st.
Market Profile
I learnt Market Profiles 10 years ago but I am not a purist by any means. Iâve long since forgotten most of Steidlmeyer and Daltonâs vernacular, but the concepts are firmly ingrained. If you need a backgrounder on Market Profile I strongly recommend you spend an hour reading the excellent thread created by They â http://www.elitetrader.com/vb/showthread.php?s=&threadid=9727. There are plenty of links, references, books, software and wisdom contained within.
Personally I find the concepts underlying Market Profile and Auction Market Theory to be very compelling. It provides an intuitive and robust picture of what the markets are doing on a short term basis. It took me a long while to figure out how to incorporate the theory of MP into a trading technique. They way I use it may not be exactly what itâs originators had intended but it certainly works for me. Iâm sure other traders use MP in a completely different manner and are successful also. I will introduce the enhancements that Iâve made to MP in due course.
One last point, MP is no panacea. It is not even a complete trading methodology. In my case it is only one aspect of my trading technique â albeit a critical one. I primarily use it to identify support and resistance and for understanding short-term market action.
Trading Techniques
Iâll go into more depth as the thread develops but Iâll start with how I prepare for each trading day. Firstly I download 1 minute data from eSignal and process it through a Matlab program I wrote to create the TPO brackets and crunch the numbers. I then paste the data into Excel and manually format it. I then examine my MP chart, and cumulative volume profile chart (both in Excel) and identify the key levels and my current trading bias. I then add these levels as lines on a 5 minute chart and map out a rough strategy for the day. A typical strategy would be if the market opens here Iâm going to place a buy stop at this level with a stop loss here. Iâll then look to take some profits here and then see how the market behaves. Typically Iâll have at least 4 scenarios depending upon where the market opens, and recent action. I write these down in my journal, wait for the open and then send the orders. I always like to try and predict what sort of day it is likely to be as a mental exercise. After a while you actually get pretty good at it and it can help your trading immensely.
Of course anything can happen at any time so you need to have the flexibility to adjust your plan for the day according to what develops. But Iâve found that MP really has helped me understand the market action and I tend to get surprised less and less.
Incidentally, you may well ask why bother using Excel rather than one of the many MP packages available. Two reasons: 1) I get a really good feel for the markets by posting charts manually everyday, and 2) Most of the MP software I have used is underwhelming. I have the eSignal add-on but I still use Excel.
Tone for this Journal
I like to have a plan for each trading day. MP is a great tool for that. So thatâs the style my posts will take â forward looking. I wouldnât waste anybodyâs time with a journal that says this is what I did yesterday â not much value in that. Occasionally Iâll post a historic chart it serves a real purpose.
I do not intend to post all my levels every single day. I donât want to spoon feed anyone. There are plenty of good sites that post UVA, LVA, POC type stuff everyday. Besides, I do things a bit different and I donât want to have to explain why my UVA is 2 ticks different than eSignal every other day.
What I will try to post on a daily basis is key things to look for in the near term and how Iâm likely to play them.
Iâm GMT+8 so Iâm mainly focused on trading and ETâing the morning action. I analyse the ES, YM, ER2 and NQ daily. Iâll post whatever is most interesting among these 4 markets.
Lastly I have nothing to sell, promote, flog, push or otherwise proffer. Nor am I thanklessly altruistic. I am motivated by sharing ideas and knowledge and I like to teach and learn in equal proportion.
Let me reiterate â I am paper trading Feb 1 â 28.
Bon chance,
bolter
