The 3-2-1 Approach: A Simplified Method for Trading Any Market
Youâre starved for knowledge about trading. You buy all the books. Youâre Googling like mad through the Internet. Maybe you lay out some big bucks for a canât-miss system that works great when the market is consolidating but falls apart when it begins to trend.
After you add every technical indicator, and combinations of indicators, into your trading arsenal, and put them on tick, time, volume, and range charts, you realize that all youâre getting is confused.
Iâve been there and done that. And Iâm here to tell you there is a better way.
With the right tools and information feed you will find there are really only two or three important factors actually driving the markets and that you can make good, timely decisions, if you donât have too sort through so many variables before you take a trade.
The Key is Volume
When the Market Profile methodology was introduced in 1985/86, we could track price changes and the number of trades at a price. The Market Profile combined time, price and volume in one display, and more importantly was based on raw data. It showed what the market was doing, not what a study said it was doing. Reality, what is actually happening is what it is all about, or what it should be about in our quest for market based information.
By using the Market Profile I discovered that the one thing consistently driving the markets was the directional movement of volume, which had nothing to do with the open/high/low/close data points. Learning this, I discarded all the analysis, tracking and manipulation on those four data points and began to focus only on volume.
However, when the Market Profile first came out, time and sales, or specific volume at a price were not immediately available â this data came through a day later via the CBOTâs Liquidity Data Bank (LDB). While informative and the key to the marketâs direction, it wasnât particularly helpful as it wasnât available during market hours.
Then CQG added volume histograms to the right of the profile and I began following the price points that had the highest number of trades. When I correlated that to the LDB the next day, the high and low volume price points in the LDB consistently stopped activity or attracted it. By combining the current dayâs activity on a screen with the long term historical data of the volume one essentially had the same information contained in the LDB in real time.
Again, over time, I could see how the high volume and low volume numbers in the LDB stopped or attracted activity, and how the dayâs or preceding dayâs numbers in the regular Market Profile could be used to adjust the longer term historical days to get within one tick of the rotational highs or lows.
What really drives the market directionally is volume. Period.
Youâre starved for knowledge about trading. You buy all the books. Youâre Googling like mad through the Internet. Maybe you lay out some big bucks for a canât-miss system that works great when the market is consolidating but falls apart when it begins to trend.
After you add every technical indicator, and combinations of indicators, into your trading arsenal, and put them on tick, time, volume, and range charts, you realize that all youâre getting is confused.
Iâve been there and done that. And Iâm here to tell you there is a better way.
With the right tools and information feed you will find there are really only two or three important factors actually driving the markets and that you can make good, timely decisions, if you donât have too sort through so many variables before you take a trade.
The Key is Volume
When the Market Profile methodology was introduced in 1985/86, we could track price changes and the number of trades at a price. The Market Profile combined time, price and volume in one display, and more importantly was based on raw data. It showed what the market was doing, not what a study said it was doing. Reality, what is actually happening is what it is all about, or what it should be about in our quest for market based information.
By using the Market Profile I discovered that the one thing consistently driving the markets was the directional movement of volume, which had nothing to do with the open/high/low/close data points. Learning this, I discarded all the analysis, tracking and manipulation on those four data points and began to focus only on volume.
However, when the Market Profile first came out, time and sales, or specific volume at a price were not immediately available â this data came through a day later via the CBOTâs Liquidity Data Bank (LDB). While informative and the key to the marketâs direction, it wasnât particularly helpful as it wasnât available during market hours.
Then CQG added volume histograms to the right of the profile and I began following the price points that had the highest number of trades. When I correlated that to the LDB the next day, the high and low volume price points in the LDB consistently stopped activity or attracted it. By combining the current dayâs activity on a screen with the long term historical data of the volume one essentially had the same information contained in the LDB in real time.
Again, over time, I could see how the high volume and low volume numbers in the LDB stopped or attracted activity, and how the dayâs or preceding dayâs numbers in the regular Market Profile could be used to adjust the longer term historical days to get within one tick of the rotational highs or lows.
What really drives the market directionally is volume. Period.
