The 3-2-1 Approach: A Simplified Method for Trading Any Market

We've tried to create a rule based methodolgy that is easy to understand and easy to execute once you undertstand basic tenets of Marlet Profile:

3-2-1 = 3 Rules, 2 Formations and 1 Indicator

3 Rules:

High Volume areas are support or resistance the first time touched. If not rejected the market will trade around the price for a couple of hours.

Low Volume Numbers stop market directional activity

Dont fade Moves out of Middle (MOM's)


2 Formations:


p's favor higher prices

b's favor lower prices


1 Indicator:

Deceleration


You'll never grasp these rules and observations without some formal learning:

What does a p look like

What does a b look like

What doea a MOM look like

What is a High Volume Number and what does it look like

What is a low Volume and what does it look like

What is deceleration

How is it displayed

What are Balance Bars

Why are they important


All these topics are covered in our formal education. Some of them are covered in our weekly free tutorial. All are discussed daily in our chat room.

I would guess that at least 80% of our students never heard of these concepts before coming to us.
 
Trading Results 6/2/08

Earlier this morning, I posted Charles Cochran's support and resistance levels for the ES and the ZB. Here's how the day turned out.

We suggest you adopt the model of the local - trading size for smaller moves. If, for example, your business plan was to make 8 32nds a day ($250 per lot traded), this trade alone would have allowed you to achieve your goal.
 

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P Formations Typically Mean Higher Prices

The "P" formations noted on this market profile chart indicate the strong possibility of higher prices. Note that the volume that is superimposed on the TPO's is what creates the P. The mode and the mean are in the top of the distribution, as is the longest line of TPO's.

How do you trade this formation? Your goal would be to buy at the base of the P, with confirming signals, and watch for higher prices.

As you can see, unless we have an important news event and the ES starts to rally significantly, your expectation would be for higher ZB prices on Tuesday, 6/3.
 

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Quote from ZAL:

You are correct. There are hedgers in the ES, however, the overall percentage of ES hedgers is less than the overall ES speculators. Exchange CTI codes indicate that the ES participants are 4:1 in favor of speculators.

The US Treasury futures complex is approximately 1:1. In other words, the same numbers of hedgers and speculators.
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Dear Mr Zalesky,

I guess hedgers (commercials), in Liquidity Data Bank, are CTI2.

What about speculators ? Are these the sum of CTI1, CTI3 and CTI4 or 1 of these 3 categories ?

Thank you.
 
Quote from Gordon G.:

Dear Mr Zalesky,

I guess hedgers (commercials), in Liquidity Data Bank, are CTI2.

What about speculators ? Are these the sum of CTI1, CTI3 and CTI4 or 1 of these 3 categories ?

Thank you.
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I'm not real confident in the validity of CTI codes ever since the CME and CBOT merged. "Committments of Traders" report is more reliable.

Additionally our TradeMAven Software offers an Institutional Volume Filter where one can filter out smaller trade size to get a more accurate feel for the "institutional" trading activity.

In th ES if you filter out anything less than a 5 lot you'll see less and less activity, indicative of a specualtive market with many small speculative traders.

In the Bond, if you filter out anything less than a 5 lot you'll notice a high degree of activity of trades much higher than a 5 lot, oftentimes many 100 lot trades, indicative of more institutional activity.
 
Quote from oraclewizard77:

Hi, you have not answered my question. Using Trade Maven with your training, what is your win% per trade based on equal risk vs reward?
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Hey let's keep it civil here . What's next, you want to know if they even trade their method and want to see their results ??
haha
 
Quote from Hombre:

Hey let's keep it civil here . What's next, you want to know if they even trade their method and want to see their results ??
haha
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Hombre....

This is my response of yesterday. I'm sorry to hear of your affliction with short term memory loss and/or attention span disorder.

Once again, trading with Market Profile, Volume Analysis and Deceleration is NOT A SYSTEM!!.

If you're looking for a fail safe, guaranteed to make money, you'll never have a losing trade SYSTEM this is NOT the place for you. If you're intersted in improving your trade location and trade maangement skills then we probably can help even a guy like you.


......yesterday I stated:

I don't know how to be more concise:

1. Buying the bottom of a 'p' formation is a high probability trade

2. Selling the top of a 'b' formation is a high probability trade.

3. Going with the direction of a MOM is a high probability trade.

I can't put an exact number on it because I don't have one. My experience tells me that #'s 1 and 2 are in excess of 70% and #3 is in excess of 80%.

4 full tic stop in the Bond is what I use. It is not what you have to use. Everbody is looking for an exact answer like trading is some kind of exact mathematical equation.....it is not.

I typically look to exit with a 4 tic profit. Other traders look for more OR less. I use 4 tics as my guide because 4 Bond Futures tics = 1 Basis point in the Cash Bond Market. The Bond Futures market is a derivative of the US Cash Bond Market.

You will be well served to get educated on the Profile, the concept of volume deceleration and Balance Bars. The more you learn the better you will execute.
 
In the pit there was saying that you "bid 'em to sell 'em" but IMO there's not much "bluffing" on the screen. Most of those cancels are spreaders and programs. IOW's I'm only 19 bid in ZB if ZN is 13 bid. As soon as 13's trade in ZN my ZB bid is canceled. ES is only fair value bid because the basket is bid-if the componants spread out then the size futures bid pulls, ect.
Quote from sandygray66:

You can't bluff a trade. Bluffing only occurs on the bids/asks as the bluffed orders are pulled when price trades at the bid/ask price. Compare what actually trades on a T&S table to what had shown up on the DOM with bid/ask volume, and you'll get an idea of how much bluffing goes on (huge with the ES). Quite often you can see over 1000 contracts at the lowest offer price, but after only a couple hundred actual traded at the offer price, the remaining several hundred offered at that price disappear. This is quite apparent when the cumulative depth across all 5 prices on ones side of them DOM exceeds the other cumulateve depth by 2x or more - paradoxically, price often goes TOWARDS the side with the 2X+ depth - but that's a whole other discussion.

What ZAL is referring to is a cumulative count of whether actual trades are occuring on the bid or ask on each respective price. Trades occurring at the bid mean the sellers are the aggressors, and trades occuring at the ask mean that the buyers are the aggressors.

While there's always a buyer and seller for every transaction, the balance of whether more transactions occur on the bid at a given price relative to the number occuring on the ask at the same price can indicate supply/demand pressure.
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MoM's - Moves Out Of The Middle

Rule 3 - Don't fade moves out of the middle of a distribution. This is a "go with" trade. Here is a bond example from 6/3/08.
 

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