Beyond Price Action

[steven46]

Today's open and first trade entry

As seen in the chart, the market gapped up
and ran. This would have been easier for retail traders
to see using 15 min candles

The problem for retail traders is that because they lack
experience, they do not know that a close above the 1st SD
confirms the breakout

As a result they are "trapped out". This means that instead of
recognizing the breakout and entering AT the next bar's open
they often chase the market, thus exposing themselves to
unnecessary risk. Also because they trade "for ticks", they almost
always do not hold long enough to take a "full scalp" (in this market
a full scalp is 3-5 points). Failure to hold means that when they do lose
on a later trade, they usually cannot overcome losses on the longer
(and more important) time frame. Thus they are net losers. This is an
important lesson that eventually they have to learn if they are going
to make a living in this business

A Final Note

I had several traders watching me today and they suggested that it was
difficult to "pull the trigger" on this trade setup. In response I said
"Okay then, lets review. Please remember that (at the time) I suggested
that this was a low probability setup, a little over 60% odds ordinarily
however the context is as follows,

The open is the time when highest volatility exists in the market as
institutions make decisions to put money to work. This is when THEY
need to see range expansion in order to make a reasonable profit

So the real odds are much better then one might expect, and in my
opinion it was worth it to take this trade, even though it is early
and we will likely have many other opportunities later.

Should have also mentioned that in the pre-open comment
we suggested that the overall bias was up. If you have our
standard display in front of you, you will note that the daily
chart shows this, as well as the upside magnets

Traded perfectly it was a 7pt winner, I took 5 pts (a standard scalp)
If I were wrong, I would have taken a 2 or 3 pt loss. in these circumstances
I suggest traders enter on small size and hold


Good luck traders

 

[steven46]

This will be my last trade, and that is to emphasize the
point I made earlier.

On this last chart, notice the spike down as institutions and
commercials all seem to get out at about the same time
This important "time based pivot" is known as the Euro/USA
Overlap, where Euro traders close their books.

Again, most of the traders watching me could not pull the trigger
even though this has been explained several times.. I get it. It is
counterintuitive however at some point you have to adapt to
reality right?

This was a reasonably good day characterized by 1) an early move
(gap and run), followed by 2) trading range. The trading range
was also anticipated (if you did your homework, reviewing typical
Monday price action)

For those who had difficulty, I hope you are trading simulated
accounts. Tomorrow is a new day

 

[steven46]

I will be transitioning to Instagram shortly
but before I do, I want to offer these last
examples showing how I frame each session

There will be two (2) charts, the first will show
the use of VWAP. While posting here I learned
that readers do not want to get into the math
so I will not present it in this venue

What I will say is that this part of the method
is widely used by both institutional and commercial
traders AND it is the basis for automated trading
programs as well. There are two (2) reasons why this system
works. First, it provides reliable buy and sell zones
Second it allows me to see when the distribution
is expanding, thus indicating a breakout (which allows
me to hold a position with confidence).

Attaching the first chart below

 

[steven46]

Here is example 2

As you can see, it is the same chart with FRVP
(fixed range volume profile). We use this tool
to obtain the statistical skew for a specific range
or prices. The red line is the POC. and its position
relative to the VWAP is the "skew". Absent a background
in basic statistics, we won't bother readers with the
math

On the chart, we show examples of positive, negative
and symmetrical skew. We explained it as simply as we
can in earlier posts. As the name implies, to use the
FRVP (correctly) one has to know where to anchor
each end of the FRVP. Once you have that ability
it takes a bit of repetition and then you can see
where price is likely to 1) reverse, 2) breakout, or
3) create a trading range. After that, all that is needed
is a reasonable setup.

Based on this system and a weekly/monthly review of session
data, we can calculate the odds that a specific setup
will succeed

 

[steven46]

And with that, I believe that I have completed the obligation
that I accepted to pay forward the gift that my mentor
provided me years back. I wish you all the best of luck

 

[steven46]

A quick note to inform that I have started a Facebook
page (Beyond Price Action) and will stage an event soon
For a period of two (2) days I will host a trading room live
interested traders can watch me as I go through the pre-
market chart markup and comment, and then trade

 

[ECATradE]

I have already posted some ideas, meant to assist struggling traders

One of those concepts is called the "Run-Up" or "Run-Up Trade" An associate of mine
also calls this "Stealing the Trade"

Basically, institutions and funds take advantage of a usually quiet overnight market
to move price in advance (news organizations often use the language "in the run-up to")
a specific high impact economic report. As I have mentioned in the thread "Long Road to
Success", this allows them to accumulate inventory, wait for the open of the RTH session
then sell the marked up inventory, thus realizing significant profit, with very little risk.

I have many examples (I use them for training purposes) and what you can see in the
current example is the "measured move" up just prior to the release of economic news
today.

I will post a few more charts and miscellaneous examples, and then I intend to continue
on with my own blog of the same name ("Beyond Price Action").

Wish you all the best of luck

That's why so many Euro and US sessions are just ranging markets.

 

[steven46]

Generally speaking, the institutions that produce the biggest volumes work on a different
premise than you might think. They use trading range days to accumulate or distribute volume
so that when high impact economic reports are released, they can either buy back (at wholesale value)
or sell relatively high priced inventory (at retail value). My approach to framing the markets begins with
looking at how the economic reports are scheduled at the beginning of each week and month. It takes
a bit of work, but once you look into it, you can see where we are in the cycle. Any good economic calendar
vendor will work, however I like to use investing.com for this purpose, and much of my (actual) prep is
done on the weekend.

This is why my screen display has two (2) components. on the left side a daily chart framed on a quarterly VWAP
envelope, and on the right side, either 15 min or 5 min candles, framed by a session VWAP envelope.
The reason I suggested that readers become reacquainted with basic statistics is that the envelope shows
two conditions, the first is a reversion to the mean, where price moves from the outer band toward the middle
(the VWAP median), and the second behavior is where the distribution expands (breaks out) and this is known
as "trend".

 

[steven46]

And here is the "reversion to the mean" example that I was talking about in the previous
post.

On the left side, the longer time frame chart shows the statistical skew (which was negative)

On the open we saw a wide range bar up to test the 2nd SD. Aligned with skew we saw sellers
come in to reverse the move creating a 2 bar reversal. Entry at the open of the 3rd bar resulted
in a profitable scalp as price moves back to the mean (the VWAP Median/black dots)

 

[steven46]

And by coincidence, we see that the skew (which of course is dynamic) changes
to symmetrical, as buyers enter the market. We see a series of strong bull bars
This type of reversal has good odds of success and although we did not take
the trade, the entry would have been above the 20 EMA (White Line). This is
an example of a "breakout" to the upside (confirmed by a close above the 1st SD)

This is a very common sequence of trades (known as an "Opening Reversal")

One of the most important lessons I can offer students is to anticipate these sequences
(and to use the restroom BEFORE the open, so that they don't miss trades like this

 

[FranziskaSchulz]

Hello

One of the problems that traders often encounter is lack of math background.
I suggest that aspiring traders take basic (first year) Statistics & Probabilities
otherwise they end up going in circles (for example). Here in the US, first year
Stats consists of about 20 weeks for the first part (100 level) and the same for
level 200

VWAP has to be started at the beginning of the current session.
Alternatively you can use the previous session as a starting point. In contrast
you can start the volume profile (POC) wherever you wish. One thing that has
to be pointed out is that you have to wait for a period of time, for the VWAP
POC combination to collect a stabile sample size. For my system, I like to wait
at least 15 minutes. (basic stats)

Using your chart, if the red line at the bottom is POC and the blue line is the
VWAP, refer to the paragraph below

If the POC is above the VWAP the skew is down, conversely if the
POC is below the VWAP the skew is up. If the VWAP is at or near the POC
then you have a symmetrical distribution and there is no skew. Finally, and
this should be self evident, price (the distribution of prices during a session)
is dynamic so the position of the POC will change relative to the VWAP as more
data is accumulated during the session.

Honestly there is a lot more to this than I can cover in one post. Again I suggest
the best place to start is with first year statistics. If time permits I will post some of
the basic math

I really like the content that you post, always informative and useful.

 

[steven46]

Hello FranziskaSchulz

Thank you for your encouraging and kind comment

My hope is to get traders to think and to learn concepts that might be helpful
This (trading) is a very competitive world, dominated by a small group of big
institutions. Most of what they do, is directed by software programs, and of course
some of it is the work of skilled professionals. The 1st tier firms hire people who
have advanced degrees in math and (almost always) computer science. They are
well paid to provide programs that can generate consistent profits. Most of what
I have learned is because a kind gentleman decided to help me years ago, by providing
me with the basics (that I introduce in my comments here). I have built on that basic
information and hope to show others how it can be used to create a viable business
model (and economic freedom).

I do this out of respect for the person (now gone) who helped me, and because I know that only a
small percentage of retail traders will take the time, and make the effort, to learn more about
this way of trading. Recently I have started a Facebook page (Beyond Price Action) and an
Instagram page (of the same title) and soon I will host some live events where traders can
watch me as I work. Its not my intention to serve as a signaling service. Instead I want people
to learn to think for themselves (and to find their own way). If you have an interest, keep in touch
with me and I will provide more help to you and others.


By the way, your name is an interesting one. I lived and worked in Germany for Dynamit Nobel
I almost never get to speak German here (in the USA) but I know that "Franziska" means "From
France" and also "Free", and a person of this name is said to be empowered to live life on their
own terms. Thank you again

 

[steven46]

Because this session was an excellent example of "Trading Range" behavior, I want to outline the basic approach
that I use.

1) Trading range behavior is common, at the open and on days when the market is anticipating high impact economic
data. This often occurs early in the week (and month) Trading range behavior is readily identifiable by candles that overlap
and have relatively small bodies and prominent tails
2) Skilled professionals will extend lines from the initial high and low closes, to define a range, then they will enter long or short
at the next test of the previous high or low. They are willing to scale in (to some extent) above and below the range, knowing that
even if price exceeds a previous high/close, it is probably not going very far.
3) Professionals also know that institutions have automated systems that use limit orders to trade these "ranges"

New or struggling traders should stand aside, and NOT TRADE during these conditions, unless or until they learn 1) how to mark up
a chart correctly AND 2) how to use limit orders Simulated accounts are excellent resources for learning how to handle "trading range"
behavior.