A Professional Approach to Trading Futures

[steven46]

Today was a "Green News" day, meaning that we had
several "high impact" economic news events happening
and (in our opinion), "other" time frame participants had
advance knowledge of the outcome and had pre-positioned
themselves in the market, to take advantage of the move up

We teach this. It's straightforward, and only requires that students
pay attention to the obvious human behavior. We show traders
how to find the "tells" which are based on price action and volume
(or momentum). Then they learn to create scenarios based on
what we call "confidence levels".

In this case, the scenario provides two options. The trader can if they
wish, pre-position along with the institutions, then if the trade is working
they take partial profit early (called "buying a stop") and they hold a
"runner". This requires that they trade at least two (2) contracts. OR

They can simply wait for the formal open and take the 1-2-3 setup with
long entry on "4".

The attached markup shows the entries. We did not take the early entry
(we were sleeping) but it is often the case that when we do the preparation
for this day, we get up early to participate in what we were taught to call
a "Green News Day Event". Obviously an overhead profit target was hit.

Postscript

We had to clean up our chart, to better show the opportunities
We have said this previously, "nothing works all the time" however
this type of logic based trading does work quite well if one commits
to and maintains the discipline. The results certainly speak for themselves.

Good luck

 

[steven46]

We attach an example chart, showing the weekly cycle to date

The operational benefit is significant, provided a trader can learn to
think along with/get aligned with the way the institutions work

What Happened this Week

1) Monday/Tues form what is known as the "Initial Balance". In a trending market
one of the extremes will usually hold. Also, professionals know that the odds favor
trading "with" the trend once it is identified.

2) After the initial balance is created, we saw a "gap up" created by economic news
From that point forward, institutions favor the long side, looking for a test of the "BRN"
(Big Round Number). Skilled participants will look for ways to get (and stay) long.

3) Institutions are always ready to capitalize on news events, and so they sell to create
"bear traps" hoping to entice traders to sell, then they activate stops and reverse the market
leaving short sellers "trapped out" of the reversal back to the ultimate profit target (5,500)
This strategy worked twice this week as seen on the attached chart..

As we have said previously, traders who prepare by looking at these 30 minute charts prior to
each session have an advantage, in that they can see, what is happening. Once they identify
the underlying logic, it is relatively easy to wait for the next setup and "go with" the institutions
as they move the market to toward the BRN (big round number) at 5,500

Good luck

 

[steven46]

Although I may return to address questions, this will likely be my last post

The attached Markup shows a dual screen with 5 min candles on
the left and 15 min candles on the right.

The emphasis is on providing retail traders with 1) a way to frame
the price action, so that they can 1) determine where price is going
and 2) find a reasonable entry that can be managed to a profitable
exit, OR on the occasions when they are wrong, they can 4) identify
that they are wrong quickly and 5) Minimize the loss or even reverse
and turn a loser into a winner. This is what it's all about.

The Tools

To that end we provide a system that uses Keltner channels as the basis
We use AVWAP (Anchored VWAP) as a "Key Reference" and we add our
own additional framing technique ("Bookends") that allows the trader to
identify conditions (Trading Range) that usually cause retail traders to
lose money EARLY in a session. These tools, when properly used, allow
the struggling trader to turn things around by quickly (first couple of candles)
identifying what the conditions are, and then applying the right decision making
process to 1) Avoid or minimize losers and 2) Take statistically good entries
The statistical basis is covered by use of FRVP (Fixed Range Volume Profile)

The chart view on the left (5 min candles), shows "Tests", based on the initial placement
of "Bookends". Once the Bookends are in place, the trader chooses how to react when
price returns (to create the test). Early in the session, the odds favor "trading range" behavior
and so a skilled trader would know which side of the trade to take. Later in the session
again the skilled trader knows that price is likely to test and then breakout (higher or lower)
and again they choose based on general rules that we demonstrate effectively.

The chart on the right shows 15 min candles and this is all about visual appeal. The trader takes
fewer trades, however those trades tend to be easier (for struggling traders) to identify, and
quicker for them to "break through" and make a profit.

Final Note

During our training, we add the final piece of the puzzle, which is HOW TO THINK
ALONG WITH INSTITUTIONS, and HOW TO UNDERSTAND THE BASIC WEEKLY AND
MONTHLY CYCLES THAT DOMINATE THE MARKETS CURRENTLY.

Good luck

 

[steven46]

I received several questions regarding the use of "Skew"

I summarize as follows

The skew is the difference between the red line (volume profile POC)
and the VWAP. Both are tools that commercial traders rely on for various reasons
AND commercial trading firms use the VWAP to evaluate each trader's performance

When the red line is below the VWAP (represented by a white line) then it is positive
and when price is AT the VWAP, statistically the expectation is that price will move higher
Conversely, when the red line is above the VWAP, then it is negative, and when price is AT
the VWAP, the expectation is that price will move lower. For those without the math background
this is probably difficult to understand. Basically it is about price moving from areas of low volume
to areas of high volume (and vice versa). IF you think about this, it means that when price moves
from an area of high volume to an area of low volume, it is trending. When price is moving from
an area of low volume an area of high volume it is usually in a trading range.

What we as traders want is to know which condition is occurring in time to "catch" the trend and I
assume that readers understand, that you want to NOT to trade in a trading range, because that is
where struggling traders get chopped up and lose money. I am tempted to say "its simple" but
of course one has to learn how to use the tools.

The attached chart shows today's example prior to the open of the London Session. This trend move
up happened as the red line moved below the white (VWAP) and when it did, I put on a trade knowing
that the statistics indicated a favorable trade.

As I have said previously, I am very selective, I want to take only trades where the statistics are in my favor
AND when those conditions are met, I want to hold my position for at least +10 points, often taking partial
profit there, and holding a small position to run further.

Absent further questions, this will be a curtain call.

Good luck

Postscript

Readers should note that I made an error in typing my definition of "Skew"
The objective is to determine when price is moving from an area
of high volume, to an area of low volume (trend), and to stand aside in all
other conditions, so as to limit loss. Its that basic, maximize profit, limit loss.

 

[steven46]

And here is an example of "Negative Skew" as traders take profit on the previous long
trade

I missed this trade, because I was posting, and this is in part why I am stopping. The
position of the red line vs the white (VWAP) is clear, and the short entry is below the
white line. Again (and for the last time I hope) this is about learning to use the tools
and then executing in a disciplined manner.

Good luck