Time & Price, Volume Confirms

robster970

Veteren member
4,566 1,390
After a couple of posts on FoMo's thread on using a simple trading strategy, I thought I would post up some basic facts about this set-up. There are some pre-conditions though:

Precondition 1 - This is largely dependent on you having done a lot of screen time and knowing your market well. This is because looking for price, trailing off over time with a volume spike indicating that it's not likely to go further requires context on the current conditions.

Precondition 2 - This is not a system and it is aimed at those with some discretionary skills or those who have a discretionary bent.

If you have little to no experience, do not be surprised if this does not work. If you are looking for easy money, you will not find it here. If you want somebody who is going to teach you how to trade, you will be disappointed in what you get here.

Alternatively if you are interested in developing your own skills to identify when something similar to this is happening on $ES_F or any other exchange traded security where volume is available, then you have something that will stand the test of time under almost all conditions (upto about 30 on VIX and then I would opt out). It works in both directions because order flow is order flow, liquidity is liquidity and value is perceived at tops and bottoms. You just need to remember the asymmetry of the market where price falls a lot quicker than it rises.

Teh Method:

1) Switch to an exchange traded product so you can see volume.
Volume is the context for a price movement. If you cannot see volume you are more likely to get the context of the situation wrong. When price reaches a high, has it stopped there because nobody wants to trade at that price or is it because somebody is heavily trading at that price using limit orders because they have determined that this is value for them? This is a big difference and shapes how you engage in the trade. Somebody hoovering up the market is a very different tell to nobody wanting to play.

2) Wait for a trend to emerge.
Initial directionality is important as it implies a continuous imbalance in the orderflow in a particular direction. It might be being caused by long term traders (a big trend day) or more often than not, short term traders playing follow the leader and unloading into those less gifted at trading. However in either case it is a force that would need >= and opposite force to stop if a price considered value is reached. This implies somebody with money would need to stop this move. If the market is chopping, nobody is playing.

3) When price gets sticky, confirmed by a volume spike, fade the move that got it there (short for a uptrend, long for a downtrend)
The volume spike is a tell. In this situation it is saying that somebody with quite sizeable cojones (like our squirrel) is hoovering up the market orders at this price. As price is not moving and volume is going up, the initial directional force has met an equal and opposite force. You probably want to be on the same side of the market as the money here.

4) Place stop just below the highest(short), lowest(long) point.
The money didn't want to trade higher or lower than this point - trade with them.

5) Exit mgmt: Trail on 15min or follow the mantra "What gets you in, gets you out"
Auction rotations on $ES_F are anywhere between 1.5-4 points typically for a 15 minute period. Stay behind the rotations so you don't get taken out. If all goes well you will see somebody else start hoovering up the market orders and you have a choice to bail or reverse.

6) Rinse and repeat. Any timeframe.
This phenomena occurs almost on all timeframes. However the higher the timeframes, the deeper the pockets you need to play and this is reflected in the size of participant you are dealing with in the market. This is why you should always look at charts from high to low - you see where the big boys are playing and you should generally be trading with them.

Teh Returns
You can double your account in 3 months trading like this intraday off roughly 1 trade per day using 2-3% risk per trade and stop set at 6-8 ticks on ES. Obviously I am referring to somebody doing between 1 and 50 contracts per trade which is the world I have lived in. Above this, I could not guarantee what would happen but I think you could take this to 200 contracts without it being problematic.

Teh Style
This style has more in common with fishing with large periods of boredom interspersed with the occassional trade. Trick is being selective, entry timing (requiring patience) and having the maturity to let it run when it goes. You do have to be vigilant in the RTH session but it is certainly less frenetic and more commission friendly than the intraday style I had 3 years ago.

SPECIAL NOTE TO MODS AND ADMIN
I am happy with people having some lulz on here and posting up pictures of people eating popcorn when somebody is having a b1tch fight, the girl in the yellow crochet bikini of course, the bishop going long 2 ES contracts, squirrels, etc so please don't feel compelled to tidy up on my behalf.
 
Last edited:

robster970

Veteren member
4,566 1,390
Today's example - 15-20pts

This is a hindsight trade for me. I have not traded today so cannot claim this one for myself but it is a good example of a slow burner. Some points to note:

a. Making new highs so watch for how the volume profile forms, how it gets top heavy and then everybody quits and bails.

b. Look at how it took a long time to roll-over but how it was commensurate with the size of the move and the time it took the move to fade.
 

Attachments

  • ES-140228-1.png
    ES-140228-1.png
    126.2 KB · Views: 489
  • ES-140228-2.png
    ES-140228-2.png
    133.7 KB · Views: 468

robster970

Veteren member
4,566 1,390
Subscribed! Nice to see another member sharing his ideas.

If anybody wants to post up their interpretations of this on other contracts then I would be interested in seeing just how transferable it is. I reckon on YM and NQ it is pretty similar. I would have thought Dax and Eurostoxx would behave kind of the same way although having played around with Eurostoxx it lacks the explosive nature that ES has and don't think it would look the same.
 

tar

Legendary member
10,443 1,313
Today's example - 15-20pts

This is a hindsight trade for me. I have not traded today so cannot claim this one for myself but it is a good example of a slow burner. Some points to note:

a. Making new highs so watch for how the volume profile forms, how it gets top heavy and then everybody quits and bails.

b. Look at how it took a long time to roll-over but how it was commensurate with the size of the move and the time it took the move to fade.

Rob ,

I see that you've marked a volume spike way back b4 the market stalls , then it stalled for hours b4 it dropped , i thought the volume spike should happen while its not moving , couldn't anyone just short the ES because its failed to progress , without even looking at the volume ?
 

robster970

Veteren member
4,566 1,390
Rob ,

I see that you've marked a volume spike way back b4 the market stalls , then it stalled for hours b4 it dropped , i thought the volume spike should happen while its not moving , couldn't anyone just short the ES because its failed to progress , without even looking at the volume ?

So the volume spike alerts to the stall occurring. Think about it, a higher number of market orders were consumed by a larger amount of liquidity in that 3 minute period. You wait for a little longer to confirm it has stalled.

In the preceding period, about 6.5k contracts traded then in this one about 3 times the volume (19k) traded indicating there was excessive liquidity from a participant with deep pockets who was prepared to sell in this price zone.

It took 2.5 hrs for this rally to burn out and it took about 2hrs of continuous accumulation of the remaining buy market orders before it rolled over which feels about right to me. The buy market orders dried up - they hoovered the remainder up. Then they probably gave the market a nudge south with a large sell market order. Then stops got hit, momentum traders joined in and the guys who had the sell limit orders filled around 65 were covering into the late arrivals in the newly formed southbound process.

To answer your question, sure you could just short it. Sometimes you hit a continuation and you get taken out but normally the PA when it is trading sideways for a continuation looks different to when it is rolling over. Continuations are a bit more tidy and you see very obvious downside tests and rejections with quite aggressive buying hinting that somebody is really holding up the price.
 
Last edited:

tar

Legendary member
10,443 1,313
So the volume spike alerts to the stall occurring. Think about it, a higher number of market orders were consumed by a larger amount of liquidity in that 3 minute period. You wait for a little longer to confirm it has stalled.

In the preceding period, about 6.5k contracts traded then in this one about 3 times the volume (19k) traded indicating there was excessive liquidity from a participant with deep pockets who was prepared to sell in this price zone.

It took 2.5 hrs for this rally to burn out and it took about 2hrs before it rolled over which feels about right to me.

.

That what you said in your OP :"The volume spike is a tell. In this situation it is saying that somebody with quite sizeable cojones (like our squirrel) is hoovering up the market orders at this price. As price is not moving and volume is going up, the initial directional force has met an equal and opposite force. You probably want to be on the same side of the market as the money here.
"
So i thought price shouldn't be moving while volume is going up , but in your example volume was going up when the ES was breaking-out and making new highs .
Thanks .
 

robster970

Veteren member
4,566 1,390
So i thought price shouldn't be moving while volume is going up , but in your example volume was going up when the ES was breaking-out and making new highs .
Thanks .

It wasn't the act of making the new high that is important. It is:

- It made a new high and then you had a volume spike in that 3 minutes period.
- Then the price stalled.

Look at the 5 candles starting with the large green one with the volume spike. Price immediately stalls after the candle with the volume spike.

Do you want me to mark it up to explain a bit more on a picture?
 

Attachments

  • ES-140228-3.png
    ES-140228-3.png
    99.6 KB · Views: 329
Last edited:

MajorMagnuM

Legendary member
9,284 888
It wasn't the act of making the new high that is important. It is:

- It made a new high and then you had a volume spike in that 3 minutes period.
- Then the price stalled.

Look at the 5 candles starting with the large green one with the volume spike. Price immediately stalls after the candle with the volume spike.

Do you want me to mark it up to explain a bit more on a picture?

would you be open to discussing a video i have found interesting by L.Rasche on this area? i can timestamp all the good bits worth discussion to save u time?
 

tar

Legendary member
10,443 1,313
It wasn't the act of making the new high that is important. It is:

- It made a new high and then you had a volume spike in that 3 minutes period.
- Then the price stalled.

Look at the 5 candles starting with the large green one with the volume spike. Price immediately stalls after the candle with the volume spike.

Do you want me to mark it up to explain a bit more on a picture?

OK so "Then the price stalled ", ok its clear , what about an hour earlier i see price stalled and there was some spikes in volume in some candles ... ? Thanks .
 
Last edited:

robster970

Veteren member
4,566 1,390
OK so "Then the price stalled ", ok its clear , what about an hour earlier i see price stalled and there was some spikes in volume in some candles ... ? Thanks .

The volume levels were roughly about the same size - nothing indicated it was an abnormally high level of volume for the 3 min period given what had been going on recently with a fairly explosive rise 9 minutes into the session. This is where the context is important. You can't just go looking for any old larger volume spike - it has to look out of place for the price and time, the volume then confirms whether something has changed.
 

tar

Legendary member
10,443 1,313
The volume levels were roughly about the same size - nothing indicated it was an abnormally high level of volume for the 3 min period given what had been going on recently with a fairly explosive rise 9 minutes into the session. This is where the context is important. You can't just go looking for any old larger volume spike - it has to look out of place for the price and time, the volume then confirms whether something has changed.

yes yes thought so ...
 
S

sonofcablemonster

0 0
bottom line if your gonna have peeps sitting in judegement of othe rpeeps make sure they qualified to do so and make sure they up to the job as part time volunteers with no skills will ruin an enterprise quicker than anything else

I think its ruined already dullard.
 
 
AdBlock Detected

We get it, advertisements are annoying!

But it's thanks to our sponsors that access to Trade2Win remains free for all. By viewing our ads you help us pay our bills, so please support the site and disable your AdBlocker.

I've Disabled AdBlock