12/12/2017 ES Orderflow Narration

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Dec 132017
 

Given how “major” the 67-68’s MR structure was I suppose it’s no surprise it was so heavily stalked and discussed in the room. Given the aggregate context I suppose it is also no surprise so many seemed to be long biased around this area as well. Be sure to see the chat transcript as usual for more color, but especially this time as there were some focused points made about thick and thin prints on first and second pushes into structures and how the order of those can show directional conviction or a lack of at the time in many cases.

So here we see the initial move legit testing the case 68’s in purple. As I said in the room I wasn’t really surprised to see the thin volume into the high there as MM’s were likely going to test the waters by pulling offers and trying to see if any shorts were left to puke or if any new longs were bullish enough to buy the case high. Though I do think spots like that can be bread and butter for countertrend scalpers, in my opinion the only interest to intraday swingers was to note volume didn’t get thick into the high there from sellers stepping up against the buyers. This was followed by a fairly shallow pullback in blue trapping quite a few sellers but not quite pulling back deep enough to test the YC. Beyond that we saw a classic pullback low failure right into the 67-68’s line in light green on paper thin volume from exhausted sellers and massive long delta divergence led by size. I’m sure for most members who were bullish swingers that was the first rotation that really jumped off the page. But for those who waited for a break of the then current high set in purple there was a second similar pullback on super thin volume with strong delta divergence in dark green, again with size leading out hard. The strongest interest from size yet as I pointed out in chat.

The recent theme of continual new all time highs being made has led to many discussions on the topic of whether or not your intraday swinging model has a provision for trading ‘into air’ as I call it – entering positions looking to trade into new highs with no prior structure to lean on or frame your risk/reward scheme with. Once again today obviously you had to decide whether you would take on a long position at all from the 67-68’s structure, and if so where you intend to look to scale with no known market structure overhead. For those defaulting to raw PA and flow we saw the buyers begin to run out of gas in the short run in pink as I pointed out in chat. Note the thinning volume into the top there and the strong short finish off the high from size in the stats. This was followed by a real battle on the second push in red which ended in even less bull delta conviction and even stronger short finish from size off the high there. Either spot would have been enough of a clue for most members to consider scaling or flattening I’m sure. To say volatility is contracted lately would be an understatement, but given that I doubt any intraday swingers can complain with solid three handle moves to a first scale in this kind of environment. Just my .02…

About the Author

Discovery Trading Group is a unique dojo focused on mentoring aspiring futures traders since 2010. It’s emphasis is on guidance in building bespoke processes and risk overlays rooted in market structure, price action and orderflow, with sound adaptable risk management as a priority.

www.discoverytradinggroup.com

 Posted by at 4:41 pm  Tagged with:

12/04/2017 ES Orderflow Narration

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Dec 042017
 

I had said early in the room that given the narrow range after the gap there weren’t going to be too many potential ops for either side. First the gap low broke down into the Friday high 50-51’s but on that one there was really no continuation play and relative volume and price action were unremarkable. When we rotated back up I mentioned that bears might wait and see whether sellers ever stepped up hard back in the zone formed between the key Globex support line 56’s and the Thursday high 58’s. As it turned out there finally were some clues of interest there with the VWAP congruent shown here.

First note in pink the stark hard rejection of highs as well was the majority of size leading out short in the stats. I have to say I’d be luke warm at best on this but only because its a first push. In a perfect world if you are a swinger I still think the ideal is to see big volume from absorption on the first push into a level and that followed by thin volume on the second push due to exhaustion of whatever side was getting absorbed on the first push. So given that was not the situation in pink and the case price was not being tested I’d have to pass on swing shorting there if I were stalking there. The subsequent push in red though showed pretty much the biggest relative volume we were seeing at the time – buyers trying to lift and being absorbed passively as well as short aggressors led by size leading out in the stats. Bingo. Regardless of the fact that it happened to work out, you can’t think that way. Either your criteria are met or they aren’t and from there if you enter you see what unfolds. Nuf said.

So if you did get short from there as I also discussed in chat the structures below to stalk scales should have been pretty clear. First was the same gap low 54’s we had already visited several times. Perhaps that’s why this time it wasn’t respected when we sold off. Note in yellow as the then interim rotation low was breached and the prior buyers knew they were cooked the MM’s took advantage and pulled bids creating the momentum that propelled the market through the 54’s this time around. Good news for those who were paying attention as hopefully they were able to avoid scaling there and squeeze out more to your first scale. I have to say though I can’t imagine holding through the volume in blue which occurred in no mans land between the 54’s and 50-51’s structures. Regardless, the next structure below at the YH wasn’t far from there. But even if you held through the blue area note both pushes into the case 50.75 below hard rejected on paper thin volume in green from seller exhaustion. Point being if you waited for the case price to test and show you something before scaling you wouldn’t have gotten much more than if you scaled in the blue area. For those who made that their first scale ignoring the 54’s for the reasons above and were still holding for a second, the selloff continued on into Friday’s closing range structure. It’s off the image obviously but for those who did sell it turned out to be quite a nice score. I highlighted the stats in purple to show how convicted the sellers were which gave a clue of coming energy to propel price down into the 45’s and beyond. Just no divergences or for that matter any interest from aggressive or passive buyers for that matter. I think its generally a good idea to look out for general clues like this as they can help you with your contextual TM choices on the fly which are always evolving…

About the Author

Discovery Trading Group is a unique dojo focused on mentoring aspiring futures traders since 2010. It’s emphasis is on guidance in building bespoke processes and risk overlays rooted in market structure, price action and orderflow, with sound adaptable risk management as a priority.

www.discoverytradinggroup.com

 Posted by at 4:53 pm  Tagged with:

11/29/2017 ES Orderflow Narration

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Nov 292017
 

Today we had a great example of when typical DTG ‘trifecta’ swingers see everything they like to see for a specific bet but never see the traction they would like to. Before the clock runs down and they may be forced to exit giving up profits prior to the end of the day, that is. Hopefully by now the structure framed by the YC and YH 25’s-27’s was clear to all of you? I pointed that out in the room after the breakdown as a spot continuation shorts would likely be stalking so as always see the transcript for more color.

So here we see the first push in purple trapping ton of new buyers just as short stalkers like to see and this was followed by two high failures in pink and red with buyers exhausted rejecting highs and the majority leading out short into the latter. If you were a bear at the time and stalking this was undoubtedly your spot. The first thing to be aware of though was the next structure below likely to draw action was close being the Globex low 23’s. Remember, there is never anything we can do about that guys. The idea is to adapt naturally as the market does and that is how things lay out quite often in contracted vol. And with that for those who entered from the pink or light red zones you reached your first or all out scale in light blue as the sellers hard rejected lows below the case 23.25 and the stats showed the majority of size leading out long into that attempt down. For those who missed or otherwise waited on the early test of the 25’s-27’s zone there was another one in dark red showing strong buyer absorption. Although some of which I’m sure were prior shorts holding out for bigger moves and covering out. The lesson: greed rarely pays. Trade what IS not what you want it to be says I. Anyway, for those who did sell from the dark red you basically found the same scale point around the OL this time with an even more stark hard rejection of the case low in dark blue and again with an even stronger delta divergence.

Obviously many who were sellers were running multiple scale out models and looking for more movement down into the R to S 20’s also discussed in the room. But alas, we never got there and the clock just slowly ran down. How EXACTLY do you handle these situations? After a certain elapsed time or rotations against you do you flatten the remainder? If you didn’t take this trade in looking back at the flow history can you see where you would have thrown in the towel and why? These questions are assuming of course you are running a model that must be flat at the end of the RTH session. Not that there is any requirement for that, of course. Very important questions to ask yourself and answer with confidence going forward…

About the Author

Discovery Trading Group is a unique dojo focused on mentoring aspiring futures traders since 2010. It’s emphasis is on guidance in building bespoke processes and risk overlays rooted in market structure, price action and orderflow, with sound adaptable risk management as a priority.

www.discoverytradinggroup.com

 Posted by at 6:29 pm  Tagged with:

11/21/2017 ES Orderflow Narration

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Nov 222017
 

Not much to say on this one that wasn’t already discussed live in the room by members today. Before we get into the specifics one thing to point out is note the wide highlight in dark green in the stats. The main message is to note when the deltas are strong and one way regardless of whether its an up or down rotation around key areas. Today obviously whether buying into new highs or buying into pullbacks the dominant aggressors were….buyers.

There were exactly two key structures overhead coming into the morning and they were both very obvious and major – the 89’s and the 94’s as marked. The 89’s regardless of being quite major broke easily on the first push almost uncontested and this was followed by a series of pullback failures in blue and green with hard rejection of the lows and very strong divergent delta stats led by size. Any of those spots would have been music to the eyes of continuation bulls today. Obviously bears looking to incentive fade had cause to stalk with the one way run up in Globex but note that the upward pushes all showed unremarkable volume and definitely not the kind of stats you’d want to see. The upside pressure was very evident so I don’t see much that would have trapped many bears trying to fade the 89’s action.

The next structure above was the 94’s of course but due to the depth of the pullbacks and depending on where you got in, even the same interim high post rotations could have been 2-3 handles. Because of that I can’t imagine not scaling at least some into the action in purple for fear of maybe a headfake after all the shorts that wanted to cover had done so. Remember, we never know what is really going to happen next. But for those still holding we subsequently tested the 94’s and again the case price was all but uncontested, easily pushing past and electing stops behind in pink. That slowed the bulls down at least enough to rotate and provided nice liquidity to scale into. Can I see incentive fading at least for a scalp on the action in pink? Absolutely. But unfortunately if you didn’t cover right out it was a scratch at best for most. No second push failure for the short swingers there to get in trouble with though thankfully.

From there we were trading ‘into air’ as I call it, with no prior market structure to lean on. You each need to decide whether your own models will permit this at all of course. But for those who do most will simply use the PA and flow components alone obviously. By any measure the action in the push in red was beyond remarkable and I can’t imagine scaling there. Behind the all time high there were bound to be a ton of longer term stops and position adjustment instructions and we definitely are seeing that in the flow in red. But again with the stats being so bullish, especially with the absence of short finish off the highs and it being such a major structure, I can’t imagine fading there to be honest. Almost too much going on making you fearful to get involved. But in any case there is much to consider on this one today. It is a rare but commonly reoccurring day type the one way big momentum action type day. If you can learn to recognize them when they are happening, you may be able to find some edge over groups of them in the future when they come up…

About the Author

Discovery Trading Group is a unique dojo focused on mentoring aspiring futures traders since 2010. It’s emphasis is on guidance in building bespoke processes and risk overlays rooted in market structure, price action and orderflow, with sound adaptable risk management as a priority.

www.discoverytradinggroup.com

 Posted by at 4:17 am  Tagged with:

11/15/2017 ES Orderflow Narration

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Nov 152017
 

It doesn’t get much more textbook than this action for those implementing some version of the DTG ‘trifecta’ strategically. It also turned out this was discussed live in the room today as well so make sure to see the transcript as a companion. As always, its never about nor does it need to be about directional prediction. Members agreed in the room well ahead of time that given how “major” the 62’s structure as marked would be on the radar of participants across all relevant time horizons, if and when the 62’s were threatened, stops and other trade elections from both sides would be apparent and tell the story via the PA and flow.

And with that coming in to the retest of the Globex low and super major former support structure 62’s we saw the massive thinning of prints as market makers pulled bid liquidity in yellow, yanking price over the line and forcing stop elections/puking from trapped longs. Just what the doctor ordered for those wanting to hop short on the momo train. The next structure below should have been very obvious with the back side of the zone being the interim support from 10/26 55 half. With most intraday swinger members trading structure to structure that was what was on the radar ahead of time as the spot to stalk scaling or flattening. And once again the PA and flow told the story plain as day down there as the first push in light blue tested the case price to the tick with hard rejection via obviously thin prints off the low. Also note the largest size leading out long into that push in the stats. This was followed by more of the same this time with a low failure trapping some late shorts and ending with them puking off the low with long finish in dark blue. Obviously either of those pushes was a viable final trigger for those wanting to play a long bounce off that low as well.

Though the next true market structure above was the same 62’s line we just broke below then acting as potential former S turned R from below, the VWAP had of course moved down between the structures so that should have been on the radar for signs of action. And with that again right on the nose we saw a big stall on strong buyer absorption in pink which likely had most of you longs scaling some or all of your longs from below. Note the largest size leading the turn once again with short deltas into that push in the stats below as a confirmation scale trigger. For those holding for a second scale obviously we subsequently saw the rally continue back into a retest of the Globex low 62’s from below. Though the first push volume in light red was not really remarkable enough to jump out at you, given the magnitude of the structure and the size of the last push up I can’t imagine many of you not scaling there proactively. For those who waited for a second push though we did see solid buyer absorption and sellers initiating there in dark red with the majority of size showing short and neutral deltas. I’m sure that action had anyone still holding throwing in the towel with your second scale for a solid five handles or so of profit on a handle or so of risk to your stop point. Though its never a surprise for the structures to get respect, it’s always nice when they hold lines as tight as these from a risk to reward perspective…

About the Author

Discovery Trading Group is a unique dojo focused on mentoring aspiring futures traders since 2010. It’s emphasis is on guidance in building bespoke processes and risk overlays rooted in market structure, price action and orderflow, with sound adaptable risk management as a priority.

www.discoverytradinggroup.com

 Posted by at 5:18 pm  Tagged with:

11/07/2017 ES Orderflow Narration

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Nov 072017
 

I pointed out a change in volume density characteristics early in the room today and as it turned out the view happened to have some merit. Essentially I said that for several sessions now as new highs were retested and/or broken we have seen the classic “P” shaped volume profiles so characteristic of aggregate short covering behavior. I’ve highlighted the recent profiles more indicative of short covering into recent new highs in green and contrasted in red the difference in today’s profile in the image below, along with the key structures in play in orange. Its pretty elemental actually. If the highest volume in a session occurs near/around the high of that session, what is more likely? Do new buyers generally like to buy the high tick, or is it prior sellers on the wrong side that tend to puke out at the high tick? So with that regarding today we noted that though we broke to a new high in Globex the profile this time just thinned out into nothing into the high indicating a potential change in trader expectations. We saw a ton of volume in pink on the retest of the OH in the cash session though, but once that flow was complete I mentioned in the room that the long side felt exhausted to me. It turned out to be true at least in the short run starting with the largest size leading out short on that last push up in pink followed by a steep second push failure in red on thin relative volume.

For those who did decide to sell into the retest as intraday swingers the structures below to look to scale into should have been very obvious starting with the yesterday RTH high potential former R turned S from above 90’s we had just broken out of. Remember guys, we can never control how close the structures will be and they will naturally expand and contract relative to each other with changes in volatility. So next we pulled back into the YH and saw new passive buyers looking to buy a pullback stepping up against late chasing sellers in light blue. Note once again size leading out against the market as net buyers into that push back down. I can’t imagine not scaling at least some into that action or the second push low failure on paper thin volume in dark blue that followed, but of course each of you has your own evaluation process. Though kind of on the fifty yard line I also highlighted more seller absorption in purple as a potential scale spot for the same zone as I did in light green as well with peak volume density around the YC 88’s. The next structure below for those running multiple scale overlays was the Globex low 86’s based on and meeting the prior super major former R turned S 85’s from 11/1 & 11/3. Plenty of trapped shorts on the first push down there in dark green ending with a strong long finish lift off the lows led by size followed by a paper thin second push failure in lime green from seller exhaustion and the world leading out long from there in the stats. Another textbook section of price action and flow illustrating the predictability of crowds around the known key market structures. Plenty for everyone today both shorts and longs, swingers and scalpers…

 

About the Author

Discovery Trading Group is a unique dojo focused on mentoring aspiring futures traders since 2010. It’s emphasis is on guidance in building bespoke processes and risk overlays rooted in market structure, price action and orderflow, with sound adaptable risk management as a priority.

www.discoverytradinggroup.com

 Posted by at 4:30 pm  Tagged with:

10/31/2017 ES Orderflow Narration

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Oct 312017
 

Textbook PA and flow action at this key structure today which member Geoff and I happened to be watching in the room and discussed in chat. We expected the spill past the OH line in the sand with spill up to the next minor 75’s structure above as marked and of course figured that either the bears would sell it hard as a headfake and/or the bulls would step up hard into a pullback back into the 73’s from above. As it turned out both unfolded as expected, but more importantly a very tight range was formed and the edges of which would end up being very exploitable “uncle” lines for whichever side turned out to be wrong and were forced to puke (in terms of those intraday swinging structure to structure). The swing shorts would be betting that the pop was a headfake and looking to trade back into the 68-70’s we had rallied from and the swing longs buying the pullback would be looking to bet the rally continued and trade into the yesterday high 77’s structure. Business as usual for most DTG swingers depending on what your bias was at the time.

So we popped up above the OH in purple but buyers quickly exhausted into the high there which was also I’m sure a layup for the short scalpers. From there as expected we pulled back shallow into the 73’s structure and saw the aggressive sellers get stepped up against massively by passive longs in light blue. This was followed by a second push low failure in dark blue on paper thin volume with new sellers totally disinterested. Either of those spots I’m sure jumped off the page for the swing longs. From there we saw the most epic battle in light green as the world wanted to keep buying but the passive sellers now were stepping up giving the bulls all they wanted. Obviously if you were a swing bull from just prior that should have made you very nervous and I’m sure plenty of you threw in the towel there. Despite this action since it didn’t really occur into the current highs I’m sure the swing bears passed on that action. But for those willing to take a shot into the afternoon the action in pink may have interested you. The bulls once again pushed hard, this time buying into the case high but got absorbed hard. Note in the stats also the largest size finishing net sellers into that push against the broad market. But alas the shorts got no traction as the buyers continued to accumulate and the new case high headfaked just enough in light red to force many prior intraday shorts back out. Again though, note the largest size selling into that push as well so perhaps the more savvy were able to hold on realizing that in the aggregate it was the longs who were the most trapped. This was confirmed with a super thin hard rejection of the highs in dark red as the bulls finally lost interest and we subsequently rotated hard back down. The first wave bailed back into the VWAP which was then the same case 73.25. And finally longer term longs were also forced to throw in some towels as the market makers pulled bid liquidity in dark green just under the interim support line that had developed for the day.

All in all action like this may be the most valuable for you to review because it illustrates that any and all analysis including that of the order flow is simply an analysis of what IS at that time and it does NOT predict what will be even in the very near future. Its just a continuously evolving auction guys. All you can do is segment the action via your intersecting criteria and see what unfolds relative to your risk/reward overlay on a trade by trade basis. Of course over groups of trades reading the flow well can have the ability to keep losers smaller relative to winners over groups of occurrences when you do happen to have it right…

 

About the Author

Discovery Trading Group is a unique dojo focused on mentoring aspiring futures traders since 2010. It’s emphasis is on guidance in building bespoke processes and risk overlays rooted in market structure, price action and orderflow, with sound, adaptable risk management as a priority.

www.discoverytradinggroup.com

 

 

 Posted by at 5:01 pm  Tagged with:

03/12/2015 Mr TopStep Bootcamp

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Mar 122015
 

Mr TopStep bootcamp where RG covers a variety of topics: market structures, gambling, charting, reading order flow, price patterns, and HFT.

 Posted by at 3:09 pm
May 202010
 

I’m probably stating the obvious for many of you, but the moral of the story is always follow the money supply starting with a macro view and all the way down to watching for shifts in what I call “The BIG three” intraday.

First up, the 10s. Ten Year US Treasury notes are perhaps the most widely used and regarded measure of risk appetite in the world. Money isn’t created (usually). As a “first stop” it flows between the S&P 500 index and the 10s in a very reactionary manner initially and from there it is chopped up and allocated to various asset classes with more detail. But if something happens that is bearish, there will be a quick move to park in the 10s and if something is bullish money will flow from the 10s into the 500 initially. It is important to note that we are in a HUGE, organized uptrend in the 10s. Notice how it is mostly uniform and not all messy like the ES? This is a really good first clue that global money is being positioned for flight to quality. Kind of like a bear settling in for a long winter hibernation. I don’t profess to be a macro God, but when I see this I pay attention. Also note that the volume is steadily increasing to the long side. Last year at this time the 10s were trading 5-600K per day. Yesterday we traded more than 1.5M and we are averaging over 1M contracts each day with the net pouring into the long side. Not good for stock indices.

Next is the Euro. Directly correlated with the 500 for quite some time now – especially during price shock conditions. Right now the EU is likely in a move to return to parity or close to it. Without going into a huge explanation of exactly how and why the Euro tracks with the S&P, just know that with the global debt issues being at the fore front right now, everything is tied to the currencies and value against the dollar in particular. Like the 10s, note the uniform down trend with increasing volume to the short side.

Finally, remember to pay VERY close attention to the Euro/Yen cross. Also known as the carry trade. The EUR/JPY cross has succeeded in calling most every major turn in the equity markets WAY ahead of time. Why? Like I said, follow the money. The world money supply is about debt and using borrowing at various efficiencies between world banks to create spread ops as well as to use as a hedge against risk appetite. Basically, the core benefit of the trade is the ability to borrow money for free in Japan at the central bank level. Actually it was really free (as in zero) until relatively recently, but it still may as well be as it is right at a mere 9 basis points. The idea is to borrow money in Japan at 9bps and invest it in US an/or European equities for a nice return and use the ECB tied to the Euro as a backstop as a hedge. Obviously there is a built in “free money” trade, since at the worst case you are borrowing for 9bps points and returning 50bps at the ECB for a difference of 41 basis points in your pocket. What is the catch? If risk appetite shrinks because the equities investments lose more than 50 bps you are upside down on the trade and the cost of borrowing is the minimum loss. This is why the carry trade is the ultimate barometer for global risk appetite. If the biggest and brightest who control the biggest pools of money in the world are pessimistic enough not to grab the free money you probably want to pay attention because obviously it trickles (or pours) down into the equities rather quickly. When the cross goes up it is bullish for equities and when it declines it means risk appetite is shrinking so money will flow out of equities. In turn the Yen declines against the Euro and the money shifts to fixed income, best reflected initially in the 10s almost always. Once again, note the significant down trend and the increase in volume as the selloff deepens.

One last thing about the carry trade: Notice in the following chart plotted against the SPX how the cross leads every major turn in the equities markets. Follow the money. This is all daily stuff obviously but you need to be watching the big three everyday and use them to spot trouble that might run you over at your key levels. Remember: Equities CANNOT win a tug-o-war with fixed income or currencies. The money is just too big and dwarfs them in every way. The S&P against the 10s or the EUR/JPY cross is like Pee Wee Herman against Sly Stallone in an arm wrestling contest…

 Posted by at 8:32 am