Don’t Worry, Be Adaptive

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Jan 192018
 

I happened to be in the room early today and suggested several potential ops to stalk for bulls and bears as usual, two of which for the bears are illustrated here. The first is the short momentum scalp keyed on stalking a market maker liquidity pull on the retest of the Globex low line. And the second is the trend continuation op on PB to the Globex low line after firm break below. As it turned out both materialized as hypothesized, but likely didn’t turn out as profitable as hoped for most members. Always remember that whatever the market does post your entry is never in your control. How could an unknown future ever be, right? Seems obvious I know, but it will rarely fail to challenge your emotions when it happens. Sometimes, despite being “right” according to your strategy/process there just won’t be as much meat on the bone as you would like. And as always your ability to capture whatever is there for the taking will be a function of the adaptability of your risk/reward overlay to market context and volatility changes. The main takeaway here being that if you are still using a rigid fixed tick/point stop and target criteria for your trades,, you might seriously consider the ongoing potential pitfalls of doing so.

So first we see the characteristically thin prints in dark red as market makers pulled bids to goose price over the case line right around the figure print (2800 even). The momentum was definitely set in motion and the speed picked up which was exactly what the short momo scalpers were stalking to hop on, but it very quickly petered out. It rotated up off the low there and you can see the volume thickened at the bottom of the pink area as many of those shorts covered out for a few ticks profit at best or a scratch at worst. Case in point number one – sometimes you have it right but it won’t pay you off to a large degree. Such is trading, but at least if you are adaptive you can get what it gives you. And as for the continuation shorts, they were happy to see the buyers disinterested on the first push back up there at the high side of the pink area hard rejecting the case line from below. This lack of interest from buyers continued on the second push in red with the bulls unable to even reach the VWAP. Surely what many classic intraday swingers were looking for also to hop on the continuation bear train. From entries there they were no doubt thrilled to see another big liquidity yank set in motion in yellow and price charge under the current new low. So far so good, right?

The next structure below by my measure was framed by the former 96-97’s MR line turned potential S from above as marked. As it turned out the 97’s side drew the action and provided plenty of liquidity to scale into in blue. Note swelling of print counts right in the kill zone as passive buyers stepped up against late chasing sellers. Those who’s models had them still holding contracts for subsequent scales though were no doubt disappointed. Given the recent explosive range expansion days I’m sure many hoped for some follow through today to the down side, but as of this writing price action remained contracted. We subsequently rallied right back up to where the move started even quicker than the initial selloff. I highlighted the volume spike in purple to illustrate that it was no mystery of course why the action was right there. Those short from that same range earlier still holding positions and not wanting to turn winners into losers covered out by lifting offers just under the swing line. I wouldn’t be surprised if more than a few members were in that flow as well scratching the second half of their shorts. If your model rules had you holding through the ranging that followed and you caught the later move down to the next structure below which was the 94’s, good on you. But remember, those who didn’t haven’t made a “mistake”. All you can do is execute your process rules trade by trade, adapting to context and volatility and find your edge over GROUPS of occurrences, not trade by trade. I still see the majority of aspiring traders out there trying to [i]explain[/i] why they win or lose event by event. I realize it’s a broken record at this point, but you need not predict the future to be a successful trader guys and girls. But you do need a repeatable process paired with sound management of risk and bankroll…

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

FUTURES TRADING IS RISKY AND LOSSES INCURRED IN CONNECTION WITH TRADING FUTURES CONTRACTS CAN BE SIGNIFICANT OR TOTAL. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. WHILE THERE IS GREAT POTENTIAL FOR REWARD TRADING AND/OR INVESTING IN COMMODITY FUTURES, THERE IS ALSO SUBSTANTIAL RISK OF LOSS, INCLUDING LOSSES EXCEEDING YOUR INITIAL INVESTMENT. YOU MUST DECIDE YOUR OWN SUITABILITY FOR TRADING AND/OR INVESTING. FUTURES TRADING AND/OR INVESTING RESULTS CAN NEVER BE GUARANTEED. THE PRINCIPAL OF DISCOVERY TRADING GROUP IS NOT A COMMODITY TRADING ADVISOR AND IS NOT HOLDING HIMSELF OUT TO THE PUBLIC AS SUCH. THEREFORE, NOTHING HEREIN SHOULD BE CONSTRUED AS AN OFFER OR ADVICE TO BUY OR SELL COMMODITY FUTURES, OPTION OR FORWARD CONTRACTS, OR INVEST IN ANY COMMODITY FUND OR POOL. https://discoverytradinggroup.com/a-disclaimer

 Posted by at 6:41 am  Tagged with:

Is Timing A B*^ch?

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Jan 122018
 

Well troops, once again we find a great example of what most members are keenly aware of by now. The good news being that market structures are almost always very predictable magnets for crowds on both sides, allowing for tight lines and risk overlay benefits that can be ground into edges over groups of trades. The bad news is just like any other indicator, price action and orderflow only tell you what IS happening right now and cannot foretell the future X minutes or hours from now event by event. The reason of course should be obvious, but has been the topic of many recent discussions on the forum related to finite vs infinite outcome games of chance (yes, trading is a game of chance folks, embrace that or be gone. lol). So here we see the action on the break above the 54-55’s structure (which had extended to include a new Globex high in the 56’s) and into the then current all time high 60’s structure. As would be expected, plenty were thinking enough is enough with this rally already and wanted to fade there, and likewise plenty wanted to stalk a shallow pullback to the 54-56’s from above to reload long there. And that brings us to the main message in support of the aforementioned realities of trading. Whether a bull or bear from these structures today as an intraday swinger, timing may have been a b*^ch…

 

First, let’s consider the initial test of the then current all time high 60’s. Shortly after the cash open we saw the case 60 even reject to the tick after strong buyer absorption and seller response in purple. Also note in the stats the largest size finishing net sellers into that push up. Obviously the bears who were strong in conviction not waiting for so called ‘confirmation’ sold into that push and made a score trading structure to structure. The next structure below the 60’s was framed by the Globex high 56’s and into the 54-55’s as marked to stalk a first scale or all out (the next below that was the one starting with the YH 51’s but we never got that far). For members reading significance in volume I’m sure many of you who were bears from the purple would have had a hard time holding through the buyers stepping up and absorbing new sellers in light blue at the high side of that first zone. They did eventually break through and hard reject prices below the low side of that same zone though so for those who held on to the bottom zone reject in dark blue, good for you. But the key takeaway here is there is no right or wrong in this stuff, just whatever your process specifics are seeking. If we consider that same action in light blue there is no doubt many bulls were looking for just that same action that bears from above were looking for to scale into, as is usually the case. Were the bulls that bought into that seller absorption on the first pullback  into the YH in light blue after break above “wrong”? No such thing is the answer. We never know what the aggregate of market participants are going to do and what effect that will have on price in the future, even when reading orderflow. Intraday swinger bears who sold the first test of the 60’s got to win, but intraday swingers who bought the first pullback from it had to puke for a loss. So like I said, timing can be a b*^ch…

But what about the action on the second test of that same all time high zone? As you can see this time the case 60 even was tested to the tick the second time around. But note on that first push in pink the buyers really exhausted into the high. That can often be a great signal for faders but in this case only was for the scalpers. Why? Almost immediately into that first pullback in light green passive buyers swarmed in and absorbed continuation sellers in a big way. From there we saw a second push double top failure in red, though again on thin volume with generally disinterested aggressive buyers. Were intraday swinger bears “wrong” to frame trades on either of those pushes looking for a move back into the 54-56’s or beyond? Obviously those who were short from there who read the super thin hard rejection of the VWAP in dark green were able to scale for a few ticks profit or a scratch at worst. But those who didn’t may have booked a full loss wishing they wouldn’t have waited and instead traded the earlier test in purple. Likewise, any bulls who didn’t catch that seller exhaustion hard reject in dark green may have missed getting in on the biggest move of the day as we saw the case high break and another big rip higher. Again, timing can be a b*^ch, but of course I say this in jest really. Only to continue to illustrate that you shouldn’t keep trying to build a trading process that evaluates itself on its ability to read whatever indicator and predict the future, one trade at a time. All you can do is execute your process in concert with your adaptable risk/reward overlay and see what unfolds event by event. Any edge that you are able to develop won’t really be able to be seen trade by trade without variance and will only be found over groups of occurrences. In our experience this seems to be the hardest fact for newer traders to accept – that they need not be able to predict the future in order to be successful. .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

FUTURES TRADING IS RISKY AND LOSSES INCURRED IN CONNECTION WITH TRADING FUTURES CONTRACTS CAN BE SIGNIFICANT OR TOTAL. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. WHILE THERE IS GREAT POTENTIAL FOR REWARD TRADING AND/OR INVESTING IN COMMODITY FUTURES, THERE IS ALSO SUBSTANTIAL RISK OF LOSS, INCLUDING LOSSES EXCEEDING YOUR INITIAL INVESTMENT. YOU MUST DECIDE YOUR OWN SUITABILITY FOR TRADING AND/OR INVESTING. FUTURES TRADING AND/OR INVESTING RESULTS CAN NEVER BE GUARANTEED. THE PRINCIPAL OF DISCOVERY TRADING GROUP IS NOT A COMMODITY TRADING ADVISOR AND IS NOT HOLDING HIMSELF OUT TO THE PUBLIC AS SUCH. THEREFORE, NOTHING HEREIN SHOULD BE CONSTRUED AS AN OFFER OR ADVICE TO BUY OR SELL COMMODITY FUTURES, OPTION OR FORWARD CONTRACTS, OR INVEST IN ANY COMMODITY FUND OR POOL. https://discoverytradinggroup.com/a-disclaimer

 Posted by at 7:00 am  Tagged with:

The Air Up There

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Jan 052018
 

Wasn’t that a Kevin Bacon movie in the 80’s? Up up and away we go once again. I realize most members don’t like the idea of trading ‘into air’ with no prior structure to lean on, but of course if so you’ve got to be prepared to sit on your hands when this happens – or, run a model variant that adapts to it contextually. We all know there is nothing as strong as prior known market structure in terms of its ability to attract players on both sides in very pinpoint ranges. And by now hopefully you all realize that in of itself does nothing to identify directional wins but instead provides for a tight line to keep risk to the stop point small relative to reward IF you happen to be right on that individual event. Over time these advantages can add up to significant edges of course, but they won’t be linear and you won’t be able to predict when and where they happen.

Case in point today we did have just one prior structure, and that was the YH 14’s obviously. And for the bulls there was a hard rejecting shallow PB after firm break above but you had to be at your desk early to catch it if you are in the US. Note size leading out hard in the stats on that last attempt back down in light blue. But if you were a bull and did catch the only structure based long for the day where did you stalk scaling/flattening with no prior structure to lean on? Does your model adapt by just using price action and flow when there is nothing else purely price and volume based? Or do you use zones based on things like Fib extensions or floor pivots or standard deviation, or something else? I mentioned in the room that when plotting a Fib extension between the former super major R line 98’s and the YH 14’s, the 50% extension on that distance just happened to land in the 22’s. I also mentioned the R1 with one most popular calculation method landed in the 19’s. Was it a coincidence that the thickest flow battles above in both the pink and red rotational pushes occurred right around those exact prices? You be the judge but in a practical sense all traders are human beings looking for something, anything familiar to lean on. And one could certainly make a strong case that is why in the absence of prior market structure these very popular indicator metrics seem to get much greater respect. Food for thought…

Anyway for those who got long from the hard rejecting PB’s in light blue or in dark blue off the cash open certainly the absorption flow along around the 19’s and/or 22’s respectively would have been enough to warrant scaling or flattening – even if you were completely unaware of the said indicator metrics. Likewise if you were a bear today either spot could have certainly made a strong case for betting on a rotation against the rally. It WILL end at some point obviously and never forget that any and all price action and/or orderflow is simply telling you the net of what was happening then, not what will be happening X minutes or hours from then. Nothing can predict an uncertain future in a constantly changing environment. Case in point note that on both pushes up in pink and red size was netting out hard to the short side as of the end of those rotations. In either spot bears were able to cost themselves very little risk wise for a shot at a reversal back to the Globex high 17’s and/or on to the 14’s. Sure, bears lost those fights today, but over a series getting 2-3-5:1 on the risk or whatever over time they don’t have to be ‘right’ all that often. Same goes for the bulls obviously, but I’m just trying to restate the same old broken record message. And that is whatever your strategy specifics are all you can do is plan ahead of time for what you seek to stalk, execute when you see it and see what unfolds after you do on any one trade occurrence. Your edge, if you find one, will be found over GROUPS of trades not one trade at a time. This is a very hard concept to grasp for many because they are used to all other things in their lives having 1:1 right/wrong – correct/incorrect feedback. When you are gambling (which is what all trading is folks, get used to it), your performance good and bad should be judged over an iteration. .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

FUTURES TRADING IS RISKY AND LOSSES INCURRED IN CONNECTION WITH TRADING FUTURES CONTRACTS CAN BE SIGNIFICANT OR TOTAL. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. WHILE THERE IS GREAT POTENTIAL FOR REWARD TRADING AND/OR INVESTING IN COMMODITY FUTURES, THERE IS ALSO SUBSTANTIAL RISK OF LOSS, INCLUDING LOSSES EXCEEDING YOUR INITIAL INVESTMENT. YOU MUST DECIDE YOUR OWN SUITABILITY FOR TRADING AND/OR INVESTING. FUTURES TRADING AND/OR INVESTING RESULTS CAN NEVER BE GUARANTEED. THE PRINCIPAL OF DISCOVERY TRADING GROUP IS NOT A COMMODITY TRADING ADVISOR AND IS NOT HOLDING HIMSELF OUT TO THE PUBLIC AS SUCH. THEREFORE, NOTHING HEREIN SHOULD BE CONSTRUED AS AN OFFER OR ADVICE TO BUY OR SELL COMMODITY FUTURES, OPTION OR FORWARD CONTRACTS, OR INVEST IN ANY COMMODITY FUND OR POOL. https://discoverytradinggroup.com/a-disclaimer

 Posted by at 7:01 am  Tagged with:

Keeping Square Pegs Out of Round Holes…

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Dec 272017
 

There is a recurring great lesson to be reminded of on this one today. It’s why we always advocate against fixed tick risk/reward overlays especially for shorter term traders. The message is to always LISTEN to what the market IS doing and not try to shove the square peg of how many ticks you want to make in a linear fashion into the round hole of the ever changing volatility and cadence of the market. It’s no secret that vol is tight currently and the net effect of that tightness as usual is for the key structures which draw crowd actions to be grouped closer together. And while that tightness will often result in smaller requisite risk to the uncle point, it will also often limit the amount of available reward for that risk to the next structure above or below.

So with that here we see the retest of the Globex low and YC 87’s off the cash open. On the first push in light blue we saw the thin prints from top of book market makers pulling bid liquidity to goose it over the line and entice breakout sellers. But as you can see it just immediately petered out with shorts unwilling to hit into it. Note in the stats size leading out long into that push down against tepid net short retail. This was followed by a steep angle second push failure in dark blue with size leading the world out HARD with long aggression. Like I said earlier due to the tight vol it cost paper thin risk to the stop point for the longs to find out if that initial pressure to the upside would continue. As it turned out it did, at least as of this writing.

But this brings us to the reward side of the risk/reward overlay discussion. As I said earlier when vol is tight the structures will also often be tightly grouped together. And with that the next structure above was still based on the 12/22 RTH and Globex high 89’s & 91’s, which was what the current Globex high was tied to. Like clockwork as soon as that structure was retested from below we saw a huge wall of buyer absorption develop right on the case 89.50’s and through the current high retest in red. I can’t imagine being a long swinger from below and not scaling at least some of the position into that flow, especially given the current vol. I have no idea of course whether the rally will continue, but if it doesn’t longs from below will likely be kicking themselves for not sticking to their plan to execute structure to structure and peel off that two plus handle win for a handle or less of risk. EDIT: As it turned out longs from the 87’s would have been happy to scale into the 89-91’s retest. Of course you can see in the image here the massive relative absorption of buyers by passive and aggressive sellers on the first push back into the level. But this was subsequently followed by one final battle on a steep angle second push failure ending in buyers throwing in the towel and their puking fueling a move back to where we had just come from. So for those intraday swingers who were bearish then or on the day you could have found a similar op short from the 89-91’s looking for a first scale of roughly the same distance back into the 87’s structure, and perhaps on to the more major 82-84’s zone next below there. Remember, you can’t control what the market does next nor predict direction and distance trade by trade. All you can do is listen to the market and most importantly develop a repeatable process which naturally adapts to its behavioral changes…

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 7:05 pm  Tagged with:

Context IS Everything. Obey your…

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Dec 192017
 

The theme of today’s educational example is an old favorite. Handicapping prospective structures on one more axis – time of day. Once again a reminder that there is always one thing more reliable than market structures drawing predictable action, and that is current context shaping outcomes. Time, along with other contextual changes often turn “right” into “wrong” depending on the risk/reward overlay, and can even manifest into situations where neither longs or shorts realistically get paid relative to their objectives – even when their initial hypothesis was correct. Such was the case on both sides at the key 83’s structure we discussed at length in the room. So as always be sure to see the transcript if you weren’t around in chat today.

I said early in chat that within the current vol even a move from the mid to high 90’s into the 83’s in one shot could easily qualify for an “incentive bounce”, and given that being such a key structure below it was definitely a spot to stalk if either long or short biased from there. We eventually got there late in the day as seen here in green and saw the case 83’s reject to the tick on strong seller absorption and a stalling rotation. Did we get a bounce? Yes, but in real time I noted that the bulls initially had a tough time with market makers pulling offers but the buyers reacting timidly unwilling to lift offers in a big way. This was the situation just under the red box where passive shorts eventually swarmed in and absorbed new buyers. Just before that in the room I said that it felt like with all the trapped buyers below around the 83’s the market still felt weak, and that perhaps the MM’s would rather pull bids to put those longs to the test which might result in many puking and a quick burst lower taking out the long stops. As it turned out that move DID happen, but not until around the cash close which can be seen in yellow. But guess what? It didn’t work. Market makers pulled bids which started the slide on thin prints and trapped new short deltas, but it immediately petered out and most momentum short players didn’t get paid. Why? The RTH session was over. Nobody left in the book to play.

In sum, the main message here is that from this key structure today we saw the market bounce but only back into the 85’s-87’s line before losing steam. Any swingers trading from the green area who didn’t recognize at the very least the time of day context and scale into the buyer absorption in red likely had to scratch at best. Those holding out for more sat and watched the bulls pick away with solid aggression across the rotations in blue but never get anywhere as the intraday clock ran down. Likewise the classic market maker driven stop run play was set in motion right at the end of the day but never materialized for obvious contextual reasons. If either the long bounce from the 83’s in green, the continuation short on the pullback to the 85-87’s in red, or the bid pull move in yellow had occurred earlier in the day would the ultimate outcomes likely been entirely different? I’d bet on on it. Where you are at in the session alone can be a really, really big deal depending on your strategy specifics and objectives. When you map out your spots to stalk ahead of the session perhaps consider some simple time based context considerations at the very least. “If we sell off hard to the 83’s structure early, I’ll consider a bounce trade. But not if its late because there won’t be enough time on the clock for it to play out…”. You get the idea. From there contextual reads can be expanded to include things like general sentiment, news, correlated market action, etc. Context is everything. Obey your thirst…er, I mean context.

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 8:13 pm  Tagged with:

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…

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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: