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.


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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.




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