Seeking Fair Value
2
- #26
- Dec 8, 2023 5:43pm Dec 8, 2023 5:43pm
- Joined Sep 2015 | Status: Trader | 2,516 Posts
Trading thin liquidity at the boundary of the charts
{quote} Trades from the start of 2023 (#2) Making my way through these trades, I should make clear that the rule about 'no trades before 5am' had not yet been implemented in some of these trades (including the trade below). 11/01/2023 1:05AM -1% Trade 1 {image} Context: At first high volume area of yesterday's D profile. Definitely not the most distinct volume cluster (separated cluster). {image} Confirmation: The whole chart is littered with inverted imbalances and consistent negative deltas. At the first reaction candle, passive sellers likely...
Trades from the start of 2023 (#3)
The weekend is upon us! As such I should have some extra time to work on the thread and post the trade journal bit by bit. Continuing straight from where I left off last post:
13/01/2023 - 2:32PM - +1%
Context: Yesterdays ‘I’ profile aka thin profile’s P.O.C. Price had tested below it but very soon found support and started to make a reaction, the 2nd bullish candle on 5 min chart closed above the P.O.C;
Confirmation: Some potential bullish signs before price turned but I use price action as well, so not viable setups. When we turned the original candle driving down showed signs of volume accumulation, and passive market participants going long. The drive back up had many imbalances showing aggressive market participants entering long with market orders. The first bullish candle did not close above P.O.C so had to wait for the 2nd candle to close for entry just to be certain. Delta was positive for both bullish candles.
Notes / Warnings: 2 bullish candles before entry. Held through weak ‘red’ news. (prelim UoM Consumer Sentiment) Took profit at 9:54pm just before market rollover.
16/01/2023 - 1:30AM - -1%
Context: At first high volume area of the upside of yesterday's D profile.
Confirmation: High volumes started appearing at the reaction area (possible accumulation in hindsight it wasn't!), the drive away was full of imbalances! Delta was negative and price action bearish candle.
17/01/2023 - 1:40PM - -1%
Context: At 2nd high volume area of yesterday's B profile.
Confirmation: Price rising, delta falling. Possible Accumulation. As price drove away a stacked inverted imbalance formed signaling aggressive sellers.
Trade 2/2 - 2:30PM - +6.5%
Context: At 3rd high volume area of yesterday's b profile, after getting stopped out on the 2nd high volume area.
Confirmation: Possible accumulation, possible passive sellers entering creating imbalances. On the drive away 2 inverted imbalances formed potentially signalling aggressive sellers. Delta and cumulative delta was negative, price action shooting star.
Seeking Fair Value
- #29
- Edited 11:22am Dec 9, 2023 10:53am | Edited 11:22am
- Joined Jun 2022 | Status: Evolving | 236 Posts
{quote} Trades from the start of 2023 (#3) The weekend is upon us! As such I should have some extra time to work on the thread and post the trade journal bit by bit. Continuing straight from where I left off last post: 13/01/2023 - 2:32PM - +1% {image} Context: Yesterdays ‘I’ profile aka thin profile’s P.O.C. Price had tested below it but very soon found support and started to make a reaction, the 2nd bullish candle on 5 min chart closed above the P.O.C; {image} Confirmation: Some potential bullish signs before price turned but I use price action...
Trades from the start of 2023 (#4)
Here is another six trades, all from January this year! This process of going back to the old journal and resaving pictures etc is getting very tedious, so next post, I am going to skip to when the next rule addition to the strategy (No trades before 5AM) was added and go from there. This will not effect the thread or any reader's ability to understand the strategy, I hope the trades I've already posted have helped provide some clarity and further understanding of the concept.
18/01/2023 - 12:10AM - -1%
Context: At 2nd to last lowest high volume area at the bottom of yesterday's D profile. Did Not trade rollover level; the level that the market closed on.
Confirmation: On the bearish candle moving down into the high volume area, price briefly stopped and large volumes (for Asian session) appeared on the ask side creating an imbalance. The drive away created a bullish candle (price action confirmation) inside of which there was an imbalance and at the very low a large (likely) passive buyer(s) caught the bottom. Delta turned Positive. In hindsight these were not the most compelling confirmations...
18/01/2023 - 11:10PM (New Day On Charts) - +3.22%
Context: At P.O.C of yesterday's thin ‘I’ profile, price opened at the P.O.C after gapping below last price.
Confirmation: Price gapped below to the P.O.C. Heavy volumes instantly appear (possible accumulation for pre Asian session) delta was positive yet a negative candle (possible absorption). On the bullish candle (PA) driving away from the P.O.C, relatively significant volumes started appearing on the ask (compared to the bid) and possible passive buyers caught the low, creating an inverted imbalance near the low. As price gapped down only longs would be appropriate as gaps are always filled, ideology is a part of the strategy rules. At the low of all the candles (at same price levels) there were volumes signalling passive participants orders are there and will stop the market there.
Notes / Warnings: Entered before 12AM (my time) market had just rolled over. Price had gapped down slightly (few pips) to the P.O.C but not break it I went long in that situation. Held through the whole day and over the rollover. Closed at entry signal to go short later that day (start of new day on charts 11:40PM)
19/01/2023 - 11:40PM - -1%
Context: At the very highest high volume area/bump of yesterdays ‘D’ profile. Price surged passed the first and largest upside high volume area/bump but reacted to the last one. This all happened before 12AM (my time) including entry but a new day on charts (after rollover).
Confirmation: At the first touch and reaction many many imbalances appeared in the 11:15PM candle, initially this looked like aggressive buyers which some likely could be. A few candles later intentions started to become clearer as a bearish candle (PA confirmation for shorts) had a large (for pre Asian session) volume on the bid creating an inverted imbalance. Suddenly the large initial volumes creating stacked imbalances may have been pending - now filled passive participants entering short! That is a confirmation as well as at the time of the bearish candle (+inverted imbalance) the delta was negative so I went short.
23/01/2023 - 1:45PM - -1%
Confirmation: Original drive down into high volume area had several inverted imbalances, in hindsight the largest could have actually been aggressive sellers not passive buyers… Volumes were traded at reaction area showing possible accumulation. The drive away included several imbalances potentially showing aggressive buyers are entering. Delta and cumulative delta were positive at entry candle (bullish candle PA)
Notes / Warnings: Potential LARGE sellers that created the stacked inverted imbalances at the 1:35PM candle, should of waited for a close above those potential sellers. Full loss 15 min after entry, price never went in my direction for a tiny bit… LARGE sellers came and sold, almost certainly the original large sellers I noted continued to move the market. My fault on the confirmation side however, the position and context in which I traded I still think had a high probability of working, in that aspect I should continue to do what I'm doing.
2nd trade of day 2:15PM - +1.75%
Context: at last upside high volume area of yesterday ‘D’ profile after breaking above it. Stopped out at first high volume area.
Confirmation: 2 hammer type candles formed (PA confirmation) each including heavy volumes (accumulation) potentially large passive participants were waiting and entered. Delta and cumulative delta were positive upon the entry candle.
Notes/Warnings: Price got near TP and reversed to entry multiple times. Even though it was a realistic trade with only 13 pip stop loss it took 10 hours and many whipsaws to eventually hit TP the next day at 1:40AM
24/01/2023 - 6:57AM +2.4%
Context: At yesterdays 2nd high volume area in yesterdays ‘b’ profile (end of uptrend scenario).
Confirmation: Potential passive sellers entered and created imbalances, also heavier volumes appeared on bid at high volume area showing aggressive sellers entering creating 1 inverted imbalance in the bearish drive away candle (bearish PA confirmation). Delta was negative.
Seeking Fair Value
- #30
- Dec 10, 2023 6:22am Dec 10, 2023 6:22am
- Joined Apr 2020 | Status: Trader/Coder | 1,929 Posts
Observer effect
{quote} Trades from the start of 2023 (#4) Here is another six trades, all from January this year! This process of going back to the old journal and resaving pictures etc is getting very tedious, so next post, I am going to skip to when the next rule addition to the strategy (No trades before 5AM) was added and go from there. This will not effect the thread or any reader's ability to understand the strategy, I hope the trades I've already posted have helped provide some clarity and further understanding of the concept. 18/01/2023 - 12:10AM - -1%...
Trades from start of 2023 (#5)
If I haven't already made clear, all of the these trades and the ones before it, are solely on EURUSD only! There is a big opportunity to use this strategy on other pairs/markets.
21/02/2023 - 8:25AM Trade 1: -1% Trade 2: +1.75%
Context: First trade at high volume cluster at the bottom of yesterdays ‘D’ profile after breaking below it, 2nd trade at the P.O.C.
Confirmation: London open, rising price - falling delta (Price - Delta Divergence). The first entry (loss) had a high volume on the bid and an inverted imbalance on the entry candle. The 2nd entry (win) first of had a large spike wick candle with the heaviest 5 min candle volumes of the day (Accumulation). The 2nd candle had a large volume on the bid creating an inverted imbalance (aggressive seller), the entry bearish candle had a likely passive seller entering at the wick of the candle, it also had an inverted imbalance within it showing aggressive sellers. Delta was negative.
22/02/2023 - 8AM (First Trade) -1%
Context: At lowest significant high volume cluster of yesterdays ‘D’ profile.
Confirmation: Inverted imbalances were likely passive buyers within the wick as well as imbalance showing aggressive buyers also present however, had to wait several candle to get an entry candle (Bullish with a positive delta).
22/02/2023 - 12:35PM (2nd Trade) +1.75%
Context: At lowest significant high volume cluster of yesterdays ‘D’ profile after breaking below it (stopping me out) and retracing back to the high volume area.
Confirmation: 3 inverted imbalances within the bearish candle (PA confirmation) potentially showing aggressive sellers, some potential passive sellers there as well: big volumes on the ask towards the top of the wick. Delta and cum delta negative.
27/02/2023 - 2:15PM -1%
Context: At the 2nd high volume cluster of yesterdays ‘ b’ profile. Of course following rules and not trading the first one.
Confirmation: Very large volumes on the run up, the initial reaction candle had its HVN in the wick part of the candle (strong sellers rejecting?) it took another 2 candles to get some more confirmation via imbalances in the 2nd bearish candle (PA confirmation) as well as a negative delta.
01/03/2023 - 8:05AM -1%
Context: At the highest volume cluster to the upside of yesterdays ‘D’ profile.
Confirmation: Heavy volume started to appear (possible accumulation) and many imbalances at the top of the wick (smart players buying the top of are they passively selling the top?) the 2nd bearish candle (PA confirmation) had 4 inverted imbalances in it showing aggressive sellers, delta was negative.
Seeking Fair Value
{quote} Trades from start of 2023 (#5) If I haven't already made clear, all of the these trades and the ones before it, are solely on EURUSD only! There is a big opportunity to use this strategy on other pairs/markets. 21/02/2023 - 8:25AM Trade 1: -1% Trade 2: +1.75% {image} Context: First trade at high volume cluster at the bottom of yesterdays ‘D’ profile after breaking below it, 2nd trade at the P.O.C. {image} Confirmation: London open, rising price - falling delta (Price - Delta Divergence). The first entry (loss) had a high volume on the bid...
Trades from the start of 2023 (#6)
Here we have another couple trades, these are some perfect, textbook trades! We are very nearly at the start of a new week, with new opportunities and as such will take a break from these old journaled trades. I'm thinking of what other aspects of the theory/strategy/execution/confirmation to continue the thread with after, I think a present day, real-time trade walkthrough would be valuable, so I'll keep an eye out for a high probability setup!
06/03/2023 - 11:15AM +1.75%
Context: At high volume area to the upside of yesterdays ‘D’ profile after breaking above it.
Confirmation: As price was falling delta was positive! (Price - Delta Divergence). The bearish candle with a wick had an imbalance at the low of the wick (potential aggressive buyers are now present). The next bullish candle (PA confirmation) had 5 imbalances showing lots of relatively large aggressive buyers.
07/03/2023 - 7:45AM +1.75%
Context: Highest high volume node to the upside of yesterdays ‘D’ profile. A new level tested AFTER 5AM!
Confirmation: The run up bullish candle had a massive order on the ask - almost definitely a passive seller going short! The next bearish candle (PA confirmation) had a stacked inverted imbalance and 3 extra inverted imbalances, showing many relatively large and aggressive sellers, delta was negative.
Notes/ Warnings: Looks like a textbook trade - large obvious passive participant - many large aggressive participants, RR 1:1.75
10/03/2023 - 8:35AM (1 Trade) +1.75%
Context: At the P.O.C of yesterdays ‘P’ profile after breaking above it.
Confirmation: Large passive participants likely entered long at the low, aggressive buyers then created imbalances through the candle, had to wait for a positive delta candle.
Notes / Warnings: Hard time deciding if the previous day's volume profile was a ‘D’ or a ‘P’ however this same trade would have been taken either way! Another textbook trade, good process, good outcome.
Seeking Fair Value
- #36
- Dec 11, 2023 12:28am Dec 11, 2023 12:28am
- Joined May 2018 | Status: Tadpole | 2,719 Posts
Stay green!!!
- #38
- Edited 8:51pm Dec 11, 2023 12:45pm | Edited 8:51pm
- Joined Jun 2022 | Status: Evolving | 236 Posts
A real-time trade on EURUSD from today (Monday 11th December 2023)
As I said, here's something different, a trade walkthrough that took place today!
On Friday, EURUSD was volatile however, a 'D' distribution volume profile was printed. I noted this in my post about EURUSD last night on the Auction Market Theory thread. It was where the level is marked on the volume profile screenshot in which this trade was placed, a significant high volume area (HVA) at the the bottom of Friday's trading range, see below:
After ranging, price eventually sold off until we came into contact with the large volume cluster. Price stopped falling and created a micro range with very heavy volumes that at first contradicted the setup, this can be seen on the 5 minute chart:
When order flow does not confirm the setup, do nothing. Flat is often the strongest position, especially non-biased, decision making wise!
The 5 minute timeframe consolidation period, had many high volumes at both the high, low and in-between. This is accumulation however, not all heavy volumes indicate they are buying, some the opposite! Unfortunately, we do not know in detail what's going on within the heavy volumes and the market participant's intentions, we can only see which way price breaks after the range and if delta confirms the move (a strong breakout should be accompanied by a strong delta, representing aggressive buyers are present and vice versa).
The chart below is the same, just 10 minutes into the future, giving price the opportunity to reveal the markets (were the largest market participants building longs or shorts) intentions by being aggressively pushed up or down after the range.
As the consolidation was coming to a close, EURUSD started to be bought up aggressively (strong delta with bullish candle, breaking out), after a shift in sentiment saw more imbalances appearing leading up to the breakout. As price breaks above these heavy volumes I go long, you can think of it in two different ways, both with the same conclusion.
One being the largest market participants were building up a massive long position, using both limit and market orders, before manipulating price to go in there direction.
and/or
There were both strong sellers and buyers present, both aggressive, thus creating the tight price channel we observed. In the end however, the sellers sold everything they had and the buyers bought it all and still want more! If price closes above all these heavy volumes, its a definite sign of buyer strength and aggression.Either scenario suggest further bullishness, that aside, where do we place the stop loss and profit target?
The stop loss is placed behind the volume cluster price reacted to, according to the rules. One of the biggest advantages of using volume profile and/or volume based methods for your stop loss/take profit placement, is that you are not constricted to the same SL/TP placement as everyone else (usually above/below market structure high/low) and thus your trading can be more dynamic while adjusting to fit changing market conditions.
The profit target, as per the rules in this profile and context, is placed at the previous day's Point Of Control (P.O.C). This works out to be over the minimum risk:reward ratio of 1:1.75 however, if it did not, I would extend the take profit until it did.
Lastly, lets look at what the trade look like on a plain, standard, 15 minute candlestick chart and discuss trade management.
As the trade has a smaller stop loss size (in pips) and there is no important economic news or data releases due this afternoon, I will look to exit the position just ahead of market rollover, if neither stop loss or take profit levels have been hit. I do this to not to risk the big increase in volatility hitting my stop level, as well as being slipped on the stop order due to the lack of liquidity.
The update: A winning trade. As was stated above and according to the plan, I took profit just ahead of market rollover for a small gain of 0.9%.
Seeking Fair Value
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