Just an opinion. Based on research 
Manipulated Markets: A Strategy To Profit
- #102
- Feb 10, 2024 6:21am Feb 10, 2024 6:21am
- Joined Sep 2015 | Status: Trader | 2,516 Posts
Trading thin liquidity at the boundary of the charts
{quote} Hi Giselle, good to see you again! The type of trading you are describing can definitely be traded effectively via order flow, as I'm sure you already know. The highlighted 'buying absorption zones' on your chart, how do you objectively determine those (I think we missed this)? If I am wanting to see absorption/exhaustion, I will load up an identical time period cumulative delta candlestick chart to that of my standard price chart, this allows be to see divergences that can hint towards either absorption or exhaustion is taking place. Essentially...
These reversal patterns(see attached file) frequently occurs. Especially,when trading Gold.
G
Hello fellow traders, I hope you are all well and are ready for the upcoming week! Today I have a great trade example and breakdown that is practically textbook Volume Profile + Order Flow trading. To anyone new to the term Order Flow and how I use it in trading currencies, refer to this post (#81), where I go in some detail on what Order Flow is, the different types and how I myself use it.
In this particular scenario, the prior day's Volume Profile can be categorized as either a 'P' or 'D' profile. This is because the same trade would of been placed regardless of what profile category it was in! If you would like more information on the categorization of daily volume profile read this thread from post #2, there you can find the 4 different category's and the rules for them.
On Thursday 15th February 2024, EURUSD initially ranged, then broke out to the upside before balancing out towards the second half of the day. This created either a 'D' profile or a 'P' profile. As such the High Volume Areas (HVAs) towards the bottom of the profile are to be seen as important support zones.
The first half of the day price stayed consolidating at the top of the prior day's range. Significant USD economic data was released at 1:30PM (UK time), this provided the sudden boost of volatility that saw EURUSD sell off around 30 pips. The sell off ended almost exactly on the High Volume Area / Cluster highlighted in the above screenshot! This high volume cluster was almost certainly the result of large buyers entering their positions before manipulating the market, aggressively buying to turn these very large positions profitable.
That's the theory, now you could of entered at the P.O.C of the highlighted HVA and instantly had a profitable trade with an amazing trade location however, this may be a one off! I always recommend confirming your trade setups via Order Flow, this way we can see what's going on in the market on a granular level and the interaction between buyers and sellers at the price levels important to us.
In the above screenshot you can see the fast sell off hitting limit orders, slowing the momentum of the move and setting place for a micro range to occur. Initially the range looked bearish due to the large limit sell orders at the top of the range and inverted imbalances throughout. Not the ideal time to go long! Suddenly something changed (all limit sell orders have been filled) and 5-6 minutes later price convincingly broke out of the range to the upside, with large imbalances showing large aggressive buyers are present and this is confirmed by the strong positive delta!
The last two bullish candles provided the textbook confirmations for a successful bullish breakout - large bullish candles with imbalances within and followed by a strong positive delta. I have highlighted these specific confirmations with the little red rectangles in the screenshot above. The 1:43PM candle was the entry trigger, at this point I was already long euro so did not take double the risk however it was great extra confirmation that I was on the right side of the market. But regardless of trade location and confirmation, where is the optimal stop loss location?
As per the rules of the strategy (linked at the top) the stop loss is placed in a Low Volume Area (LVA) behind a High Volume Area (HVA) as highlighted in the above 30 minute EUR futures chart with a daily volume profile overlaid. You can clearly see the 'HVA's' in between the entry and the stop loss. I do this because it allows for general market noise but also to let the whole HVA to become support/resistance before quitting the trade!
The take profit is near the high of the prior days highs (target a intraday resistance level where price struggled to go any further) however there was more semi-significant economic data still due to come out one hour after entry, but the most important news/data had passed by then.
I hope this trade setup and confirmation breakdown was of to some use/help to my fellow order flow traders. Thank you for reading and have a great day/night!
Trade safe,
MM
Friday 16th February - Volume Profile + Order Flow Trade Setup (Context) & Confirmation
In this particular scenario, the prior day's Volume Profile can be categorized as either a 'P' or 'D' profile. This is because the same trade would of been placed regardless of what profile category it was in! If you would like more information on the categorization of daily volume profile read this thread from post #2, there you can find the 4 different category's and the rules for them.
On Thursday 15th February 2024, EURUSD initially ranged, then broke out to the upside before balancing out towards the second half of the day. This created either a 'D' profile or a 'P' profile. As such the High Volume Areas (HVAs) towards the bottom of the profile are to be seen as important support zones.
That's the theory, now you could of entered at the P.O.C of the highlighted HVA and instantly had a profitable trade with an amazing trade location however, this may be a one off! I always recommend confirming your trade setups via Order Flow, this way we can see what's going on in the market on a granular level and the interaction between buyers and sellers at the price levels important to us.
In the above screenshot you can see the fast sell off hitting limit orders, slowing the momentum of the move and setting place for a micro range to occur. Initially the range looked bearish due to the large limit sell orders at the top of the range and inverted imbalances throughout. Not the ideal time to go long! Suddenly something changed (all limit sell orders have been filled) and 5-6 minutes later price convincingly broke out of the range to the upside, with large imbalances showing large aggressive buyers are present and this is confirmed by the strong positive delta!
The last two bullish candles provided the textbook confirmations for a successful bullish breakout - large bullish candles with imbalances within and followed by a strong positive delta. I have highlighted these specific confirmations with the little red rectangles in the screenshot above. The 1:43PM candle was the entry trigger, at this point I was already long euro so did not take double the risk however it was great extra confirmation that I was on the right side of the market. But regardless of trade location and confirmation, where is the optimal stop loss location?
The take profit is near the high of the prior days highs (target a intraday resistance level where price struggled to go any further) however there was more semi-significant economic data still due to come out one hour after entry, but the most important news/data had passed by then.
I hope this trade setup and confirmation breakdown was of to some use/help to my fellow order flow traders. Thank you for reading and have a great day/night!
Trade safe,
MM
Seeking Fair Value
