@makingmoves can you share more of your trades from time to time using this strategy please?
- #123
- Edited 2:28pm Feb 24, 2024 5:15am | Edited 2:28pm
- Joined Jun 2007 | Status: Trader | 1,010 Posts
A Trade Setup / Example From Yesterday (Wednesday 28th February 2024) & Discussion
On Tuesday 27th February 2024, EURUSD created a balanced 'D' distribution volume profile. The following day (Wednesday 28th), price consistently trended lower, breaking out of the prior day's volume profile range. As price found a temporary bottom and started to retrace, this is where you begin looking for a breakout-retrace and then trend continuation D profile trade.
In the screenshot below, I have highlighted the most significant volume clusters (of the prior day) that may become important resistance zones. This is because we can expect the prior day's 'D' profile was the result of the largest market participants secretly accumulating their positions before manipulating price into a sell off, to turn those very large positions profitable. It is logical to assume that IF price manages to retrace back up to the 'D' profile (after breaking out/trending), those same market participants, and others, will become active again and push price back away.
When price reached the first highlighted High Volume Area (HVA) I was already sceptical of the chance of a rejection as there was obvious strong buyers present. Before we go further, this brings up a really important part of Order Flow trading and trading in general:
While we continue to learn, adapt and strive to get a better understanding of the market in terms of the best confirmations to enter a trade. We must also work just as hard to continually monitor the current market environment but more specifically what is or is not currently working and what characteristics both of these scenarios have!
Reading or watching any classic trading books / videos or even modern trading content from respected traders, one thing is consistently brought up excluding risk management. Traders who fail to indefinitely learn/monitor/analyse their trading and all markets connected to them are bound for failure but more importantly, traders who fail to adapt/evolve to the ever-changing markets will be left behind. Meaning no matter how powerful your strategy, how significant your edge is or how large your skillset, if you don't adapt/change along with the changing market, you will eventually be forced to stop trading.
Now, what made me sceptical of the potential for a rejection of these levels and thus a profitable trade? If you have been following me, you'll see I have been using Price + Cumulative Delta divergence more often over the last few months. This tool has been very powerful in my trading and is becoming more so! This is where I refer to the above discussion on knowing when not to trade and adapting your trading.
As you may know, Price-Cumulative Delta Divergence can accurately predict moments where price has a high probability to turn and follow the Cumulative Delta. There is actually a reason for this unlike your standard divergence indicators, that being, Cumulative Delta is its most basic form is orders coming from either buyers or sellers (positive/negative respectively). So for example, when sellers are jumping in - pushing Cumulative Delta down but price is still rising, there is opportunity and risk that price may soon turn and follow delta!
However here's the first reaction highlighted with the circle in the first screenshot on a 1-minute Price & Cumulative Delta line chart. As you can see, there is no divergence - there is no sellers jumping in. That doesn't mean that price can't still turn, just that it's less likely. I still look for confirmations but it will have to be a complete, aggressive reversal full of large sellers to convince me that price may be peaking/reversing.
Above is the screenshot of the 5 minute footprint chart, unlike the Cumulative Delta line chart suggests, buyers don't appear that strong! Price had even hit a bunch of limit orders and transacted heavy volumes around the rejection point (possible accumulation) however, the last candle had a warning signal present. Next to the exclamation point is, to the best of my knowledge, large passive buyers entering the market and NOT aggressive sellers. This is confirmed by the fact that during that candle, price did not move below these levels. So in conclusion, I didn't feel comfortable entering at this HVA.
Here is the 1-minute Price & Cumulative Delta line chart of the second reaction in the first screenshot. The same thing again! There is no divergence and thus there are no sellers jumping in. But staying consistent, lets look at the 5 minute footprint chart during this period to double check this is the case.
That aside, it is still good practise to understand where we would of placed a stop loss had the trade been confirmed. As this was a breakout-trend continuation style trade and not mean reverting, the rules state that bigger stop losses are affordable.
I always try to have my stop loss behind a HVA and placed in a Low Volume Area (LVA) as marked in the above daily Volume Profile chart screenshot. Another favourable aspect to this location is that it is on the opposite side of the prior two day's Value Areas (highlighted green section of each profile), this will add an extra buffer between the entry and stop loss price levels for reasons I will not go into now as I am yet to introduce Auction Market Theory to the thread.
Thanks for reading!
Trade safe,
MM
Seeking Fair Value
A Trade Breakdown From April (Fri-Mon 26-29th April 2024)
Hello everyone I hope you are all well! Its been a while since my last trade breakdown according to this strategy and as such I decided to make another new post and trade breakdown. This post/analysis is specifically about the (rare) trending type of volume profile ('I' Profile) of which we categorize based upon the daily volume profile. This post will also include Order Flow in detail, if you would like to understand what you are seeing, I have dedicated a post for you (Post #81 - Understanding Order Flow).
On Friday 26th April 2024 EURUSD traded aggressively throughout the day, trading from high to low and trending very fast. This was a trend day, price did not have time to stay at any one particular price level for any prolonged period of time, leading to the relatively thin 'I'' shaped Volume Profiles we categorize.
Now we know what the previous day's market environment was, we are now more prepared to navigate the following day profitably. The rules for this type of Volume Profile state that the Value Area High (VAH), Value Area Low (VAL) & Point Of Control (P.O.C) are the only levels to be traded off of: "Only Point of controls, value area highs and lows can be used as potential S/R. Of course this must be confirmed by looking for aggressive/passive players using order flow and price action at the level."
We however must always know where High Volume Areas (HVAs) are located, even if not trading off them directly, as they are very often significant support/resistance zones.
Lets get back on track. The day following the 'I' profile day we will look to trade a bounce at any of the mentioned levels above or the highlighted levels in the screenshot above. Before we can enter a trade though, we must first confirm or reject the setup via analysis of Order Flow. In this scenario there were two different potential confirmations to enter a trade, the second far more convincing then the first but while that was taking place there was simultaneously an equally strong confirmation happening, Price - Cumulative Delta Divergence!
As you may know, Price-Cumulative Delta Divergence can accurately predict moments where price has a high probability to turn and follow the Cumulative Delta. There is actually a reason for this unlike your standard divergence indicators, that being, Cumulative Delta is its most basic form is orders coming from either buyers or sellers (positive/negative respectively). So for example, when sellers are jumping in - pushing Cumulative Delta down but price is still rising, there is opportunity and risk that price may soon turn and follow delta! That is the exact scenario in the screenshot above.
This divergence puts me on high alert and tells me sellers are present, now lets confirm that idea via Order Flow:
The first reaction to the VAH (above screenshot) had some, although unconvincing, confirmations to sell (just two Inverted Imbalances). Given the strength of the bullish candles leading up to the reaction, I decided it's too risky to enter based on these limited confirmations alone. Luckily very soon after, price started to range and set up and confirmed a textbook short confirmation:
From the far left to right of the chart we can see Inverted Imbalances showing aggressive sellers are now present, this is a very common feature of a intraday tops and as such a very good confirmation. As price continued to range and print Imbalances, there was a very strong rejection candle/doji wick that echoed the idea that aggressive sellers are now here and stopping-reversing price. The best and final confirmation to sell came on the close of the 6:20AM candle. Within the bearish breakout candle there were three Inverted Imbalances, two of which were significant heavy volumes, accompanied by a strong negative Delta gave me all the confirmations needed to sell.
However you cannot enter any effective position in any market if you don't know where the optimal stop loss placement is. The Volume Profile is quite possibly the best tool for identifying insignificant price levels to place your stop loss.
According to the rules, as we traded off of the VAH, we place a fixed Risk-Reward Ratio of 1:1.75 on the trade and place the take profit respective of the trade's risk.
I hope this was informative and helpful, whoever is still reading, have a good day/night!
Trade Safe.
Seeking Fair Value
- #129
- Edited 3:50pm May 3, 2024 12:38pm | Edited 3:50pm
- Joined Jun 2022 | Status: Evolving | 236 Posts
I like this thread, though I don't think there is a market manipulation. It's a big liquidity market with lots of HFT firms doing arbs and mm. Use VP for market context and order flow for confirmation is a good thought.
Thank you for checking out the thread, I respect your view on the market, the main thing as you have pointed out is the utilization of these powerful tools together for a more precise view of the market.
The manipulation aspect of the trading strategy is to provide meaningful theory behind the strategy, while also allowing newer traders to understand what we are seeing by using the current popular lingo/beliefs. Do I believe the FX market is manipulated? Yes, but not to the extremes that some gurus claim, a lot of manipulation can be attributed to shady brokers. The intraday price action may look random but very often using these tools you can see why and where price has a good probability of turning or vice versa, this activity could even be called 'manipulation' as there is no definitive trading definition for the word.
So forget manipulation for a minute, what's the crucial/main aspects of this strategy and style of trading? 1) Unbiased solid theory around why the strategy will work. 2) Volume Profile in conjunction with higher timeframes to give the trader greater context on where the market is currently at and how it got there. 3) Order Flow for detailed analysis of volumes and interaction/imbalances between buyers and sellers, adding more confluence and confirmation to the trade. 4) Strict and consistent risk management to keep us in the game.
That's really the message of the thread but a friendly counter to your point, yes HFT and all types of algo/MM is taking place everyday, there are also large banks and institutions who often have no choice but to transact huge volumes in order to manage risk and to take advantage of the market for their clients. Like any business, it is in the business of cutting costs & increasing profits and as such manipulation is apart of their everyday trading strategy. There is evidence for this all over the internet and I'm sure more scandals will come to light in the future, I went into this a little bit in the first post of the thread I believe. Another aspect of manipulation and probably the most well known is some sort of price manipulation to push price into an area of increased liquidity to again fill the largest player's huge positions/orders.
Thanks again for checking out the thread and allowing me to give a good reply for the thread!
Trade safe.
Seeking Fair Value
Being slightly dyslexic, I found this concept to be almost impossible, Also looking at the profile requires you to have a data feed, use a platform like sierra charts, which is the worst platform ever to use. I bought a course from NV discussing all of this and engaged 40 hours of my life listening to him waffle on then at the end of it all, he say that he does not use the DOM or profile to trade off of. As to the order flow in the candles, looks good in hindsight in practice, it keeps falling through the order blocks.
Also volume is manipulated not so bots are busy shoving in orders in order to camouflage their buying levels. Volume might have been the key a couple of years ago, but that edge is gone IMHO.
I use liquidity which is easier to see with the right indicators, and a liquidity histogram. Coupled with synthetic liquidity, it's hard to make a losing trade.
that's how clear it is to me now
Also volume is manipulated not so bots are busy shoving in orders in order to camouflage their buying levels. Volume might have been the key a couple of years ago, but that edge is gone IMHO.
I use liquidity which is easier to see with the right indicators, and a liquidity histogram. Coupled with synthetic liquidity, it's hard to make a losing trade.
that's how clear it is to me now
- #136
- May 5, 2024 5:13am May 5, 2024 5:13am
- Joined Sep 2015 | Status: Trader | 2,516 Posts
Trading thin liquidity at the boundary of the charts
- #137
- May 5, 2024 5:19am May 5, 2024 5:19am
- Joined Dec 2022 | Status: Trader | 2,427 Posts
{quote} This is the second thread you have dumped some crap about Synthetic Liquidity on Forex Factory, even thought it’s impossible to see any real liquidity pools unless you trade within centralised market like Futures via a DOM. Who’s unethical really
When did this new word come to be? Wasn’t it Oochi who started with it a couple of day ago in GU-thread?
I’ve noticed alot of stuff/terms get copied on this forum, and then it’s used by either gurus or by the news sites.
Parroting.
You have an IQ lower than 90 if you interact with this user.
- #138
- Edited 9:01am May 5, 2024 8:43am | Edited 9:01am
{quote} This is the second thread you have dumped some crap about Synthetic Liquidity on Forex Factory, even thought it’s impossible to see any real liquidity pools unless you trade within centralised market like Futures via a DOM. Who’s unethical really
I do not wish to offend you, but before you decide to dish out insults at least have the decency to base your statements on some solid factual evidence ratherr than your own lack of knowledge.
Now, because you are ignorant, I will simply prove you so.
So I posted this in my Discord group, you can see the date of the posting, trust me it was done before the news came out, again you could see the development of Aqua bars (high liquidity)
So these are just 2 charts of many that I posted before the fact. So grow up, be a man and open your eyes.
Here is the second trade where I went long you can see the entry line in this one and the exit level. Before the Wight brother, everyone though flight was impossible, that's what makes trading hard for people. So many traders cling to outdated concepts and useless indicators developed in the 1960's. Elliot waves, Elliot died a pauper. MACD invented 1970. Are you still using a 1970 computer???
So before you sling mud, do your research and base your attack on fact not fiction. You say you are a liquidity trader, that I respect, however I do not respect the fact that you think only you have the means to calculated liquidity. Quite happy to go up against you on any market on my platform and see who does the better analysis.
Just to add in the SP500 trade I took.
