Blue's Clues to Trading: Timing Levels and Behaviour of Price

Very good video this morning from Chris Drysdale re Mark Douglas and trading process/size.

Well worth 12 minutes no matter where you are on the spectrum.

BALANCE/IMBALANCE>>>>>>>>>MARKET STRUCTURE





The point of this is simply for one to Observe how the Initial Balance forms a distribution and this distribution
becomes structure... Highs lows etc... This all come from the above post and Auction Market Theory.



I speak of the EDGE OF VALUE....and trading from this area.




It's simply a process like HTF>LTF Starting with a Monthly VWAP and drilling it down to the session.
Using Vol Profile, VWA,P Initial Balance and MArket structure to identify are we Balanced or Imbalanced.

Identify your setups in relation to where these areas are.
For ex
Price Discovery Continuation Trade
Return to Value Trade
Fade the Edge of Value Trade
VWAP Bounce Trade.

Some great setups on the ES... Its the only chart I have viewed today ,,zeroed in on
Fri inside day same as last Fri.. Mon taking out H/L just like last Monday.

Always always always in the back of mind is Al Brooks 18 bar probabilities...
Bar 1 Sets H/L of day approx 20% of the time... (RTH)
Last week was Mon and Thur....

Will it be today? No idea

RoadMap is part of my playbook.... Trading Timing Window is 8-11 EST generally,,,

Volume profile and VWAP anchored to Thurs...Why? well it coincides with the Weekly VP
and it was a significant event... Thurs is bit more granular than the Prev Week VP but relatively the same

A big day...As Stacey Burke always says....How good can you get ?

It's you vs you... 5 pts 10 pts 20 pts 40 pts ? 60,80,100 !

It is all possible. You need the mindset and the framework.

Much like SIZE...The same fears / emotions come up hanging onto trades.

Last Weeks Volume profile levels and VWAP carried over into new week.
Always looking for Balance and Imbalance...Where is it ?
Then I look for the appropriate setup to appear or not




Current weeks VWAP session vwap etc all showing the same idea.
RoadMap always on the chart to toggle off on.

Volume profile has such powerful levels...An excellent tool that IMO can help
most strategies.

Cheers

Al Brooks 5m 18 bar probabilities.
Written about it for a number of years..

It's always in my trading mind as I watch PA
Unfold ...


In Al Brooks’ price action methodology, the "18-bar rule" is a statistical benchmark used to assess the likelihood that the day’s high or low has already been established. On a 5-minute chart, the 18th bar marks the end of the first 90 minutes of the trading day (e.g., 11:00 AM ET for a 9:30 AM open).

Brooks emphasizes these probabilities to help traders understand when the "Opening Range" has likely defined the boundaries of the day.

The 18-Bar Probabilities (5m Chart)
MilestoneProbability High or Low of Day is Set
Bar 1~20%
Bar 12 (1 hour)~50%
Bar 18 (1.5 hours)~80% to 90%
Bar 80 (End of Day)99.9%


Yesterday Monday Bar 1 set the LOD
Today Bar 1 set the HOD.... (RTHs)

I have found many many weeks where 2 days of the week do this... 20% is one day


Gotta Love Al Brooks !

In Volume Profile POC VAH VAL are the "North Stars" of PA Price Action.
They simply define the Value Area !

So in these charts below I have the Monthly VP and Monthly VWAP
both from Jan 1st....

As stated prev....
I will "carry over" Monthly levels into a new month,,,as long as relevant 2weeks alot of times.
I will "carry over" Weekly levels into a new week,,,,ditto 2 days plus
I will "carry over" Daily levels into a new day,,,,ditto 2 sessions plus
you get the picture.....

Common sense tells us that once a Month is finshed or a week ,,,,that previous "time" period
does not cease to exist...no no no....Price has memory...a very good memory.

AS for VP and VWAP they simply define VALUE...and Fair Value is Balance,,,,
You can consider BALANCE as a RANGE,,,,,

And when the market is IMBALANCED...it is in PRICE DISCOVERY searching for NEW VALUE....

THINK of WYCKOFF,,,one area to the next,,,back and forth,,,
for me AMT AUCTION MARKET THEORY is HOW THE MARKET WORKS.

Take all the WYCKOFF Smart $$$ concepts etc..Dow Theory it all boils down to
AMT

Opening Range
Initial Balance
Vol Profile
VWAP.....

There is more but that is more than enough...for me
I think there is great value in Delta in bookmap etc etc etc...
Footprint charts..Market profile... So many great tools...
But we need to find the tools that we can master....


Bit of a ramble before bed but I cant stress the importance of
AMT VP and how the market revolves around these "DATA BACKED" levels....

Think of the VAH VAL as "THE FENCES" and within those FENCES IS 70% of the Markets volume.
So these MONTHLY levels on the below charts...within VAH VAL is 70% of ALL JANUARYS VOLUME.

AND the MONTHLY POC !!!!! it is where the HIGHEST amount of VOLUME within the month.
POC IS THE MOST AGREED UPON """ACCEPTED""" PRICE FOR THE ENTIRE MONTH !!!!
THE CENTER OF GRAVITY
THE MAGNET.
And what do magnets do ????? ahh yes ATTRACT AND AND AND REPEL !!!





The Magnet on Tues was the Monthly VWAP....
The Institutional "Efficiency" Gauge
Large institutions (pensions, mutual funds, ETFs) use the Monthly VWAP to grade their execution.

1. Buying: If a fund manager is tasked with buying 10,000 contracts of ES over the month, they are considered to have done a "good job" if their average entry price is below the Monthly VWAP.
2. Selling: They aim to sell above the Monthly VWAP.

Because these massive orders are "parked" at these levels, the Monthly VWAP often acts as a massive area of Support or Resistance.

For anyone that can follow what I have written here KUDOS lol....
If we consider/know the 5day ADR of the ES is approx 80pts...(wow)
And we have moved down from the Monthly VP VAH to the monthly VWAP....

IF we understand HOW POWERFUL these levels are and what they represent,,,,,
THEN.... remember IF THIS THEN THAT scenarios....
So IF price has moved WITHIN VALUE 60pts...and ADR is 80
THEN probably a good idea to book profits at Monthly VWAP ???

10 c net 50= a good day

How good can you get ?
Open your eyes and your mind to the bigger picture...If you desire.

930pm bedtime!! These levels (Monthly/Weekly) are the most important levels
coming into tomorrow...

Process Monthly Weekly daily VP VWAP...
All to answer the first Q I ask.... Balance or Imbalance(Price Discovery)
Once answered I then know which setups to FOCUS on,,,

Timing Levels Behaviour of Price.

Part of my Algo running in my brain is always asking and looking to see
where are we in relation to Closes M,W,Daily..to Opens to Initial Balances
to M,W,Daily Highs lows....as these levels one or several come into play
and can give a trader a sense of the markets sentiment.

Do I trade off them Nope,,but when they are in play along with my setups
and in unison with Balance or Imbalance then they become very important.

Today on the ES was just that.... Extremely clear setups.

Anyways a hodge podge of charts...
Alot of pts today if one can read the charts well.

I have written many times about using the 8ema channel as a dynamic momentum indicator,,,
and use it as a way to manage trades..both for adding on and exiting.
from 1m-5m... Look at todays 1m 8ema channel...and NO 8ema is nothing special at all..
The only thing special is stick to one,,to your plan.

This is what I am observing in regards to the 8ema channel..

Where is price Opening and closing ? Inside the channel outside..

If I am short as today.. When price is opening and closing outside the channel indicates strong momentum.
A place to add contracts...and when price closes on the opposite side its a hard out..Exit

Which one to follow ? well its a double edged sword.. The 5m can grab massive runs..but then its a long
long way to go to the opposite side and watch profits whittle down.

It really plays on the mental side... Its find what works best.

It can be a handy tool to take away or should I say give you,,help you develop some trade mgmt rules,,,,

The hits just keep on coming...

2nd chart was a textbook Price Discovery Continuation short trade off the Weekly VWAP's 1SD
Aligning with the VAL of the Weekly Volume Profile... I did not trade that..

Are we Balanced or Imbalanced ?
Where's Fair Value ?

Ask these above Q's. =>>If this Then,,,
Define the current market to define your setup.

Setups for a balanced market and setups for price discovery.

Of late I have solely concentrated on ES nothing else...
So thats all I am posting charts of... I just looked at gold Fri now and
see some very similar setups...With Weekly and session confluences
of VWAP and VP.

Going into the Equity Open we are in Price Discovery on the Daily...meaning Long
the blue line below is the VAL of the Weekly VP. When Price is BELOW the POC and ABOVE
the VAL that is considered a "DISCOUNT" area.. We like to buy at a Discount. Simple as that.


Now when the market Opens at 930 Price on the Daily is Long in price discovery...(Imbalance)
And on the Weekly Vwap price has re-entered Balance. Probabilities tell us that price will most likely
gravitate to VWAP as well as VP's POC...



And lastly everything on the charts...Weekly Volume Profile levels.
Weekly Vwap and daily Vwap..as well as prev days NY VP VAH and PWC.

It's simply Auction Market Theory playing out on a daily weekly scale.

GOLD

Auction Market Theory and the Weekly VWAP etc... just some thoughts

The statistical principles of the Weekly VWAP are identical to the daily version,but the "gravity" of the 1SD bands becomes much stronger because the data set is significantly larger.

On a Weekly VWAP, the 1SD bands still contain roughly 68% of the price action and volume, but the interpretation shifts from intraday noise to institutional trend health.

The Dynamics of Weekly 1SD
While a daily VWAP resets every morning, the Weekly VWAP builds a "memory" from Monday through Friday.

1. Institutional "Fair Value": Large funds and institutions often benchmark their performance against the Weekly VWAP. If the price is within the 1SD bands, they view the asset as being priced at a "fair" weekly average.
2. The 68% Rule in Practice: Because a week involves much more volume than a single day, breaking and holding outside the 1SD band is a significant event. It suggests that the market has fundamentally shifted its valuation of the asset.
3. Mean Reversion: On a weekly scale, the 1SD bands act as powerful magnets. If the price overextends to the 2SD or 3SD mark, it almost always snaps back into the 1SD "Value Area" eventually.

I also use an indicator on TV that plots the prev days closing VWAP and here is why
and then some charts to give you a simple simple look at WTH i am talking about lol....

In the institutional world, the Previous Day’s RTH VWAP Close isn't just a line on a chart—
it's a financial performance metric and a hard-coded variable in high-frequency trading (HFT) and execution algorithms.

Here is exactly how both humans and machines use that specific price to start the next day.

1. The "Execution Quality" Grade (The Scorecard)
For an institutional desk, the VWAP close of the previous day is the final "grade" for their traders.

1. The Rule: If a fund manager told a trader to buy 10,000 ES contracts yesterday, and the trader’s average fill was lower than the final VWAP close, they "beat the benchmark."
2. The Algo Carry-Over: Many execution algorithms are programmed to finish a specific order by the end of the day. If they fail to fill the total quantity, the Previous Day's VWAP becomes the "Price to Beat" for the remaining order the next morning.

2. Algorithmic "Pivots" and Gap Logic
Algorithms use the previous day's VWAP close as a binary switch for "Market State."

1. The Sentiment Switch: If the ES opens the next day above yesterday’s VWAP close, algorithms categorize the session as "Bullish/Strong." This triggers "Buy-the-Dip" logic.
2. The "Unfinished Business" Magnet: If the market gaps far away from yesterday's VWAP close, "Mean Reversion" algos look for signs of weakness to short the market back toward that "fair value" average.

3. HFT "Absorption" Levels
High-frequency algorithms treat the Previous Day’s VWAP as a major Liquidity Level.

1. Because thousands of retail and institutional traders place their stops or "limit-to-close" orders around the VWAP, HFTs know there is a massive cluster of orders sitting there.
2. They will often "run" the price into yesterday's VWAP to trigger those orders, providing the liquidity they need to flip their own massive positions.

Well I think thats enough to fill a weeks worth of study for some or more A little advanced when we get into these
prev day closing vwaps as they are rarely discussed but oh so relevant to Algos and Institutions...

So with that said... Enjoy your day and I wish ALL a prosperous week !

Gold

Some A+ setups for the brave I didnt partake in any gold trading today or past little while.
With the volatility we are experiencing I am solely focused on one market.

It's like driving a car 200kmh... you best have both hands on the wheel and sharply focused.
Shit goes wrong fast.

Anyways enough dribble talk.

Gold opened OOB out of balance on the (prev)weekly VWAP and soon moved OOB on the Prev Week VP VAH.
When price does that it is in price discovery PD and in search of new value(balance)

Weekly levels are so so powerful to gauge current sentiment and thus dictate what setups you are looking for.
The simplest is the Price Discovery Continuation trade...A trend trade...Best place to buy is the dip the pullback
Simple basic trading.. For that we scale down to the Daily and session levels to find value areas to execute at and
logical places to put risk on.

Besides my Initial Balance indicator... everything is data derived from time/price/volume(executed orders)

I think it very worthwhile for retail traders to understand what these Weekly levels represent from an "institutional"
standpoint. It is very much viewed in AMT eyes... Wheres Value ? Wheres Balance ? Is Value shifting ? Rising Falling ? etc

And we simply determine that by using VWAP and VP which is based off of executed orders.
are considered "non-lagging" or "reactive" indicators because they are built directly from
actual executed orders (Time & Sales data).

Unlike a Moving Average, which only cares when a price happened,
VWAP and VP care how much money was actually spent at that price.

Attached Image (click to enlarge)

Attached Image (click to enlarge)

Attached Image (click to enlarge)

So many great setups once again today on the ES...
Looking like Bar 1 setting LOD !!! Al Brooks 18-5m bar probabilities 20% .
On a Monday !

Fun little thing is to do a lookback on this twofold.
1) How many times a week does Bar 1 set the H/L of the RTH day.
2)What days of the week ? Are some days more apt to this than others ?

The 18-Bar Probabilities (5m Chart)
Milestone Probability High or Low of Day is Set
Bar 1~20%
Bar 12 (1 hour)~50%
Bar 18 (1.5 hours)~80% to 90%
Bar 80 (End of Day)99.9%

Sidetracked,,,,lol

Poker and trading are much alike in that we deal with incomplete information at the onset of our deal/trade.
But as more info is revealed we can or should make decisions based on expected value (data)

We are simply dealing in a game/business of risk mgmt disguised as an endeavour of chance to many.
But truth is its calculating risk based on probabilities...(data)

For some of us like myself we take the route of using tools that are data backed and not simply
mathematical(normal indis)... Is it the best or necessary..No not really we are all different in how
we process info and perform etc.... But I do prefer to have as much "reasonable" data based probabilities
on my side as possible.

Today is just another great day of as the market unfolds and reveals its probabilistic intentions we can
make better informed decisions ...whether its staying in a trade, moving a stop up...adding or scaling out etc.
It can be as dynamic as we want or simply a set and forget type of trade.. No right answer really at all.

Time for some lunch so cut to the chase heres some charts...

VP Monthly Weekly Daily
VWAP Weekly Daily NY.
Prev Week Close/PDC always a powerful level..why...closing volume/institutions

Zen and the Art of Poker is one of my favorite trading books.

If a would-be trader reads it and doesn't understand why I consider it to be an important trading book, then would-be trader will remain a would-be millionaire until such time as he or she does get it. Only then can one progress beyond the would-be millions to the actual millions.

I consider a key holding of my "success library," a handful of books selected from the hundreds I have read on the subject of trading that I keep close at hand and regularly re-read.

Zen and the Art of Poker is probably a better trading book than Mark Douglas's books, to be honest with you.

Appreciate that Vidvad !

A quick AI synopsis...fwiw AI that is

It is no coincidence that many of the world’s top hedge fund managers are also avid poker players. The bridge between Zen Poker and Trading is built on the reality that both involve making decisions under pressure with incomplete information.

Applying Larry Phillips’ Zen principles to the markets looks like this:

1. Non-Attachment to the "Trade"

In Zen Poker, you must be able to fold a winning hand if the situation changes. In trading, this is the discipline of the Stop Loss.

1. The Trap: Many traders "marry" a stock or a crypto project, letting their ego dictate that they are "right" even as the price drops.
2. The Zen Approach: A trade is just a vehicle. If the setup fails, you exit without anger or "revenge trading." You detach your identity from the P&L (Profit and Loss) of a single position.

2. The "No-Mind" (Mushin) of Execution

In Zen, Mushin refers to a mind not occupied by thought or emotion.

1. In Trading: This is the transition from discretionary anxiety to systematic execution.
2. When a signal hits, you enter. When a target hits, you exit. There is no "What if?" or "I'll wait five more minutes." You become a vessel for your strategy rather than a victim of your impulses.

3. Patience: The Art of Doing Nothing

Phillips argues that the most important skill in poker is the ability to sit out. This is even more true in trading.

1. Over-trading is the "tilt" of the financial world. It comes from the desire for excitement or the need to "make things happen."
2. The Zen Approach: You wait for the market to come to you. As legendary trader Jesse Livermore once said, "It was never my thinking that made the big money for me. It always was my sitting."

4. Embracing Variance (The Process vs. Outcome)

A "Zen" trader understands the math of expectancy.

1. If you have a strategy with a $60\%$ win rate, you will still lose 4 out of 10 times.
2. The Zen Approach: You don't celebrate a win or mourn a loss. You celebrate following the process. A "bad" trade is one where you broke your rules, even if it made money. A "good" trade is one where you followed your plan, even if it hit your stop loss.

The "Zen" Trading Mantra

The market is a chaotic system that you cannot control. The only thing you can control is your reaction to it. When you stop trying to "beat the market" and start trying to "master yourself," the profits often follow as a side effect of your discipline.


EDIT: I just copied and pasted this with a quick read...seems on point

Earlier this morning before the Open limited info but a very good trade presented.

A textbook VWAP bounce short..Key being the market was OOB/Inbalanced (outside of the 1sd)
It returned into the daily vwap value area and held..testing the 1sd...returned to VWAP and bounced
off VWAP and importantly the Weekly close.... then right to last weeks POC...

A simple hand that was dealt which you couldnt present a better vwap bounce scenario..perfect textbook.
do it over and over and these hands get dealt.

Market opened and things got busy,,,as price forms value follows and starts showing more cards...
Just be aware there is always a wild joker somewhere lol...