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"Ratios & Harmonics: a Different Way to Trade." Summary 37 replies

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Ratios & Harmonics: a Different Way to Trade

  • #28,741
  • May 11, 2017 6:01pm May 11, 2017 6:01pm
Quoting pereiraalex
{quote} Definitly interested ! But can I ask your opinion on something ? On monday I will have to buy a yearly license from SierraChart. They have 2 service packages, one with footprint and one without. I think I can still get the delta information with both of them. You think its worth it ? I am afraid of buying it and then end up not using it later on.
Honestly, being a NT user I don't know Sierra well enough to comment. You may want to see if you can find a free or cheap footprint chart around the web and weigh the costs. I'm preparing some material now, and hope to have it up this evening... take a look and find out how informative you think it is to know the details within the bar vs only the delta, then share your thoughts with us
  • #28,742
  • May 11, 2017 6:03pm May 11, 2017 6:03pm
Quoting jmezz
{quote} {quote} Selling on that 2nd leg into the 618 is weaker than both the harmonic pb and projected 1:1. {image}
Thanks Jmezz. Yes it has all the confluences. I have always been comparing momentum with previous bullish swing. Just found out we should compare with previous bearish swing, not the bullish ones. Thanks again!
  • #28,743
  • May 11, 2017 6:19pm May 11, 2017 6:19pm
Quoting Mr. Pip
{quote} Please do we are all students here. Looking forward to your lesson.
Quoting Forthebulls
Mr Pip and traders, I think it's great that Damian is showing some order flow/footprint charts. Back in the day they just called this "reading the tape" and it was reserved for pit traders. I began my quest to learn these a few months back when Rocky first shared one, and like Mr Pip, I've had a lot of fun playing around with them. I know a few traders who frequent this thread are familiar with them, but I assume most are not. If there is any interest I'd be happy to put together a post on how to read order flow, and how market orders fill limit...
yeah really interested in this. Always been intrigued when rocky started with these (is he still posting? Just catching up with the thread). Still looks a little like the matrix but sure it is easy once you know what it all means.
  • #28,744
  • May 11, 2017 6:55pm May 11, 2017 6:55pm
Quoting PipTrendz
{quote} {quote} yeah really interested in this. Always been intrigued when rocky started with these (is he still posting? Just catching up with the thread). Still looks a little like the matrix but sure it is easy once you know what it all means.
Hey PipTrendz he actually just started posting again this week out of nowhere, including some OFA charts, check them out... good stuff. I don't use OFA because of the price.

https://www.forexfactory.com/showthread.php?p=9856831#post9856831
  • #28,745
  • May 11, 2017 6:55pm May 11, 2017 6:55pm
I will do my best to convey the basics, but I am 10 years removed from school so my teaching skills may be rusty.

Reading the tape:
There is a ton of info to take away from the footprint, I will be using 6B as an example since the currency futures are much more active this time of day.

Have you heard of auction market theory? That's really what trading is, one big Ebay. We want to buy low (at a discount) and sell high (at a premium), smart traders want to avoid that middle ground they call "fair market price" because that's where those EMA crossover suckers live. The footprint allows you to see the details of the auction that a standard candle will not show. Think about this, it is 2017 we have home computers with 16 cores and high speed internet that allows us to download 100 MBs/second, so why are we trading like it's still 1980 off of nothing but a candlestick image? Why aren't we reading the tape and trading like real pit traders now that the technological capability is available to all of us? There is so much data available to futures traders but it seems we've been taught to ignore it and instead focus on lagging indicators which do nothing but separate us from our money! Let me ask you one last question before you open this chart image... even if you have never traded with a footprint, do you keep a T&S window up while you trade to see the flow of market orders hoping to catch notice of those big block trades that give away smart moneys intention? With a footprint, due to the visual nature, it is much much easier than monitoring 1000 rows of T&S data.

Setting up your footprint: I've come across footprint charts that are time based, tick based, volume based, and range based. It's really up to you, because ultimately the data will be the same. Range bars are my personal favorite because I feel like they coincide best with that auction market theory idea I mentioned earlier. Since footprints have so much data in each bar it's also nice not to have a new one print every 30 seconds, to me, that's just not enough time to process all of the information that we now have to base our trading decisions on.

I've tried to include ample notes in this chart but I also want to discuss the DOM and fill process because many traders don't fully understand what causes the market to move. I will expand on that in a separate post to prevent congestion.
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  • #28,746
  • Edited May 12, 2017 6:48am May 11, 2017 6:56pm | Edited May 12, 2017 6:48am
Do you trade with a DOM? Do you realize that this ladder of limit orders is what smart money uses to steer the market? Look at the DOM attached, what will happen when 1 market buy fills, what will happen when 1 market sell fills? Since there is a que to buy at the current price of 1.2901 (limit orders) a market buy will shift the price up to 1.2902 because they aren't going to get a price better than the guys who have been waiting in line, the market does not tolerate line jumpers! In fact, if you were to buy 5 orders you would move the market to 1.2903 assuming no other traders were offsetting your position.

What would happen if 1 market sell fills, price would stay the same at 1.2901 because there is no que to wait behind, in fact you would have to sell 13 contracts to get this market to move down to 1.2900. I don't have that type of cheddar but the larger players do.

Another great feature about the DOM is it gives us instant access to market sentiment. Just pull it up and watch it, If there are more bulls interested in buying the market, you'll notice that the market tends to follow the path of least resistance and head towards the money.

Also, watch the DOM during high impact news events and you will notice that it clears right before the news. 90% of those limit orders just disappear in a second and that is what produces the liquidity vacuum that causes price to jump 50 ticks in 60 seconds.

Hmm, I wonder if smart money uses these limit order ladders to steer the price wherever they want Once you've seen the DOM shuffle enough times from bullish to bearish in the blink of an eye, you start to catch on. that being said always be cautious when trading off the DOM sentiment alone, after all these are limit orders and they can all be cancelled with the click of a mouse.

One last thing to think about... looking at the DOM a market fill can often cost you a tick Do all those ticks add up across a day, week, month, year? Yes! So be like the smart money, save yourself a tick and enter with a limit order when you can.

Note that the second image is just an easter egg for NT traders, the DOM is like a video game, you bind your mouse keys and click away... it's like I'm 18 playing Starcraft again . But be careful a few careless clicks can cost you money, like if you left click the buy column above the market price you will get filled at market (unless you click MIT, market if touched). I know when I first started using the DOM I lost a few hundred bucks mixing up my limit and stop key, so be careful... fool me once, shame on you NT, fool me twice... shame on me (and that's what happened).

I hope everyone has found this material useful, like Damian always says, "I hope it has added value!"
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  • #28,747
  • Edited 2:45am May 12, 2017 1:31am | Edited 2:45am
entered long EurAud

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closed for +7
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  • #28,748
  • May 12, 2017 2:47am May 12, 2017 2:47am
Quoting Forthebulls
Do you trade with a DOM? Do you realize that this ladder of limit orders is what smart money uses to steer the market? Look at the DOM attached, what will happen when 1 market buy fills, what will happen when 1 market sell fills? Since there is a que to buy at the current price of 1.2901 (limit orders) a market buy will shift the price up to 1.2902 because they aren't going to get a price better than the guys who have been waiting in line, the market does not tolerate line jumpers! In fact, if you were to buy 5 orders you would move the market to...
Thanks FTB for the detailed explanation above. Will still need to see how Damian uses it during live trading....
  • #28,749
  • May 12, 2017 3:46am May 12, 2017 3:46am
Thx for the info Forthebulls

But just remember one thing make sure that the underlying Market Structure is looked at i.e. main trend and immediate trend and then it depends upon whether you are aiming for 6 to 10 ticks or bigger amounts.

Once again many thx for posting this information.

Regarding the DOM (or ladder), this is very crucial and the following may help.....PLEASE NOTE I AM NOT AFFILIATED WITH THIS. However, he has explained it in a simple way and I hope it improves understanding and helps.

I'll post the link and if Damian has issue then i'll happily remove it....


Published on 14 Aug 2016

Part 1 of this video covers the absolute basics of order flow. It explains what is shown on the DOM (a.k.a. depth of market, ladder, order book, depth and sales). Many new traders want to learn more about order flow but they don't even understand the basics of limit orders vs market orders, uptick/downtick, why price changes, etc. Part 1 explains all of this in great detail and after watching it, you should clearly understand what you are seeing on a DOM.


Part 2 explains why the DOM is useful.
Part 3 explains the impact of unnecessarily giving up the bid/ask spread

Experienced traders who understand the DOM and price movement may want to jump straight to Part 2.

Intro
04:11 (https://www.youtube.com/watch?v=iWwxMokC0F8&feature=youtu.be#) - Part 1 - The Basics
42:55 (https://www.youtube.com/watch?v=iWwxMokC0F8&feature=youtu.be#) - Cumulative volume profile
46:45 (https://www.youtube.com/watch?v=iWwxMokC0F8&feature=youtu.be#) - Placing orders
55:20 (https://www.youtube.com/watch?v=iWwxMokC0F8&feature=youtu.be#) - Part 2 - Why is the DOM important? How is it helpful?
1:23:11 (https://www.youtube.com/watch?v=iWwxMokC0F8&feature=youtu.be#) - Part 3 - Giving up the bid/ask spread and its effect on P&L


https://www.youtube.com/watch?v=iWwxMokC0F8&feature=youtu.be

trade well
It's a dirty job but someone's gotta do it!
  • #28,750
  • May 12, 2017 5:12am May 12, 2017 5:12am
Thank you guys.

I am testing and checking it out, and really there seems to be some bullish candles with big bear deltas, and then the next candle is really bearish ( and vice versa ).
Seems a great way to make really nice entries ( and avoid really bad ones ).

Its also a great timing, as I will buy the license on monday with the orderflow package.

My work area:
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  • #28,751
  • May 12, 2017 7:57am May 12, 2017 7:57am
Quoting Forthebulls
Do you trade with a DOM? Do you realize that this ladder of limit orders is what smart money uses to steer the market? Look at the DOM attached, what will happen when 1 market buy fills, what will happen when 1 market sell fills? Since there is a que to buy at the current price of 1.2901 (limit orders) a market buy will shift the price up to 1.2902 because they aren't going to get a price better than the guys who have been waiting in line, the market does not tolerate line jumpers! In fact, if you were to buy 5 orders you would move the market to...
Thank you for both posts very informative.
If you fail to plan, you plan to fail.
  • #28,752
  • May 12, 2017 8:08am May 12, 2017 8:08am
Quoting PeterT
{quote} Sleeping time.. SL at BE+1, TP at safer location as I cannot trail while I sleep Momentum of the bears is weak, we're at S1 pivot support so I don't know if we'll make it without hitting the SL. {image}
Just for the record. Not that anybody was waiting for the results

Went to sleep with SL at BE and TP way before the 1:1 completion to have maximum TP hitting probability.
SL was almost hit in Asian session. Lucky for me I didn't use the usual BE+3 as SL
I could have taken profit at the bottoms of the swings down.
But I didn't and practiced patience.
After the third swing down I moved SL to above the swing, thinking that would be room enough for price.
It wasn't.
There was a small break of structure, SL got hit, and price fell all the way down to hit my profit target.
.. Typical
Got +10 pips out of it though..

Now I wonder what is the lesson to be learned here? Anybody?

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  • #28,753
  • May 12, 2017 8:10am May 12, 2017 8:10am
Quoting pereiraalex
Thank you guys. I am testing and checking it out, and really there seems to be some bullish candles with big bear deltas, and then the next candle is really bearish ( and vice versa ). Seems a great way to make really nice entries ( and avoid really bad ones ). Its also a great timing, as I will buy the license on monday with the orderflow package. My work area: {image}
Looks nice. What kind of monitor setup do you have ?
  • #28,754
  • May 12, 2017 8:14am May 12, 2017 8:14am
Quoting PeterT
{quote} Just for the record. Not that anybody was waiting for the results Went to sleep with SL at BE and TP way before the 1:1 completion to have maximum TP hitting probability. SL was almost hit in Asian session. Lucky for me I didn't use the usual BE+3 as SL I could have taken profit at the bottoms of the swings down. But I didn't and practiced patience. After the third swing down I moved SL to above the swing, thinking that would be room enough for price. It wasn't. There was a small break of structure, SL got hit, and...
I was waiting for the result .. and the lesson is .. give your trade the room it needs
On a more serious note.. after seeing such a breakdown in PA I would've taken profit at the blue-ish structure or trailed very aggressively.
  • #28,755
  • May 12, 2017 8:38am May 12, 2017 8:38am
Quoting x3m-PippiN
{quote} I was waiting for the result .. and the lesson is .. give your trade the room it needs On a more serious note.. after seeing such a breakdown in PA I would've taken profit at the blue-ish structure or trailed very aggressively.

I followed your (good) advice x3m-PippiN and it could have turned out ok but unfortunately it didn't

Thanks for pointing out the breakdown of PA. I guess I didn't see it as a threat.
I noticed the bears couldn't make the NSL after a 61.8% retrace, but I assumed that price needed to correct deeper to find more sellers, as I was still expecting a NSL and a 1:1 completion.
But at 78.6% correction I still didn't see any weakening of the bulls.. A bit more selling yes..
At that point I thought it was pointless to quickly take profit to save a few pips.
It happened to me before that price corrects 100% and then returns..
So I left the SL above 100% correction.

A little disappointed but still happy with the 10 pips
Lesson learned
  • #28,756
  • May 12, 2017 8:55am May 12, 2017 8:55am
Quoting x3m-PippiN
{quote} Looks nice. What kind of monitor setup do you have ?
A very weird one 2 identical monitors 25' with 2560x1440 and one 27' with 1920x1080.

The 25' monitors are recent, and the 27' is old. They are in a row. I am on the middle of the new ones and the 27' one is a little to the side
  • #28,757
  • May 12, 2017 9:03am May 12, 2017 9:03am
Dj30 looks like trading range, took one scalp short +11, now watching for BO !!!
  • #28,758
  • May 12, 2017 9:27am May 12, 2017 9:27am
+4.4 NDX
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  • #28,759
  • May 12, 2017 9:32am May 12, 2017 9:32am
risky short, TP around 8
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  • #28,760
  • May 12, 2017 9:34am May 12, 2017 9:34am
Quoting Victor_Lin
risky short, TP around 8 {image}
Not so risky.....the market is in range maybe 10 , 15 points are possible!!!!
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