MarketDelta Blog

Many times the best things in life are the most simple in nature.  The same is true for a good trading strategy.  Taking a trading strategy and making it more complex and “sophisticated” does not necessarily make it better.  In fact it will probably make it more difficult to understand because now there are more variables to take into consideration.

  - Footprint Profile Video Overview (7 min)

The Footprint chart within MarketDelta offers a way to categorize and track the high volume price within each bar.  The high volume price is denoted by the black outlined price within each bar (column).  This shows where the greatest amount of volume traded for the time frame being viewed.  The time frame in this example is 15 minute bars.

The strategy worth considering is using the high volume price as a measure for the underlying trend in the market. Tracking this point within the bar and its relation to the previous bar can be very insightful because it shows where market participants are complacent conducting trade.

If the high volume price is higher on the current bar than it was on the previous bar that would tell you volume is confirming the higher prices.  If prices trade higher but the high volume price is lower than where it was in the previous bar it should be a warning sign the underlying trend is weakening.

The idea behind this strategy is to provide a way, other than just monitoring price activity, to identify the trend and hopefully exploit it more fully.

The bars can be created in any time frame you choose. To some it would be important to see this on a 30 minute chart. To others it would be important to drill down to a much shorter time frame that would help identify inflection points more clearly. A few suggestions would be some of the non-time based periodicities you here us talk about often.  A simple 3 or 5 minute chart works well too!

Here is an example of a 15 minute ES chart from yesterday. This represents the entire day on this single snapshot.

Click for full size

Here is a short list of some of the characteristics you should pay special attention to when looking at a Footprint Profile:

1. Shape of distribution. What is the shape? Is it “P” shaped, “b” shaped, double distribution? The book Markets in Profile talks about this further.
   Links to read about the shape of a distribution: Blog 111 | Blog 112 | Blog 145
2. Relative location of high volume price. Is is near the high, low, or mid-point of the bar?
3. Relative location of high volume price with respect to the previous bar. Is the high volume price higher or lower than the previous bars high volume price?
4. What is the magnitude of distance between the currnet bars high volume price and the previous bars?

The basic strategy is this: If the high volume price is moving higher, stay long. If the high volume price is moving lower, stay short. When this changes stop yourself out of the trade, 1/2 your position, or exit and reverse (not recommended).

The distance or measure of one high volume price to the next gives another clue to the “urgency of the crowds”.  Notice how large it was between the 11:15 and 11:30 bar…almost 10 points.  Price was pushing into new lows as well. Buyers stepped in near the low as can be seen by shape of the bar AND the blue Footprint.  Consequently, the next few bars had a very stable high volume node as the market churned and failed to retest the lows.

I will write a follow up article at a later day to discuss other ideas on using this key piece of information.

The IOAMT group is proud to host a live presentation by Don Jones, founder of CISCO-futures, a futures research and education company. Bill Duryea, the founder of the Institute of Auction Market Theory will conduct the presentation with Don.

If you have registered for an IOAMT trial in the past you will have the instructions emailed to you Tuesday the 18th, even if it is expired. If you haven’t registered for an IOAMT free trial please do so now to ensure you receive the instructions.

Click Here to register!

The presentation will cover aspects of The CBOT Market Profile and Understanding the Market Generated Data by using Value at price over time. They will also discuss:

• Time frame for ‘market acceptance’ of price
• Starting with a balanced market and how to determine when a market is balanced
  • (Value in the absence of balance is a pretty nebulous concept.)
• A balanced Market begins with the end of a trend.
• Each succeeding day adds to the balance until a new trend begins.
• The trend beginning is observed as a breakout from the balanced distribution.
• A single day session may or may not be a valid locator of value. Value determined from a three day Overlay is far superior.
• The trader must be prepared for either a trending or congesting market.
• The market generated data gives the support price, the resistance price, and breakout points.
• Markets tend to run and pause in all time frames.
• Starting from a balance, a market will test the balance limit, then breakout starting a trend.
• Then the trend slows, testing the propensity to continue the movement.
• Finally, the next balance forms. And so it goes as long as the market exists.
• A day trader is very interested in the run-pause picture within the day, There can be several run and pause phases within a day.
• Identify key reference points for trading action.
• The day activity is taking place within the context of the longer term [multi-day] auction
• Reading the profile graphic is easy. Reading the current timeframe is a lot harder.
• CISCO solution; Value Analytics, trading tool that parses out the current day, looking for runs and balances. This is the Run- Pause tool that breaks down the market on a 15 or 30 minute basis.

Bill Duryea, founder of IOAMT and CISCO home Study Course alumni will moderate the discussion with Don Jones, which will be held in the IOAMT/OmNovia Room. It will start at 3:30 pm CST and will be about 1 and half hours long. There will be time for questions at the end. WE encourage everyone to take advantage of this opportunity to pick the minds of industry leaders. This opportunity doesn’t come along often.

Just register for a 5 day free trial to IOAMT between now and then and you will receive entrance instructions to attend the event. If you have registered for a trial in the past you will receive the instructions.

We recommend reading these 2 articles by Don:
http://www.cisco-futures.com/congestion_background.html
http://www.cisco-futures.com/value_analytics.html
We look forward to seeing you there. If you need anything contact support@ioamt.com.

The risk of loss in futures trading can be substantial, as too can be the potential profits. You should carefully consider whether such trading is suitable for you in light of your financial situation. Past results are not necessarily indicative of future results.

In MarketDelta there exists a chart called “Custom Profile” which allows you track a quote page of instruments in a more visual manner than what a quote page offers. Below is an example of the Dow 30 stocks. This shows the percent change on the day for each Dow 30 stock. Those showing green are positive for the day and those showing red are negative for the day. They are ranked in decending order.

All you need to do in order to create this is first build a quote page with the symbols you want to display on the custom profile. Save the qoute page. Next, click File | New | Custom Profile. To modify the custom profile right click it and choose preferences. Once created and saved, they will be listed as a chart under the “Open Chart” icon.

Click here to watch a short 4 minute recording of how to do this.

Custom profiles provide an easy way to track watch lists, industry groups, or sectors. A popular way to use this would be to list industry sector ETF’s and monitor the strengh of them. Traders may then choose to zero in on certain stocks with a sector or play one sector against another.

We wanted to share (with permission) a newsletter from one of our educational partners that was published yesterday. It provides some interesting long term perspective of the S&P emini futures and showcases some very nice functionality available in the Standard + Market Profile or higher edition of MarketDelta.

Take a look at the newsletter and let us know if you need any assistance getting the chart setup similar to what is shown in newsletter. Click here to download a similiar chart definition and then File | Import | Chart Definition in MarketDelta to open and have the chart for yourself.

Also, if you are looking for an opportunity to learn more about Market Profile, be sure to check out Alexander Trading’s next seminar here in Chicago in June.

Each Friday we do a 1 hour webinar presentation in the Institute of Auction Market Theory (IOAMT) live trading room. While we do not record each session, some we will because of the content presented.

Last week Brian did a market playback of the FOMC interest rate decision using the Footprint chart to show one way a short term trader might have applied this information. Secondly, he oovered what we are calling the “tracker” functionality. This allows the trader to quickly plot delta on a traditional chart to gauge delta in almost any time frame.

He covers some ideas and strategies you might consider for using this new functionality. One of the strategies discussed looks at “the first TPO” trade and how to monitor trading when this occurs.

Here is the link to the 47 minute webinar.

Here is a link to more information on the tracker (5 minutes).