Author: user

Below is an insight into a potential approach into multiple markets. Combining Volume Profile and Channel Patterns. This could be done for all Al Brooks Best trades.

This is a walkthrough using the Logic inherent in the Structural patterns. We would only be considering trades in Play from F1-F9 and would ignore or at least make note of NF situations which would cause us to stand off a trade.

1st OP

Market has been open for an hour and formed an F10 during the Euro IB which we test just after the London Open.

 

 

 

 

 

 

 

 

2nd OP

Following the F10 we move higher and see the seller step in at 95 and 96. This forms what looks like an F5. We are looking for a continuation trade. We have also just formed a major reversal pattern at the low.

This pattern had two trades the first bounce from the 96 step and the second was a spring of the step.

 

 

 

The Market moved higher in a stairstep fashion offering another three F5 trades the final one also being an F7 test of an earlier volume node.

 

 

 

 

 

 

 

 

 

 

 

 

 

Before we dive into DOM trading Skills we should examine the Basics of the framework – the median Line.

The median line is the slope in slope analysis the center of the channel and the centre point in the application of Action and Reaction.

Babson stated that if a trader understood this theory he would be a millionaire. He also cited several different Action and Reaction Types. Rather than try to memorise these lets just look at a few examples of price action.

Above we see some uses of the median line. The entire concept of the methodology is to time a touch of a Volume profile point using the theory and to look at the DOM and Volume/Tick index during that touch.

Below we see the channel touch coincides with the vol POC. This is all we are after.

 

 

 

 

 

 

 

Several touches below on VPOC’s

yesterday I identified about 10 opportunities and never made money because i pulled the trigger to late. This walkthrough will marry the two approaches of AR and SC and take every trade with a 1 point Stop Loss and 1st Target.

Above are the first of five opportunities taking during the first 90 minutes.

1. First entry is the 1:1 reaction line at point 1 created from the move down
2. Second we have a channel overshoot
3. Third trade is also a channel overshoot
4. Fourth trade is a with trend channel touch
5. Fifth is a with trend channel touch.

So lets now look at the volume profile during each of these entries.

 

 

 

 

 

 

 

 

 

 

 

 

The first entry above is an F2 hitting the Vpoc of the developing distribution.

 

 

 

 

 

 

 

 

The Second entry is responsive buying within the wiggle room of the dist.

 

 

 

 

 

 

 

Third entry again is an F2

 

 

 

 

 

 

 

Fourth entry is an F2

Fifth entry below is a cookie cutter or the edge of value in the down move.

Ok an NF3 trade states we don’t fade what appears to be absorption coming off the low. People who hit the bid thinking we were going lower now need to hit the offer to get out. This causes a volume spike.

 

Question is now why doesn’t it spike through the Queue who is on the other side?

Could be first scalps for new longs! How easily does the market clear the queue on retest. Does it absorb again. On clearing the queue does the market hit the bid again?

The DOM is the single  most important tool in the Prop trading World. However it’s essentially telling the same tale as the tape with the exception that as well as whats printing we have the Depth pf market.

10 Year Notes Absorption and Backtick
Price has been moving down and suddenly we see absorption on the Bid at 070. Every time the bid is cleared the buyer immediately sweeps the offer as it steps down and nothing gets through to 065.

This is our first heads up that a buyer is interested here. however the Seller takes the 070 Bid and brings 2000 down on the offer. Only 38 trade into the next price however before the buyer sweeps the offer indicating he;s still in play.
The Buyer then takes out the next offer at 075 and places size on the Bid. This is the first time he has lifted to consecutive offers and likely the start of his press. We then have a pattern of offers pulling off and the buyer sweeping and stacking the bid until we reach 085. The seller sweeps the buyers Bid at this level which is the first indication of Balance. Time to take profit if long.

 

 

 

The following are the structural contextual patterns that define the trading plan.  Fade trades should only be taken if they match a contextual pattern.

Fade Patterns

F1:  Fade the Edge of a Distribution

The first fade pattern is playing the edge of a distribution or range. The same pattern is valid for a developing Daily Value Area Low/High or the edge of a small range formed over several minutes. The difference being the Developing value Area entries we would expect to see absorption. On micro ranges we may not and would have to consider other context for entry such as a correlated market.

With these trades we need to be aware of wiggle room, essentially we often shakeout week hands before going the expected direction.