CISCO Futures
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Introduction
DayTrading highly volatile markets like the SP emini and DJ e-cbot is most often
based on some form of tick chasing, e.g. 30 second bars etc., often including
some sort of oscillator like stochastics. The reason for this highly hands-on
approach is the observed speed of price change. If you swoop in and grab a
few ticks you have limited your risk, but you are limiting your return as well.
Internet http//www.cisco-futures.com
Email dljones@cisco-futures.com
Daytrading with CMaPS
Background
CMaPS is an evolution for CISCO
A Revolution for the Day Trader
The CBOT Market Profile (tm, CBOT)
A Market Profile is a graphic displaying price and volume on the vertical
axis, with cleared price activity on the horizontal broken down by trading
period. Market Profile is a subset of the Liquidity Data Bank (LDB) report.
LDB reports are released only by the Chicago Board of Trade (CBOT).
The horizontal activity is identified by letters for each time period (for
half-hour periods the letters are A = 08:00 to 08:30, B = 08:30 to 09:00 and
so on). These letters are called BRACKETS or TPOs (Time-Price-Opportunity).
Value is defined as those prices included within the central 70 percent
of the volume, beginning at the peak volume of the day. Market Profiles are
available only from exchanges that report volume at price. Market Profiles
come from cleared data and hence are not available in real time.
The CISCO Meta-Profile
A Meta-Profile replaces the volume of the Market Profile with tick data,
generating TPOs (That-Price-Occured or Ticked). These TPOs are used as a
surrogate for the volume of the CBOT Market Profile. Value is defined as those
prices included within the central 70 percent of the TPOs. Meta-Profiles are
generated in real time and are limited only to markets that produce tick
data. Meta-Profile methodology was created by CISCO in 1987, it was published
in 1987 and it has been in continuous use on the CISCO Bulletin Board and
website since then. In balanced markets values from Meta-Profiles and Market
Profiles agree quite well. In directional markets they diverge, an activity
quite useful to traders and market analysts.
It is now proven that markets are complex and driven by feedback. Market Profile/Meta-Profile
is the only known tool that can decode the feedback, converting each price to
value. CMaPS builds Meta-Profiles in real time. It is nimble, responsive to
change, locates turning points (sets your timing), finds hidden values, fast,
user friendly, accessable via the internet and inexpensive.
A. CMaPS Reference Points
B. Tracking Directionality
C. Example
D. Worksheets
Many lose with the swoop-in strategy. Even in highly volatile markets like
the SP emini, new market information takes time to become assimilated.
This market "response time" is around 30 minutes. Swooping in may well find
you trading volatility.
Thus, a better approach is to know something about markets
(and yourself) and follow a well devised trading strategy that gives you timing
Trading Model Development.
The best
sort of strategy always involves understanding how markets behave and how to
respond to their behavior Intro to Auction Markets.
In concept, day trading is simple.
Find a trend start and enter.
Determine when the market has begun congestion (or reversal) and exit.
CMaPS (Current Meta-Profile Service) provides a great deal of the information
you need for these two steps. (This is often called timing, but it is market
understanding that gives you the timing.)
One of the important pieces of information is the Meta-Profile Value Area.
In the last few years many traders have learned that the Profile
Value Area often locates support and resistance for the next day. Their
successes have naturally led to increased use of this element of the profile.
Most of these traders are unaware of the power of profile techniques and
only use the Value Area numbers blindly. CMaPS not only provides those
numbers, but also gives you the tools to understand the market. If you
need review on Market Profiles/Meta-Profiles, go to the link on the CISCO home-
page: Data to 'Market Profiles/Meta-Profiles' in the Background Reading section.
Market Profiles Background
At CISCO we have researched Market Profiles since 1986. We
developed the most common technique for finding profiles (from ticks) in
1987 (Stocks & Commodities Magazine, Sep 1987). We continued to innovate,
publishing the book Value Based Power Trading (VBPT) in 1993
Value Based Power
Trading Text.
VBPT extends profile analysis to multiple days. This 'super profile' finds
Market Condition, the framework within which daily trading takes place
Overlay Demand Curve Background.
A. CMaPS Reference Points
CMaPS gives you comprehensive market information in real time.
CMaPS is for the daytrader. It offers real time information for tracking
the changing market.
CMaPS provides these reference points, information
generated by the market as the trading day proceeds:
Meta-Profile for the Periods Selected (PS)
Value Area for PS
Point of Control (maximum TPO price) for PS
Half-hour price bars for PS
First and Last prices traded (F and L) in the last half-hour bar
Tick count total for PS
Half-hour OHLC 30 minute bars for PS
Time range
Ticks
First (Open), High, Low, Last (Close)
Time of High
Time of Low
Tick count
Reference Points (optional)
Current Day
Tick count for PS
Value Area for PS
Point of Control for PS
Initial Balance (range of first two periods) for PS
Upper
Lower
Range Extension (trading above/below Initial Balance, 2 TPOs or more) for PS
Upper
Lower
Volatility (average range of half-hour bars) for PS
Trade Facilitation Factor (average number of TPOs per price) for PS
TPOs above Point of Control (excluding single TPOs) for PS
TPOs below Point of Control (excluding single TPOs) for PS
Total TPOs for PS
Prior Trading Day (Day hours)
Tick count for day
Value Area for day
Point of Control for day
Initial Balance (range of first two periods) for day
Upper
Lower
Range Extension (trading above/below Initial Balance, 2 TPOs or more) for day
Upper
Lower
Volatility (average range of half-hour bars) for day
Trade Facilitation Factor (average number of TPOs per price) for day
TPOs above Point of Control (excluding single TPOs) for day
TPOs below Point of Control (excluding single TPOs) for PS
Total TPOs for day
Attempted Direction
CMaPS provides you the tools to find breakouts, i.e. the potential
beginnings of trends.
Starts of trends are changes of the distribution from directionless
to directional. Well before a trend starts, attempted direction can
show the tendency toward directional movement.
Attempted direction in a slowing trend is much harder to divine, since
trends inherently display a push-pull character. CMaPS has other techniques
to guide you in the recognition of a budding congestion.
A concept advanced by Pete Steidlmayer (developer of the Market Profile) views the market as a struggle
between the short timeframe traders (members and professionals mostly) and the longer timeframe traders
(public). In this view, a balanced market is 'attempting' to become directional, or a directional market
is 'attempting' to become balanced. A table in the book, Mind Over Markets, pg 192-3 categorizes directional
relationships based on Value Area and volume. An abbreviated list for up attempted direction is below:
1) Higher value with higher volume ==> very strong (for continuation)
2) Higher value with unchanged volume ==> strong, continuing
3) Higher value with lower volume ==> slowing
4) Overlapping to higher value with higher volume ==> moderately strong
5) Overlapping to higher value with unchanged volume ==> moderately strong, balancing
6) Overlapping to higher value with lower volume ==> slowing, balancing
7) Unchanged value with higher volume ==> balancing
8) Unchanged value with unchanged volume ==> balancing
9) Unchanged value with lower volume ==> balancing, weakening
10) Overlapping to lower value with higher volume ==> weakening
11) Overlapping to lower value with lower volume ==> moderately weak
12) Overlapping to lower value with unchanged volume ==> weakening, balancing
13) Lower Value with higher volume ==> weaker
14) Lower Value with unchanged volume ==> weak, balancing
15) Lower Value with lower volume ==> weak
A daytrader riding a trend is looking for congestion or signs that a congestion
may be in the wind. Any situation below 4) in the table above is an alert to
exit. But how can you
use this data, since volume is usually not known soon enough for decision making?
Well, CMaPS lists tick counts, not a bad surrogate for volume in the computer
based markets (e.g. emini SP), but not as good where one tick can be many
contracts. Value, likewise
is a bit of a problem in unbalanced markets (where value is changing).
You track price change directly, value from TPO aggregation. By the time value
becomes readily recognizable, it is probably well past time to exit. But you
can easier estimate the direction of value (increasing, decreasing) on the fly
and that is why 'attempted direction' techniques can be helpful in finding congestion.
Market Breadth
You can examine the SP emini from midnight through the end of day trading. Or
you can combine e.g., the 10 year notes floor and a/c/e markets to cover the
same timeframe.
CMaPS lets you slice and dice your profile, as you will see in the
example. You can examine selected time periods. You can pinpoint the action
and examine the profile of a new distribution as it starts. In this way you
can directly examine the periods in which you suspect that congstion is
emerging.
Our research indicates that even volatile markets rarely offer more than
three valid trading opportunities per day. CMaPS allows you to track and
locate those individual opportunities. If you persist in trading where
the market is not offering opportunity you are taking undue risks.
B. Tracking Directionality
What Information Exactly does CMaPS Provide?
1. The Market Profile/Meta-Profile is a visual of market behavior. It shows which prices
are too high, which are too low. It locates value and value change throughout
the day. It identifies cash flow and congestion. It shows directionality.
Overall, profile shapes show if the market is behaving normally or not.
The profile gives you a feel of the market.
2. The current value area and point of control identify the currently
significant trading area. A move out of the current value area is an
alert to a potentially significant price change. Comparing the value
area with the previous day and the values earlier in the current day
shows you how value is moving.
3. The half-hour vertical bars give the time-sequence of the trading, an
item hard to pick out of the profile display itself. You can identify
the areas of congestion and directionality. The last bar is annotated
with a 'F' and 'L' for first and last trades in that period.
4. The open - close half-hour bars table identifies period letters, number
of ticks, first, high, low and last prices (OHLC) and the time the
high traded and when the low traded. The timing of the highs and lows
is another measure of directionality.
5. Current day reference points quantitize the pulse of the market. The Market
Profile information on value, Initial Balance, range extension, volatility,
trade facilitation and TPO counts quantatively gives you the market
parameters for determining directionality.
6. Prior day reference points are the jumping-off point for current
trading. Particularly, the value area is the support/resistance levels
to measure today's market movement against. Point of Control is the
center for return, in case today's movement away from value area fails.
How can CMaPS help your trading decisions?
CMaPS guides you to market value and directionality
Using yesterday's value support and resistance as targets
CMaPS locates todays support and resistance and the changes
It shows you the state of the market and how it is changing
It pinpoints breakouts
It shows cash flow (trending)
It identifies the congesting areas
C. Example
Trading SP emini July 14, 2003
a. Previous Day
At end of day on Friday, July 11, the market was in a five day
balance and the Meta-Profile was balanced as well.
The beginning reference points are in Table 1. These numbers were on the
CISCO system Friday evening.
100825 Upper Overlay Limit
99850 Value Area Upper
99400 Value Area Lower
98975 Lower Overlay Limit
Table 1. Auction Market Reference Points: SP emini Sep, July 11, 2003
The five day Overlay Demand Curve is in balance: 100825 - 98975.
Meta-Profile Value Area (from yesterday reference points) for July 11,
is 99850 - 99400
Volatility and volume for Friday is normal (from CISCO end of day data).
Overlay data is in the CISCO Trader Control Package.
Swing Trader Package(TCP) Page
In many day trading situations, the Overlay limits can be ignored, since
one's focus is on the very short term.
(If you are not familiar with the Overlay Demand Curve, go to the link
'Overlay Demand Data' on the CISCO homepage in the Background Reading
section.)
Overlay Demand Curve Background
b. Starting information for Monday, July 14.
Since movement outside the Value Area (VA) suggests a change in short term
value, a short timeframe (day) trader will see longside opportunity at
99875, the breakout price; shortside opportunity is at 99375. Break out
of the VA qualifies as an 'alert to an 'internal' trend'. If there is an
upside breakout at 99875 it should be considered, at least initially, a
"minor" movement, since price normally rotates between the upper and lower
limits in a balanced market (between 100825 and 98975).
Continuation (directional price movement) to above 100825 suggests a "major" movement,
since a successful breakout from a balance region limit creates a new
distribution and ultimately, a new balance. In this context, 'minor' and
'major' relates to the average level of opportunity offered by the market: moving
to a new value within a 5 day balance is low level opportunity; breaking
out of the balance offers more potential profit, as well as a confirmation
of the original trade. Many day traders focus only on the very short term.
c. Starting the New Day
The SP market day on the exchange floor begins at 08:30, Chicago time. A pre-
market trades through the night at much reduced volume. Normally a day
trader seeks volume. However, there is often valuable information in
the pre-market, sometimes an early tip-off of things to come. Using CMaPS,
you examine the pre-market from midnight to 06:30 (Fig 1) while having
your breakfast.
July 14, 2003
UU U 00:00 06:30
Meta-Profile
---------------------------------
Meta-Profile VA Half-Hour Periods
100450 w w
100425 w w
100400 uvw uvw
100375 uvw* uvw L
100350 uvw uvw
100325 uvw | uvw
100300 mnuvw | mn uvw
100275 mnpuvw | mnp uvw
100250 kmnpquvw | k mnpq uvw F
100225 klmnpquvw > klmnpq uvw
100200 klnpquw | kl npq u w
100175 jknpqu | jk npq u
100150*jkpqrtu | jk pqr tu
100125 jkqrstu | jk qrstu
100100 qrst qrst
100075 qrst qrst
100050 r r
Figure 1. UU U 00:00 06:30 CST CMaPS Meta-Profile/Half-hour Bars Display
Reference Points
Value Area 100325 - 100125
Point of Control 100225
Trading Volume 30 ticks per half-hour period (from 1/2 hr bars)
Last tick (L) 100375 above the value area. (See Table 1 for VA)
First trade price * 100150
Last price * and L 100375
These reference points set the tone for the day.
1. The early morning Monday market is well above the Friday Value Area
levels. (Something must have happened over the weekend.)
2. Friday trading was contained within the five day balance,
and today's early market is also within the 5 day Overlay Limits
(see Table 1).
3. Conclusion: There is early strength, so your trading should
be on the long side until the market indicates otherwise.
d. Considerations at 06:30
A trader comfortable with the risk inherent in trading low volume markets
might want to enter the pre-market long at a price above the night trading
range, say above 100450. After all, there has been a Meta-Profile Value Area
upside breakout earlier; so value is moving up, although on low volume.
An alternative, lower risk strategy could be to wait for a later take on
today's pre-market trading or the open of exchange trading at 08:30 and
decide what to do at a later point. (The lowest risk strategy of all is
to make no trade. But then there is also no opportunity, either. Inevitably, risk
and opportunity are coupled. Your task is to learn where you fit in between
very high and very low risk.)
CMaPS has provided you enough data for a decision, that is, you found upside
strength. Your decision depends on your trading methodology and attitudes.
e. 7 AM
At about the time of that second cup of coffee, CMaPS shows the 07:00
market.
July 14, 2003
UU U 00:00 07:00
Meta-Profile
---------------------------------
Meta-Profile VA Half-Hour Periods
100575 x x
100550 x* x L
100525 x x
100500 x x
100475 x x
100450 wx wx
100425 wx wx
100400 uvwx uvwx F
100375 uvwx | uvwx
100350 uvwx | uvwx
100325 uvwx | uvwx
100300 mnuvw | mn uvw
100275 mnpuvw | mnp uvw
100250 kmnpquvw | k mnpq uvw
100225 klmnpquvw > klmnpq uvw
100200 klnpquw | kl npq u w
100175 jknpqu | jk npq u
100150*jkpqrtu | jk pqr tu
100125 jkqrstu | jk qrstu
100100 qrst qrst
100075 qrst qrst
100050 r r
Figure 2. UU U 00:00 07:00 CST CMaPS Meta-Profile/Half-hour Bars Display
A SP emini daytrader would take an early look at the night market from
midnight on. Reference points:
Value Area 100375 - 100125 vs for 06:30: 100325 - 100125 (higher)
Point of Control 100225 vs for 06:30: 100225 (same)
Trading Volume 35 vs for 06:30: 30 ticks per period
Last tick (L) 100550 vs for 06:30: 100375 (higher)
First trade price * 100150
Last price * and L 100550
During breakfast, value has risen a little and price much more.
Also, just as in the 06:30 data, the last price (L) is above the first
price in the period (F). Your earlier impression of strength is
continuing to be confirmed. A trade at this point has the advantage of
using the early information, while still dealing with a lower volatility
market.
f. 8:30 AM
It is now 08:30. You are at the office and your market is ready to open.
July 14, 2003
UU U 00:00 08:30
Meta-Profile
---------------------------------
Meta-Profile VA Half-Hour Periods
100825 A A
100800 A A
100775 A A
100750 A* A L
100725 A A
100700 $A $A
100675 $A $A
100650 Z$A Z$A
100625 Z$A Z$A
100600 Z$A Z$A
100575 xZ$A xZ$A F
100550 xZ xZ
100525 xZ xZ
100500 x x
100475 x x
100450 wx wx
100425 wx | wx
100400 uvwx | uvwx
100375 uvwx | uvwx
100350 uvwx | uvwx
100325 uvwx | uvwx
100300 mnuvw | mn uvw
100275 mnpuvw | mnp uvw
100250 kmnpquvw | k mnpq uvw
100225 klmnpquvw > klmnpq uvw
100200 klnpquw | kl npq u w
100175 jknpqu | jk npq u
100150*jkpqrtu | jk pqr tu
100125 jkqrstu | jk qrstu
100100 qrst | qrst
100075 qrst | qrst
100050 r r
Figure 3. UU U 00:00 08:30 CST CMaPS Meta-Profile/Half-hour Bars Display
The emini daytrader continues to take an early look at the night market
from midnight on. 08:30 is the opening of the NYSE and the future's floor.
Reference points:
Value Area 100425 - 100075
Point of Control 100225
Trading Volume 55
Last tick (L) 100750
First trade price * 100150
Last price * and L 100750
From 06:30 to 08:30 the market has continued to show strength. The latest
price at 100750 compares to 100375 at 06:30 and 100555 at 07:00. A risk
inclined trader who has not yet entered (long) might bet that an early
entry could be profitable, based on the strength shown so far. The more
risk averse trader may choose to make a trading decision after seeing
the Initial Balance (first hour of trading).
g. 9:30 AM
At 09:30 the Initial Balance is complete (periods B and C).
July 14, 2003
UU U 00:00 09:30
Meta-Profile
---------------------------------
Meta-Profile VA Half-Hour Periods
101400 C C
101375 C C
101350 C* C L
101325 C C
101300 C C
101275 C C
101250 C C
101225 C C
101200 C C
101175 C C
101150 C C
101125 C C
101100 C C
101075 C C
101050 C C
101025 C C
101000 C C
100975 BC BC
100950 BC BC
100925 BC BC F
100900 BC BC
100875 B B
100850 B B
100825 AB AB
100800 AB AB
100775 AB AB
100750 AB AB (L) at 07:00
100725 AB AB
100700 $AB $AB
100675 $AB | $AB
100650 Z$AB | Z$AB
100625 Z$AB | Z$AB
100600 Z$A | Z$A
100575 xZ$A | xZ$A
100550 xZ | xZ
100525 xZ | xZ (L) at 06:30
100500 x | x
100475 x | x
100450 wx | wx
100425 wx | wx
100400 uvwx | uvwx
100375 uvwx | uvwx
100350 uvwx | uvwx
100325 uvwx | uvwx
100300 mnuvw | mn uvw
100275 mnpuvw | mnp uvw
100250 kmnpquvw | k mnpq uvw
100225 klmnpquvw > klmnpq uvw
100200 klnpquw | kl npq u w
100175 jknpqu | jk npq u
100150*jkpqrtu | jk pqr tu
100125 jkqrstu | jk qrstu
100100 qrst | qrst
100075 qrst | qrst
100050 r r
Figure 4. UU U 00:00 09:30 CST CMaPS Meta-Profile/Half-hour Bars Display
A SP emini daytrader now has the Initial Balance data. Heavy volume has
hit the market.
Reference points:
Value Area 100675 - 100075
Point of Control 100225
Trading Volume 176
Last tick (L) 101350
First trade price * 100150
Last price * and L 101350
B period (08:30 - 09:00) showed single prints up (100850 to 100975). And
C period (09:00 - 09:30) had single prints up (101000 to 101400). There
is a great deal of long side cash flow in this market. Normally, the Initial
Balance does form a balance. In this case it did not because of the heavy cash
flow into the market.
h. A Risk Averse Decision
The risk averse trader has a decision to make. Should she enter on action
above the Initial Balance? Maybe, since there has been strength since
6 AM (w period). This could be one of those days when the market goes
to the moon. Alternatively, the Initial Balance does not offer a measure
of the shortest time frame value for this day. But she waited for just
that reference point. Since she is quite risk averse, she will probablly
stand aside until the situation clears. Chasing a trade is risky business.
No matter what happens later, the less risk averse trader who entered
before 08:30 experienced a large gain. In the periods shown, the latest
price is always higher than the first price in that period. Is this
generally true from the beginning at 06:30?
Half-hour bar table:
Pd TPO Time Ticks First High Low Last Hi Time Lo Time
-- --- --------- ----- ----- ---- --- ---- -------- --------
14 x 0630-0700 101 100400 100575 100325 100550 06:43:09 06:37:28
15 Z 0700-0730 115 100575 100650 100525 100650 07:29:59 07:05:15
16 $ 0730-0800 118 100625 100700 100575 100600 07:52:12 07:42:01
17 A 0800-0830 228 100575 100825 100575 100750 08:29:27 08:04:57
18 B 0830-0900 1308 100775 100975 100625 100950 08:59:55 08:46:49
19 C 0900-0930 1089 100925 101400 100900 101350 09:26:29 09:11:16
In every case the Hi Time is later that the Lo Time! This fact is embedded
evidence of the power in this market. Emini traders are well aware of the
potential for movement in their market. Many want to follow every tick.
Yet, over the three hours of this study there were many opportunities to
get with the market at low risk, opportunities that may well not have been
apparent to someone looking at the tick level. The reason is the noise
component of the market can hide moves. Ticks reflect the randomness of the
volatility. A broader, more integrative look is more likely to show the
market's intent. The market told how it felt via the reference points.
i. The Less Risk Averse Trader
At this point, 09:30, look at the market from the standpoint of the less
risk averse trader. Good so far, but what now? Take profits and run?
What, except fear, would make you do that? With that attitude, you probably
would not be still holding, since there have been earlier points to take
profits and run. So, what to do?
When in doubt, follow the rules. That is, start looking for congestion!
Actually, you should have been searching for congestion from the moment
you got your fill. With the extreme cash flow, there just has been little
congestion so far.
A market turn down will either come from a steady erosion of the long's power
by the sellers, or a sharp reversal. In volatile markets, one should always
carry along a loose trailing stop to guard against disaster. Most of the
time markets do not turn on a dime, even the SP. You got to this point by
trading on strength. Congestion is just another word for lack of strength,
the lack of directionality. At any point in a trade, you should ask "is the
market strong enough to continue?". Up through C period the answer has been yes.
The strongest markets generate single prints, as in the B and C period
runs. The buyers ruled. At some point the sellers will stop the
buying, reversing the direction of the market flow. Normally, the reversal
takes some time: buyers weakening, sellers getting bolder. The net result
is usually a gradual slowing of the up move (as in this case), a pause and
then a reversal (down movement). Markets tend to go too far, to overshoot.
This overshoot is called excess and is present in all auction markets.
Excess is often quite clear on a Meta-Profile. Figure 5 covers the time
08:30 - 10:30
July 14, 2003
UU U 08:30 10:30
Meta-Profile
---------------------------------
Meta-Profile VA Half-Hour Periods
101475 E | E
101450 E | E
101425 DE | DE
101400 CDE > CDE
101375 CDE | CDE F
101350 CDE | CDE
101325 CDE | CDE
101300 CDE | CDE
101275 CDE | CDE
101250 CDE | CDE
101225 CDE* | CDE L
101200 CDE | CDE
101175 CE | C E
101150 C | C
101125 C | C
101100 C | C
101075 C | C
101050 C | C
101025 C | C
101000 C | C
100975 BC | BC
100950 BC | BC
100925 BC BC
100900 BC BC
100875 B B
100850 B B
100825 B B
100800 B B
100775 B B
100750*B B
100725 B B
100700 B B
100675 B B
100650 B B
100625 B B
Figure 5. UU U 08:30 10:30 CST CMaPS Meta-Profile/Half-hour Bars Display
Excess is apparent first in D and then E periods. If the move is merely
pausing the excess will be wiped out in F or later periods. Since a pause
quite often grows into a congestion, the day trader had better treat a
pause with respect.
j. Reference points:
Value Area, etc. are no longer the salient reference points. Why? Those
reference points refer to the 'old' distribution. The move started out
of a balanced distribution. Then the directional distribution, the trend,
took over. Congestion at the end of the directional distribution is the
beginning of a new distribution. Probably the new distribution is a 'proto'
balance, but some time must be spent in development to be sure. It is the
required development time between moves that limits the number of good
trading opportunities to about three per day. Assuming the norm, the
important reference points are TPO sums at price, the period first and
last prices, directionality and consolidation.
D Period struggled to get one tick higher than C.
E Period reached only two ticks higher than D.
In D period the high came after the low, but E period showed the
opposite. This may be a significant change in direction.
A view of the profile shows consolidation from 101400 to 101200. Note
that the TPOs C, D, and E are clustering. The first sign of clustering
came at 101375, the first trade in period E. The congestion, apparent
at least by E period signals the start of the new balance distribution.
The market has slowed to a crawl. The party is most likely over. An exit
is called for. Where? There is no preset price target. You exit as
soon as the evidence is clear TO YOU that congestion is present.
Congestion became suspect in D period when the momentum appeared to be
waning. In terms of the Mind Over Markets table, the market is
'attempting' to stop the upward move.
In E period the failure to move up and then the three prints
across at 101400 (second time, on the way down) said "congestion" in a
loud voice. You might have made up your own mind earlier, using the
same evidence, but interpreting the D period slowing is your first
congestion signal.
What if you exited in the neighborhood of 101400 - 101200 and later
the market made another strong move up? Did you err? No, not if your
strategy was clear. You entered on strength, exited on weakness. The
trader's job is to enter (on a breakout, usually) and immediately become
a searcher for congestion or reversal. Reversal is easy to spot,
congestion takes longer to develop and detect. Again, the Mind Over
Markets table can be of help.
k. Recap
The market offered you opportunity several times from 0630 to 0830. Just
how you reacted depends upon your methodology and attitudes. CMaPS
demonstrated the opportunity. You had value numbers to guide you. You
knew the previous day upper Value Area of 99850 was already exceeded
by your first look at 06:30. What number should I exit on, you might
ask, if you want a blueprint. The answer before is still valid: there is
no 'target', you exit as soon as you become convinced congestion has
set in. To trade successfully, you must learn to read the market. CMaPS
gives you directional information. You must process that information
for your trading decisions. You are the trader. CMaPS is your trusty
aide.
Once a trade is completed, another breakout is sought and again,
immediately upon entry, you start looking for congestion. A delayed
continuation of the old move might well offer a new trading opportunity.
In the meantime, you have stuck to a well defined strategy, thus
reducing your risk.
l. Another Trade on July 14
This day did offer another opportunity. Congestion reigned from F
period (10:30 to 11:00) through L period (13:30 to 14:00). Note the
well shaped bell curve. CMaPS allows you to partition the day for
'partial' profiles.
A downside breakout came along in M period (14:00 to 14:30), ending
in congestion at the end of the day. You would follow the market
after exit in E period, noting the congestion. M period breakout
is clearly defined in Figure 6.
July 14, 2003
UU U 11:00 15:15
Meta-Profile
-----------------------------------------------
Meta-Profile VA Half-Hour Periods
101375 G G
101350 GKL G K L
101325 GKL G K L
101300 GKL G K L
101275 GKL G K L
101250 GJKL G J K L
101225 GJKL G J K L
101200 GHJKL G H J K L
101175 GHIJKL G H I J K L
101150 GHIJKL G H I J K L
101125 GHIJL G H I J L
101100 GHIJLM G H I J L M
101075 GHIJLM G H I J L M
101050 GHIJLM G H I J L M
101025 GHILM G H I L M
101000 GHLM G H L M
100975 GHM G H M
100950 GHM G H M
100925 HM H M
100900 M <== Start of M single prints M
100875 M M
100850 M M
100825 M M
100800 M M
100775 M M
100750 M M
100725 M M
100700 M M
100675 M M
100650 M M
100625 M M
100600 M M
100575 M M
100550 M M
100525 M M
100500 M M
100475 M M
100450 M M
100425 M M
100400 M M
100375 M M
100350 M M
100325 M M
100300 M M
100275 M M
100250 M M
100225 M M
100200 M M
100175 M M
100150 M M
100125 M M
100100 M M
100075 M M
100050 M M
100025 M M
100000 M M
99975 M M
99950 M M
99925 M M
99900 M M
99875 M M
99825 M M
99800 M M
99650 M M
99550 M M
99500 M M
Figure 6. UU U 11:00 15:15 CST CMaPS Meta-Profile/Half-hour Bars Display
G period (11:00 - 11:30) through L period (13:30 - 14:00) formed a well
defined bell shaped distribution between 101350 and 100950. A breakout
below 100925 in M period (14:00 - 14:30) was the start of a long down
side run. Later, there was a recovery that ended in a late day balance.
In this figure, the balance that developed in periods G, H, I, J, K, L
and the first part of M set the stage for the M period trade.
D. Worksheets
It is true that there a number of reference points to track. It is likewise
true that you will add reference points of your own as time goes by.
For starters, here are a couple of worksheets for the day's trading.
Worksheet number one can be completed prior to the beginning of trading.
a. Worksheet One
Market Condition: Five Day Overlay Demand Curve (optional for fday trading)
Balanced
Upper Limit ______
Lower Limit ______
Directional: Up or Down ____
General Market from Free Tables of Averages
Average Volume, Exchange Total
90 Days ______ 5 Days ______
Average LDB Volume
90 Days ______ 5 Days ______
Average Trade Facilitation Factor
90 Days ______ 5 Days ______
Average Range
90 Days ______ 5 Days ______
Average Price Tick Volatility
90 Days ______ 5 Days ______
Average Ratio Initial Balance to Range
90 Days ______ 5 Days ______
Meta-Profile Prior Trading Day
Value Area
Upper ______
POC ______
Lower ______
Estimate of Shape
Symetrical Single Distribution _____
Skewed Single Distribution To Upper_____ To Lower ______
Multiple Distributions, Last Dist To Upper_____ To Lower ______
Note: The above tabulated reference points can be looked as as the
minimum needed to catalog the market condition. Other reference points
can be developed from Market Profile, Liquidity Data and BuySell Data
(see e.g. Trading Model Development in the Background Reading section).
Also, an observant trader will catalog particular market characteristics
and behavior that become personal reference points.
The second worksheet is to be filled out, period by period, as the trading
day proceeds. It becomes a visual of a trade's progress.
b. Worksheet Two
Current Trading Day Information
Period Covered ___ to ___ ___ to ___ ___ to ___ ___ to ___ ___ to ___ ___ to ___ ___ to _
Price Location Relative to Overlay Demand Curve
Above __ __ __ __ __ __ __
Below __ __ __ __ __ __ __
Within __ __ __ __ __ __ __
Price Location Relative to Meta-Profile
Above __ __ __ __ __ __ __
Below __ __ __ __ __ __ __
Within __ __ __ __ __ __ __
Value Area
Upper ______ ______ ______ ______ ______ ______ ______
POC ______ ______ ______ ______ ______ ______ ______
Lower ______ ______ ______ ______ ______ ______ ______
Estimate of Shape
Symmetrical ______ ______ ______ ______ ______ ______ ______
Skew Single Dist
To Upper ______ ______ ______ ______ ______ ______ ______
To Lower ______ ______ ______ ______ ______ ______ ______
Multiple Dist: Last Dist
To Upper ______ ______ ______ ______ ______ ______ ______
To Lower ______ ______ ______ ______ ______ ______ ______
Directional Tendency Observed
Up/Dn ______ ______ ______ ______ ______ ______ ______
Last Price in Latest Period vs Earliest Price
Hi'r/Lo'r ______ ______ ______ ______ ______ ______ ______
Last Price in Timeframe vs Earliest Price
Hi'r/Lo'r ______ ______ ______ ______ ______ ______ ______
Volatility vs Average
Hi'r/Lo'r ______ ______ ______ ______ ______ ______ ______
Completed Worksheets
Worksheet One
Market Condition: Five Day Overlay Demand Curve UU Sep 030711
Balanced
Upper Limit 100825
Lower Limit 98975
Directional: Up or Down none
General Market from Free Tables of Averages
Average Volume, Exchange Total
90 Days 622,117 5 Days 483,193
Average LDB Volume
90 Days n/a 5 Days n/a There is no UU LDB Report
Average Trade Facilitation Factor
90 Days 3.9 5 Days 4.1 Use SP values
Average Range
90 Days 1323 5 Days 1020 Use SP values
Average Price Tick Volatility
90 Days 320 5 Days 262 Use SP values
Average Ratio Initial Balance to Range
90 Days 0.45 5 Days 0.46 Use SP values
Meta-Profile Prior Trading Day
Value Area
Upper 99850
POC 99650
Lower 99400
Estimate of Shape
Symetrical Single Distribution Yes
Skewed Single Distribution To Upper n/a To Lower n/a
Multiple Distributions, Last Dist To Upper n/a To Lower n/a
Worksheet Two
Current Trading Day Information
Period Covered 00: to 6:30 00: to 7:0 00: to 8:30 00: to 9:30 8:30 to 10:30 ___ to ___ ___ to _
Price Location Relative to Overlay Demand Curve (optional for daytrading)
Above __ __ __ Yes Yes __ __
Below Yes Yes Yes __ __ __ __
Within __ __ __ __ __ __ __
Price Location Relative to Meta-Profile
Above Yes Yes Yes Yes Yes __ __
Below __ __ __ __ __ __ __
Within __ __ __ __ __ __ __
Value Area
Upper 100325 100375 100425 100675 101475 ______ ______
POC 100225 100225 100225 100225 101400 ______ ______
Lower 100125 100125 100075 100075 100950 ______ ______
Estimate of Shape
Symmetrical Yes Yes Yes Yes n/a ______ ______
Skew Single D
To Upper ______ Yes Yes Yes Yes ______ ______
To Lower Yes ______ ______ ______ ______ ______ ______
Multiple Dist: Last Dist
To Upper n/a n/a n/a n/a n/a ______ ______
To Lower n/a n/a n/a n/a n/a ______ ______
Directional Tendency Observed
Up/Dn up up up up flat ______ ______
Last Price in Latest Period vs Earliest Price
Hi'r/Lo'r High High High High Low ______ ______
Last Price in Timeframe vs Earliest Price
Hi'r/Lo'r High High High High Low ______ ______
Volatility vs Average
Hi'r/Lo'r Avg Avg Avg Avg Avg ______ ______
BACKGROUND_CMAPS.TXT