CISCO Futures
1-303-306-1521 1-800 800 7227 Fax 1-303-368-9449
Market Profiles (tm) Develop Market Structure
Responsive and Breakout Trading
Contents
CISCO Futures
Data base: half-hourly, creating about ten 'mini-days' in each day.
A 'profile' is the sum of one days' trading, with volume identified
An Overlay Demand Curve (tm); is composed of a number of profiles,
A 'bracket' is a trading range market, defined by a price range and an
An 'Octant' is one-eighth of a brackets' price range.
'Value' is the region of 'fair' prices, the area of most trading.
A 'responsive' trade is one based on market offered opportunity,
A 'breakout' occurs when price exceeds the limit of its' bracket.
For demonstration purposes only, we provide the following rules:
1. To be considered, a market must be in a bracket.
2. A responsive long is triggered when price has entered the lower octant
3. A responsive short is triggered when price has entered the upper octant
4. Breakouts occur when price moves past the bracket limit.
TPO Volume
Prior to the open, we prepare for the market by analyzing the information
accrued up through the previous day:
1. Examine the Overlay Demand Curve (tm) for reference
points
2. Check the Rotation Index for Alert-to-breakout.
3. Look for Commercial trader support/resistance
points.
The Overlay Demand Curve (tm) is a summation of the volume of trading
from the half-hour data base. The price range of each half-hour timeframe
is added cumulatively for the Overlay (tm) period (5 days, 10 days, etc.).
Visual Graphic for June 1992 T-bonds, May 7, 1992
Five Day Overlay; for May 7: The 5 day market is in
bracket, see table below, 5 day Overlay, where we find the three
basic reference points: Limits 9909 & 9809;
Octants 9905 & 9813; Mid 9825.
05 07 Lower Comml Action:
9824
Middle of value:
9825 (9827 - 9823)
1. Where would an upside breakout begin? __________
Locate the stop. ______
What effect would the commercial activity have
on your answer?
2. If there was no upside breakout, where would you short?
________
If you (responsive)shorted the market where is
your stop? _______
If you (responsive)shorted the market where is
your target? _______
3. Where is price when the probability of either up or down
is equal? _____
4. Where would a downside breakout begin? __________
Locate the stop. ______
What effect would the commercial activity have
on your answer?
5. If there was no downside breakout, where would you go long?
________
If you (responsive) bought the market where is
your stop? _______
If you (responsive) bought the market where is
your target? _______
1. Where would an upside breakout begin? 9909 + 1 =
9910
Locate the stop. 9905 (Octant)
What effect would the commercial activity have
on your answer?
Commercial capping at 9907 lies between the
Upper Limit and the
Upper Octant. I would set my long entry on
a breakthrough of
9911 (one octant from the commercial cap).
2. If there was no upside breakout, where would you short?
9905 - 1
If you (responsive)shorted the market where is
your stop? 9909
If you (responsive)shorted the market where is
your target? 9825
3. Where is price when the probability of either up or down
is equal? 9825
4. Where would a downside breakout begin? 9809 –
1 = 9808
Locate the stop. 9813 (Octant)
What effect would the commercial activity have
on your answer?
Very little. A downside breakout is well below
the commercial buying level.
5. If there was no downside breakout, where would you go long?
9813 + 1
If you (responsive) bought the market where is
your stop? 9809
If you (responsive) bought the market where is
your target? 9825
Visual Graphic for June 1992 T-bonds, May 8, 1992
The market opened at 9909 (see O, H, L, C table on l-h
column of the VG)
Long at 9910 in z period (7:20
- 7:30) with automatic stop at 9905
Stop at Octant 9905 hit in $ period for 5 tick
loss (-$156)
Responsive short at 9904 ($)
Stop at Upper Limit at 9909
Target at middle value 9825 hit in C period for
11 tick gain ($343)
Responsive short at 9904 (E)
Stop at Upper Limit at 9909 hit in F period for
5 tick loss (-$156)
Target at middle value 9827
Long on breakout at 9910 (F)
Stop at Octant 9905
Out on close 10002, 24 tick gain ($750)
For the day: 4 trades, $781 gain, less commissions and slip.
Legend: Elements of the Visual Graphic:
1). Go to the CISCO home page http://www.cisco-futures.com
2). Go down to "CISCO Futures Data".
3). Click on "paid-for-or-trial-data".
4). Click on "get summary bracket screen for today".
5). Enter your username (e.g. 499mmm) and password (e.g. genie).
6). Go back to the page with your log-in information.
7). When finished, exit.
CISCO Futures
1-303 306 1521 1-800 800 7227 Fax 1-303 306 1572
Internet http//www.cisco-futures.com
Email:
Internet http//www.cisco-futures.com
Email dljones@cisco-futures.com
on May 8, 1992 for US day T-bonds
using
Trader Control Database Visual Graphic
1. Defintions
2. Strategy
3. Sample Overlay Demand Curve (tm) with Reference Points
4. Overlay Demand Curve (tm)
5. Check for Alert to trend
6. Commercial support/resistance
7. Interpretation of the commercial data
8. Trading for May 7, 1992, Reference Points
9. Questions
10. Answers
11. Trading on May 8, 1992 using the May 7 (after close) reference points
12. Legend for Visual Graphic
13. Getting Visual Graphic from the internet
1-303 306 1521 1-800 800 7227 Fax 1-303 306 1572
Internet http//www.cisco-futures.com
Email dljones@cisco-futures.com
Periods are labeled: A = 8 to 8:30 AM, B = 8:30 to 9,...
at each price, constructed on half-hourly time frames.
becoming, in effect, a 'super profile'.
Overlay (tm) time period (5 days, 10 days, etc.).
Price rotates throughout the range, over the time period.
It is at least an octant (1/8 of bracket range) in extent.
i.e., when price has moved away from value.
and then turns up, crossing through the lower octant.
Target price is the middle of the distribution.
Stop price is the near bracket limit.
If neither target nor stop is hit, then exit on close.
and then turns down, crossing through the upper octant.
Target price is the middle of the distribution.
Stop price is the near bracket limit.
If neither target nor stop is hit, then exit on close.
Stop price is the near octant.
If stop is not hit, then exit on close.
100:00 x
99:31 xx Trading above the upper limit
alerts to start of up-trend
99:30 xxx <== Upper bracket limit:
Breakout point.
99:29 xxxx
99:28 xxxxx <== Octant: One-eighth of
bracket range.
99:27 xxxxxx
99:26 xxxxxxx (<== Quadrant: One-quarter
of bracket range.)
99:25 xxxxxxxx
99:24 xxxxxxxxx
99:23 xxxxxxxxxx
99:22 xxxxxxxxxxx (<== Middle of
distribution.)
99:21 xxxxxxxxxx
99:20 xxxxxxxxx
99:19 xxxxxxxx
99:18 xxxxxxx (<== Quadrant: One-quarter
of bracket range.)
99:17 xxxxxx
99:16 xxxxx <== Octant: One-eighth of
bracket range.
99:15 xxxx
99:14 xxx <== Lower bracket limit:
Breakout point.
99:13 xx Trading below the lower limit
alerts to start of down-trend
99:12 x
Bracket limits
Octants
Middle of Overlay (tm).
(Commercial traders identified
on CBOT and CME only.)
The net result is a distribution of price - volume that shows maximum
volume around the middle price, going to zero at the upper and lower price
extremes (an approximate bell curve). The Visual Graphic carries
Overlays for 20, 10 and 5 days, respectively.
Internal
Trend is Up (see the lower r-h corner of
VG, labeled IT).
(for the last 10 days, see r-h side
of VG, vertical dashed bars, *’s are the
unusual commercial activity at extremes).
05 06 Upper Comml Action:
9907
Lower Comml Action:
9819
05 05 Upper Comml Action:
9823
05 04 Upper Comml Action:
9819
05 01 Upper Comml Action:
9827
04 30 Upper Comml Action:
9812
04 29 Upper Comml Action:
9815
04 28 Lower Comml Action:
9709
There was commercial resistance at 9907 (5/06), near the top of the
bracket; support around 9824 and 9819 (5/06) and an obvious
rise in value from the period 5/05 back to 4/29. Such a narrow
range (15 points) often portends change.
Bracket Limit: Upper
9909
Lower 9809
Octants: Upper
9905
Lower 9813
Alert to trend: Up
Comml Cap: Upper
9907
Comml Base Lower
9824, 9819.
Instructions: Using these reference points, answer the following (ans
below):
and a long at 9910 was immediately taken. (Use the
half-hour bars
on the far r-h side of the VG to track the
day’s trading.)
The first line of the graphic gives the contract and the date of the data.
For example U206 05/19/98 is the June (06) T-bonds (day) (U2) contract
for the trading date May 19th 1998 (05/19/98).
The Visual Graphic is in two parts: UPPER graphics and LOWER tables.
The upper part of the VG consists of 6 graphics with a common price strip on the
extreme left.
From left to right, the 6 graphics are:
(U1) Last 20 day Rotation profile 'Rotprof'
symbols a thru t represent the prices traded during each day
a=20 days ago; k=10 days ago; p=5 days ago; t=current day
this is like a market profile with each period equal to one day
(U2) '20 day Overlay'
the histogram represents the # of TPOS's at each price
dashes enclose a distribution/bracket
RotProf symbols: a = 20 days back, t = latest day
a b c d e f g h i j k l m n o p q r s t
(U3) '10 day Overlay'
the histogram represents the # of TPOS's at each price
dashes enclose a distribution/bracket
RotProf symbols: k = 10 days back, t = latest day
k l m n o p q r s t
(U4) '5 day Overlay'
the histogram represents the # of TPOS's at each price
horizontal dashes pairs enclose a distribution/bracket
RotProf symbols: p = 5 days back, t = latest day
p q r s t
All three Overlay histograms have the same horizontal scale.
Note: (Balance defn: Single distribution, close inside dist.)
A balance starts in some day as a congestion. It grows day-by-day. We
only list 5, 10, 15 and 20 day Overlays on the TCP (5, 10 and 20 on
the VG). Clearly there can be a 6 day balance or a 19 day balance, etc.
A rule: If the latest 6 days are in balance, a 10 day Overlay will
report a balance, ignoring the old four days of the previous
distribution. 15 day Overlays must have at least the latest 11 days
in balance, 20 day Overlays must have at least the latest 16 days
in balance. 5 day Overlays must have 5 days in balance. However,
you can eyeball the 5 day display to find shorter balances.
Using RotProf, you can tell exactly how many days are in balance.
The basic balances come to Visual Graphic from the Bracket Screen.
The Bracket Screen Background report explains the data.
Under the flag
End of Day Data
End of Day Data
Regular Bracket Screen
(U5) Last 10 day Commercial Analysis 'cti2' for CBOT and CME only
high-low dashed vertical line bars cover the last 10 days
latest day is on right
* indicates commercial action at high and/or low
the single horizontal dashes on the vertical bars are the closes
(U6) 30 minute high-low bars for latest day '30m bars'
last period on right
(U7) Also, between the Rotation Profile and the 20 day Overlay:
Current day close 'cl'
Commercial action at current day high (if any) 'uc' for CBOT and CME only
Commercial action at current day low (if any) 'lc' for CBOT and CME only
(U8) Trading Units:
Markets are initiated by exchanges to serve a particular 'trade' or
area of commerce. Trading units selected are those in use by that trade.
While many units are decimal fractions, some are not, such as grains
which are traded in pennies and eighths per bushel. A price of 2406 for
corn means 240 and 6/8 cents for a bushel. Other exceptions are the
30 year bond in the Visual Graphic display, which trades in 32nds, 10
year notes and 5 year notes, in 64ths, and 2 year notes in 128ths.
Any questions can be resolved by visiting the exchange's Contract
Specifications.
Example: The 5 day Overlay limits are 12020 to 11930. Range in 32nds
is: 11930 - 11931 - 11200 - 11201 - 11202 ....... 112020 or 23 32nds.
Rounding off to 24 32nds, an octant is 3 32nds.
The LOWER (tabular) PART consists of 5 tables of data.
From left to right, these 5 tables are:
(L1) Below the Rotation Profile:
(L1.1 )'O' is the Open for latest and previous trading day*
(L1.2 )'H' is the High for latest and previous trading day*
(L1.3 )'L' is the Low for latest and previous trading day*
(L1.4 )'C' is the Close for latest and previous trading day*
(L1.5 )'Tf' is the Trade Facilitation Factor for latest and previous trading day*
Smaller TF implies better trade.
(L1.6 )'Vo' is the Price Tick Volatility for latest and previous trading day*
Very Low Volatility implies lack of interest
Very High Volatility implies overheating
(L1.7 )'Sf' is the Shape Factor for latest and previous trading day*
Smaller is better.
(L1.8 )'HL' for the two front months, gives the % of the current close from the 60 day low
also gives the days (in last 10 days) when new highs ('NH') or new lows ('NL')were established
* is a separator
e.g. 81* NH 3 4 means there was a new 60 day high established 3 (and 4 days) back
and close today is 81% of 60 day range (from 60 day low)
(L1.9 )'Tv' is the Total Contract Volume for latest and previous trading day*
(L1.10)'Cv' is the Commercial Contract Volume for latest and previous trading day*
(L1.11)'Pv' is the Public Contract Volume for latest and previous trading day*
(L1.12)'CUL' is the Commercial Action and Type for latest/previous trading day
First is the action at the current days high for each measure
Separating the high and low actions is a ':'
Second is the action at the current days low for each measure
Separating the current day from the previous day is a '/'
Third is the action at the previous days high for each measure
Separating the high and low actions is a ':'
Fourth is the action at the previous days low for each measure
Types: Q=quadrant measure, A=value-area measure, V=volume/price measure
For example: Q--:-A-/QAV:--- means:
Q-- commercial activity at latest days high with Q measure
: seperates activity at high from low
-A- commercial activity at latest days low with A measure
/ separates current from previous day
QAV commercial activity at previous days high with QAV measures
: seperates activity at high from low
--- NO commercial activity at previous day low
The Commercial, Public and Total Contract Volume and the Commercial Action
analysis is derived from the Liquidity Data Bank which is released
by the CBOT and CME exchanges only. It is same day cleared trading volume
and excludes spreads.
(L2) Below the 20 day Overlay is bracket/distribution info for this Overlay
(L3) " " 10 day
(L4) " " 5 day
If the Overlay IS bracketing:
'U ' is the upper limit
'UO' is the upper octant price; the number to the right is the $ gain for
a responsive short going from the octant to the center M
'UQ' is the upper quadrant price; the number to the right is the $ gain for
a responsive short going from the quadrant to the center M
'M ' is the bracket center
'LQ' is the lower quadrant price; the number to the right is the $ gain for
a responsive long going from the qudrant to the center M
'LO' is the lower octant price; the number to the right is the $ gain for
a responsive long going from the octant to the center M
'L ' is the lower limit
Below the U-UO-UQ-M-LQ-LO-L lines are the responsive trade gains (again) and
the $ risk of the responsive trades. The risk/reward ratio is 1 to 3
for the octant. The $ risk on the responsive trade is the same as the
$ risk for a breakout trade (octant is the stop).
Below is the $ gain and $ loss for the quadrant (The risk/reward ratio is 1 to 1.)
If the Overlay does NOT show bracketing:
The number of distributions is listed ('distr'; max 4 shown), with:
The Upper ('U') and Lower ('L') Prices for each distribution
(L5) Below the commercial analysis vertical dashed (if any) and 30 minute solid bars
(L5.1 )'VA U' is the Value Area high price for current and previous day*
(L5.2 )'VA C' is the Value Area center price for current and previous day (POC)*
(L5.3 )'VA L' is the Value Area low price for current and previous day*
(L5.4 )'VA R' is the Value Area range for current and previous day*
(L5.5 )'TPOT' is the # of TPO's total for current and previous day*
(L5.6 )'TPOA' is the # of TPO's above maximum TPO line for current/previous day*
(L5.7 )'TPOB' is the # of TPO's below maximum TPO line for current/previous day*
In a totally balanced market TPOA will equal TPOB
The TPO counts in a perfectly balanced market would be symmetrical, a perfect
bell shaped curve. There would be as many TPOs above the center as below.
If the market is just coming into balance the symmetry will not yet be there.
So long as the market stays in balance you would expect the TPO counts to
approach symmetry. If TPOA is greater than TPOB you would expect more trading
in the lower region to add TPOs.
For non-balanced markets, the TPO counts add little information.
(L5.8 )'Att Dir' is the attempted direction for current and previous day*
The possible values are: n for none, U for Up or D for Down. A rule of thumb for
Att Dir, after the close, measures F% (the close - POC distance) as a fraction of the day's
range. If F% is 20% or more above POC Att Dir = U, 20% below POC and Att Dir = D.
(L5.9 )'IB' is the high and low price of the Initial Balance for current day
The Initial Balance is the first two 30 minute trading periods
(L5.10)'IBR%C' is for the current trading day. It consists of:
'IBR' is the Initial Balance range
'%' is the Initial Balance range as a % of total range
'C' is Location of close relative to Initial Balance: ABV, BLO, INS
ABV when the close is above the Initial Balance
BLO when the close is below the Initial Balance
INS when the close is inside the Initial Balance
(L5.11)'RiQc' is todays Rotation Index/Quadrant of Close using last 4 and 8 days
For example: 0.67/1 .7/4 means Rotation Index for last 4 days is .67
Quadrant of Close for last 4 days is 1
Rotation Index for last 8 days is .7
Quadrant of Close for last 8 days is 4
(L5.12)'VADir' is the Value Area Direction for current day vs the previous day
The possible values are H, A, Z, L or n
'H '= higher
'A' = overlapping higher
'Z' = overlapping lower
'L' = lower
'n' = none (inside or outside)
Preferred direction is up if close above Overlay midpoint, down if below.
(L5.13)'ITDir' is the Internal Trend Direction based on RiQC for last 4 & 8 days.
The possible values are n for none, U for Up or D for Down
This is not in the text version of the TCP data- only on Visual Graphic
* The previous day data value is to the right of the '/'
Getting Visual Graphic Information from the Internet
or "get regular bracket screen for today".
Examine the screen for markets in balance (5 day, 10 day, etc.).
Note: The 5 day balance is required for a balanced market.
Select your list of trading candidates for this day.
Select your first commodity from the "Select One Commodity" box.
Click on "Send".
Click on the "Select delivery" box for the delivery month.
Click on "Send".
Jot down your trading parameters in your trading journal.
Print the graphic you have chosen. You may want to make notes on it.
Select your next commodity from the "Select One Commodity" box.
Click on "Send".
Click on the "Select delivery" box for the delivery month.
Click on "Send".
Jot down your trading parameters in your trading journal.
Print the graphic you have chosen.
Go through the 6). process for all futures you selected.