Friday, February 6, 2009

Two Volume Lessons

Hi Guys,
Hope you had a successful and fulfilling week. Here are two charts that show you powerful ways to look a volume. The new MD 9.2 makes it easy to see this important data. Those of you without MD, I don't know what to say. I wouldn't want to live without it.

Both of these are trades I was waiting for. I draw boxes throughout the day around areas of stat high volume. That is, areas where you see significantly higher levels of volume than surrounding prices. Make note, as in the opening period, when the buying volume really kicked in. These are areas of Initiated Buying.

I will teach more on this subject in the future. It is potent stuff. When you you see stat high volume (12,000, 13,000, 15,000 etc) when the surrounding volume at price is 1,000, 2,000 etc. these are the areas to watch on a retrace. The broader the zone (2 point range or more) the more important the area.

In the other chart, I show how the new VPS indicator can be used. I just put it up last night and it has already paid dividends. Needless to say, I will be watching this one.

Hope it helps. Have a great weekend. Study Study Study. And do get out and play. See you next week.

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  1. hi mgtrader,
    I am a professional prop trader of 8 years and I'm a pretty successful s and p and equity trader who is trying to learn and incorporate market delta into my trading. Do you recommend any courses? I took an alexander trading seminar that was helpful with simplifiying market profile. I was thinking IOAMT? what are your thoughts?

  2. Hi Michael,
    Here are my thoughts on that. Know that I am not affiliated with any of these organizations and receive no compensation from any of them so my thoughts are pretty non-biased. There are several cool people out there that I have learned from and they all have a differet slant on the subject.

    I have learned a ton from Bill and Jackie at IOAMT and I recommend that, if you haven't already, you take a 5 day trial with them. It has taken me a pretty long while to understand what they are talking about. But the knowledge gained has been absolutely imperative to my development as a trader. They are amazingly knowledgeable.

    Bill can be a bit abrasive, at times, but I sense he is a good and honest guy - and very giving. Bill's trading style is so absolutely unlike mine. He is aggressive and willing to take on a lot of risk if he believes in a trade. Jackie is his co-teacher and she is a joy. She is more conservative in her entries. She is so brilliant and quick. Her mind and understanding blows me away. I can't always follow her thoughts but I know they are valid and important.

    I have several friends who spent a good deal of time in the room. They all attest to its value. That said, all of them still had trouble making consistent money with Market Profile.

    All of them (as well as myself) have found our way to JP's room ( His approach is night and day different from IOAMT's. He really looks at the MP formations and has developed specific trades around the data. BTW, he will be doing a free trial in about a month or so. He is an honest and sincere guy and a very successful trader. He is funny, kind of like an old kid in his personality.

    For me, the two of them offer complementary perspectives, and I wouldn't want to be without what I have learned from either of them.

    I have also learned a good deal from Joe Mertes. His newsletter is great and what I have learned from him has been very lucrative for me. He has added another piece to my understanding. I have a post in the blog, a few days back, about a webinar he will be giving in a couple of weeks. I don't know him personally nor have I take a class from him. But, I think his class will be very valuable and informative.

    There is also Reza ( took a day long, web-based Boot Camp from him, several years ago. It was very good - imformative and reasonable. I was impressed by his knowledge and goodness as a human being. He has a live trading room - but I have never experienced it.

    Hope I didn't overwhelm you and I hope this helps.


  3. thanks very much for the post mg. Which of all the courses would you say makes the most use of the market delta software?

  4. Michael,
    The answer to this question is much shorter. IOAMT. JP is making more and more use of MD and teaching it more and more in his room. But Billy and Jackie of IOAMT really focus on it.

    It is partially the lack of great MD related info that led me to start this blog.


  5. Hi MG Trader,
    First of all - many thanks for the time you're taking to blog. I've been following it since Traderfeed posted your link and really enjoying it.

    I have a question which I don't believe you've covered - How do you determine your stops? For example, do you place them x ticks above what you deem to be a sound structural point e.g. if we take out y + x ticks then my trade was wrong.

    To give an example, I was trading the ES today and got short at 864.5 at around 09:51 EST. In hindsight this was pretty awesome day trade location ... but I was stopped out at 866 before the market sold off. It's easy to say "If I had only placed my stop at 866.5 then I would have been fine". I think looking back I should have placed the stop at 867.5, above the 2nd highest volume node from a 2 day merged profile.

    Just wondered if you could share some thoughts around how you determine stops?


  6. Hi NSL,
    I don't have one answer for this question. Because it depends. But to keep this simple, I don't like to place larger stops than I have to. I try to lean on key volume areas and enter as close to them as I can. I prefer stops of 2 points or less. But sometimes this is not practical. If I get can in right up against a key area (usually with a limit order) I may have a stop of 5 or 6 ticks. If it takes me out, not a big loss.

    You know, that is the value of getting an order in ahead of time. I get ahead of the level I consider important by a tick or two. I pull the order if the Footprint chart warns me off. ANd then wait for confirmation.

    Sometimes, I wait for the footprint to confirm to get in. My entry may be 4 or 5 ticks away from the key area, I want to lean on. In these cases, I may increase my stop to 2.5 points or so. And yes, I hate to get stopped out on bigger stops.

    With a bigger stop I watch the footprint for signs of the trade failing. I just don't really want to pull the exit trigger premature.

    I don't take a trade if I'm not comfortable with the stop. An arbitrary stop amount is not preferred. That said, every once in a while I jump in at a poor entry after the market has taken off. But, I try and wait for a retrace with supporting delta. Then I try to place a stop just above that retrace bar.

    This is just what I do. Doesn't mean its right for everyone.

    Hope this helps,


  7. Thanks MG,

    Some good information and food for thought. You make an interesting point about getting your limit orders in ahead of time at key levels, that's something I've been thinking about a fair bit recently.