Wednesday, March 11, 2009

Limit Orders or Footprint Confirmation?

Here was a really nice short opportunity. I broke it up into two charts to give you the setup from a 30 minute MP and regular MP perspective as well as a 6 tick Reversal confirmation. I am still recuperating from dental surgery so I didn't trade today. But, I watched this trade set up and pass me by. While I am not 100%, I really wanted to post today, as I have not had much of a chance the past number of days due to computer problems and then the surgery.

There was an interesting discussion in the IOAMT trading room today as to whether it is more beneficial to just place a limit order at at Key Area or to wait for a reversal or confirmation signal on the shorter term footprint chart.

Bill Duryea's observation was that you don't usually have to give up too much in location by waiting for the confirmation and you get a lot in return for waiting. I heartily agree. Here are my reasons:

1. Limit orders placed in advance will all too often not be filled when the market doesn't quite hit the level.
2. Limit orders may be blown thru.
3. If I can get a good location with confirmation, my odds of a winning trade go up substantially.

On the side of placing a limit order in advance, there are definitely benefits (sometimes). We have all seen the market hit a key level (often to the tick), reverse and go off to the races without us. While this is irritating for sure, I have probably seen an equal amount of times when the market doesn't quite reach my order level or (even more exasperating), hits my order without filling me - before it takes off.

Waiting for footprint confirmation keeps me on my toes, observing what the market is really saying rather than entering on a bias based only on the longer time frame. In this way, I get the best of both worlds. All in all, my preference is to wait for confirmation. As my skills in reading the volume at price charts have grown over time, this method has become comfortable and profitable. Feel free to chime in with your thoughts on this.

I hope you have been having a good trading week. I hope to be full blast by Friday.

Hope this helps.



  1. hi,
    i can't tell from looking at your 30-min profile how the circled areas are known to be initiated selling, compared to other volume clusters also on the chart.
    Also what is the significance of the red price rows in each 30-minute profile and how did you set that up in MD?
    p.s. i joined JPJ.

  2. AJS,
    Sorry. I usually show this on a 30 minute footprint chart showing the actual volume at price numbers. In D period, as price comes down from the high of the bar, you can see the volume bars extend at the two circled areas. Large selling came in at those two price levels.

    To fully understand this concept, I suggest you take a trial at IOAMT. I mark areas of initiated buying and selling throughout the trading day and keep those numbers on my chart if they have not been violated.

    Hope its more clear,


  3. Nice write-up. I hesitated on this one as Jackie was talking on it looked like it was going higher. She talked me out of it. Unusual for her to miss one of these

  4. Can I get the chart definition for your 30 min MP chart (top chart).