Monday, June 22, 2009

Focusing on the Structure of the Day's Trade


Here's an updated Market Delta chart for the day's trade. Note how volume at bid has consistently exceeded volume at the offer for the ES contract (bottom histogram); how we've remained below the volume-weighted average price (VWAP) all morning (red line); and how we have accepted value lower by trading increasing volume at lower prices (side histogram). The reason I have my chart set up this way is that it provides me with a quick, visual sense for the structure of the day's trade.

Where I see traders making mistakes in trading this market is by focusing on what has been happening in the last few ticks of movement, rather than the emerging day structure. That has kept many traders out of the market--or on the wrong side of it--even as we've taken out the S3 level. A thorough market perspective also needs to look beyond the day timeframe; that shows how we have moved below last week's lows and, so far, have accepted value beneath that level. Given that dynamic, bounces that stay below last week's range become candidates for selling.
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9 comments:

Noam said...

Dear Dr.
You wrote that the volume @ bid exceeded the volume @ ask.

In a down trend the volume of the sellers side (ask) should be stronger isn't it?

Please correct me if i'm wrong.

Thank you

Stocks said...

Thanks! Brett . . nice view.
What service provides charts like that ??
I daytrade using this system: http://bit.ly/MyZQy

OKL said...

I've thrown my mouse a few times already.

Stocks said...

Thanks! Brett . . nice view.
What service provides charts like that ??
I daytrade using this system: http://bit.ly/MyZQy

Matthew C. said...

Dr. Brett,

You mentioned that buying came into the market the last hour. However the buying was not able to surmount 895 and with no strong $TICKs, so I put in a short at 894.75 and rode it down to 892.

We are finally seeing a more "normal" trend day down pattern a couple times the past 2 weeks after being almost completely absent the previous 3 months. The "permanent late-day bid" seems to be gone for now. . .

ross said...

Noam, the volume at bid should be higher. That is because people are really keen to sell and so instead of sitting on the ask side and waiting to be lifted, they and just going ahead and hitting bids to get out of their longs (or enter new shorts).

Noam said...

Thanks Ross,

I thought that Brett means that the bid size was higher which i think means more buyers...

Now I understand the real meaning of the Ask Bid volume.

Do you know where can i learn more about it, tutorial or something else?

Thanks

Trader Kevin said...

Noam: "I thought that Brett means that the bid size was higher which i think means more buyers. Do you know where can i learn more about it, tutorial or something else?"

MarketDelta shows what's traded and where (bid or offer). The number of fake, hidden, and CIC (Cancel If Close) orders makes the size on the Depth of Market irrelevant in my experience.

Go to MarketDelata to learn more about the Footprint.

Noam said...

Thanks Trader Kevin