Flat Session - Have The Markets Already Closed For New Year's?

Mkt gapped up (30m) from a minor pre-mkt report (Goods Trade Balance) and then didn't do much else.  Even the CB Consumer Confidence red report at 11pm didn't spark any activity.

I tried a cpb buy looking for some follow-through.  It pushed a bit my way but showed little buyer dominance.  My 1st tgt was hit (1m) but not filled and then it came through me and chopped and was eventually scratched. I saw no leadership from ES or YM so didn't look for a re-entry. I knew I was buying high plus the range chart formed fewer bars than the 1m so no point sticking around.

30m shows it grinded higher after a few hours as expected but doesn't mean I was wrong to exit.  I like to see volume and volatility otherwise it's best I stay out.

Patternwise I like the probe of the 11:45 lows (5m) which was tested and then continued the uptrend - one of mine.  That was around 1:20am though and I had quit an hour earlier.

Result: 1 BE

Volume - Does It Matter Or Not?

I've been studying Price and Volume for a year now (Wyckoff and VSA) and rather than seeing volume as key to what causes turning points I see it as something that is there or isn't but haven't yet discovered whether it is useful to me or not.  I would like it better if the "experts" explained the presence of volume or the lack of it in a consistent way.  Instead it seems to be a case of each of the "laws" being able to describe why the market turned the way it did with an air of certainty.  Problem is it's never done with that level of confidence in real-time.  Sure I understand each person may use it their own way, but since the use of volume comes from Wyckoff's teachings I expected if volume is truly "telling a story" then they would be receptive to its message similarly.  Instead volume is being used in completely contradictory ways.  Clearly, volume doesn't tell it's story well enough - each trader is just trying to interpret it.  In fact it's message is pretty vague at times and impossible to decipher at others.

Taken at their word the stock "lessons" I've encountered will only damage my account.  I've found the more invested someone is means they aren't necessarily good at using volume.  Of course they may feel their knowledge is at an "expert" level, but the problem is they tend to be rigid and defend their stance. Sometimes they should admit the market is noisy and random, it'd be fine to say more information is needed to properly assess the market.  I'm also amazed how some volume experts are regarded as "Gods" even though the most impressive thing is their recollection of all scenarios rather than their ability to apply the correct timing and direction for money-making trades.

Here's a typical scenario: If an uptrend sees a pause at a top with decent volume it is called "Stopping Volume", if it is on excessive volume (subjective) it is called "Climactic", if it is either of these or anything in between but the market does not reverse it is explained as "Absorption" meaning the buyers are soaking up all the selling thus preventing it from declining.  In real-time I haven't seen anybody identify which of these is occurring until the market does something afterwards, either it declines or trades sideways, but the "result" is what is needed to explain which of the 3 it is, and by then it will then be a perfect explanation of which of the 3 ALREADY happened.  If it's all clear in hindsight what is the use?

To make things even more confusing lets say the market declines but does so on low volume.  Well what happened there then?  VSA or Wyckoff practitioners will then say it didn't fall from the aggressiveness of sellers but that the buyers simply stopped buying i.e. the lack of demand meant that any selling was more easily able to apply downward pressure.  Hmmm, okay.  Sounds like markets can turn an uptrend on high, medium and also low volume.  If I didn't look at volume at all wouldn't I be able to wait and see the result and simply say "the market turned down right there"?  Sure I wouldn't know why, but who cares?  How does volume explain the turn any better?  Hindsight is clear to all, NO VOLUME INDICATOR NECESSARY.

Both camps of volume doctrines have flaws, no need to separate them and pinpoint the pros and cons since they have some overlap.  "Bar by Bar" analysis seems like BS, quite a time-consuming and yet fruitless exercise.  I also see "No Demand/No Supply" as semi-BS.  There are times it is useful to know that ND/NS is occurring, but for me it is pretty useless since the timeframes I watch have periods where ALL VOLUME has dropped off.  Knowing this (now) I can avoid getting sucked into a trade due to a lack of demand being there coz now I can see it's just lunchtime (LOL).  The concept of "Absorption Volume" is also semi-BS.  I dont deny it, just that it is explained only after the result. If a market trades sideways with high volume you can easily think absorption is occurring only to see the market move away in the "wrong" direction nullifying that idea.  Die-hards quickly forget those instances and only use the occasions that rise as evidence AV is a real thing.  Again, it works sometimes and other times it declines anyway to which they will say it was marked down so the Smart Money can accumulate some more.  Whatever.  All I care about is whether Absorption is identifiable and when it induces me to buy at high prices I expect if it has an edge what will follow are even higher prices most of the time.  I'm not convinced.

There are more of these concepts that seem useless but those are the main ones.  At least I never got so invested in volume analysis that I can't tell it like it is.  A year of study may not sound like much, but how many charts do you need to see to know whether the aforementioned concepts are gonna work for you or not?  I've seen a good share to feel safe about my conclusions.

Not all is lost though because this has made me study harder looking for the whole point of volume's significance.  I can't say "I've got it!" but the best use seems to be when used in the context of a trend. Sounds obvious, but I've observed many traders can't help using volume to identify reversals.  Reason being the high volume peaks are more obvious, but I can't say they mark the day's high or low very well.  The trend turns tend to be on less exciting amounts of volume - mostly low. Occasionally a pullback will occur on very high volume, which I would say in real-time looks more like a reversal into a downtrend, but if that gets bought it usually provides a great long trade because eager sellers all got wrong-footed.  In those cases it is prudent to hold off on buys since they might actually be beginnings of a new downtrend, but then to watch closely at the reaction.  If it stops dead and then pushes higher it indicates the original uptrend is still intact and that the decline was a shakeout. I'm not attempting to justify volume analysis just like the Wyckoff/VSA traders I'm pointing out where I have seen it is actually useful.  In future I will be discussing what does work when using volume.

USDCHF - Bread and Butter Trade

D broke DTL, jaws up
240 jaws up, testing HL 5 bars previously (w HV)
60 MAs flat testing previous HL with vol increase
10 downtrend had increasing vol, churn at lows, DTLB, broke AR with push through at 7pm

This is a best setup (based on high win % rather than R:R) because there is no doubt which way I should trade. Keying off the big TFs I had the momentum and volume in my favor. The concern was in trying a buy so high up on the 240, but I believed I could get a scalp on the pop off support.  I only targeted 32 pips (the highs seen on the 60). The trade was a Set n Forget as I left to football with stop set to BE at 8pm.

My exit was at the highs which then reacted with a brutal sell-off erasing all the gains with high selling volume - a reminder that taking the conservative gain was best rather than trying to milk this for more.  Only the buys at potential beginnings of trends should aim for multiple R targets.

Result: +1R

Losses From Reading Volume 2 (Follow-up)

Yesterday I bought EURJPY after seeing the SOS.  Unfortunately I bought at the 60 min range highs. As mentioned it was foolish to expect my stop to hold if the SM allowed the mkt to drop so they could accumulate lower. Today the mkt tested the lower end of the range and held.

A buy taken at the lows requires a smaller stop and has a greater potential reward higher.  At the time of the snapshot the mkt has reached the 60 min range highs again - 70 pips higher.  Profits could either be taken or stop moved to BE.  This is the proper sequencing for a countertrend buy.

Off My Radar - MASSIVE MOVES!!!!!

GBPNZD has been wildly volatile with mega pips available for anyone willing to trade it.  I have not looked at it in awhile since I reduced my watchlist to a dozen pairs.  Seeing this I will take time each weekend to run through all the pairs for opportunities.

Daily shows a 2200 pips uptrend from April 22 low. MAs are jaws up (obviously).
240 is in a ranging state 600 pips wide!  Either play the shorts off the highs or the buys off the lows (I prefer going with the dominant trend).
60 shows yesterday's pullbacks for buys off the trap box at support.
5 shows 3 possible buys.  The first is a push-through entry as the narrow range was broken, the second was a pb buy to the upward 60 min MA (thick lime MA) and the 3rd entry was a break of the 2-hour long down channel at 9pm.  Any of these entries at the 2.1100 area had 400 pips potential upwards.

What draws me to these trades is not the ease they worked, but the distance they traveled.  Sure we never know how far any trade can go, but the ATR was almost 300 pips indicating the environment was ripe to catch a big move.  There is no point seeking large targets in a mkt that doesn't show ability to move. But choosing mkts with higher ATRs than normal at least offers a chance an outlier can be captured.

My analysis of this market would lead me to stalk buys.  My method could have caught 100-400 pips. This is not typical, but to catch these trades I have to see them.  GBPNZD isn't on my day-to-day watchlist due to it's wide spread (6-11 pips).  However, it is worth trading the large spread pairs when they offer high R setups.

Losses From Reading Volume 1

Yesterday's trade in EURJPY was typical of my last 4 attempts (not shown on the blog).  Basically I have been reading the charts from Daily to 5 min, but making a misstep along the way and not trading with the flow.  The main problem is seeing evidence of activity on the volume and drawing conclusions about it prematurely.

The Daily view is an upward trending state with the past few weeks being locked in an upward channel. This was supported by the jaws up MAs.

The 240 shows the upward channel and that 3 sessions ago the market collapsed hard which I marked as SOW (Sign Of Weakness).  Normally I would try to go with the recent flow and try a short. However, there was no room to target to the downside as the drop had already reached the bottom end of the channel.  This meant I couldn't go short and instead wanted to try a buy inline with the Daily's uptrend.

Looking at the 60 the market had bottomed and made 2 HLs (circled) both had accumulation volume (buying).  I marked the 2nd HL as a SOS (Sign Of Strength) and looked to get long.

The 5 min shows strong pushes up to the day's high.  From 4-6pm the mkt only went sideways at the highs rather than testing down to the lows.  I bought at 135.01 shortly after 6pm and saw a good start to the trade. However, the mkt drifted back downwards to my entry and subsequently to my stop knocking me out at 9:30pm for -1R.

At first glance my sequencing seems correct and that I was right to try a buy.  But just as with the other attempts I was stopped out despite the premises being valid.  The problem is I am too early.  I am seeing things on the volume and drawing a conclusion that SM are going to take it up immediately.

I am aware that even if they are accumulating to take this mkt higher they will only do so once they have adequately built up their positions.  Plus, the mkt is still shaken up by the collapse so I should expect there will be more selling.  Getting long at the top of the 60 minute's range made me a sitting duck if SM allowed the mkt to drop so they could buy more at lower levels.  Today it is at those lower levels (testing the 60 min trap box) and basing looking like SM are continuing to accumulate.

The timing of my trade was superb for a scalp, but trying to time the exact 5 minute entry inline with the Daily is a lot to ask.  I could've taken a scalp win or scratched when it came back at me, but was foolish to take a loss.

I see the main problem with my buy being the drastic jump from 240 to 60 to find a buy entry.  If I took note of the 240 I should have seen the jaws down MAs and expected another attempt lower. If the mkt cannot go lower it will still need to work off the downward momentum by going sideways causing the MAs to flatten.  Then if SM continues to accumulate buys the mkt will steadily drift upward and it will then be safer to try a buy.

I will continue to stalk EURJPY and will update on any re-entry.

GBPUSD - Incorrect Read

GU has been in an overall downtrend for 10 months, but has become very choppy in the past month.

D shows the range boundaries.
240 is a mess but last week broke out of the down channel and is testing from above. The bar before my entry was a bull pin marking the end of L2. I stalked a test of that low.
60 shows the DTL stalled upward movement.
5 shows I missed the optimal buy after the downmove ended with a vol climax. Entry would've been taken just after 6:00pm.  A 2nd climax occurred at 8:30pm with an entry at 9:30pm.  I missed both entries and instead entered on a break of the small consolidation at 10pm.

No surprises how this ended.  I was stopped out after only seeing about 10 pips in favor when the resistance held i.e. the sellers returned.  The 60 shows a trap box just above the DTL that held. The 5 shows that same trap box and how my entry was right into the sell zone - big mistake. The 3rd vol circle shows they hit it hard as well. Not shown is GBPCAD which I watched at the time and saw it leading the way down.

1 loss for -0.5R. Fortunately, I took a reduced position knowing it wasn't a very good trade. Reflecting back I realize I should've skipped this buy seeing that I missed the 2 better entries earlier. The D had no momentum and was in a range, I entered at the top of the range and didn't exit when sellers hit it. Nor did I heed GBPCAD's warning. I could actually make a better case for a sell! Not because that worked, but because it was fresh off the TOP of the range and it agreed with GBPCAD's bearish view.

EURCAD - Pipped Out Again

Following the result after yesterday's trade I was looking to go with the overall downtrend on EURCAD.

D in downtrend tested S/R from below and held with a significant sell-off.
240 reached a support area and I was looking for a test up to short into.
60 got to the MAs and was holding
5 shows my short entry at 25. It was messy but I saw a H&S pattern and entered when the 6pm low was broken.

5 min shows it tested the top of the choppy range 30 mins later. It probed the top leaving a large wick and vol shows BB sold into it.  From there the mkt was finally ready to go.  Not only was I stopped out but I wasn't around to re-enter.
60 shows I targeted the trap box at the lows, my 2R target was hit 4 hours later.

Summary: I took a -1R loss despite a perfect read. The consolidation was messy and I expected it to break downside at the point I entered. I should expect I will sometimes enter in consolidations that don't break until later.  Main thing is my view is correct and I believe the target is achievable. I should not use tight (hitable) stops when things are choppy - I'm just asking to get pipped out. The last 2 stopouts have been barely tagged and is a result from trying to reduce risk and to increase the Reward multiples.  However, smaller stops can also make it unlikely I'll reach my target because the noise can snag them.  So it's not just about having a large R multiple but about having the right mix of good win percentage plus an appropriate Risk:Reward.  If I need a 40 pips stop and that means I can only achieve a 2R win then I cannot use anything smaller than 40 pips.

EURCAD - Range Trade

D was in a downtrend, but in a range with traps above and below.
240 shows the range. I was keying off of the blast up on Friday. After that it consolidated at the highs for 2 days and suggested a breakout could occur.
60 pb to 50% with a vol increase.
5 made a reversal with test flag. I bought the resistance break and saw the mkt quickly advance.

60 shows I targeted the trap highs.
5 shows vol increasing at the resistance highs.

Despite the ease my trade worked I resisted going for more pips.  That decision saved me because BB slammed EURCAD right after I exited.  60 and 5 make my exit look lucky, but all I was doing was following the plan - enter at support and target the highs. The hard rejection at resistance shown on 240 and D suggests the overall downtrend is regaining control.

Summary: A simple +2R win in a range. Ranges lack the momentum of trends, but are good in their own way as long as I play the boundaries correctly.

EURJPY - Tagged Out Before the Move

D retraced to previous Jan support in 2L. Mkt showed tapering and alternation.
240 shows the detail of L2 as a move with distribution at the top.
60 shows two sets of selling at the top.  My entry was attempted after supp was tested (No D) and then a 50% pb to underside of MAs.
5 showed a 2L pb and then No D.  My entry was taken at 56, but I should've been in 4 bars earlier at about 64.

I was stopped out for -1R right at the top of a violent test up as shown on the 5.  The mkt eventually broke down and is at 4R as shown on the 60.

A trade like this should be given room. It seems foolish to exit at -20 and miss the re-entry when the 1st LH has such huge potential. EJ is uncatchable for an alternate entry (at +6R now). As far as a confluence of factors in favor they don't get much better than this - agreement in all TFs and the large move I was playing for.

AUDUSD - 3 Point Trendline Short

D in overall downtrend. AU rallied up in 2 legs meeting Feb resistance.

240 shows the 2L upmove with tapering at the top. It appeared 3L wasn't a possibility and I opted for a short off the DTL.

60 showed 2 sets of distribution at the 2 previous highs. The high I was entering had a nice probe of the DTL.  5 shows the vol climax followed by the pb to support. There was no demand so entry was taken on a supp brk.

The mkt didn't brk for another 2 hours. Fortunately the tests of the resist trap showed weakness. The drop commenced and after 2L I exited for +1R after the bull pin bar (circled). The bounce was shortlived as my tgt was reached just 20 mins later.

A look at the 60 as AU stands today shows the short looks unreal right off the highs. Rather than a 3 or 4R win I took just 1R - I grabbed at profits due to being affected by all my breakevens this week.

USDJPY - Right Call But Got Shaken Out

D shows UJ as rejecting resist from Dec.  It had already gone down in 2L and I wanted to get short after seeing L2 was larger than L1 i.e. I was expecting L3.
240 shows the FOMC wackiness on Mar 19th left a tail that was fully cleared by L2 down.  All the pb were small displaying how weak UJ was.
60 showed a FOF in the downward MAs, I wanted an entry at around 120.40, but this was all it could muster before the next leg down would come.
5 shows a move to 119.75 which wedged and then broke downside. I was in at 65.

The close proximity to support made it tough to stay with the trade. I ended up exiting at BE as the mkt pin-balled repeatedly. It eventually broke down for the L3 as I expected and v-bottomed.

Considering my entry had a 15 pips stop the mkt went down about 7R - how could I scratch it?  When I see good setups (probability) that also have high R potential I have got to bag them. I believe my issue could come down to old habits making me worry about the trade's success. I must remember I am playing for R-multiples and not a high hit rate.