Trading with Market Statistics X. Position Trading

[jperl]

Position Trading is generally described as a trade which you enter and expect to hold for a considerable period of time during the day. Such a trade can be entered at any time after the open. My personal preference for a position trade is at the beginning of the trading day using market statistics from the previous day as my guide for determining entry, profit target, stoploss and scale in points if necessary. The direction of the trade is based on interpretation given in the last 9 "Trading with Market Statistics" threads but using the previous days statistics as the starting point. Position trading is thus no different than any other type of trading that I have previously described.

Here is the idea:

a)Set up a chart with yesterdays volume histogram, PVP, VWAP and SD's on it. Leave sufficient room to the right of yesterdays close so that at the open you can continue to add to the statistical data as todays market begins to unfold. In effect you are continuing to update yesterdays volume distribution as more data is added to the chart.

b)Before the open, decide on your trading plan. Pick a direction for the trade, an entry point, profit target and stoploss based on what you see in the volume distribution function. It will help to reread the previous threads to determine what you should be looking for.

c)When the market opens, execute the plan.

In the following video on trading the ER2 (Emini Russell 2000), you will see that the previous days volume distribution ended the day in a symmetric state with the VWAP = PVP. I then concluded that I should look for a countertrend trade back toward the VWAP as described in "Trading with Market Statistics Part VIII".

Watch the video to see what I did on September 06, 2007.

ER2PostionTradeSep06

This trade was a good position trade which would have been even better if I had traded more than one contract. After having climbed up to the 2nd SD above the VWAP, the price action continued on down below the VWAP to the 1st SD and then evenutally to the 2nd SD, a very typical signature of a symmetric distribution.

[Soultrader]

Very interesting video Jerry. Thank you very much. I will be spending some time this week pouring and reviewing your threads so I can hopefully understand your methodology better and have some good questions for you.

[Soultrader]

Hi Jerry,

Do you ever use the average of the past few trading sessions for the opening play? Or do you only take the previous session data?

[jperl]

	Quote:	Soultrader
	Do you ever use the average of the past few trading sessions for the opening play? Or do you only take the previous session data?

I usually use only the last trading session for a position trade. Once I decide on a trade entry, I will then take a look at the VWAP and SD's from previous 2 days, 1 week, 1 month, 2 months and 1 yr data to see if there is anything that would block the progress of the trade. I haven't gotten around to preparing a thread on this for want of time. Probably do so when I get back from my China trip.

[Dogpile]

not much discussion in 'market profile' area.... thought I would point out that we closed today with a reasonably 'normal' distribution, price closed right on VWAP at 1498.50 and PVP was close by.

here is an example of combining statistics with a pattern or two. I put a short on very late in day at 1498.00 to play for an overnight gap. we've had 3 up days in a row but I am unimpressed by the last few days. I did try a long this morning but it didn't fill (missed by a tick) so I took the day off. I came back and this Head & Shoulder pattern had become evident but I did not want to fight the market while it built higher value so I waited until very late in the day to enter as the market appeared to find a home at 98.00 and could come out of this balance to the downside overnight. Effectively, I want to find a short in the morning and this trade is a hedge in case the short works overnight instead of in the morning (both could still happen too).

[darthtrader]

	Quote:	jperl
	Once I decide on a trade entry, I will then take a look at the VWAP and SD's from previous 2 days, 1 week, 1 month, 2 months and 1 yr data to see if there is anything that would block the progress of the trade.

Jerry, does this apply to all your trades or just position/breakout/no skew to the market trades?Or even just position trades/no skew?
Also, if yesterdays close is a HUP I take the high and low of yesterday is also a HUP?
If I ask you any stupid questions I'm sorry. This is kind of why I never did good in math classes in highschool or college. I get the first few videos but I learn top down then fill in the details where your building on the details.

Have fun in china, I don't know how you could not. That should be an interesting time to say the least.

When you get back though, HUP theory, please? I'm dieing to understand what you see there.

[jperl]

	Quote:	darthtrader
	Jerry, does this apply to all your trades or just position/breakout/no skew to the market trades?Or even just position trades/no skew? Also, if yesterdays close is a HUP I take the high and low of yesterday is also a HUP? When you get back though, HUP theory, please? I'm dieing to understand what you see there.

You are right on track Darth. There are two kinds of HUP, static and dynamic. The static ones are for example yesterdays high, low and close. The dynamic ones are all the VWAP and SD's from yesterday, 2 days ago, 1 week, 2 weeks, 1 month 2 month, 1 year ago. I think you can see that how these cluster will be important for determining price action. The rest of the story you will have to wait until I come back.

[Karish]

Hi Jerry, great thread I hope you will find soon the time to explain us your HUP concept.
In the meanwhile I invest the time to code the theory (I am using AMIBROKER) and practicing, no doubt it improved my stats.
I wonder if and how we can implement Market statistics trading strategy to longer term trading style such as swing of several days?
Thx
Karish

[BlowFish]

Im glad someone mentioned HUP's again before I did! I have a broad idea what they are but do wonder how Jerry uses them in trade decisions. Last I recall he was not quite sure how to present this. I hope that he comes up with something as I have enjoyed this series immensely and miss my Market Stats fix!

Cheers.

[jperl]

	Quote:	Karish
	Hi Jerry, great thread I hope you will find soon the time to explain us your