Using Previous Day POC as Target

[Dogpile 10]

To me, Market Profile is about context for your pattern recognition. ie, I have been using 2 guideposts for my trading -- though I trade NQ futures mostly, not S&P's.

 

There have been 102 trading sessions in 2007 so far:

 

NQ has 'touched' the previous days POC 80 of those 102 sessions - 78%.(price calculated POC, not volume) .

 

FYI, NQ has touched the 15-min 20-EMA 94 times out of 102 sessions - 92%.

 

Thus, if the market has pushed one direction but has not touched these 'pivots' yet -- I am biased for a move towards these pivots. Having this statistical tendency is quite nice. Clearly, you need a great short-term reward:risk trading strategy to go with this tendency but in the volatile NQ futures market, it is nice to come in each morning with a first trade plan to short above yesterdays POC or a long below yesterdays POC and play back for the 15-min 20 ema or yesterdays POC, or play simply for it to try to test it -- not necessarily touch it.

 

Curious if this is standard Market Profile thinking or if there are other such things that you guys use that I might incorporate into my gameplan each morning (MP-based context to give short-term technical strategies that added boost). Thx in advance.

[notouch 10]

I'm curious about the 15 minute EMA one because the 15 EMA is constantly moving so it could move wildly against your entry level and even if price returned to the 15 EMA it would still leave you heavily in a loss. As for Market Profile, there is no catchy one sentence rule for its use. It's all about reading the market. Yesterday for example we had a higher value area, a single-print buying tail and then strong initiative buying into the close - all very bullish. Is it likely to touch yesterday's POC or would you be better off with another strategy?

[Dogpile 10]

Well yesterday was a special case where no price on the S&P futures found 'acceptance' --- it was an 'elongated' trend-day (skinny profile). NQ did form a value level near 1903.00. In this case, I am more inclined to play for the 15-min EMA. Not blindly -- only in combination with a risk-controlled technical strategy.

 

Re your 15-min 20-EMA comment -- Yes, this is just a guideline and the real trick is reading the pattern and applying short-term trading strategies around it. You must avoid fighting trend days in pursuit of this tendency. But NQ tends to have large retracements and I am very often sitting there saying "wow, we are 18 points away from yesterdays POC -- no way it touches it today" -- and then it does. For example, Tuesdays POC (to use for Wednesday) was 1892.00 on NQ. We had a strong push up on Wednesday during period 'A' (opening 30 minutes) and put in a typical morning reversal during period 'B' -- NQ then formed what looked like a large A-B-C down for a play back up. I went long here, it pushed up and I got my stop up to breakeven but then stopped out when that China news came out. What happened next, it proceeded directly to the previous days POC before going vertical back up. Turns out there was an even larger scale A-B-C down. The useful point here was to stay flexible to the idea that the odds are it will go touch yesterdays POC --- not necessarily to always trade/scalp with that as the objective. As I reviewed my trades that day, I realized that once it touched the POC --- the downside pivot had been met as an objective for the day and that could give you confidence that the market may have just put in a large corrective A-B-C down rather than thinking to 'go with' the downside momentum. Again, this is context for how to put oscillator momentum into perspective and using 'right-brain' thinking to synthesize the various buy and sell pressures into a trade.

 

I was just curious how others are practically using the information generated in Market Profile for context. I have read Daltons books and they opened my eyes big-time with how to think about trade location ("Markets In Profile" is just excellent).

[Dogpile 10]

nice example in todays (Friday 6/1) market...

 

1st play was to find a short set-up to play back for the 15-min EMA... it did a nice test of that level though missed it by a tick or two on first try... Nevertheless it was nicely profitable... then the next play was to find a set-up to play for yesterdays POC since yesterday had a real 'fat' profile (1931.25 on NQ, 1533.75 1534.00 on ES). Both touched their levels in ABC form down. Then the play was to look long.

[walterw 10]

Hi Dogpile, can you post some charts of what you are explaining ? will be much easier to understand and will have a superior educational value... thanks Walter.

[Dogpile 10]

sure.

 

let me try a youtube video...

 

YouTube - MP Concepts of Value Extended to 15-min EMA

 

Thursday did not touch previous day POC --- but this wasn't unexpected since Wednesdays profile was 'elongated' (skinny)... showing higher prices were attracting more buyers --- value was trending up, not balancing.

 

 

Concept though is to find good statistical tendencies (touch 15-min EMA, touch previous day POC etc..) through market profile 'concepts' in order to improve your pattern recognition (ie, morning reversal pattern, A-B-C correction, momentum oscillator patterns etc...)

 

comments appreciated

[walterw 10]

nice... are the abc`s inspired on John Novaks work ?

[Dogpile 10]

nah, ABC is standard Elliott wave speak...

 

markets often go up in 3 impulses (2 counter moves) for 5 'waves'

markets often go down in 2 impulses (1 counter move) for 3 'waves'

 

makes sense, first there are the pullback/bull flag buyers... when that test fails, they all get stopped out on a break of the swing low -- leading to a better set-up to test the highs. If that low is taken out -- then that is considered a 'trend reversal' (3 impulses down)...

[walterw 10]

Ok I see... well I asked you because I followed lots of Novak work and actually he used a very similar abc count wich works very nice like the one you showed... thanks for video, keep posting.... cheers Walter.

[notouch 10]

Interesting video. I'm more inclined only to trade in the direction of the migration of the POC which for the past few days has been up so today for example buying the rejection below the value area was good for a bounce.

 

I can see how you determine your exits but how do you determine how to enter a trade? Would you wait for a bearish candlestick before selling or do you have some other entry criteria?

[Dogpile 10]

<<I'm more inclined only to trade in the direction of the migration of the POC which for the past few days >>

 

I see your logic in what you say about looking long at previous days POC. I have studied George Taylors technique and what you say is kind of consistent with that concept -- find meaningful pivots to use as guidelines. this is similar to what I am saying about the 15-min 20-ema.

 

btw, Taylors Trading Technique has a lot to do with fading the multi-day migration of price. ie, look for a spot to short if up 2-3 days in a row and vice versa.

 

Linda Rashke has made practical indicators based on his work. I highly recommend 'Street Smarts' the book for its practical interpretation of Taylor (particularly, the '2-ROC' fade and the 'Pinball Buy' chapters).

 

<<I can see how you determine your exits but how do you determine how to enter a trade?>>

 

This is an entire new thread but to answer in general, I like to use short-term parabolics for NQ --- NQ tends to swing a lot in spikey fashion so parabolics work well. doesn't work so well for other contracts that chop around a lot. it also has nice time component to it... gives your trade some room to work for a while and then tightens up. the best trades tend to work right away. once you get some initial movement in your direction, take part off and then use more discretionary stop...

[Dogpile 10]

<<but how do you determine how to enter a trade? >>

 

yah, this is the hard part...

 

here is a single timeframe of a mechanical method to demonstrate an entry technique. the entry technique is crucial but getting direction right is also crucial -- which MP certainly aids.

 

NQ+week+of+June+1.bmp (image)

 

notice that we are in a clear uptrend so 'lower lows' are all considered corrective ABC waves and are buyable. there are better ways to enter ABC's than this parabolic method used in the chart... but I drew the lines on there in any case...