A Jack of Small Trades

26-FEB-2016 | ES

1) In this morning's example of a Head & Shoulders pattern using a 4 tick range bar in the forward e-Mini S&P 500 electronic futures contract, the ES had retraced upwards within a downtrend from 10:30 am EST untill about 11:00 am EST on February 26th .

2) The left shoulder is colored yellow by the Better Data Suite's Order Flow Bars. This is indicative an intrabar reversal. The head closes at the low and is colored yellow by the BDS | Order Flow bars. This points to an intrabar reversal to the Sell side. 

3) Our right shoulder occurs at 11:17 a.m. EST. The right shoulder pierces the Upper Median line of the BDS | Better Forks and trades to the Median Line.

4) After the Entry, the BDS Order Flow Bars shows new fuel with multiple bars colored Red. The 'redder' the bars the higher the 'sell force'
 
 02.26.16 1st right shoulder BDS


For a deeper dive into how to use Better Data trade the Right Shoulder of a Head & Shoulders pattern click here.

...sceeto

The supporting order flow data that is presented on this page was generated by ...sceeto.

If you find this type of information and trading approach, as interesting as we do, please feel free to take a free trial of ...sceeto.

If you are curious about incorporating Better Data into your trading, please feel free to set up a complimentary consulting call here.

Here's an approach for using Bollinger Bands to deduce that price momentum is fading, and then using order flow, to confirm the price fade with an eye towards trading a reversal.

The trick is to know when an excursion beyond the Bollinger means that there will likely be continued momentum and when an excursion is OK to fade.

There are times when price moves in a fairly straight line. 

This sets occasions for price to pierce a Bollinger Band.

This is usually accompanied by price hugging the Bollinger Band.

We refer to these instances, when price hugs a Bollinger, extends beyond the Bollinger, and then reverses back into the Bollinger Band, as a potential penultimate high.

In these cases, if a new higher-high is put in, and that high is within the Bollinger Band, there is a reference that price momentum has decreased, and thus, is a candidate for a price reversal.

But a decrease in price momentum, in and of itself, is not enough evidence to infer that a price reversal may be immenent.  

Hence, we refer to this as just a 'potential penultimate high' and a 'candidate for a price reversal'.


Once this price action has played out, we now look to order flow to see if there are clues in the 'tape' that indicate that the supply and demand curve is being pressed by either incoming buy orders, or incoming sell orders.

This practice, is known as, 'reading the tape'.   In the days of yore, this was achieved by traders hunched over a ticker tape machine.   

Today this reading of the tape, is done by software algorithms, specifically, the 'Order Flow Bars' prictured below.

In this example, we see that the lower momentum higher-high that was put in after the penultimate high, was color coded 'yellow'.

A Yellow Order Flow Bar infers that the order flow associated with all of the transactions that transprired within that bar pivoted from Buyers to Sellers beyond a certain threshold.

Bollinger Fade

The takeaway here, and what is most interesting to me, is that just at the right place at the right time, where the standard price momentum technical analysis techniques infer that price has lost its upward momentum, we can peirce order flow and see that the buying has cessated, and the selling has begun.

And isn't this a wonderful place to enter a trade?




 

NinjaTrader is graciously hosting a workshop for us to showcase our new offering for NinjaTrader 8 (beta) on February 10th @ 4:15 p.m eastern.

You can register here.

 

The new offering is a suite of tools that allows a trader 3 ways to analyze market data.

1) Levels
2) Forks
3) Order Flow

Any one of these components can provide a trader with important insights...however, when takend together, a market panorama is exposed.

Feel free to take a trial.  You will need a beta version of NinjaTrader 8.

 

03-FEB-2016 | ES

1)   In this afternoon's example of a Head & Shoulders pattern using a 4 tick range bar in the forward e-Mini S&P 500 electronic futures contract, the ES had been in an downtrend since Wednesday Februrary 3rd 3:10 pm. EDT.

2) A -1 Standard Deviation Downtick Ratio and a High Frequency Sell Surge ocurred just before the Head.  A reversal in MacDaddy occurs just after the head. These indications in the tape point to exhaustion.

3)   Our right shoulder with a left strengh of at least 5 occurs at 3:40p.m. EDT. The right shoulder is accompanied by a  -2 standard deviation Downtick ratio and a Red Spike in Macdaddy. Immediately after the Right shoulder MacDaddy resumes to the buying side. We also have another +1 Standard Deviation Uptick Ratio indication. These indications point to Conclusionary selling and new fuel. 

4)  additonal New fuel indications occur as the move progresses. MacDaddy is strong green after the right shoulder. MacDaddy shows a few resumption spikes as the move continues. We also have a plethora of long indications on the tape. Multiple indications of Long Strong Tape Imbalance, Long Order Book Swept, Long High-Frequency trading Buy Surge, +1& +2 Standard Deviation Uptick Ratios, +2 Standard Deviation Volume Ratios, and +2 Standard Deviation # or Trades Ratios occur.  These indications in the tape point to New Fuel.

 12.09.15 1st Rt shoulder


For a deeper dive into how to use Better Data trade the Right Shoulder of a Head & Shoulders pattern click here.

...sceeto

The supporting order flow data that is presented on this page was generated by ...sceeto.

If you find this type of information and trading approach, as interesting as we do, please feel free to take a free trial of ...sceeto.

If you are curious about incorporating Better Data into your trading, please feel free to set up a complimentary consulting call here.

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