ES - Trading Process Exercise

08-14-17 Day 6 - Part 3 - ES - Trading Process Exercise - Lot

Management - 2 Lots - 10 Steps
The Exercise
• This is a process not a set up
• It can be traded on any time frame but….
• Use the 1 min chart
• So you get lots and lots of experience
• DRILL……DRILL……DRILL….so the trades become automatic
• The idea is to put you under pressure
• To put as many pieces of the jigsaw quickly together resulting in a
decision
• Want to see who can cope with pressure on a 1 min chart

2
Add Fractal Indi IF Needed
• Fractal indicator
• Supports you to be able to see the turning points in price action
and C-Liquidity levels
• Showing where there are trading opportunities
• If price doesn't go through the previous high or low it is a
Failed Auction Fractal
Fractal

Failed 3
Fractal
Auction
Failed Auction Significance
• If price doesn't take out the previous high or low, it is a failed auction
• Below is a failed sell auction, as price hasn’t taken out the previous low
• This signifies that there is still demand in the market and you should be
ready to buy at or near the Auction high

High New High

Set a Buy
order

Auction
New Low
4
Failed
Auction
Low
Each Box = an Auction
High

Failed
Auction
Failed
Auction

Failed
Auction ?

Failed
Auction
5
Low
Opportunities
FA

FA FA FA

FA
FA
FA

FA

FA

6
A Momentum Trade
• The Core Idea = a momentum trade in the direction of supporting
intrinsic value
• As price approach's the Buy Order we want to see intrinsic value for
ES in our favour such as :
• Being in an uptick
• Block volume is positive
• Want to see a buyers rotation, so buying Merrill's auction
• Trin is bullish
• Ideally buying before the breakout, but in this exercise we will start
by buying the break. Then practice working the trade backwards so
as to enter before the break out
• Statistically the market stays in a trend 60-65% of the time so you
should be able to get a win rate in that vicinity
• Targeting 1 and 2 ticks
• Stop of 4 ticks
• The end game of this process is you will have a trading system that 7
has a maximum 4 tick stop, minimum 60% win rate.
Exercise Step 1
Only do this on demo as an exercise to learn how to process lots of information quickly

Target 60% Win Rate

1 ticks and Profit +3
2 ticks Stop -8
Over 10 trades = -14
Buy break out Aim is to equal or
Stop better this
4 ticks Once you better it
Failed move onto Step 2
Auction

1. Recognising price action: Identifying flow and movement of price. If you miss
a trade on a downtick then through this process you will learn to enter on the
up tick when value is still in your favour. In this exercise you are buying C-
Liquidity hoping you will be involved in the stop run 8
a. Enter using : Buy Stop or Sell Stop orders
b. Helps you recognise the squeeze in line with your trade
c. Effectively buying C-Liquidity for the stop run
Exercise Step 2

Target 70% Win Rate

1 ticks and Profit +3
2 ticks Stop -8
Over 10 trades = -3
Buy before break out Aim is to equal or
beat this
Failed Stop Once you beat it
Auction 4 ticks move onto Step 3

2. Jump in before the market breaks

a. Buy Stop or Sell Stop orders
b. Using a failed auction only
9
Exercise Step 3
Target 90% Win Rate
1 ticks and Profit +3
2 ticks Stop -8
Over 10 trades = +19
Buy before break out Aim is to equal or
beat this
Failed
Stop Once you beat it
Auction 4 ticks move onto Step 4

3. Trading in the direction of Value : Add 1 value : watch to see if value

is in favour of the trade or not
a. Value with the trade take it
b. Value against trade don’t trade, move your buy stop order away
10
+19 ticks per 10 trades without moving your targets or stops
Exercise Steps 4-7
In each of the following steps expand on your trade setup
4. Add Volume
• Make sure volume supports the trade direction
5. Add 2nd Value
• Add another value line
6. Move Target 2 & Move Stops to Break Even
• Move targets possibly using measured move of the auction
moving stops to break even after taking target 1 or 2
7. Move Target 1 & 2
• Using measured moves or structural levels ie before previous
H/L the ceilings and floors

Make sure you only add one change at a time and then assess how that 11
impacts on trade performance
Measured Moves for Targets
High

Failed
Auction
Failed
Auction

Failed
Auction ?

measured
move measured Failed
move Auction
ProfitTarget 12
Low
Exercise Step 8
Stop
4 ticks
Sell Limit 3 ticks above high

Target
1 ticks and
2 ticks

8. Sell limit order 3 ticks above top edge

a) Now we are looking to sell C-Liquidity
b) Watch to see if value is in favour of the
trade or not
c) Value with the trade take it
d) Value against trade don’t trade, move 13
your sell limit order away
Exercise Step 9

Stop
4 ticks

Sell for Squeeze

9. Squeeze continuation in the

direction of value
Target a) Add to trade before it
1 ticks and breaks fractal
2 ticks b) Value with the trade take it
c) Value against trade don’t
trade, move your sell stop
When you become order away
successful with the 1 and 2
14
tick profits then move
targets further away
Exercise Step 8 and 9

Sell Limit 3 ticks above high

Sell for Squeeze

9. If price fails to take the top Sell

Limit order then the Squeeze
continuation will catch the trade
a. As long as the value is still
with the trade
15
Exercise Step 10

Sell Limit 3 ticks above high

Sell Limit Order

10. Move Limit Order to catch 2 tick back

pressure
a) If price moves off before the top
Sell Limit is filled then try to get
filled on an up tick with a Sell Limit
order trailing 2 ticks behind price
b) As long as the value is still with the 16
trade
Add : Levels, Volume and 1 Value (1/DXY)

GC Example

17
Add : Levels, Volume and 1 Value (1/DXY)
GC Example
10:30 GC auction
Previous day POC

2:00
Level

Previous day VolP shelf

21:00 Level

Low Vol VolP zone

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Add : Levels, Volume and 1 Value (1/DXY)
Sell Limit 3 ticks above high

GC Example

10:30 GC auction
Previous day POC

2:00 Level

Previous day VolP shelf

21:00 Level
Low Vol VolP zone
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GC

20
Technicals
• When Price is in an up trend
• There should be a buy trade on a break
• There should be a buy trade 1 tick before the break
• Failed Auctions give you C-Liquidity buy
• There are trades all over the place not only at the tops or
bottoms
• You need to be able to find these trades

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Is ES a Buy or Sell
• Look on daily chart first
• On large daily down bars we are only
looking to buy
• Look to see how much hedging has been
put in place
• Where is Value
• Move to smaller time frame for trading
• On a 5 m chart at bottom edge enter using
• failed auctions/wobbles
• 3 ticks limit order
• There are trades everywhere

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Tape reading : Order Flow
Many different ways to read but always happens around the big figures
When at top edge and we see an edge rejection, we now look at the tape to see when
there is an opportunity to enter through a tape imbalance
All you are doing is
Watch for an imbalance, a reduction in liquidity. If you buy
reading the diagonal,
now price should up tick, giving you a 1 tick look at the market
watching for the
Liquidity above liquidity to get very
the market of 50 thin. Then hit into that
40
offer and lift the offer
50 10/5 50
If you need to get
50 50 off the trade you
Price should
could exit for 0
immediately
except commision
up tick

For price to move As soon as price

above this level ticks up liquidity
Liquidity below the 50 lots above moves in to
the market of 50 the market will
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defend the level
have to be
covered
Tape reading : Whole Numbers
What happens when price approaches big figure levels (ES 10, 20, 30 etc, Currencies 50 or 00).
A lot of games go on at these levels. We can see where the games are being played, through
watching liquidity.

Liquidity
Liquidity is added to push
price through the big figure, Pulled Added
then the liquidity is pulled liquidity Liquidity
away from above, trying
desperately to get more 00
buyers into the market, when Once they have
in reality all they are doing is Added accumulated
accumulating more shorts enough shorts they
Liquidity flip liquidity
removing liquidity
Pulled from below the
liquidity market and adding
Liquidity is often below price it above the market
and added as it goes up,
trying to encourage buyers 24
as liquidity is behind them

Added big Liquidity for Target