Microstructural phenomenons: pre-testOn the chart, Oct '94 is a pre-test of 92.26
I'm not sure it's a good example here, but it'll suffice to explain this easy concept.
Again, it's not the system's behavior principle, the reason of this microstructural phenomenon is all of us.
Forgot to mention before...
There's no such thing as, "A new wave started after "almost" hitting a level". NO. In 100% cases, a level should always be touched. because cheap/expansive is always 1 tick past the level, the main responsive activity will be concentrated after the level, never before.
However, some of us sometimes gets a lil heavy handed in scaling in/scaling out of the previously acquired position. That's why prices start to react (sometimes quite strong) in front of the level.
The main things to learn from here:
1) Pre-tests are not the systemic events, if you're responding at a level / a lil deeper past the level, nothing had changed for you at this points;
2) If you started to scale in before the level and got caught in a pre-test, just simply close your position with whatever revenue this pre-test offers a lil bit later and start scaling in again like nothing happened;
Caution: pre-tests are also a part of the recorded market activity as everything else, during which the things may change or may not change. Pre-tests should be taken out of the context and be processed as independent entities.
Levels
Microstructural phenomenons: option strikesThere's no such thing as round levels , instead:
1) You open the option chain of given vehicle;
2) You notice the step between the strikes that have significantly higher volume/OI than the other ones;
3) for example on ES dem would be xx50.00 and xx00.00;
Without further analytics of the option chain, the very general rule is that these levels usually stop & repel the sharp jumps in prices, and allow the average activity to pass through em with a little stuck around em.
Again the reason is microstructural, some of are hedging current & anticipated option positions on good prices. Usually market allows to do it right after economic releases.
About the example, if you have any platform that offers a liquidity heatmap, try to find that reversal on ES & correlated assets, that moment in time that I market with a circle, you might be surprised.
Microstructural phenomenons: re-positioning 4 real, levels can't be re-positioned, but there's a lil detail.
As explained in "Real levels: positioning and clearing", positioned levels can't switch direction, ie once a level was positioned as support it can't become a resistance, once a level was positioned as resistance it can't become a support. A positioned level can only be cleared with time, price or volume.
However, there are things that do exist and not based on the ways of the system behavior, but rather on some lil details how the sub-systems and the super-system work.
Aye aye, easy, a level can switch directing for a very specific and short period of time, but not due to the principles of how things work, rather by a microstructural reasons. The reason is all of us & common sense. When we scale in near a positioned level, but shortly after it becomes obvious with evidence that a level was consumed/cleared (ie there's no more level anymore), in most occasions there's no reason to take a loss right away, it makes sense to try scaling out at around break-even.
1879 was positioned as support in the end of march 2022, the same time 1788 was discovered as a back level of 1879.
Point 1: we enter @ ~ the level;
Point 2: the level gets definitely proved as a cleared one;
Point 3: we leave at break-even, concentrating the liquidity around 1879 (~ when we've entered);
Point 4: we see the result, a pop.
If we would've dropped much deeper than 1788 (technically said, if we would've contacted another deeper level), that phenomenon would've never occurred (there would've been no1 to scale out at breakeven).
Real levels: pivot highs & lowsThis is the main method of locating the levels that is used everywhere, it's robust & general. Instead of using the actual volumes we infer volumes from prices, the prices that include all the information about everything, prices that consider all the correlated volume.
I think many may know how to find these levels, these are simply pivot highs & lows (aka PHLs).
But aside of understanding the positioning and clearing, the trick is to choose the right resolution.
Btw, an obvious thing I haven't mentioned before: the levels are located, positioned and cleared on the same resolution. Only this way.
So, about choosing the correct resolution, basically you need the lowest resolution possible where a level origin (a PHL) can be found:
1) Choose a unique color for every resolution, start with the lowest resolution possible, like 1Y chart, mark all the positioned levels there, optionally mark the back levels as well, and maybe non-positioned level as well with a dash line. Now repeat the process on every resolution until you hit your target resolution. So if you decide to stop at 1D chart, you'll need to consider 1Y, 1Q, 1M, 1W and ofc 1D resolutions;
2) Don't forget to periodically check and delete the cleared levels.
To be efficient you need to develop a habit of scrolling through all the resolutions you use when you have a question about what's happening.
Clearing by volume with PHLs happens this way:
1) We consider volume to be uniformly distributed along the bar, so at every price inside each bar there's N volume;
2) Consequently, we can simply count the number of bars during positioning, and add 1 to it (PHL is always one bar by definition);
3) Then we count the number of bars during testing, when this number becomes equal to the number of bars during positioning plus one, the level is considered cleared.
On the chart you see I got (almost xd) all the positioned levels from 1M in red, yellow from 1W and gray from 1D.
Live Long and Prosper
Real levels: pivot volume modesA fully serious disclaimer from the beginning: every analysis based on volumes is very unstable and unreliable on most of the assets, hence this way of locating levels is very specific and should be used with care. It can be used if:
1) you trade an asset that concentrates most of the volume (+80%) of all its "correlees", maybe traded only on one exchange, doesn't have liquid option market and OTC volume is not there. Examples are "standalone" stocks that are not part of any indexes, don't correlate with anything & and traded only on on exchange;
2) you trade all correlees together. Example: you trade both Crude and Brent futures, monitoring several active expiration, not only the front contract. Another example: you trade Gold & monitor the ETFs. Or you trade all the bond futures together (with EU as well).
So, if you trade ES futures looking at volumes, and unless you also monitor SPY, NQ futures, QQQ, all the sector ETFs, individual leading stocks like AMZN & APPL etc etc, all the option markets, darkpools & OTC trades. Unless you trade all of em together (prolly at least 100 assets), you need a reality check in terms of relying on volumes.
Not gonna talk a lot about these PVM levels, but anyways:
1) Instead of bar chart you use a footprint/clusters/whatever you call it, and locate volume modes of every bar;
2) A mode that is lower than the previous one and lower than the next one is a level;
3) A mode that is higher than the previous one and higher than the next one is a level;
4) Positioning happens as explained in "Real levels: positioning and clearing";
5) Clearing by volume happens this way: first you need to check the amount of volume that was built at the level since it's origin till the end of positioning. Second, you monitor how much volume builds at the level during the tests. When second volume exceeds first volume, the level is considered cleared by volume.
Real levels: positioning and clearingFrom where the levels originate & about the proper resolutions we'll discuss later. Soz again for the order xD, but I decided to do that in order to highlight 2 of the most important concepts most people seem to miss for centuries. A level can not be broken, switch direction or suddenly stop working. A level:
1) Can be positioned first as support / resistance;
2) Then it will be cleared.
Positioning
After a level finishes it's formation (it's origin becomes well defined and confirmed), regardless of it's type, at this point of time this level is just a level, it's only a potential support/resistance or supply/demand, whatever you call it. In order to become a confirmed support/resistance, a level must be positioned . In other words, a level becomes supply & demand only after its positioning is over, until that it's only a potential supply/demand.
So:
Price comes back to the not yet positioned level for the first time.
The first bar that touches a level initiates positioning, which ends with the first bar that doesn't touch the level (a free bar).
One free bar above the level means your level just got positioned as supply/support.
One free bar below the level means your level just got positioned as resistance/demand.
A positioned level has two prices: front and back.
If it's a supply level, the front level will be the original level, the back level will be the lowest low of all the bars participated in positioning.
If it's a demand level, the front level will be the original level, the back level will be the highest high of all the bars participated in positioning.
All the pictures show literally the same - positioning of levels as supports/resistances. Dash lines are level themselves, which will become front levels after positioning, dot lines are theirs back levels. Circles are the hypothetical origins of the levels.
Case 1: after completion of the 5th bar the level got positioned as demand, high of the 2nd bar is the back level.
Case 2: after completion of the 3rd bar the level got positioned as supply, low of the 2nd bar is the back level.
Process the other cases yourself just to get a feel.
Clearing
After a level got positioned, later it might be tested or not, regardless, eventually it will be cleared either by:
1) Time. Can be elaborated further, but as an "ok" general rule, when the distance in bars between the level's origin and the current bar is higher than 256 bars, almost surely the level has expired some time ago;
2) Price. When price tests the positioned level deep and touches the back level, or a new free bar forms past the front level. Chances the level got cleared;
3) Volume. Depends on the type of a level, gonna explain later.
In essence, clearing of a level means removing the responsive activity from it: limit orders, MIT orders etc.
Imaginary levels: fair price aka valueIntro
So called "value" or fair price is like limits in math, can be infinitely approached but never reached. We can model it, anticipate it, imagine it , but it doesn't make it real. In double/dual auctions fair price is an idea.
We can surely say that some prices are too cheap and too expensive, these are real levels that can proved with evidence. The only thing we can surely say about value is that it's somewhere in middle between these 2, everything else ain't better than just making projections or extrapolations. Neither time nor volume profile won't magically calculate you a fair price buy finding mode of the distribution, it's not better (and probably worse) than just taking an average. None can prove a price to be fair for both buyers and sellers.
It cannot even consistently exist due to the nature of double/dual auction. We have bid & asks, not just bids. A simple illustration is GE futures, that can trade at 2 neighboring ticks for ages, in order for a fair price to even appear for a second, bid should move one tick down or ask should move one tick up, so a free space will be created, only at this point a fair price starts to exist. But guess what? You can't make a trade at this price while it's fair, because in in order for a trade to happen there some1 should place a bid or ask at this free space, at this point the fair price disappears.
You're automatically quoting CL futures at 19:00 Chicago time, BBO is 89.56-89.57. An imaginary fair price of 89.565 can't neither exist nor be traded due to tick size of 0.01.
There's a buy action and a sell action, there's no action in the middle. You can place either bid or ask, the're no "in the middle".
We can go for ages logically proving that fair price is always imaginary, but what we know 2 things: it's in the middle between cheap & expensive, and it appears when there's widening of prices.
The same principle applies to all the resolutions due to the fact that recorded trading activity is quasi-fractal (quasi because fractals go infinitely in both directions, it's not our case exactly).
Howto
After an exhaustion/overexertion a wave should stop and produce another wave in the opposite direction, whatever the size. Sometimes due to other factors it does not happen, and an already overextended/exhausted wave continues to go much further. This wave can be called an overridden wave because this kind of event happens due to an exogenous (not in the data analyzed) event. This event "overrides" the exhausted wave and fuels it to continue. In every overridden wave, its middle aka fair price aka value is an imaginary level that can be used.
A wave that started at 337.89 became overextended/exhausted in both price and time when it reached ~450. After hitting 450 it didn't stop but continued and went really far. It has finally stopped in year 2000 and a sell wave emerged. Knowing that we witness an overridden wave, we start to consider value as a temporary legit level. Imaginary, but still a level, ain't no options aye? And again, we use imaginary levels when there's nothing else, but a decision has to be made.
Statistically, overridden waves are the structural breaks. A serious change. Fair price is supposed to become new cheap or new expensive.
Imaginary levels: wave exhaustion priceCan't explain this 4 real until I explain how to properly locate levels & distinguish buying & selling waves. I KNOW I'M MESSING UP WITH ORDER OF INFO SUPPLY, SORRY.
Still...
Pretty soon you'll understand that 3393.52 and 2191.86 are the levels, and there's one buying wave between em.
Point 1 is the wave start.
Point 2 is the wave end.
When 3393.52 get cleared, another buying wave starts originating @ 3393.52 & point 2.
All the details & questions will be explained & answered later.
Now just focus on the wave exhaustion prices.
Every wave becomes exhausted in terms of price when it's range exceeds the range of the previous wave in the same direction. Not a lil bit before, exclusively past the threshold value.
So after getting past this level and considering the other conditions that would be explained later the current wave becomes prone to end and consequent start of another wave in the opposite direction.
Just as with partition levels (that are imaginary as well), these levels don't make much use any more when the real price activity start to emerge there. Imaginary levels are used when there's no alternative, but a decision has to be made.
Imaginary levels: partitionsImaginary levels are used when there’s no alternative, but a decision has to be made. We need something to "snap" to.
No, these are not the binary levels like 512, 8912 or 65536 that I'm sure a lot of funny people are hiding or present as super secret, lol no.
When there's truly nothing else and just the empty medium, we take partition function, give her all the integers, and get the levels around which the long-term order flow might change direction. Dem are already calculated, called Sequence A000041 , more info there .
That's the natural way how to find level in the emptiness.
After having the real trading activity at these levels we can forget dem partition levels, ain't no reason to use em anymore.
Since the start of 20th century, mainstream text book science seem to forget about the concept of aether (tldr the emptiness is an object itself, and it's not uniform, 'everything' exists in a medium including waves & light, totally obvious if you use your own head for thinking). As usually, the lovely market, as a sub-universe in our universe, is the same, teaching the real stuff & proving fakies wrong.
Dot - And a bunch of Alts look the sameMost of my titles are pondering, watching, stalking. That sort of thing. I see the potential setup according to my trade rules and sit on my hands awaiting. This one is no different.
Bunch of Alts look basically the same. Showing a spike down to an area that has shown some strength as a level in the past. If you draw levels, go right to left. Decide on strength of level. Have things you watch for, and trade on.
I'm on the lookout for a swing failure pattern, as always will depend on context, how price moves into the area and overall market strength. I get the sense that this next little bit will be BTC/ETH focused however, will keep an eye out.
Don't get too hung up on the candles in blue, just showing what an SFP may look like. Results will vary.
Longer term downside targets into 2023My type of trading works in finding longer term channels that the $SPX will trade in and sell or buy trendlines as we move along into the year. It pays to find these channels early to be able to follow price well. One of these ways that could be worth a shot is connecting the tops and bottom and finding fibonacci levels that make sense based on 2022.
The price has formed a triangle. Good entry pointThe asset is traded on volumes. The price has formed a triangle, a situation for the continuation of the movement. Fixed below the volumetric level of POC. The market is negative. I expect a fall, the target is 0.2809$
Good volumes. Expect a drop below The asset is traded on volumes. We came to the level of resistance, got a reaction. Fixed below the volume level of POC, which indicates weakness. We also broke through the sloping support level. I expect the fall to continue. Goal - 0.477$
strong resistance level on the round number. Good entry pointThe asset is traded on volumes. The price approached a strong resistance level on the round number - $ 1.2. We can observe periodic flashes of volumes that ended in shadows, which indicates the weakness of the buyer. An inclined level in support has formed, we shake it. I expect a breakdown and movement to the volumetric level of POC - 1.135$
EUR-USD Technical Analysis!
Hello,Traders!
EUR-USD is now retesting
A horizontal resistance level 1
While trading in an uptrend
And I am bullish biased mid-term
Short term however, we can expect
Some range trading between
Support and resistance levels
And after the likely bullish breakout
The next goal for the pair
Will be to reach horizontal resistance 2
From where we are likely to see
A bearish pullback
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See other ideas below too!
Technical analysis for FLMHigh sales volume failed to dump the price that shows us strong buyers. Higher than average volumes and probable liquidity grab demonstrate long movement continuation. Open long on high activity only.
$NZD - Where to next?$NZD - Where to next?
Here is the great element of trading us traders can take advantage of even we are within ranges - there are still opportunities. Here's a clear view of the levels it can go towards.
Today we have PPI which will move the markets and next week we have FOMC - Take advantage of the moves and data that's coming through whilst sticking to your OWN trade plan.
Best,
Trade Journal
BB Looking Bullish At Support!BB is currently at support and it looking to move higher. Stop loss should be set below the support box which is a clear invalidation. ES1 & S&P500 are currently looking bearish on the higher TFs but a quick pump can happen before the higher TFs play out.
Love it or hate it, hit that thumbs up and share your thoughts below!
Every day the charts provide new information. You have to adjust or get REKT.
Don't trade with what you're not willing to lose. Safe Trading, Calculate Your Risk/Reward & Collect!
This is not financial advice. This is for educational purposes only.
Large volumes appeared. I expect a rebound from the support leveThe price has been in a downward movement for a long time. Large volumes appeared. Got a reaction from the level. An oblique level in the resistance was formed. I expect a rebound from the support and movement towards the boundaries of the inclined level. Goal - 0.477$
$XAU - Gold, where are you heading?$XAU - Gold, where are you heading?
Another day, another great opportunity...Precious metals within the ranges a break to either direction!
Trade Journal
USDJPY trailing stops, EURJPY short comingThe yen’s up by nearly 8% against a correcting dollar, and by more than 10% against all the Latam currencies which have been the best FX performers this year. Back in 1998, USD/JPY was halfway through a correction that took it almost back to 100, after rallying from just above 100 to just below 1 150 in1996/1997, and then falling back in 1998/1999. A cynic might point out that US/JPY has averaged 108 over the last 30 years, gyrating in the 75-150 range. All sound and fury, but not actually signifying much! Purchasing Power Parity was never of any use for forecasting but on that basis, USD/JPY was, until a few weeks ago, a chapter relative to the dollar than it has been at any point since the end of Bretton Woods. Over 50 years, USD/JPY has averaged 150, PPP has averaged 170. A 20% JPY overvaluation. From there 40% undervalued is an extreme move and while we can understand why it happened, the potential for a whipsaw correction similar in magnitude to what we saw in 1998/1999, 2002/2004, 2007/2011, or 2016, is clear. Japanese investors have been significant sellers of foreign bonds this quarter, hardly surprising but a positive for the yen on days when geopolitics, energy prices, and the BOJs current policy stance aren’t dominating the market. The story this morning (and catalyst for the yen’s bid, focuses on anti-Covid-Zero protests in China, which have punctured some of the re-opening optimism and hurt risk-sensitive currencies everywhere but AIUD, NZD, and KRW in particular. AUD wasn’t helped by weak retail sales., either. The euro started slowly but has found a bid amid ongoing slightly hawkish ECB rhetoric. Ahead, we have CPI data this week (Germany tomorrow, EZ on Wednesday) and we expect lower core inflation for the Eurozone, and I’m not confident of a break in EUR/USD 1.05 (which would drag money into the euro) but will be watching. EUR/GBP is currently failing to break lower, which may mean GBP short covering is all but complete, though sentiment is bad enough to prove sterling with more support than it deserves. The rest of the week will see attention on Friday’s labor market data in the US and Canada, month-end, and football. © Sociéte Genérale
The USDJPY has been falling along with yield curves and oil. The yen is clearly strengthening as the drag effect of monetary policy and the energy crisis wains. But it could also be the canary in the coal mine that reflects the market's mood around China and the disruptions happening there. The yen is a safe haven currency and usually, the yen is the indicator that not all is well in the world. Though the US dollar has been the ultimate safe haven due to the rate differentials. The market is trying to tell us something.
The EURJPY is about to follow the USDJPY and this means we could potentially have a trend trade about to start.
The coin is traded on volumes. Support for the POC volumes levelThe price broke through the inclined level and fixed higher. The coin is traded on volumes. After the impulse, we returned to the retest. At the bottom there is support for the POC level, stop for the level. I recommend entering the position from $ 4.723. First goal - 4.85$
Local highs are decreasing. We broke through the inclined levelLocal highs are decreasing. We broke through the inclined level, secured lower and went to the retest with a large shadow. Got a response from the POC level. Volumes are falling. I expect a return to the mirror level. Goal - 1228$
