When we generate a trading idea from the ego, we become attached to it. It becomes our view. We naturally look for evidence that supports our view, allowing confirmation biases to blind us to contradictory information. In an important sense, when we trade from the ego, we no longer trade to make money. We trade to be right.
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Above is my main trading screen Sierra Chart platform and how the market was looking a little while ago this morning. I went short the market based on what we see with the purple arrows above, and that has been a good trade. Those participants are trapped and have to cover their positions, fueling a move in the opposite direction. The top panel is the ES futures, where each bar represents 80, contracts traded.
I find that technical indicators in general--and ones that track cycles specifically--work better with such event charts. The green line through the ES futures chart is simply a period exponential moving average line.
It provides context to tell me if the market is stretched to the upside or downside and whether the trend is rising, falling, flat, etc. This Delta measure tells you, transaction by transaction, if buyers are more aggressive lots of green or if sellers are more aggressive lots of red. The bottom panel takes a moving average of the Delta data. As we stressed in the webinar, this is because there are many often hidden orders in the market absorbing the buying flows.
That, indeed has played out. Finally, note the yellow arrows at the side, where we have a histogram. The histogram captures the amount of volume transacted at each market price, so that we can actually visualize where buyers and sellers are most active and the cards they hold in their hand.
Note how we broke out of the top value region top yellow arrow and have come down to test the lower value area bottom yellow arrow. This can be very helpful in framing both entries breakouts from the value areas and targets. What I find most helpful is that all of this is on one screen. If I want to look at shorter or longer term perspectives, I simply create a new bar size and all the indicators refresh.
My experience, having worked with many successful traders in proprietary trading firms and hedge funds, is that simple charts are not enough. We need to see beneath price and volume to understand the intentions and psychology of large market participants.
That is where we can find true edges in the market. Further Reading:.
Richard Moreen rated it really liked it Dec 21, Amazon Restaurants Food delivery from local restaurants. Thanks for the opportunity to share my perspectives! You may change your cookie settings using your browser settings. TraderFeed High to Low Avg. An active trader and author of the popular TraderFeed blog, Steenbarger coaches traders in hedge funds, proprietary trading groups, and investment bank settings. Only 6 left in stock — order soon.
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