Education - Value Trading Basics
Fig. 3 shows a powerful reversal that occurred on the July 12th 2011. Observe how buyers moved price above the VWAP with a series of candles that had higher highs and higher lows. What unfolded was a classic bull trap. When amateurs were buying, believing this rally would never end, Trading Room clients were aware and alert to the fact that price were rapidly approaching the 3rd upper standard deviation. This alerted our clients to anticipate a market pause or a possible opportunity to take a short. An additional heads-up was the Japanese Doji candlestick formation that formed at the peak of this upward move.
Fig. 3 07-12-11 E-mini YM ($5) Futures 5 Min Chart
Chart courtesy of our trading platform partner, NINJATRADER®
Further context on the day’s market action would have been provided by a Market Profile® study (not shown) in that this upward move was actually a failed attempt to get through the point of control (POC) that was obviously rejected and resulted in lower value becoming established and accepted in the short term!
We approach trading as a BUSINESS so our client’s immediate goals include:
- Identify optimum locations on the chart to do business.
- Identify poor areas on the chart where NOT to do business.
- Determine IF and WHEN to do business i.e. is the EDGE present?
- Determine how COST effective it is to do business i.e. reward-to-risk.
- EXECUTION CONFIRMATION i.e. Deal or No Deal? - acting on your iiiiiiEDGE without reservation or hestitation.
- Focus on Trade Management - minimise risk, maximise profit potential.
Our clients are achieving trader excellence using our unique PMA Pad Trade Planning System Software which has been developed and refined over many years of trading various financial instruments in the financial markets, a robust system based on our proven and profitable methodology that identifies low risk high probability optimum trade locations based upon inherent market mechanic principles involving:
- Market Profile® & Volume Profile charts to determine value & context.
- Order Flow - cumulative delta, COT & Bid/Ask volume analysis.
- AMD analysis to identify market structure & development.
- Evolving volume-based Value Area analysis - our WOC.
- MTA & VAM analysis to profit in sideways & trending markets.
Our approach is grounded in a methodology that is so naturally occuring that it is actually fractal, meaning it is observable on multiple timeframes in a similar way to the fractal nature of clouds, trees or even the controversial paintings of the infamous American painter, Paul Jackson Pollack.
Clients who rely on iTradePod's unique PMA Pad daily trading plan software system are exposed to the Value Trading principles mentioned in this article on a daily basis allowing those traders to identify powerful market moves and locate optimum high probability trade locations
Next time I’ll introduce you to how we use Market Profile® (Normal, Normal Variation, Non-Trend, Neutral, Double Distribution and Trend days), and Virgin POCs to go beyond short term analysis of intraday value migration.
About the Author
Rodney Lalgie is a professional futures trader at iTradePod and has over 10 years trading and investing experience. His current focus is in trading his own private capital using futures indices employing methods based on Auction Market Theory principles. Rodney Lalgie also moderates the iTradePod Trading Room alongside Andrew Hall and has been mentored and exposed to the iTradePod approach by Andrew over the last four years. Follow Rodney on Twitter via @IB_Trader or email him at Rodney@iTradePod.com.
blog comments powered by Disqus
- FREE Resources
All our registered clients are given exclusive access to download the powerful Market Matrix software that we talk about in our Hedge Fund Mindset Workshop. Clients can also download our Pro Trading Journal that our own traders use for detailed logging of trades.
- Massive Discounts
We have partnered with some of the major players in the trading industry and so we are delighted to offer our registered clients significant discounts on trading related products and services.
- Daily Analysis
Our clients have access to Market Data containing Market Profile® Trading KRAs for low risk and high probability trade location entries.
- Registration is quick and FREE.