E-MINI S&P500'S SEARCH FOR VALUE
15TH OF AUGUST – 1ST ENTRY (ES Futures Contract)
I started to build my swing position by shorting the market at 4275.00. At the moment I’m risking 0.25%. I’m 25 points away from my entry targets. The reasons for an early entry are:
1. Overall weak Market Structure (last 2 month-rally).
2. Weak liquidity on 4 Consecutive Days. This is suggesting me that we might be experiencing a temporary bullish hype by weak hand traders.
3. Gradual build up of my trade. A market that trades against me and goes to 4300 and beyond will allow me to add more size and complete the trade, while improving my average price of entry.
NOTES
For more explanations, please view my previous post, "A Dive Into My Swing Trading Approach (+setup)".
I started to build my swing position by shorting the market at 4275.00. At the moment I’m risking 0.25%. I’m 25 points away from my entry targets. The reasons for an early entry are:
1. Overall weak Market Structure (last 2 month-rally).
2. Weak liquidity on 4 Consecutive Days. This is suggesting me that we might be experiencing a temporary bullish hype by weak hand traders.
3. Gradual build up of my trade. A market that trades against me and goes to 4300 and beyond will allow me to add more size and complete the trade, while improving my average price of entry.
NOTES
- 4100 – 4150 = it is logical for the market to trade in brackets around a high-volume area, which in this case it was also the fairest price of the instrument (VPOC). The most important aspect of monitoring the VPOC (volume point of control) or fairest price level is the ability to visualise the potential change or no change in the fairest price level. On the 10th of August the market breaks away in an attempt to raise the perceived value of the S&P500.
- 11th of August – Perfect example of how the markets lie and trading what you see can be dangerous. The daily candle closed as a shooting star and trapped many traders into weak positions making them think it was a possible turning point. I was suspicious due to weak liquidity been put into the market and various volume anomalies. On the next day we have the shooting start violation and therefore a market confirming the fact that we didn’t have any real selling pressure that day, but rather a liquidation due to profit taking of weak hands traders.
- 4300 – 4365 = This is the area of potential entries. The value of the instrument is out of balance once again, the market can now be attracted to this area where we have significant low volume nodes. Low volume nodes represent past aggressive auctions (aggressive sellers here) which take the market out of fair value. They tend to be rebalanced by the market at some point, just like any other weak/inefficient area. At 4300 we also have obvious/weak highs. Any buying that took place above the fairest price level (VPOC) saw buyers buying price above the fairest price. When this is occurring traders are taking above-average risk, when I trade I like to constantly think in terms of odds. Any selling, relative to the fairest price level, would be considered selling short-in-the-hole or selling price below value. In other words, by going out of balance now (breaking away from the VPOC) we are testing the best short locations. This becomes particularly powerful when contextualised in a particular scenario (like this case) and compared with volume in relation to time and price, market structure and other relevant clues.
For more explanations, please view my previous post, "A Dive Into My Swing Trading Approach (+setup)".
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