Pro Trade Setup for normal variation day’s…

Pro Trade Setup for normal variation day’s…

I assume you are at the intermediate level in the market profile concepts and you are well aware of the day structures and it’s characteristics. If you aren’t,  then you must study the basic concepts of the market profile to get the most advantage of this article.

When I started my journey as a profile trader,  I used to have a lot of confusion and conflict with my own thoughts on the market and technical concepts of market profile. Slowly I started gaining the conviction on the trade setups that I was comfortable with. However, when I started monitoring my trade results, the reward factor was not that great and the risk to reward was around 1:2 RRR. 

Shockingly I found a pattern in my trade style and around 75% of the time I was opting trades only on neutral days or non-trend days!

and when I reviewed the overall market moves in that period, I noticed that I had missed many normal variation days! Where the market extended the range in one side direction ( 80% of the IB Range ).

That’s the huge punch on my thought process. As traders, we are always demanded to think in terms of probabilities. Think about it, if I keep on opting the trades on low probable and low conviction day structures(Neutral or non-trend day), how can I increase my profitability factor? it’s certainly impossible, right. This can be increased only when I get good rewards on what I am risking. Image 1.1 shows the Probability of occurrence and conviction level of day structures.

It was very clear for me that to improve my rewards, I must gain a conviction on Normal Variation days.  There are a lot of benefits in mastering NV days since it has a high probability of occurrence and good conviction level. It really makes sense to work on conquering these days.

Here comes the challenging phase of my trading career, in one hand I need to find a way to trade NV Day and in another hand, my trading style which was inclined to Neutral and Non-trend days had to be changed.

I started Backtesting NV days for about 5 years and started observing it in the live market. I found patterns or information that were repeating in the past and in the current market. And that’s it, I found a way to trade NV days with good conviction level. However, there are few cases where I am still missing trades on these days but the repeated patterns which I have observed generally offering very good rewards for the risk I’m taking in each trade. In this article, I have made an attempt to present this information.

Well, let’s begin.

To succeed in this dynamic market one should have clarity and conviction on three important aspects of trading and they are:

1)  Direction.

2) Entry location and method.

3) Exit method.

Before discussing how to trade the NV days, let us understand the characteristics of it.  Below checkpoints shall converge to consider any trading day structure as Normal variation day and they are:

  1. Medium IB (Initial Balance) range.
  2. Range extension in one direction of the IB.
  3. The range extends about 80% of the IB (Most of the time).

By keeping the above points in mind, we will proceed to the next steps.
We will conduct this analysis after the formation of Initial balance. In our Indian market which is at 10:15 am. 

1st step: Identification of Medium IB range.

We should be able to distinguish IB range as either medium-range, small range or large range. Market Profile concept describes that whenever there is a medium IB range, either Normal variation day or Neutral day can be expected. And this also explains in general that there will be a 100% extension of IB on NV days. 
Now let’s take an average range of last 10-day’ s(Two weeks) for example the present Daily ATR of NIFTY is 126 (Refer image 1.2)

Now we know that the average range of NIFTY from last two weeks is around 126 points. To identify medium IB in this range, we need to do the following. Firstly we divide 126 by 2, that approximates to 63 points. Secondly, we divide 126 by 3 which approximates to 42 points.

Now any IB which falls within the range of 42-63 points can be considered as medium IB Range.

2nd step: Defining the direction.

Now that you have learned how to identify medium IB range. Let’s proceed to define the direction for the day.

Considering any trading day, at the end of the day, there will be an unfair high and unfair low. In general, the high or the low of the day occurs in the first 60min of the day (70% Probability) and in the first 30min (50% probability). As we demand the highest probability lets consider the 1st case where the market makes high or low of the day within the first 60min.

Image 1.3 shows an example of Up-trend formation for the day, where the second 30min candle is broken the first 30min candle high hence the low of the day is formed and the market will not return to the low that formed in first 60min(70% probability). This established direction will be negated if the market breaks the low that is formed in the first 60min. 

Similarly, Image 1.4 shows an example of Down-trend formation for the day, where the second 30min candle is broken the first 30min candle low hence the high of the day is formed and the market will not return to the high that formed in first 60min(70% probability). This established direction will be negated if the market breaks the high that is formed in the first 60min. 


There is another condition, if the second 30min candle is within the first 30min candle range then the view will be neutral for the day (Refer Image1.5 )and the probability of Normal variation day is less on these days.


3rd step: Entry location and exit methods.

Here comes the important question “Where I should enter the market and exit the market?”. This question decides the fate of trading and the answer to this question is the ultimate goal of any analysis.

Well, Before entering the market, one should have clarity on entry location and method. In my view, I have observed VWAP level acts as major support or resistance (Note: Only on NV days) for day trading. Click here to know about VWAP.

As per my understanding, VWAP(Volume weighted average price) is nothing but the dynamic volume POC and it is the price level where a maximum number of transactions occurred. Generally, this has a lot of influence in day trading and it’s used by many professional traders and institutions. 

 VWAP becomes the best entry location for normal variation day. 

Note: I use 15min timeframe in Intraday to time my entry and exits.

Once you know the IB is medium and direction is established in the first 60min,  next step is to wait for the price to retrace back to the VWAP level and take entry in the established direction based on (PIN BAR, ENGULFING or HARAMI Candlestick patterns). The entry candle low or high becomes the SL if its a pin bar candle, If its a harami or engulfing patterns then the big candle low or high becomes the SL. Simple! Let’s understand this in charts.

Once we take entry the next step is to exit the trade. On Nv days it becomes easy. We know that  NV days IB will extend by around 80% (most of the time). And this becomes our first target. Whenever I anticipate responsive activity I generally exit trades at 80% IB. But when I anticipate Initiative activity then I remove 50% positions at 80% IB and remaining I hold till EOD with trailing to lower lows or higher highs. If it takes the SL we exit by having a small loss(If you planned so).


SUMMARY

  1. IB is medium on NV days.
  2. IB extends 80% of IB range.
  3. The Direction of the day establishes in the first 60min(70% probability)
  4. VWAP is the best entry location for NV days.
  5. PIN BAR, ENGULFING or HARAMI Candlestick patterns for entry method

Excited,

Whatever the information I have shared here is my experience and observation. You don’t have to follow this blindly. Take last two-year intraday data and backtest it for few times. If you find a good EDGE and conviction then start trading in the real market. I hope this information will help you.

Please leave your valuable feedback and comments in the below comment section.

Happy Trading:)

Nataraj Malavade
Twitter : @mpwizardsNSM

ARTICLE BY 

Nataraj M S

Nataraj M S

Full time Trader & Founder - Market Profile Wizards

Nataraj is a full-time NIFTY and BANKNIFTY Trader and founded Market Profile Wizards to overcome the hurdles of retail traders which he faced during his journey as a trader. He has been in the stock market since 2013 as an active investor and trader. His main focus is in the area of Short term trading and Intraday trading.

He has an expertise in Market Profile, Order Flow, Price action, volume profile, Advanced options trading, technical analysis.

Watch first lesson for FREE

How to get the market profile & Order Flow software at the best cost?

How to get the market profile & Order Flow software at the best cost?

Greetings for the day 🙂

I got many  queries regarding the market profile software source and how to get this and how to install and is there any ways to reduce the cost etc

Hence I have decided to write this article to answer these questions, The main objective of this article is to spread the awareness on market profile software and help the retail traders on reducing the cost of the software.

Nowadays’s Market Profile and Order flow software are becoming one of the most used tools by retail traders and generally, this leads in creating a demand for the product. The same is effectively used to increase the cost of these software’s.

The present moment the software cost varies from

Market Profile : 17000 – 21000 Rs 
Order Flow : 53000-60000 Rs.

Licence validity : LIFETIME

As a trader I can clearly say, this is the huge amount to invest in software in the initial stage of the trading and even after using this costly software also the success is not guaranteed in this markets.

Well, the important question at the moment is,

Is there any way by which we can save or get discounts on these software’s?

The answer is YES!

You can actually get the software’s at 50% flat discount, read the complete details to get the clarity.

The FIN-ALGO software devoloper is the answer for this.

How can you get the benefit here?

FIN-ALGO is a devoloper of Many Indicators for NINJATRADER, In that the market profile and Order flow are also included indicators.

When we purchase software by them we get a single license but this license can be used in two computers at the same time.

So, You can find a partner who is looking for buying the software and purchase a single license and you can use the same license for two computers simultaneously

The straight forward benefit of doing this is, you will be benefitted with a flat 50% discount on the original product.

The present software cost of FIN ALGO is

MARKET PROFILE (TPO chart with volome profile) : 289$ (Approx 20200 Rs)
ORDER FLOW (Market Balance) : 750$ (Approx 52500 Rs)

If you purchase the license by having an other partner it will cost you

MARKET PROFILE (TPO chart with volome profile) : 10100 Rs Approx
ORDER FLOW(Market Balance) : 26250 Rs Approx .

And its also a lifetime license.

If you want to know more about fin algo and their products, Find the details below.

FINALGO WEBSITE : http://fin-alg.com/

To get additional discounts on these prodicts vist our WEBSITE  : https://www.marketprofilewizards.com/indicators/

Hope this article helps you in reducing the investment costs of these software’s.

Please leave your feedback in below comment section…

Happy Trading 🙂

Click below to know more about the market profile and order flow software.

Nataraj M S

Nataraj M S

Founder - Market Profile Wizards

Nataraj is a full-time NIFTY and BANKNIFTY Trader and founded Market Profile Wizards to overcome the hurdles of retail traders which he faced during his journey as a trader. He has been in the stock market since 2013 as an active investor and trader. His main focus is in the area of Short term trading and Intraday trading.

He has an expertise in Market Profile, Order Flow, Price action, volume profile, Advanced options trading, technical analysis.

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What it takes to be a trader?

What it takes to be a trader?

We all want to make tons of money in markets. But success in trading typically comes after watching and observing the markets with devotion. A successful trader looks at the chart and knows in which direction market is probably to make the next move and most importantly he knows when not to pull the trigger. That’s hard for most of the traders to do because in any trading decision there are so many things to weigh. Trading is all about decisions, In my perspective Trading is a business of decisions where people transact RISK for the REWARDS. Your fate in trading is directly depending upon how well you decide on every aspect of trading.

Good decisions come from good habits after all we are a creature of habits.

Making the jump to master the trading requires taking something that you know is a good trait and turning it into a habit. You already know several good habits. You might not appreciate them but you do. For example, when you were a beginner you were told that as “You should place a stop loss after entering a trade”, “Trend is always a friend until it bends” etc. You already know some, if not most, of the important learnings that successful traders have made their habits. But you probably don’t take them as seriously as a successful trader does ­perhaps because they sound too simple. For instance, successful traders never counter the strong trend, in fact, they try to align with the flow but most of the time unsuccessful traders tries to catch the high’s and low’s of the markets and always end up with losses by anticipating the counter move to the strong trend.

The market has its own mood and it is always changing from low volatility to high volatility, from the range market to the trending market and vice versa. This change is not recognized by the majority of traders and they fail to differentiate the dynamics of the markets. Whenever they fail, They start blaming others because It’s easy to blame others. And it’s the last thing you want to do because. If you blame others, you are not ready to take complete responsibility. If you don’t take the responsibility for your actions, you are giving up your power to change. If you give up the power to change, you’ll never improve for the better.

So what it takes to be a trader?

Being a breakeven trader after continuous trading itself is a big achievement, and then comes the layer of consistent profits. Trading is not an easy job as it offers easy money. Anyone with a trading account can participate in trading. But the hardest fact is only 5% of the traders who make their fortune in these markets. The stock market is dominated by strong players, with access to information and clear agendas, computational power, and operational speed which is far greater than any of us. There are millions of rupees traded every single day across NSE exchange alone. But can the retail trader win in this business? 100% Yes. But achieving the successful trading milestones is not guaranteed, and it’s going to take a lot of time and devoted efforts with many cycles of ups and downs to get there. The truth is most people do not possess the skills required, or the patience or discipline needed, to achieve and maintain consistent profitability.

Trading is a business and you know running a successful business takes a consistent effort towards improving oneself every day. What most of the new traders fail to realize is that just like any other business venture, there needs to be a long period of research and planning that takes place before jumping in head first. Conventional business plans like operations, marketing, and customer relations don’t apply to trading. However, there are a very different set of considerations and skills that are absolutely necessary. What’s important to remember is that just because you’ve read some books on the market or attended any workshop or have rolled the dice on a few good trades along the way, it doesn’t mean you’re ready to tackle the markets on a daily basis.

Learn to respect the risk and market, before you lose all capital. This requires both emotional control and a firm understanding of the uncertainty of markets and probabilities of trading.

Recognize and control the impact your emotions have on your decisions. Naturally, we are not good traders, in fact just the opposite. Usually, the most comfortable decisions are the wrong ones, and we are conditioned to make decisions that feel good (or panic us at exactly the wrong times). It takes a while to gain screen time to recognize and reverse these tendencies.

Develop a simple strategy for trading. What edge do you have? This one is tricky and requires you to stick with a strategy to balance conviction, but also the flexibility to adjust and throw away ideas when they don’t work.

So the first step is to learn and understand the market dynamics. The next step will be gaining screen time (experience). Getting comfortable taking losses, dealing with uncertainty, and finally, developing or finding a trading strategy that you are comfortable with.

So ask yourself, are you willing to spend a full year learning and studying markets if you still lose money? Once again, throughout this period, there is no guarantee you will achieve the level of success you’re looking for.

So, Do you have what it takes?

 

Nataraj M S

Nataraj M S

Founder - Market Profile Wizards

Nataraj is a full-time NIFTY and BANKNIFTY Trader and founded Market Profile Wizards to overcome the hurdles of retail traders which he faced during his journey as a trader. He has been in the stock market since 2013 as an active investor and trader. His main focus is in the area of Short term trading and Intraday trading.

He has an expertise in Market Profile, Order Flow, Price action, volume profile, Advanced options trading, technical analysis.

Pro Trade Setup for normal variation day’s…

I assume you are at the intermediate level in the market profile concepts and you are well aware of the day structures and it's characteristics. If you aren't,  then you must study the basic concepts of the market profile to get the most advantage of this article....

How to get the market profile & Order Flow software at the best cost?

Greetings for the day 🙂 I got many  queries regarding the market profile software source and how to get this and how to install and is there any ways to reduce the cost etc Hence I have decided to write this article to answer these questions, The main objective of...

Get your trading ideas automated for FREE

Hey everyone, If you feel you have a winning trading system or a trading idea, we can now help you automate your idea through AMIBROKER. We also provide the backtested report of the system and let you know the statistics. Please, post your idea in the following...

What it takes to be a trader?

We all want to make tons of money in markets. But success in trading typically comes after watching and observing the markets with devotion. A successful trader looks at the chart and knows in which direction market is probably to make the next move and most...

Market Profile: Open Trades

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To Become a successful short term trader, one must understand trade facilitation and auction process in all time frames, We have a particular objective or time frame we wish to participate, but ignoring what the other participants have in mind, or messages that they are possibly intervening in the Auction, can prove costly for most traders…

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