Timeframe Setup:
- Trigger Chart
- Minute Chart
- Structure Chart
- Daily Chart
The minute chart is what I look at to just get a snapshot of the current trading day and I also plot horizontal levels on it. These levels should be getting reactions throughout the entire contract, from start to current. I discuss how to accurately plot these in the education piece “How to Calculate Daily Key Support and Resistance Levels”. It is based on the same concept that I use for my daily charts, except just with the beginning of the contract month. I only use 15 and 5 minute charts on this one.
The structure chart is what I use for price structure for the past few days and various price patterns as they appear as discussed in “Pressure, Structure, & Location”. It is a zoomed out chart so I really don’t need to see the details, just the overall structure. For the S&P I leave it on 5000 tick, NASDAQ on 2000 tick, 10 year notes & euro on 1000 tick.
Daily chart is to show me what kind of market conditions I am trading in using the context of my trend analysis as discussed in “The 4 Components of a Trend”. I provides great context for the location I am trading in, price support levels that are high probability stalling points, overall direction to know which way price may be accumulated/distributed and where, daily key levels, daily structure, and price pivots from previous trading days. The main focus of using the daily chart for intraday trading is to determine where the current day is trading in relation to the others (ex. if we are trading at all time highs, if we just broke down from a wedge, just broke a big resistance level, etc.), this allows me to get great context of where we are in order to effectively use the rest of my analysis.
Indicator Setup:
- 5 minute open range with extensions
- Pit session open price
- VWAP or Volume Weighted Average Price
- Volume Pressure
- Bid Volume & Ask Volume
- Volume Profile
- Gap Fills
- NYSE Advancing:Declining Issues
- NYSE TICK
- Intraday stock index correlations
- Daily Trend Support Setup
I use the VWAP in conjunction with the open range targets. I know based on probability that if price breaks to the upside and continues to get bullish reactions from the VWAP or stays levitated above it, the probabilities of continuing to hit targets is higher. It also works visa-versa to the downside. Volume Weighted Average Price is just the average price of the day based on volume. So theoretically the most volume of the day should be around the VWAP, and big money will use this to enter larger orders into the market when price is trading around it. What that tells me is that big money is also supporting the current direction that price is moving in when price is getting good reactions from it. This is represented as the orange line on my trigger chart. Here is a Russell 2000 chart from a few days ago, you can see the good bullish reactions from the VWAP and continued on to hit multiple targets.
Volume Pressure is a study that I built myself and all it does is just show me extreme moments of buyers or sellers taking control. That doesn’t necessarily mean that are doing so at the correct place which is why I use it in context with my other analysis. Sometimes it marks volume exhaustion points and causes a short term reversal and sometimes it marks buyers or sellers being in complete control, it’s all about how price reacts to it. Most of the time it shows exhaustion, but not all the time. I have a theory that it is big money getting too aggressive with their trades and having to back off for a second or else they will disrupt the market, it is too consistent to be retail buying or selling at the complete worst spot possible at the same time. This is today’s crude oil session in the morning and you can see the short term reversal points and you can see where buyers or sellers are in control. The blue dots on top are aggressive buyers and red dots on the bottom are aggressive sellers.
Bid Volume & Ask Volume is simply what it sounds like. How much bid volume and ask volume happened within 150 trades. Bid being sold on the bid or lower, and ask being bought on the ask or higher. I like to use it to gauge energy levels and it just helps me get a feel for the market. I used to use it only on my 15 minute chart or various other methods but when I found out that volume could actually be useful on a tick chart if you separate it into bid & ask (if you don’t separate it, it is basically always the same), I decided to put it on my 150 tick chart.
I use the Volume Profile in a different way than most. I have it set to pit session only. I do not use it for any entry system, determining direction, future support/resistance, or anything like that. On days that aren’t trending, I like to know where the value is. I also like to see where the VPOC is and look to see what kind of price action happened at and around that price level, what kind of structure and reaction happened at that level. I typically don’t use it until there is a significant amount of data plotted, at least a few hours. On trend days, when I am buying a dip I like to see a volume pocket underneath my entry price just for added support. It is kind of like an x-ray that I really don’t need but like to have. Also, on daily bars that print accumulation/distribution bars I like to look at the profile to see if there was a significant amount of volume in the tail. There is a 1 tick range chart plotted with a line on there as well just so I can follow the price along with it.
Gap Fills are a fairly important tool to follow. I use it just like anyone else, as a magnet for price to fill. I really just consider it another extension from the open range when I get an entry signal in the direction of the gap fill. I leave the horizontal line as is until price touches it, it doesn’t matter if price gaps through it 10 times if it doesn’t trade at the gap fill price, it is unfilled. When the gap does fill, I use the “Cut Drawing” feature on my platform and just cut it until the session ends then I delete it. Here is an example of that: Russell 2000 gap fill.
I have recently started trading the S&P for various reasons and I find that the NYSE TICK works a lot better for the S&P than any other index so that is the only reason I have that up there. It is strictly for the S&P and I use it just like anyone else does. I watch if it is above or below the 0 line and I watch for extreme TICK readings so I can gauge how price reacts to those readings. I want to know whether it just pulls back a little bit and continues or reaches a significant turning point, it is just a good way for me to feel out the S&P because it doesn’t have as much personality as most other markets. This is what it looks like on my charts: NYSE TICK.
Intraday stock index correlations is something I picked up from someone as well and it stuck with me because it worked well. When I am trading stock indexes I like to see that they are all moving in the same general direction. Sometimes there is a good looking setup I am looking to take and I will look down and see that the NASDAQ is heading straight down while I am looking at a bullish setup on the Russell 2000 and sure enough that trade will fail more times than not. I know it is counter-intuitive to think that one index can pull down or up the other three, but it can and it happens all the time. That is why I follow that indicator though. I have it on a two minute setting and it includes all four indices. Russell 2000, NASDAQ 100, S&P-500, & Dow Jones, all four being the futures contracts. Here is what it looks like on my setup: Stock Index Correlations.
If you follow my work you know what my Trend Setup is. If you don’t then go read, "The 4 Components of a Trend". I don’t think I actually told you what those moving averages are so here it is; 18EMA, 20EMA, 35EMA, 35(high)EMA, 35(low)EMA, 50SMA, 89SMA, 144EMA, 200SMA. Here’s the picture: Trend Support. Using the trend setup in it’s full form is a great way to learn how to follow trends effectively and it provides great intraday support or resistance levels.
So, I hope that helps clear things up. If there is anything I missed or if you want me to further explain anything or clear something up, just let me know in the comments. Thanks for reading.
Trade well,
-Michael
