Learning tape reading

[TAjammy]

just a thought about trading retracements of breakouts...
i mean you don't know if support is support until you see it being broken and loads of stops losses htting the bid ( market orders buy at ask and sell at bid?) so you know it's support, after the breakout has happened you can do the whole SBR RBS thingy for a quick scalp. Haven't tried it but just a thought- i am trying to observe what false breakouts look like on time and sales but havent had enough screentime.

 

[TAjammy]

another update: after i see a breakout...yeh wahatever loads of stop losses will be hit ( a lot of asks will be hit at resistance breakout and we will see bids being hit at a support breakdown) so then what?
Well i noticed that by simply looking at the colours you can get a feel for whts going on...i seen a support breakdown on ES, i then seen a lot of asks getting hit, a few high volumes came in aswell and price rallied back up into it's range- a false breakout

 

[rathcoole_exile]

another update: after i see a breakout...yeh wahatever loads of stop losses will be hit ( a lot of asks will be hit at resistance breakout and we will see bids being hit at a support breakdown) so then what?
Well i noticed that by simply looking at the colours you can get a feel for whts going on...i seen a support breakdown on ES, i then seen a lot of asks getting hit, a few high volumes came in aswell and price rallied back up into it's range- a false breakout

in english please paddy .......

 

[TAjammy]

you can tell if a breakout is real or not by getting a feel for who is buying or selling and why and where. by looking at whether ask is getting hit by impulsive dip buyers you know its probably gonna rally back to previous support...sorta....

 

[rathcoole_exile]

I can't challenge your well-written, clear and succinct explanation (for which I thank you), but what I cannot give credence to is how a retail trader can realistically identify the fakers from the shakers.

With the limited resources at your disposal, I struggle to get past the supposition that any success you obtain with this is anything but luck and playing the odds.

If I'm wrong, I salute you !

 

[yellowlion]

you can tell if a breakout is real or not by getting a feel for who is buying or selling and why and where. by looking at whether ask is getting hit by impulsive dip buyers you know its probably gonna rally back to previous support...sorta....

Breakouts...eek. I'm more inclined to fade them if I want the other side. I would rather wait for a pullback if I want the breakout side.

Some thoughts on how I would go about looking for validity on a break:

1)How many false breaks/number of breakouts are there?
Maybe the probabilities are better with fading them and I can just play that.

2)What is the price action like inside the range. Is there a path of least resistance?
What side is the volume on? This can be helpful, but false means false.

3) False breaks mean someone needs volume for an entry. Where would I place my stop if I was on the other side of the break?
OR: Over this breakout data set, on average, a false break reverses after traveling x percent of the previous range with a sample minimum of w percent and a sample maximum of y percent.

4)Make a discretionary decision based on #3 to decide where to place my breakout entry.

5)Or wait for a pullback to the top of the range and get a soda if it goes without you.

 

[dcraig1]

Taking about "false" breakouts here's a nice one on the DAX. I'm not going to explain all the wiggle bits on the chart, other than to say its from IB data, ten ticks per bar, and the bar plot second from top shows contracts traded at ask minus contracts traded at bid.
What are the odds that the buyer of those 400 odd contracts started selling immediately at the top of the spike and has been selling more all the way down ? You are liable to be roasted buying this sort of breakout on the DAX. Just to add a bit of spice, the "breakout" was off R2.

 

[rathcoole_exile]

but if you had a Stop Buy entry at R2 you would have had at least 10 points of movement to collect profit and/or move SL to BE+
Some people might be happy with 10 points on a Dax Breakout from R2 ?

Just musings - I would probably have been using R2 as my target from the previous break from R1

 

[TAjammy]

I can't challenge your well-written, clear and succinct explanation (for which I thank you), but what I cannot give credence to is how a retail trader can realistically identify the fakers from the shakers.

With the limited resources at your disposal, I struggle to get past the supposition that any success you obtain with this is anything but luck and playing the odds.

If I'm wrong, I salute you !

meh you don't really know what will work and what won't, an understanding of time and sales an order flow will help your odds.

Don't forget though, that this is just scalping a few tick or points here or there.
And access to DOM can tell you what is support and resistance ( support has lots of buy limits and vice versa).

The real gains are made by holding for a few hours and not a few seconds, identifying if it will be a trend day or not by realising patterns on $trin or $tick in the opening minutes or hours, after that you can just hold on all day.

well for example $tick in the first hour of ES pushes +1000 5 times lets say....price budges a little upwards...then $tick hits -800 and price moves down a lot you can tell the bears are in control, and by looking at advanced decline line,$trin and other internals you can see what the sentiment of the market is- even if a negative tick pushes price more than a positive one there is no point holding short whenever other internals suggest bulls are in control.....

edit: by the by the whole scalp breakouts thing is ok if you have reduced comissions or a CME or CBOT seat or something like that, but for the majority paying 4-5 RT you have to look for places where pirce is gonna bounce lmore than 1 or 2 ticks, more like a point, for example trading a retracement of a breakout, you can tell whether price is actually going to bounce by checking time and sales during the breakout (if it's resistance) you will see a lot of asks being hit because of stop losses, after this you can place a buy limit at previous resistance and trade the bounce for a decent scalp ( stop loss will be one tick below previous resistance)

 

[pedro01]

meh you don't really know what will work and what won't, an understanding of time and sales an order flow will help your odds.

Don't forget though, that this is just scalping a few tick or points here or there.
And access to DOM can tell you what is support and resistance ( support has lots of buy limits and vice versa).

Be careful out there...

Hubert Senters Vid on messin wid the DOME

 

[TAjammy]

very interesting....

The thing about that is you have to pay attention to MASSIVE amounts of buy or sell limits , but not in the middle of a trading range, for example at a pivot point where it is more likely to be a block from a hedge fund than people playing games.

 

[pedro01]

very interesting....

The thing about that is you have to pay attention to MASSIVE amounts of buy or sell limits , but not in the middle of a trading range, for example at a pivot point where it is more likely to be a block from a hedge fund than people playing games.

You can put any number you like on there.

In fact, if you wanted to fake things - would you put down 1 contract ???

 

[rawrschach]

very interesting....

The thing about that is you have to pay attention to MASSIVE amounts of buy or sell limits , but not in the middle of a trading range, for example at a pivot point where it is more likely to be a block from a hedge fund than people playing games.

google paul rotter

although the SEC now wants to ban flipping

 

[TAjammy]

hmmm he seems shifty though. i don't really understand what filpping is .
he seems to use his big size to lure people to set limits and stops....

 

[rawrschach]

People put big orders on the bid to get small traders to front run them, big-order-trader then sells into the volume coming in in fron of his big bid. When he's sold as much as he wants he then puts a big order on the offer, little traders like you then run to cover, pushing the price down and he buys back the contracts he sold to you in the first place.

This is why you don't blindly jump in front of big bids or offers, no matter where they are.

 

[TAjammy]

You can put any number you like on there.

In fact, if you wanted to fake things - would you put down 1 contract ???

its a self fulfilling prophecy then isnt it?
people see a tonne of orders tyhey will place orders around it...so if people read the order book more it won't really matter.

i hope flipping gets banned

 

[pedro01]

its a self fulfilling prophecy then isnt it?
people see a tonne of orders tyhey will place orders around it...so if people read the order book more it won't really matter.

i hope flipping gets banned

Imagine if you put an order on and then saw things happen that made you feel a little nervous about your order. Then imagine hitting the cancel button & being told you have to honour your initial order.

For sure, games are being played, whatever rules & restrictions the govt place will merely cause a new set of games to be developed. Traders are smarter than regulaters at the end of the day.

The system as it stands is not so bad. I'd rather deal with some fake orders than not be able to withdraw when I want.

 

[TAjammy]

good point. Thing about all of this manipulation is that you can always trade where there is less manipulation- on higher time frames dailies weeklies etc.

Then again this is where time and sales is better than DOM, t&s tells you what has definately happened and what is happening,DOM tells you what could happen, but ultimately it could be people flipping and people can withdraw their orders...but like if you see 20000 sell limits below a pivot then you probably know to fade the first test of it (go long).....

 

[pedro01]

but like if you see 20000 sell limits below a pivot then you probably know to fade the first test of it (go long).....

Bottom line. There is nothing anywhere that tells you with certainty what will happen next.

IMO - the more obvious something is, the less likely you can rely on the outcome.

 

[TAjammy]

Bottom line. There is nothing anywhere that tells you with certainty what will happen next.

IMO - the more obvious something is, the less likely you can rely on the outcome.

hence why (IMO) it is best to:
not follow system based rules
have a bias
trade discretionary using internals
scalp bigger moves like 1 point on ES rather than 1 tick
know a market very well so that you know from experience what is likely to happen and when things are weird.