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MP Spoos Feb 8th




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What is a hidden pivot Alex? (I thought that I'd asked you this before but I've just done a search of the forums and can't find where I did ask you this if indeed I had.)

I had a long bias today after the Range Extension to the upside which kept me on the correct side of the market. I feel that we have a large potential to spend most of Thursday inside the value areas that were formed from Friday and Monday's price action. We closed today right in the middle of that area and it looks like Tuesday and Wednesday demonstrated test and reject of the area below that. What do you think?

I will prepare myself for a tight and choppy range day - but as you said - there are big news items coming out that may push the market one way or the other.
Here is another view of today's profile in the ES. I like to compare this one to the one that Alex does because it gives me a slightly different shape and I'm used to these letters.

[1269.75] Q
[1269.50] Q
[1269.25] Q
[1269.00] QR
[1268.75] QR
[1268.50] PQR
[1268.25] PQR
[1268.00] PQR
[1267.75] PQR
[1267.50] PQ
[1267.25] PQ
[1267.00] PQ
[1266.75] PQ
[1266.50] P
[1266.25] P
[1266.00] P
[1265.75] P
[1265.50] JP
[1265.25] JP
[1265.00] JP
[1264.75] JKP
[1264.50] JKNP
[1264.25] IJKMNP
[1264.00] IJKLMNP
[1263.75] IJKLMNP
[1263.50] IJKLMNP
[1263.25] IJKLMNP
[1263.00] IJKLMNP
[1262.75] IKLMNP
[1262.50] FIKLMN
[1262.25] EFIKLMN
[1262.00] EFILM
[1261.75] EFIM
[1261.50] EFHIM
[1261.25] DEFHIM
[1261.00] DEFGHI
[1260.75] DEFGHI
[1260.50] DEFGH
[1260.25] DEFGH
[1260.00] DEFGH
[1259.75] DEFG
[1259.50] DEFG
[1259.25] DEFG
[1259.00] DEFG
[1258.75] DEFG

[1258.50] DEG
[1258.25] DEG
[1258.00] DE
[1257.75] E
Alex: Do you use the big S&P500 futures data for your SPoos analysis? If so, you might be interested in these 2 articles that I have written about the demise of the SPoos:

Is the SP Doomed?

Predicted End Date for SP
1.you ask me what I thought about Thursday
answer I thought I had made that uite plain and clear on the chart with the commentary that ended with sell 1278.5 for retest 1264.
Now I do believe that the range was 1277.5 - 1265.2 . Not bad for government work I believe the saying is.
2.Yes I use the Big S&P
3.Yes someone sent my your links. Firstly I will buy your concept of Jan 2008 demise of the pit and ask what is your next price. The pit is not going away. Yes it is true that the volume is being eroded however you fail to recognise several very important things. a)Regulatory agencies WANT the pits to survive because the pits actually keeps the industry on the right side of the law. b)Transparency in the electronic world does not exist at all c) watch for the liquidity "Mirage" of the electronic world. d)In fast markets the pit is still quicker than the electronic world AND has transparency AND has liquidity rather than the "Mirage" that exists in the electronic world.
4.Hidden MP Pivots. If you really want to know about them and how exactly I was able to call the range in S&P on Wednesday for the Thursday session almost to the tic (and lets face it not for the first time) then I suggest you apply for my MP courses. There are two available. 1 is a course delivered in a pdf file that runs alongside the CBOT MP Handbook and explains effectively exactly what is inside and also explains effectively the meaning of the 346 pages of the handbook and the 2nd one is a CD that is a series of videos delivered as lessons that takes the student from Beginner through Intermediate and then on to Advanced Market Profile analysis.
quote:
Originally posted by alleyb

1.you ask me what I thought about Thursday
answer I thought I had made that uite plain and clear on the chart with the commentary that ended with sell 1278.5 for retest 1264.
Now I do believe that the range was 1277.5 - 1265.2 . Not bad for government work I believe the saying is.
Your call was remarkably accurate. How do you implement it though? Do you scale into your shorts near the top? If you don't then it doesn't matter how accurate your call is because you wouldn't have been filled if you were offering 1278.5...
quote:
3.Yes someone sent my your links. Firstly I will buy your concept of Jan 2008 demise of the pit and ask what is your next price. The pit is not going away. Yes it is true that the volume is being eroded however you fail to recognise several very important things. a)Regulatory agencies WANT the pits to survive because the pits actually keeps the industry on the right side of the law.
I am under the impression that it is easier to keep an eye on an electronic market using software. Have you seen the anti-colusion software that poker sites use for example? Or are you talking about something else?
quote:
b)Transparency in the electronic world does not exist at all
That I don't understand. I thought that the electronic market was 100% transparent...? Please explain...
quote:
c) watch for the liquidity "Mirage" of the electronic world.
If the pit traders were operating in the ES market then the supposed "mirage" would dissappear would it not? Why would pit traders be more likely to keep the pit liquid when electronic traders wouldn't keep ES liquid? Under what circumstances would the ES lose liquidity when the SP would maintain it?
quote:
d)In fast markets the pit is still quicker than the electronic world AND has transparency AND has liquidity rather than the "Mirage" that exists in the electronic world.
There's no way that a pit can process more orders that a transaction server. The pit has a physical finite size and only so many traders can be in there trading and the external orders still need to be fed to them. Electronic markets can handle vast amounts of order traffic and the speeds will only get faster each year adding more capacity to what is currently there.
quote:
4.Hidden MP Pivots. If you really want to know about them and how exactly I was able to call the range in S&P on Wednesday for the Thursday session almost to the tic (and lets face it not for the first time) then I suggest you apply for my MP courses. There are two available. 1 is a course delivered in a pdf file that runs alongside the CBOT MP Handbook and explains effectively exactly what is inside and also explains effectively the meaning of the 346 pages of the handbook and the 2nd one is a CD that is a series of videos delivered as lessons that takes the student from Beginner through Intermediate and then on to Advanced Market Profile analysis.

What do your courses cost? Do they cover black and white entry/exit strategies that have been back tested? Or they more theoretical?
quote:
Originally posted by daytrader


quote:
d)In fast markets the pit is still quicker than the electronic world AND has transparency AND has liquidity rather than the "Mirage" that exists in the electronic world.
There's no way that a pit can process more orders that a transaction server. The pit has a physical finite size and only so many traders can be in there trading and the external orders still need to be fed to them. Electronic markets can handle vast amounts of order traffic and the speeds will only get faster each year adding more capacity to what is currently there.



Well there is one time when the pit can process more orders than a computer, and that is whenever the computer system fails.

I feel the pit serves an important function for the larger houses that need the liquidity to clear large orders in a fast market. It's important to remember the contract size represented by the SP .vs. the ES. A single 1000 lot order in the SP pit is the equivalent of 5000 lots in the ES. In order for the SP pit to stop trading, the CME will need to provide an equivalent size electronic product. I do not get the sence the CME is ready to take that final step however.
quote:
Originally posted by pt_emini

Well there is one time when the pit can process more orders than a computer, and that is whenever the computer system fails.
This is very true
- but we could also argue the if other systems that the pit relies on (quote feeds, telephones, power) were to fail then the pit would not have information or the means to get information to use for trading. So you're left with a bunch of uniformed pit traders trading in dark... Is this not more dangerous? The computers can be setup with backup mirror servers in remote locations etc.
quote:
I feel the pit serves an important function for the larger houses that need the liquidity to clear large orders in a fast market. It's important to remember the contract size represented by the SP .vs. the ES. A single 1000 lot order in the SP pit is the equivalent of 5000 lots in the ES.
Yes I took that into consideration when doing the calculations and compared the value of ES to SP and not the number of contracts in order to make them the same. The ES trades 5 times the value compared to the SP each day and we see 1,000 lots passing through the ES each day. How often do 200 lots trade in the pit? (when watching T&S)
quote:
In order for the SP pit to stop trading, the CME will need to provide an equivalent size electronic product. I do not get the sence the CME is ready to take that final step however.
Well I don't think the CME will pull the plug - I just think that the volume will dry up to the point that the spreads will widen and people will move to the ES. I think that the ES and SP need to be merged to extend the life of the pit. The ES needs to be made 0.1 points per tick or the SP needs to be dropped to $50 per point and trade electronically the same hours as the ES. i.e. side-by-side with the pit. All this will mean is that traders that don't want to trade the ES electronically can stand in the pit and trade it with each other.

Don't get me wrong. I think that it's very sad that we see this decreasing trend in the SP volume - I would hate to see the pits go - but the reality is that we need to prepare ourselves for this to happen. If we rely on the SP prices and the market is drying up then we may be caught using invalid prices to pick our trades and this may be detrimental to our trading.
I have 2 MP courses
1. A pdf or word document that is to be used in conjunction with the CBOT Handbook
2. A CD that is delivered via video and audio commentary set up as a series of lessons taking the student from beginner through intermediate and on to advanced
Each course seperately is prived at $395 but if you join my website Membership then the courses are offered at a discount of $200 each to Members. Full details are found at http://www.tradingclinic.com

To answer your question about trade setups and backtesting etc I will quote from the pdf Pete's own words:
....Sound market logic rather than following formulae by rote or automatically accepting the conclusions of others. You can’t respond mechanically and expect to succeed on a regular basis....
and...........
By developing a logical approach, it is possible to identify data parameters that work 60 times out of 100 – sometimes 90 times out of 100. The key to using these parameters effectively is thinking about the conditions in which they will succeed. You can separate the winning situations from the losers more often than not when you don’t react automatically. By way of explanation, the characteristics that classify daily market activity – Normal, Trend and Non-Trend – are defined data parameters. Once you recognize the characteristics of a Trend Day, for instance, the appropriate response is to go with the market. This strategy won’t work on normal days because normal day’s activity creates a different kind of opportunity which requires a different approach or response.............

And from me:
Consistent performance depends on LOGICAL DEDUCTION – About WHAT is ACTUALLY happening in front of you on the screen. That’s why the only effective tools in today’s uncertain investment climate, in my opinion, are those that DON’T treat all process and opportunities as equal or alike. To evaluate the situation developing in front of you on the screen realistically, you need experience gained in the marketplace and tools that DON’T rely on happenstance.

CBOT® Market Profile™, because it captures and defines the situation as it develops in real time, is such a tool.

I also urge you to go look at my comments posted on the MP Spoos Feb9th chart
I will try to adress your questions/comments individually
the numbers refer to the numbers in you Q from 02/09 at 20:20 and subsequent.
1.Implementation of trade is about observation of price at anticipated levels. Please do not confuse precision which is what you are talking about with a zone where price becomes advantageous. After all would you not prefer to make 14 points on 1 contract on a pre determined and defined risk reward rather 50 trades that end up arriving at the same degree of P/L.
3. Software allows one to scan multiple markets and therefore it is true that computers now allow us to drill millions of securities for example looking for patterns, seasonals. Yes it is quicker but your comment misses the point I made. Regulatory agencies WANT the pits to survive etc.
b)The answer was in c) and also my post in MP spoos Feb9th
d)Technically you are right BUT noone has sufficient bandwidth. How many times has you platform frozen across the fast markets of reports for example.
4.I have addresses this in a seperate post above or is it below
pt_emini. makes an important observation
daytrader. reposnse to pt_emini comments.if the lights go out then the world comes to a halt.We are so connected that actually your backup servers will fail as well. You talk about the perfect world but in reality less than 5% have secure backups and procedures in place. I used to work for a company that thought it had a fail safe 3 way backup with one server in Europe one in Uk and one is USA thereby recreating a mini version of the superhighway.They thought that it was impossible for all 3 to fail but I would remind you of the time when we had the power failures in US that tripped into Canada. I would remind you of the effect Katrina had and how long FLorida was without electricityetc. If the lights go out they go out for everyone thats also a reason for having a platform and multiple brokers that allow you to trade both CBOT and CME in case of redundancy
and lastly I agree with your sentiments about the pit but the world evolves and yes you are right that the pit will eventually disappear but its the timing that is questionable. When Bonds went electronic and when 3 month Eurodollars went electronic everyone thought (especially the Europeans who have been bred on electronic connectivty) that the pits would disappear. well they haven't and still serve a vital function.
Lastly I will elaborate a bit about transparency here with another comment about liquidity mirage: The day that Bonds traded 5 big figures in the electronic market the pit only traded 3.5 because the pit was actually more efficient and in fact on that day several brokers then locked their clients out of the market by shutting down access on their platforms. The day that the Russel dropped 16 big figures in 30 seconds there was chaos. The order that was sent was sell 4k cars at market. The day that the Mini Dow dropped 500 points in 30 seconds not because of a fat finger but because a commercial deliberately sold 5k cars at worst. there are plenty of examples and will continue to be. Take care and good luck. I shall be travelling in the NY area until March 2nd so unlikely to post for a while however my website TradingClinic.com will be kept bang up to date especially with all matters Market Profile
Thanks for all your comments alleyb. I have plenty more to say on the pit versus electronic subject but I don't think that this will help either of us or any other readers of this topic so I will let the subject rest.

Your courses no doubt cover the basics as well as intermediate and advanced topics. What percentage of your material is already covered in the 3 books:
1. CBOT manual
2. Mind over Markets
3. Steidlmayer on Markets

Assuming that a person has read, absorbed and understood all 3, will there be anyting more to gain from your courses? How much unique material have you created and added to the original material? And how did you create this material? Through market observation (subjectively) or through empirical testing? If I understand your quote from Steidlmayer correctly then you have not tested any Market Profile concepts...
actually i see parralels in our stats. I said: ...50% Normal Variation, 25% Neutral, 16% Trend, 5% Normal, 5% Non Trend

You said:
Here are the facts:
Neutral: 32% (662 days)
Normal: 2% (42 days)
Normal Variation: 65% (1341 days)

Total: 100% (2045 days)

So there are very few Normal days and Normal Variation days outnumber Neutral days by 2 to 1.