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ES 06-18 / 08. May 2018

wtl
wtl Daily Digest

Traded volume was 1.238.294 according CME settlement data. 

President Trumps Iran press conference was the catalysator for todays sideway market movement. Word was out earlier than his appearance and much of the markets response had already been seen. Oil returned much of their recent gains and gold bounced off of its lows. Stocks were negative ahead of the news, accelerated just after, but by the close were little changed on the day. Worth keeping an eye on currencies and especially the continued strength of the USD. 

Absorption

It was this movement in ES which attracts me and considered to make my first move. 

Absorption is the process of excess selling or buying taking place at a single price or series of prices but being absorbed by resting orders.

Selling Absorption

Buying Absorption - This is where large resting sell limit orders (sometimes in the form of iceberg orders) absorb excess buying.

Selling Absorption - This is where large resting buy limit orders (sometimes in the form of iceberg orders) absorb excess selling.

Absorption happens every single day in all markets but some are more important than others. Some occur at intraday swing levels and while others are often present at key tops and bottoms on longer time frames.

Buying Absorption
Selling Absorption

Absorption Microview

Imbalance on the Order Book

Imbalance on the order book signalizes that a side is trying to "block" the price auction and convince auction members to trade the opposite side of the price ladder. Imbalance happens when more liquidity is added to the order book then the normal average. Let's say the normal average on ES Future is about 250-300 lots on either limit side, then a liquidity increase of 200-300 additional lots signalizes an order book imbalance. 

Imbalance on bid side

This constellation gave me a reason to take a long position @2661.50 as tweeted on Twitter. Stop was 2659.50 below that area and target was clearly set by the order book imbalance at 2670.00. 

To continue with imbalances which worked well today, I must mention the long lasting 2670.00 area, which was on plan in the preview of possible support/resistance zones.

It was an ugly setup because it lasted quite long until broke down. 2668.75 short and covering @ 2662.75. 

Time after these setups rumors came up about pres. Trump Iran deal speech and his willingness to pull out of the Iranian nuclear deal and reinstate sanctions.

In this Blog entry I have stated following:

Is this science? In my opinion it is not. It is all about reading the volume, seeing liquidity filling or missing in the order book. Where are the "Ceilings" and "Floors"? Which side is strong and which is not? Where is the price vacuum?

And at the end: There is always luck involved in trading! 

It is just not what you think it is. The luck is not whether you make money or not during your trading career. The luck is how much you make. 

Here's some examples from my trading experience:

You see liquidity comes in on the screen, in time. You place the trade. It goes in your favour for, let's say, 10pts in ES. Next day you see the same set up, liquidity shows up, you take the trade but you make only 2 pts in ES. Or in worst case you are being stopped out. 

It depends of the day and time if other big market player want to play or not. It doesn't depend on you. However, if you make right trading moves, you'll still make money. 

Stay in touch and leave a comment.  

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