Last Updated:

ES 06-18 / 20. April 2018

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wtl Daily Digest

Traded volume was 1.567.823 according CME settlement data. 

Todays US session seemed to be all about Apple and its 4% price decline. This takes the stock negative for the year and highlights concerns many have about iPhone sales. Being such a dominant stock has had a negative effect on indices and we saw all core markets close lower across the board. The treasury market remained weak with yields creeping higher. 

Break Out Trades 

Interesting question came up during this trading day, which is worth to be discussed:

Didn't the same thing happen at the 2665 floor? What is the difference between 2669 ceiling and 2665 floor? Tweet 

What happend? I was long at 2668,00. At that level 2669.00 was "eaten" by the buyers and no additional orders were added to the 2669.00.  I entered my position at 2668.00 and market proved that I am right. Stop was 1 pt. 

What is the difference between 2669 and 2665? There is no difference. Let's look closer at 2665.

Volume was absorbed by the Bid side at 2665.25. Generally speaking this is always a legit long trade. Visible fact was that the "Floor" was broken because of the absorption. No additional BID liquidity was added.  

Let us have a view on the second "leg" of this move (3rd picture): 

  • The way down was "open"
  • No significant Bid liquidity was added. 
  • Sell was absolutely justified by the given situation

In this respect, there is no difference between 2669 and 2665. If you take a short here, let's say 2668.00, then you could have caught some ticks. Stop at BE would have prevented to make this move a loser. 

I took my trade because of: 

  • Absorption at 2669.00
  • Ceiling broken
  • Higher Lows
  • positive divergence in vol. Delta
  • stop supported at 2667.00 

Both trades could have been losers. No doubt. The probablitiy for the second trade was higher for me and, as explained above, market proved that I was right. 

Again, a sell trade taken at the support at 2669.75 would have worked, too.

Lesson: Break Out Trades

  • Never take a position at the absorption or big volume level in the direction of the move!
  • Wait !! 
  • Dow theory: HH / HL ?? 
  • Try to take a trade before break out. 
  • Is there resistance above / support below
  • Volume Delta divergence?

There is normally enough time to make all this desicions in time when you watch order book and the associated liquidity. 

Another Picture Book Trade

This trade was a classical liquidity area trade with a high probability to win and btw. with optimal MAE!

Liquidity Sell Area

And that's what happend:

Any suggestions? Leave it in the comments please. 

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More insights here:: https://bookmap.com/blog/depth-trading-1-interview-walter-lesicar-trade-win-trader/

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