Market Profile Series #8
Today I'll tell you how I build your daily strategy. You can use this as a blueprint.
You made a lot of progress as far as I can tell, but I know that some of you struggle with execution and strategy building, so here we go.
0. Foreword
We made it to the last issue of this series for now.
First of all let me thank you for the interest you've showed. Many reached out with questions and it only increased my motivation to make better materials. I really hope they helped you get better.
If so, please share this article so other internet people can get better too.
Some even reached out to ask for mentoring and stuff like that, and even offered money - I'm flattered, Anons, but at the moment I can't accomodate these requests. Too busy with trading and other projects currently. Perhaps in the future I will, who knows.
Regardless of what will happen, all of the educational materials will always be free. If I ever decide to do mentoring or things like that, all the materials will stay up, no worries.
So what about the Market Profile series? Is it over? Not really. It's more like a break, and after today's article, I will move to the Orderflow series. I will get back to this later. It take some different knowledge and experience before we can progress further with Market Profile.
Market Profile commentary/educational content will still be posted regularly.
Have you ever watched The Matrix, Anon?
At some point, Neo is plugged in, data streams into his brain, and after a few seconds, he sits up and declares, "I know Kung Fu."
Morpheus, smiles and says, "Show me."
This leads to a sparring match in a virtual dojo. Neo still sucks, but the fight ends with him landing a solid hit on Morpheus.
Right after the fight, Neo reflects on Morpheus's superhuman speed and abilities. Neo asks, "You're saying I can dodge bullets?"
Morpheus replies calmly, "No, Neo. I'm trying to tell you that when you're ready... you won't have to."
(By the way, if you're a zoomer and haven't seen The Matrix - for you own sake, do it immediately. Too much of this culture comes from this film for you to miss it)
1. Steps to build a strategy
a. Define market structure.
I gave you an in-depth explanation in article #6, so I will just go over the concepts very quickly.
Check the market structure and establish a trend bias. I know that being contrarian sounds very cool, but it's extremely high risk, and we don't want to blow our money. So stick with the trend until proven that the market has reversed.
If you're unsure or the market is choppy, just sit this one out.
Downtrend.
We sit just below a 0.382 Fibonacci level, and price action formed a pivot on the 0.236 level.
b. Check important levels
Where are we with the levels? Are we approaching any key level? Are we bracketing between two levels?
This is relevant because the market reacts to key levels. If a key level is rejected, the market can trend aggressively in the opposite direction. If a key level is accepted, the market will try to confirm the direction with conviction.
See the picture above? When a level is accepted (it might take a few days), market trends lower. And vice versa.
c. How do the recent profiles look?
Last week was a downtrend, little relevance of the weekend. The market opens and attempts to trade higher on Monday.
We had a recent, continued downtrend, broke below 0.236 Fib - about $ 82.5k - and are currently trying to trade above it and regain 0.382. This level roughly matches Friday's VAH.
d. Last trading day
We take the Friday as last trading day since weekends have low volume.
What can we hypothesize here, Anon?
You've read the articles, so this looks like a possible setup for an 80% rule play to Thursday's POC. The Market opened inside Friday VAH, and attempts to trade higher.
Setup 1: If price holds Friday's VAH/Thursday's VAL and tempo increases, we could see a move to regain 92-93k.
But this is a LOW PROBABILITY setup, because we know this is a downtrend.
So, shall we go long? It's up to you. I told you it's low probability, so it's about how risk-adverse you are.
Invalidation: rejection of Friday VAH.
Stops: VAH lower limit.
Setup 2:
Wait for the price to near Thursday's POC, and seek for a loss of tempo and momentum. This could be a P session shape, for example.
If price breaks, we can confidently short when tempo increases downward towards Friday's VAH again.
Invalidation: tempo builds up towards an higher move, or price consolidates at Thursday's POC after NY session opens.
Stops: Thursday POC
Setup 3: The market rejects Friday's VAH and starts trending lower.
Short on tempo buildup. Since there are only 84.7K and 83K on the way to 75k, this is a good setup with clear lines, in favor of the trend.
Invalidation: price remains above Friday's VAL.
Stops: Friday's VAL lower limit.
Conditions for entry:
a. For all trades, you want 1 or more TPO confirmations above/below the profile levels listed so far.
b. For all trades, you want to see tempo accelerate, e.g., rapid trending, and possibly liquidations (we will look at the importance of liquidations as a local trend confirmation in the Orderflow Series).
Let me stress this: it's better to be a little late but right than being a little early and wrong. Profit is profit, Anon.
The sooner you realize the perfect entry is a foolish concept, the earlier you become profitable. Don't be a fool. It's not worth it.
2. Rationale (and psichology)
Now, as you can see it's never "up or down", but it's about being prepared for the most likely scenarios.
I listed three because it's already a lot to digest, but the more scenarios you can anticipate and plan for (in a reasonable way), the more options you will have during the day.
If the market makes a move you did NOT plan for, don't trade it. You're just FOMOing into the unknown, and have no clue of what will happen.
Market is flat? Don't trade it. Range inside Thursday's VA? Don't trade.
If you don't have a plan, you. do. not. trade.
Of course, you could pay your tuition fees to the market, but learning from other people's mistakes is far superior to learning from your own.
This is it. Learn that perfection does not exist, there is only positive and negative PnL. Decide what side you want to be on. No bullsh*t, I won't give you that.
You'll need hundreds, if not thousands of trades to make it. One loss is not the end of the world, just don't get liquidated and survive to trade another day.
Be prepared for as many moves as possible, after removing the unlikely ones.
3. Conclusion
Back to The Matrix.
If you've seen the movie, after the Kung Fu fight, Neo goes through the jump program, fails miserably and when he's back to reality his lip is bleeding.
"I thought it wasn't real."
And Morpheus goes: "Your mind makes it real".
Emotions like fear or hope are your greatest enemy. You have the knowledge to see through the charts, and to make your mind one with the markets. It's not easy, but dumber people succeeded. Ignore the noise. Kill the emotions. Build experience.
Emotions can translate to real-world pain if you let them. When you inevitably bite the asphalt, don't let emotions get to you. Don't let them bleed into reality. Understand what happened and adjust.
If you persevere and keep conditioning your brain, you can see through the illusion and realize that it's all coded, much like Neo visualizes the source code after being clipped several times in a dark hallway.
That's what you should do.
Get clipped, get back up. Until you see the source code.
Until next time.