Tag Archives: volume Profile

Archive, Zoom Daily

Daily Meeting for Thursday March 7

Posted on by Conor Browne

Navigating the Nuances of Box Trades and Volume Profiles in Option Trading

• Understanding and implementing box trades to lock in profits and manage risk, particularly in relation to the pattern day trader rule.

• The mechanics and strategic application of box trades in various trading scenarios, including futures.

• Utilizing volume profiles to confirm or override trading decisions, understanding market behavior around profile lines.

• The distinction between simulated trading environments and real-market fills, emphasizing the importance of realistic trade execution expectations.

• The significance of volume profile lines as indicators of potential market resistance or support, aiding in decision-making for entry and exit points.

• Exploring the potential of capturing additional profits through strategic positioning and management of box trades amidst market movements.

Summary

The daily meeting on March 7th focused intensively on the intricacies of box trades, a strategy designed to lock in profits without incurring a pattern day trader strike. This was particularly relevant for options on equities and indexes subject to this rule, unlike futures which do not carry the same restriction. The dialogue explored how box trades could be utilized to secure profits in a manner that’s detached from the fear of market reversals. Additionally, the conversation delved into the use of volume profiles as a tool for better understanding market behavior around specific profile lines, offering insights into potential resistance or support levels. The discussion also highlighted the discrepancy between simulated trading fills and real-market conditions, underscoring the importance of setting realistic expectations for trade executions. Furthermore, the dialogue covered strategies for optimizing the use of box trades, including the possibility of reaping additional profits by skillfully navigating market movements post-box trade implementation. Overall, the meeting offered a deep dive into the strategic application of box trades and volume profiles in option trading, providing valuable insights for managing risk and capitalizing on market opportunities.

Archive, Zoom Daily

Daily Meeting for Tuesday March 5

Posted on by Conor Browne

Navigating Market Complexities and Strategy Refinement

• Market Uncertainty and Strategy Persistence: The meeting opens with reflections on the challenges of navigating the current unpredictable market conditions. Despite experiencing losses and witnessing others profit from contrary decisions, the importance of sticking to a consistent strategy is emphasized, acknowledging the difficulty in predicting market movements.

• Historical Strategies and Personal Evolution: The discussion transitions to the evolution of trading strategies over time, from personal experiences of significant financial loss to the discovery of statistical arbitrage and the eventual focus on more sustainable, risk-aware approaches.

• Technical Tools and Volume Profile Insights: The conversation delves into the technical aspects of trading, highlighting the value of volume profile analysis over traditional market profile techniques. The potential of integrating volume profile with the out-of-the-money fly strategy for better market navigation is discussed, alongside the implementation and future enhancements of the 0DTE profit taker tool.

• Leveraging Edges in Trading: A detailed examination of various edges in trading, including asymmetry, directionality, and premium collection, is presented. The synergy of these edges, underpinned by consistent execution, is portrayed as critical for successful trading, with a nod to continuous improvement methodologies from the IT world for strategy refinement.

• Expanding Trading Strategies to Larger Accounts: The feasibility of applying current strategies to larger account sizes is debated, considering the potential shift from SPX to NDX for higher volatility and the challenges posed by liquidity and bid-ask spreads.

• Future Developments and AI Integration: The meeting concludes with a forward-looking discussion on the development of new tools and the integration of AI into the service. Plans for a Discord bot that simulates the approach and knowledge of the strategy’s architect are shared, alongside aspirations for a comprehensive system that includes a trade analyzer, journaling capabilities, and a playbook for traders.

Summary

The daily meeting explored the intricate balance between adhering to established trading strategies and adapting to the volatile market landscape. Through a journey from past trading experiences to the implementation of sophisticated technical tools and the anticipation of AI-enhanced capabilities, the dialogue underscored the importance of consistency, risk management, and continuous learning in the pursuit of trading excellence. The discussions about volume profile’s efficacy, the strategic use of asymmetry and directionality, and the contemplation of expanding strategies to accommodate larger accounts highlight a deep commitment to refining trading practices. Future developments, including the integration of AI, promise to further enhance traders’ ability to navigate the markets effectively.

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Daily Meeting for Friday February 23

Posted on by Conor Browne

Volatility and Strategy Insights

• Volume Profile Analysis: Discussion on leveraging volume profile for market memory and trading decisions, focusing on how historical volume impacts current trading strategies.

• Butterfly Trade Execution: Practical demonstration of placing a butterfly trade on SPX, including risk to reward calculations and strategic considerations in low volatility.

• Market Behavior and Fed Guidance: Insights into the market’s paradoxical reactions to Federal Reserve’s signals and the complexity of predicting market movements.

• AI and Trading Tools Development: Updates on the development of AI tools and applications designed to enhance trading strategies and decision-making processes.

• Risk Management: Emphasis on managing risk through strategic trade sizing, especially in the context of low market volatility and unpredictable market movements.

• Interactive Q&A: Addressing member questions on topics ranging from volume profile usage, trade adjustments in response to market conditions, to the practical aspects of using trading platforms like Thinkorswim.

Summary

This daily meeting provided comprehensive insights into navigating the current market volatility, with a focus on utilizing volume profile analysis and executing butterfly trades as part of a broader risk management strategy. The discussion also ventured into the challenges of interpreting Federal Reserve signals and the market’s unpredictable reactions. Ernie, leading the session, demonstrated the practical aspects of placing trades, underscored the importance of risk management in low volatility environments, and provided updates on the development of AI tools aimed at refining trading strategies. The meeting facilitated an interactive exchange of questions and answers, offering participants clarity on applying the discussed strategies and tools in real-time trading scenarios. Overall, the session underscored the importance of strategic flexibility and the continuous adaptation of trading approaches to manage risk and capitalize on market opportunities.

Archive, Zoom Daily

Daily Meeting for Monday February 12

Posted on by Conor Browne

Navigating Trading Strategies, Tools, and Psychological Fortitude

• Trading Strategies and Tools: Explored various trading strategies, including the examination of Euro futures trading, the impact of volatility on trading strategies, and the practical use of volume profile in identifying trade entry points.

• Psychological Aspects of Trading: Delved into the psychological challenges traders face, emphasizing the importance of detachment, consistent approach, and the danger of quitting.

• Application of Gamma Hedging and Risk Management: Discussed the technical aspects of gamma hedging in options trading and the importance of risk management through strategic exits and leveraging volatility.

Summary

This Daily Meeting was a comprehensive session that spanned from casual conversations to deep dives into trading strategies and psychological resilience. The discussion on using standing desks and the anticipation of new office furniture set a relaxed tone, while the sports commentary added a personal touch to the meeting. The core of the meeting focused on trading strategies, specifically the use of Euro futures trading as an example to illustrate the application of volume profile and the importance of considering volatility in trade planning. The psychological aspect of trading was underscored, highlighting the need for a detached mindset, the dangers of quitting, and the value of a consistent trading approach. The conversation on gamma hedging and managing risks through strategic exits reinforced the technical skills necessary for successful trading. Overall, the meeting offered a blend of personal insights, technical trading advice, and psychological strategies essential for navigating the complexities of trading markets.

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Daily Meeting for Friday February 9

Posted on by Conor Browne

Navigating Low Volatility and the Dynamics of Futures Trading

• Discussion on market levels, volatility, and economic indicators, emphasizing the impact of Federal Reserve actions and government economic reports.

• Exploration of challenges and strategies for placing trades in a low volatility environment, including adjusting bid prices to secure fills.

• Analysis of trading futures vs. Forex, highlighting benefits such as counterparty risk, liquidity, and access to volume profile analysis for informed trading decisions.

• Detailed walkthrough of setting up and interpreting volume profiles for trading futures, particularly focusing on the Euro futures (6E) and considering other futures like the Japanese Yen (6J) and Crude Oil (CL).

• Introduction to tail hedging strategies and comparison with the roundabout strategy employed in the discussed trading approach.

• Q&A session covering various topics such as the use of box trades, the significance of volume profile inflection points, and considerations for trading calls and puts directly.

Summary

This daily meeting revolved around discussions on current market conditions, specifically addressing the challenges posed by low volatility and its effects on trading strategies. The conversation opened with observations on market levels breaking significant points and the skepticism around economic reports, highlighting the influence of Federal Reserve policies on market dynamics. The group navigated through the intricacies of placing trades in an environment where volatility is subdued, emphasizing the necessity of adjusting expectations and bid prices to achieve fills.

Further into the meeting, Ernie detailed the advantages of trading futures over Forex, citing reasons such as better counterparty risk management and the utility of volume profile analysis. He provided a comprehensive guide on setting up volume profiles for trading futures, focusing on contracts like the Euro futures (6E), while also touching upon the potential of trading other futures like the Japanese Yen (6J) and Crude Oil (CL). The conversation briefly explored tail hedging strategies, comparing them with the conservative, roundabout strategy that prioritizes capital preservation in uncertain markets.

A Q&A session enriched the discussion, covering a range of topics from the practicalities of box trades to the analytical depth provided by volume profiles. Ernie debunked common misconceptions about trading strategies, emphasizing the importance of understanding market structure through volume profile inflection points over traditional indicators like moving averages or trend lines. The meeting concluded with a reiteration of the cautious approach warranted by the current low volatility market environment, urging traders to stay informed and adaptable.

Archive, Zoom Daily

Daily Meeting for Friday February 2

Posted on by Conor Browne

Navigating Market Trends and Decision-Making in Trading

• Discussion on Choosing Bullish vs. Bearish Positions: The meeting opens with Ernie addressing a question about deciding between bullish and bearish positions based on the Hull Moving Average and other indicators, emphasizing trend following over trying to predict market reversals.

• Importance of Managing Expectations and Consistency: Ernie emphasizes setting realistic expectations about the complexity of trading and the importance of consistency, persistence, and a continuous improvement loop for success.

• Approach to Profit Management in Low Volatility: The discussion touches on managing positions for profits, especially in a low volatility environment, highlighting the challenges and strategies for capturing gains without exposing oneself to significant risks.

• Utilizing Stochastic Strategy Selector and Price Action: The conversation includes an explanation of using the Stochastic Strategy Selector for decision-making and observing price action for additional cues, reinforcing the importance of flexible strategies based on market conditions.

• Volume Profile and Gamma Risk Considerations: Ernie discusses how volume profile and gamma risk impact trade management decisions, explaining their roles in understanding market structure and trade sensitivity to price movements.

• Reflections on Personal Trading Decisions and Habits: Throughout the meeting, Ernie shares personal insights and experiences related to executing trades, handling profits and losses, and the psychological aspects of trading, including the development of productive habits.

Summary

This daily meeting focused on a comprehensive discussion of trading strategies, particularly around choosing direction based on market trends and indicators such as the Hull Moving Average. Ernie provided detailed explanations on managing expectations, the significance of consistency in trading, and the challenges faced in low volatility conditions. The conversation delved into technical aspects like the Stochastic Strategy Selector, price action, volume profile, and gamma risk, offering participants a deep understanding of how these factors influence trading decisions. Personal experiences and decisions were shared to highlight the importance of habit formation and psychological resilience in trading. The meeting underscored the necessity of a methodical approach to trading, involving careful analysis, risk management, and continuous learning to navigate market dynamics effectively.

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Daily Meeting for Thursday January 25

Posted on by Conor Browne

Navigating Market Volatility and Trading Strategies

• Discussion on Trading Platforms: Traders shared experiences and confusion regarding the use of different trading platforms like Charles Schwab and TD Ameritrade, especially concerning futures trading and account transitions.

• Real vs. Simulated Trading Insights: The meeting covered the differences between real and simulated trading results, emphasizing the importance of realistic expectations and the role of simulation in developing execution skills rather than predicting success.

• Analyzing Market Movements: There was a focus on analyzing market trends, with particular attention to the NASDAQ 100 index. Discussion included the importance of real-time data and the impact of the dollar’s performance on market movements.

• Volume Profile and Price Action: The use of volume profile in understanding market structure and its limited significance in short-term trading strategies was discussed. The conversation highlighted the challenges in predicting market movements based on recent trading volumes.

• Adapting to Market Volatility: Strategies for trading in different market volatility scenarios were explored, including adjusting risk exposure and expectations in low volatility markets.

• Development of New Trading Tools: Plans for introducing a new risk graph tool, incorporating machine learning for better trade visualization and decision-making, were discussed.

Summary

The meeting commenced with a focus on trading platforms, particularly the challenges faced by traders using Charles Schwab and TD Ameritrade, especially in terms of futures trading capabilities. Participants also discussed the differences between simulated and real trading, underscoring the importance of managing expectations and using simulation primarily for improving execution skills.

Attention then shifted to market analysis, with a detailed look at the NASDAQ 100 index and the importance of real-time data for accurate market analysis. The impact of the dollar’s performance on the market was also considered, noting an inverse correlation but with caution against over-reliance on this relationship for trading decisions.

Volume profile’s role in understanding market structure was debated, with consensus leaning towards its limited significance in short-term strategies and its potential usefulness in longer-term analysis. The conversation also touched on the challenges of trading in low volatility markets, including the need to adjust risk exposure and maintain realistic expectations.

Finally, the meeting revealed the development of a new trading tool that incorporates machine learning. This tool aims to enhance trade visualization and provide actionable advice, although caution was advised regarding its predictive capabilities. The meeting concluded with a positive note on embracing new technologies for trading insights.

Archive, Retrospective

Retrospective for January 21

Posted on by Conor Browne

Adapting to Market Volatility: Insights and Strategies

Quick recap

Ernie shared his trading experiences and mindset, highlighting the importance of not focusing solely on win rate but also on preserving capital and being comfortable with small losses. The team also discussed the current state of the market, with Ernie predicting a potential rise due to inflation and the Federal Reserve’s monetary policy. They also discussed their trading strategies, with Ernie emphasizing the importance of managing premium decay and focusing on the directional aspect of the strategy. Towards the end, Ernie discussed the potential risk of overconfidence after a series of successful simulated trades.

Summary

Trading Strategies and Mindset
Ernie and Laura had a conversation about trading strategies and the mindset behind successful trading. Ernie shared his experiences, mentioning that his trading week was somewhat successful, with mixed results but no significant losses. Laura praised Ernie’s handling of challenges and his confidence in his methodology. They also discussed the importance of not focusing solely on win rate but also on preserving capital and being comfortable with small losses. Ernie emphasized the need to understand the edge and avoid risky strategies that could lead to big losses. Kevin agreed, highlighting the importance of accepting small losses.

Austrian Economics and Trading Insights
Kevin, Ernie, and Laura had a discussion about a book on Austrian economics. They appreciated the author’s storytelling approach and the comparison of Austrian economics to the evolution of conifers. They highlighted the importance of skills like controlling drawdowns and staying in the game. Ernie clarified the role of market makers in the stock market, emphasizing their role in providing liquidity rather than manipulating the market. Laura expressed interest in learning more about order flow, which Ernie acknowledged as challenging but important. The discussion concluded with Kevin emphasizing the need to learn from experienced traders.

Trading Strategies and Market Analysis
The team discussed trading strategies, with Ernie elaborating on a fisherman’s net analogy, comparing it to their wait-and-see approach. Kevin and Laura added their insights, noting that the added money butterfly does not significantly impact their strategy. Later, Dave raised concerns about changes in the meeting link and calendar, which Ernie acknowledged and attributed to user issues. Ernie also mentioned potential changes to the daily meeting link to improve functionality. The team also discussed the current state of the market, with Ernie predicting a potential rise due to inflation and the Federal Reserve’s monetary policy. Ernie also demonstrated a technical analysis exercise, predicting a value of 5,239 using an ABC correction. Towards the end, they briefly touched on astrology’s influence on the market.

Roundabouts, Boston Driving, Investing Strategies
The conversation covered various topics, beginning with a discussion about the reemergence of roundabouts in Connecticut and their presence in Massachusetts. The discussion then shifted to a humorous conversation about driving in Boston. The conversation took a financial turn when Ernie shared his intention to start investing in long puts, a strategy he believes will allow significant profits when the market collapses. Ernie also explained his trading strategies, emphasizing the importance of a capital-efficient trade with a minimum 1:9 reward-to-risk ratio. Jill, a new participant, sought clarification on short strikes on the butterfly, which led to a conversation about their trading strategies.

Trade Strategy and Volatility Management Discussion
Ernie Varitimos discussed the trade strategy that adjusts widths according to volatility and risk tolerance. He highlighted the importance of managing premium decay and focusing on the directional aspect of the strategy. Ernie explained that their profit management framework dictates when to exit a trade, not waiting for the market to pull back. Ernie also shared insights on the potential returns of their strategy, ranging from 25% to 1,000% return on risk. Herb Lauw added that he uses the volume profile to follow the trend and pick a direction. Ernie emphasized the importance of considering the overall volatility regime when determining the cost and potential profit of a trade. He also discussed the behavior of the premium in the final hours of the 0 dte te and how it decays, emphasizing the need to play both the premium decay and be in the right place at the right time to capture additional profit.

Trading Ranges and Volatility Adaptation
Ernie Varitimos discussed his approach to trading ranges in response to changing volatility. He stressed the importance of not treating every trading day the same and adjusting to specific conditions. He shared his experience that there is no significant difference in his performance or return, regardless of when he trades. Ernie also emphasized the importance of continuous adaptation and improvement in his strategy, which involves collecting a wide range of data and making micro adjustments weekly. He also shared his personal trading strategy, which involves putting on trades before the market opens or around 9:45 to 10:15. Finally, he explained the advantages and disadvantages of trading the E-mee features.

Ernie’s Performance and Strategy Discussion
Ernie Varitimos discussed his recent performance, which saw a drop in his win rate to under 50%. He identified a significant drawdown but clarified it wasn’t a major one and shared his strategy of becoming more conservative to protect against long losing streaks. Despite a 13 out of 15 losing streak, Ernie was only 1.6% down. He emphasized the importance of understanding the reasons behind mistakes and adjusting strategies accordingly. Ernie also discussed the use of the profit taker, explaining it was not mandatory but a tool to raise awareness. He also addressed questions about the impact of holding a trade through the day and the reliability of trading simulators. The discussion concluded with Ernie sharing some of his successful trades.

Simulator Practice for Trading Beginners
Ernie Varitimos discussed the importance of practicing on a simulator before using real money, suggesting that beginners should aim to do 1-2 trades a day. He emphasized the need to focus on execution skills rather than accumulating simulated dollars. Ernie also highlighted the potential risk of overconfidence after a series of successful simulated trades. Towards the end, he explained a strategy where insurance trades are placed three months out, with the goal of then investing in undervalued equities if the insurance pays off.

Archive, Zoom Daily

Daily Meeting for Thursday January 18

Posted on by Conor Browne

Comprehensive Analysis of Trading Strategies in 0-DTE

• Overview of daily market conditions and decision-making process for bullish or bearish trades, including consideration of recent economic reports.

• Detailed discussion on the use and setup of volume profile in trading, highlighting its role in identifying market structure and significant price levels.

• Insights into the effect of volatility on option premium decay, especially in relation to butterfly trades, and the rationale behind morning trading.

• Strategies for entering trades based on various factors, including risk tolerance, direction, and timing, with emphasis on morning sessions.

• Exploration of the profit management framework, including the impact of volatility on decision-making in different market zones.

• Q&A session addressing specific trading queries, such as last-hour trades and translating volume profile insights from futures to SPX trading.

Summary

This meeting included an assessment of the current market situation, including the influence of economic reports. The focus then shifted to a comprehensive tutorial on using volume profile in trading. Ernie explained its importance in identifying key market structures and price levels, such as support and resistance zones. A significant portion of the discussion revolved around the impact of volatility on the decay of option premiums, particularly in butterfly trades, highlighting why trades are often initiated in the morning when volatility is typically higher.

Further, the meeting delved into the strategies for entering trades, considering various factors like account size, risk tolerance, and market direction. The presenter underscored the importance of timing, particularly in the morning sessions, to leverage the benefits of higher volatility. Additionally, the profit management framework was discussed in detail, explaining how different market zones and times of the day affect trade management and decision-making.

The session also included a Q&A segment, where specific trading queries were addressed. These ranged from the effectiveness of last-hour trades to the applicability of volume profile insights from e-mini futures to SPX trades. The meeting emphasized the necessity of logging, journaling, and reviewing trades to develop a deeper understanding and consistency in trading. Overall, the meeting provided in-depth insights into various aspects of trading within the Zero DTE service, emphasizing the importance of strategy, market awareness, and disciplined review processes in successful trading.

Archive, Zoom Daily

Daily Meeting for Friday December 15

Posted on by ernie

Volume Profile Analysis and Trading Strategies in the Market

• Market Overview and Trading Strategy: Discussion on the market’s current state, including a focus on negative economic indicators and their impact, and the Fed’s narrative suggesting a dovish approach.
• Candlestick Patterns and Technical Analysis: Ernie talks about interpreting candlestick patterns, like the evening doji, and emphasizes the importance of context and statistical significance in technical analysis.
• Trading Execution and Price Selection: Insight into selecting appropriate prices for trades and the importance of patience in waiting for trades to fill.
• Profit Management and Risk Tolerance: Ernie discusses his approach to managing profits and setting trailing stops based on risk tolerance and account size.
• Investing in Short-term Treasuries and Money Markets: Conversation about investing in short-term treasuries and money markets for better fund management and interest returns.
• Detailed Volume Profile Analysis: Ernie explains how to effectively use volume profile in trading, focusing on the importance of high-resolution data and identifying key levels in the market.

Summary

In the daily meeting, Ernie delved into various aspects of market analysis and trading strategies. The session started with a discussion on current market conditions, highlighting negative economic indicators and the Federal Reserve’s dovish approach. Ernie emphasized the importance of context in interpreting candlestick patterns and the limitations of technical analysis without statistical backing.

The conversation shifted to practical trading tactics, focusing on the process of selecting appropriate prices for trades and the value of patience in allowing trades to fill. Ernie shared insights on managing profits, setting trailing stops, and risk tolerance, especially in different sized trading accounts.

Investment strategies outside of direct trading were also discussed, with an emphasis on short-term treasuries and money markets as a means of fund management and securing interest returns. Ernie provided detailed guidance on using volume profile in trading, stressing the need for high-resolution data and identifying significant levels in the market. He debunked common misconceptions about market indicators like the point of control and moving averages, advocating for a more objective approach based on market memory, as supported by mathematician Benoit Mandelbrot.