02 Oct What software do I use?
I learned to trade on CQG and have used it for years. The software is very expensive and the company has done a poor job of keeping up with its charting services. It is the premium charting service for professional futures traders. Since November 2009, I switched to Investor/RT (MarketDelta) using IQFeed as the data provider and have been very happy with it. I also use TradeStation for some of my charts, but it is slowly being phased out.
Click here for a comprehensive Webinar that goes over Charting
My setup for charting at the office consists of a quad-screen configuration (4 screens mounted in a grid on one stand). I also have a dual-monitor setup (2 monitors set up on top of each other) also for charts.
The charts and trading platforms are running on a secure local gigabit network running at internet bandwidth speed of 622 Megabits/second (OC3).
All miscellaneous internet applications and unsecured communication such as Tweetdeck, Skype, email and so on is run on a 17” laptop with a 23” monitor attached.
You can go here to view and use my latest templates/definitions:
I use the S5 Trader platform provided by my brokerage. For a demo of this platform, you can sign up here.
Since I’m trading from the Chicago Board of Trade, my trading platform has a quick connection to the exchange through the fastest possible pathway. There is little to no chance of connectivity issues.
I no longer use X-Trader Pro. I have used that platform since 2002. I use Investor/RT by Linnsoft on a DTN IQFeed datafeed to generate the Volume at Price charts (Volume Profile) charts that I post on Twitter every day. The tick data is not aggregated or sent in burst mode. On IQFeed, longer term charts are equalized automatically to reflect the proper futures premium across expirations.
My trading setup consists of 1 screen mounted underneath the 5th charting screen on the dual-monitor setup. That trading screen has my Depth of Market windows for the various markets I watch.
I have voice alerts for various markets’ highs and lows. I also have alerts on key currency pairs and market internals. I use these to make me aware of what is going on in markets that I don’t necessarily watch a chart for.
I wasn’t asked by anybody, but I thought I would go over my equipment setup for those who might have the question after having read this.
Charting: Dell Precision with Core i7 16 GB RAM running Windows 7 Pro on 4 screens. Wired mouse and keyboard. Battery Backup and External backup drive. Screens driven by nVidia dual head video cards.
Trading: Hewlett Packard Z600 with Core i7 10 GB RAM running Windows 7 Pro on 2 screens. Wired Logitech MX-518 gaming mouse and keyboard. Battery backup.
All equipment is using 1 Gb/s network cards and Category 6 network cable into a network built on Juniper. For the real IT geeks out there, I have QoS set up in the switch to maintain consistent bandwidth to my trading computer. It gives me the flexibility to assign equipment and to do some network intensive things on my own.
Sounds techie, but some of you might want to know.
I hope this covers it.
02 Oct What I look at when trading?
These are questions from an email I got a couple of days ago:
- Do you look at other market information/indicator for trade confirmation besides volume profiles and ‘trade areas’?
If you are asking if I look for any technical indicators for entries, the answer is a resounding “no”. You will notice in my prior post that there are no technical indicators on my futures charts except for VWAP. The rest are subcharts of internals (VIX, TICK and ADD). Even those are fairly useless, in my experience, because they don’t give you a true picture. It is best to create the tick and others on your own. I used to have this with CQG, but haven’t learned TS enough to create them myself.
My entries are refined through heavy usage of the Depth of Market (DOM). I started out trading as a SOES bandit back when the NASDAQ was the exchange to trade electronically. When I switched to futures, I continued to be a momentum scalper who really never looked at his charts. I have somewhat of a refined ability of reading the quality of the prints (sales) going through the DOM. My entries are based strictly on the quality of the move into my levels that I want to trade. I don’t stand in the way of the market except on my scale-outs.
My process is simple: I do my homework before the market opens (at night or in the morning). I identify the “areas I want to do business in“. Generally, I have at least 3 fundamental setups every day before anything happens at all. When I come in next morning, I note what happened overnight by looking at a chart of the overnight session only. I put a line up for the high and low of the overnight session. That becomes another benchmark. The next benchmark is where we open relative to the prior day’s action.This gives me a couple of more setups for the morning. I measure the participation by the bigger traders through the opening swing size and how it is treated.
At that point, it is just a matter of waiting to take those setups or to wait for the market to get to my “areas I want to do business in”. Note the last statement that I’m waiting in either case. Once those areas are close, I use the DOM to measure how it is approaching and what is happening by keeping track of 3 dimensions of the tape. These are hard to describe in writing.
Does this answer your question? If not, please reply in the comments section.
- What’s your screen setup for different time frames?
I use small time frames across the board, but have composite charts of 405 mins (Regular Trading Hours) to quickly assess the bigger picture when one of my areas gets violated.
- Do you trade breakouts from value?
No, I only trade breakouts on scalps of economic or news releases. When the market was thinner and less mechanized, the big trades were breakout trades that a trader can take and actually add to. Now, it is mostly reversion trading. I generally trade rotations from one important area to the next. I let the market come to the area and go the other way unless something says differently.
On a separate note, I don’t use “value” as defined by Market Profile in any of my setups. I think it is theoretical and is irrelevant. Why should the market stop at 1 sigma? Why not 2 sigma? Was it a trending day yesterday. If so, what value does “value” have? It is a day for price discovery, so obviously the market didn’t find value so it kept going in one direction or the other. Do you follow what I mean?
- What are your stops based on (do scalps have different stops)?
My stops are based on whether or not it has violated an area. In some areas, they are tight because there is a sharp volume cluster or other setup that just got violated. In most instances, I will manage a trade within the “area of interest” unless I see aggressive actual prints going against me as algorithms and people panic out. I feel comfortable adding when I need to in order to improve a position. I also scalp around those trades to keep improving my average as well. Stops are generally pretty big when they do happen, but their occurrence is statistically acceptable.
I use different stops for scalps than I do for the “heavy” positions. In either case, I know how much I can lose if I’m wrong and, most of the time (LOL!), I accept it before hand. This is key to consistency. Create a hypothesis, define the risk, put on the trade and let the market prove it right or wrong. In away, a trader is a scientist who is getting paid to validate a hypothesis that is later shown to be right.
I hope that has answered your questions.