Methodology Introduction

 

Since the vast majority of retail traders we encounter are trading the E-Mini S&P 500 futures (ES) intraday, we decided to use what we have discovered (and haven’t) about that market through our experiences in both the discretionary and quantitative arenas as the principle focus of the site. To cut to the chase, we have yet to identify an entirely mechanical single market intraday methodology which is consistently profitable across the wide range of market conditions encountered over a decade or more. Nor have any of our industry peers to our knowledge for that matter. In our experience the most viable path to consistent performance trading a single market intraday seems to be via a volatility adaptive discretionary approach, and one focused on creating the primary edge through understanding of market structure and context along with the management of risk and bankroll. The key point to take away here being that it’s NOT through any rigid mechanical entry and/or fixed tick stop and target schemes. As such, the methodology we have chosen to share here is structure and RISK focused, personality trait driven, highly adaptive, and rooted in simplistic price discovery via the natural auction process common to all liquid markets. And due to the adaptive nature of the approach we advocate, many members over the years have continued to successfully apply the same basic strategy framework to markets other than the ES including other equity indexes, interest rate products, currencies and other liquid commodities.

To summarize the basic framework of the methodology, the price levels on our daily worksheets are areas where we expect buyers and sellers across all timeframes to make the majority of their entry and exit decisions with a high level of probability. These battles tend to manifest potentially profitable ranging activity around these areas at the very least and in many cases significant market turns. The methodology seeks to derive it’s most basic edge from a consistently better than even money probability that a combination of price action and orderflow around these key levels will signal successful short term directional outright trading opportunities with favorable risk and reward characteristics over a significant number of events.

Each day we post a detailed ES Trade Plan Worksheet. On the sheets you will find each key price zone defined by an upper and lower price limit marking a potential “sweet spot” entry and exit areas, along with detailed comments about it’s significance or expectation of action around these areas. Key levels are separated into often overlapping long and short zones. Long zones are for potential new long entries or existing short trade exit/scale points, and short zones are for potential new short entries or existing long trade exit/scale points. Additionally, there are sections for economic releases, if any for the day and a breakdown of both broad market and institutional volume and directional convictions with comments for the prior day session and the current overnight session ahead of the cash market open.

DTGexamplesheet

In addition to the daily plan sheet we also post a recap of the day’s trading showing how the market respected (or didn’t) respect our anticipated key levels along with one educational example for the day opening discussion of potential entry and exit ranges, market context and potential risk management considerations which hopefully everyone  can learn something from. The level recaps and the educational example will be posted shortly after the close and all are both welcome to and encouraged to make use of the information by way of comparing our thoughts to your own as an ongoing developmental tool. Educational examples with a more detailed analysis of order flow and considerations for entry criteria, timing, and trade management such as the image below are archived in the members area with more than SIX YEARS (!) of detailed, annotated daily educational examples.

DTGexampletrade

If you are interested in learning more and taking your trading to the next level, inquire about becoming a part of our totally unique educational experience/experiment here:

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 Posted by at 9:10 am