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 anchor for the community. 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 viable path to consistent performance trading a single market intraday for most seems to be a volatility adaptive discretionary approach anchored by repeatable processes, and one focused on creating the primary edge through understanding of market structure and context along with the strict 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 variants most pursue here are RISK MANAGEMENT focused, highly adaptive, personality trait driven and rooted in simplistic price discovery via the natural auction process common to all liquid markets. And due to the adaptive nature of the approaches advocated, many members over the years have continued to apply the same basic strategy framework to markets other than the ES including other equity indexes, interest rate products, currencies and other liquid commodities, and in variants ranging from scalping to swinging to position trading.

To summarize the basic framework of the methodologies, the market structure zones on our daily worksheets are examples of areas where members expect BOTH buyers and sellers across a range of relevant periodicities to frame their execution decisions with a high degree 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 or continuations of momentum or trends. The methodology seeks to derive it’s edge from a consistently better than even money probability that various price action and orderflow activities around these key structures will often signal short term directional outright trading opportunities with favorable risk and reward characteristics over a reasonable number of occurrences.

Each day one of the founders posts a relatively detailed document called the ES Trade Plan Worksheet. On the sheets you will find each key market structure possibly relevant to intraday traders defined by an upper and lower price limit defining a “sweet spot” for potential entry and/or exit, along with comments about it’s significance or expectation of action around these areas. These key structures are separated into often overlapping long and short zones. Long zones are for potential new long entries or exit/scale points for existing short positions. Short zones are for potential new short entries or exit/scale points for existing long positions. In addition, there are sections for any economic releases for the day and a breakdown of both broad market and larger participant volume/directional convictions with comments for both the prior day session and the current overnight session ahead of the cash market open.

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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) the key structures as anticipated along with one educational example for the day opening discussion of potential entry and exit ranges triggered by price action and orderflow, market context and potential risk management considerations which hopefully everyone can learn something from and apply to their own model development. The level recaps and the educational example will be posted shortly after the close and all encouraged to make use of the information by asking questions and interacting with the founders and the rest of the community. 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 SEVEN YEARS of detailed, annotated daily educational examples.

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

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 Posted by at 9:10 am