Every day I get a number of comments to this blog as well as a host of emails. Many traders searching for CP seem to be caught up in looking at the trees rather than the forest.
I trade order flow and enter positions either leaning against support or resistence or when support or resistence is broken AND momentum is in my favour.
If reading order flow has been a problem, then one way of solving this is what I did with Kiki in the early days: ONLY TRADE OBVIOUS ORDER FLOW and pass on anything that is not 100% obvious. OK, you will miss a lot of trades and your profit per trade will be lower due to late entries but your WINRATE WILL BE HIGHER.
I think you know that for me, winrate is hugely important. Winrate is the centre of my universe because I can build everything on it: average profit per trade and more importantly, I can increase my size to earn what I need.
So when is the order flow obvious? Well, its in the eye of the beholder. For Kiki and me, it's the smoothed Cumulative Volume Delta.
Today's chart is not a trading chart but a chart that I have market up to show a trade that could have been taken when the order flow was "obvious". To get this trade, I first looked for a turn in the order flow from the smoothed CVD. I then qualified the bar for my momentum and support or resistence entry criteria to decide whether it's a trade or not. If not, I wait for the next bar and repeat the process.
If you look at the marked entry bar, you can see the starting point of the analysis is the turned sCVD. Price had come down from a high. The bar before the marked entry bar, where I would have entered this trade as I am aggressive, showed the possibility of a change from BUYERS to SELLERS. The VB already clued me in. So when it was "obvious" that the order flow had turned, I saw it broke the EMA support and the CCI showed the momentum was down. A perfect trade. These major turns in the order flow are forgiving of a later entry as there is so much profit in the trade. These major turn are the ones that make your daily bread if you scale out rather than taking an all in-all out approach. The major turns are characterised by these new highs and lows. If you did your SIM work correctly, you will be able to recognise these easily.
If you look at the marked entry bar, you can see the starting point of the analysis is the turned sCVD. Price had come down from a high. The bar before the marked entry bar, where I would have entered this trade as I am aggressive, showed the possibility of a change from BUYERS to SELLERS. The VB already clued me in. So when it was "obvious" that the order flow had turned, I saw it broke the EMA support and the CCI showed the momentum was down. A perfect trade. These major turns in the order flow are forgiving of a later entry as there is so much profit in the trade. These major turn are the ones that make your daily bread if you scale out rather than taking an all in-all out approach. The major turns are characterised by these new highs and lows. If you did your SIM work correctly, you will be able to recognise these easily.
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