Mind Over Markets - Dalton (Volume Profile)
Opening Types -

• Open Drive - 
• • if market opens above or below prior day's range or value area, then an Open Drive is dominated by responsive buying or selling
  • if market moves away from prior day's range, than the open is dominated by initiative buying or selling
  • You want to detect this early and not trade against it - OTF is active and aggressive
• Open Test Drive
• • Market opens, moves a short distance in one direction and then another advertising for someone to step in.  
  • This will usually test a prior key area and then push once it has gained conviction that nobody is left to oppose it.  
  • OTF has found an area of conviction to participate in the opposite direction
• Open Auction in range - 
• • nothing has changed between this session and the last.  
  • Market will be unfriendly to breakout traders and reward those who trade from the outside in
• Open Auction out of Range - 
• • outside of the previous traded range.  
  • There is a high probability of OTF action and these can be big days.  
  • There will be a higher level of conviction by responsive as well as initiative traders.
  • expectation is to go back into yesterday's range or value area
  • • if price does not go back in, OTF is absorbing and it will likely continue to push
    • look for test of previous high or low

Day Types - 

• Non-trend - complete balance, no OTF
• Normal - everything inside IB
• • MPD_IB_RNG >= 0.85 * (HI - LO) AND (HI = MPD_IB_HI OR LO = MPD_IB_LO) AND (HI - LO >= 18 * 1pt range)
• Normal variation - IB high / low breaks
• • IB range < 0.85 * (HI - LO) AND IB range >= 0.50 * (HI - LO) AND (HI = IB_HI OR LO = IB_LO)
• Neutral day - OTF present, so range extension on both IB
• • Neutral: HI > IB_HI AND LO < IB_LO AND CL < (IB_HI + HI)/2 AND CL > (IB_LO + LO)/2
  • X: HI > IB_HI AND LO < IB_LO AND (CL >= (IB_HI + HI) / 2 OR CL <= (IB_LO + LO) / 2)
• DD Trend - builds energy from one range and then quickly moves to another and balances
• Trend - OTF remains active throughout the day
• • MPD_IB_RNG < 0.50 * (HI - LO) AND (HI = MPD_IB_HI OR LO = MPD_IB_LO)

The Big Picture- 

• Market, Structure, Trading Logic, Time
• Time - regulates opportunity
• • Good opportunities to buy below value and sell above value will not last long
  • • If the inventory doesn't move quickly, and stays below value for longer than 'expected' value has changed and it is now being accepted lower
• Structure 
• • range extension - identifies control and helps gauge buyer / seller strength.  
  • • the stronger the control the more frequent and elongated the extension, ie:Trend day
  • 30 min auctions
  • open and close
  • profile shape
  • tails - aggressive buyer / seller enters the market on an extreme and moves prices quickly
  • • lack of tails mean lack of OTF conviction
  • initiative vs responsive
  • • initiative buying - any buying occurring within or above the previous day's value area
    • responsive buying - any buying occurring prices below value
    • • initiative selling on range extension can result in responsive buying
  • Time Frame control
  • • Day 
    • • open, mid, previous close, high and low of previous day, current day, week (only if near the current price)
    • OTF 
    • • bracket highs / lows
      • weekly/monthly high / low
      • unfilled gaps
      • common MA
      • if these are in control switch from rotation to momentum trading
    • Destination - once a directional trade is underway, look for obvious visual cue
    • • Day - phod, plod, 3d high / low, top / bottom of a gap
      • OTF - long term bracket high / low and it make take months to reach there
      • • Monitor for continuation!
  • Trending vs Bracketed Market (Trading range)
  • • Trending market
    • • must determine if trend is continuing
      • is price accepted or rejected by market - are 30m value areas overlapping or separate?
      • market profile is not as useful, since the direction is obvious
    • Bracketed
    • • Markets trend, balance, and then turn around
      • Different market participants have different views of value, and these are often conflicting
      • market profile is more useful because the composite gives the views of all these participants over several profiles
    • 
      

• Trading Logic
• • byproduct of experience, it is an understanding of why the market behaves a certain way
  • ie:if there is a large tail, and a rotation back into the tail, and TPO builds over time, trading logic says that the OTF that moved quickly is no longer present or willing to respond to those same prices
• Extra
• • Must ask the following questions:
  • • Which timeframe responded to price?
    • How strong was the response, represented by volume?
    • Were the responders the innovators, early adopters, early / late majority or laggards
    • Were the innovators responding opportunistically to the actions of the late majority or laggards?
  • Preparation
  • • Review Monthly, Weekly, Daily bars for excess / trend
  • Overnight Inventory
  • • if inventory is long and market doesn't adjust on the open, it is a strong market in the short term
    • 
      
• Markets ultimate purpose is to facilitate trade
• • Which was is the market trying to go?
  • Is it doing a good job in its attempt to go that way?
• 
  

Day Trading

• Day trader begins each day with a set of expectations that serve as guidelines, based on the market's past performance
• • Study of long term direction, recent value area placement, and opening print
• Opening Call - overnight session?
• • opening call gives an idea of what will happen the 1st 30 minutes to 1 hour of the session
• Open
• • 1st 30m of the day establishes 1 of the extremes 50% of the time
  • Directional conviction
  • • open  drive (OD)
    • • market opens and aggressively auctions in one direction
      • price never trades back through opening range
      • • price where open drive fails is important
        • if price moves back through opening range, something significant has changed
      • generally caused by OTF who have made their decisions pre-market.  
    • open test drive (OTD)
    • • similar to open-drive but market lacks the initial confidence to drive immediately after the bell
      • market usually tests beyond a known reference point (phod, plod, previous swing hi / low) and swiftly moves back through open
      • often establishes one of the day's extremes
    • open rejection reverse
    • • opens, trades in one direction w/o much conviction, reverses back through opening range
      • more common the OD and OTD
      • initial extremes hold less than 50% of the time
      • normal / normal variation day should be expected
      • ON high / low will likely be tested
      • strong moves will likely be retraced
    • open auction
    • • market randomly auctions around open w/o much movement
      • conviction depends on where the market opens relative to the previous day
      • inside previous range 
      • • non-convictional day is likely to develop
        • market sentiment from previous day is likely unchanged
        • market auctions in one direction until activity slows, then the other
        • non-trend, normal, neutral days
        • initial balance unlikely to hold
      • outside range 
      • • good potential for market  to move in either direction
        • often gives rise to double distribution days

• Open vs previous day profile
• • open out of previous day value / range indicates imbalance and more opportunity
  • acceptance (auctions within previous range for 1 hour) indicates balance
• OAIRIV - within previous value and is accepted
• • range will rarely exceed the previous day range 
  • one of the previous day's extremes will generally hold
  • • use MM from an early extreme to find the likely range
• OAIRIV - within previous value and rejected
• • drives out during the 1st 30
  • very hard to determine how far, or in what direction market will go
• OAIROV - outside previous value and accepted
• • value will generally overlap previous days value, but only on one side
  • range is reduced compared to previous day
• OAIROV - outside value and rejected
• • range potential is unlimited
• OAOR - accepted
• • as long as price does not return to previous day's range the market has accepted the breakout, even if it auctions back and forth
  • if market continues to drive in direction of breakout range potential is unlimited and Trend day usually results
• OAOR - rejected
• • market is rejected back into range
  • expect price to check accepted value
  • price range is still unlimited, but likely in the opposite direction of the breakout

• 30m Auctions
• • Auction Rotations
  • • successive 30m auctions where low < plow or high > phigh= 1 time framing (1TF) - only buyer or only seller in control
    • if the auctions overlap it is 2 time framing since both buyers / sellers are in control
    • 1TF on 30m indicates Trend day
    • 2TF on 30m indicates normal, normal variation, or neutral days
  • Extremes - Strong high  / strong low
  • • tail provide the most evidence of timeframe control
    • no tail on the extreme is significant, it indicates lack of conviction
  • Range Extension
  • • less overlap = stronger control
    • must take into account the bigger picture elements
  • Time
  • • ability to identify difference between enough time, and too much time is the key to anticipating a change in control
    • this is intuitive to each trader
• Identifying Time Frame transition
• • No transition - entire day is 1TF or 2TF
  • 1TF to 2TF
  • 2TF to 1TF
  • 1TF to 1TF
• Auction Failure
• • follow thru - when market auctions through a known reference point
  • • new initiative activity will fuel the continuation
    • auction will fail and not follow through - will often fail with speed and conviction
  • failures at longer term reference points are larger than short term reference points
• Excess
• • market auctions too far and aggressively moves in the other direction
  • only useful in hindsight - should serve as support or resistance in the future
• Point of Control (POC)
• • fairest price of the day

Profile Shapes

• Short Covering Looks like a P
• • it is old business covering their positions, and it is unlikely to break to the upside
  • usually happens after several days of selling.  Once imbalance of covering is over, trend continues down
• Long Liquidation looks like a b - it is the opposite of short covering
• Ledges - sharp drop that indicates a breakout lower after a lack of continuation
• High Volume Area
• • has tendency to attract price and slow it down
  • the longer price is away from the HVN, the less significant it becomes
• Low Volume Area
• • typical in unbalanced trending markets
  • should hold against future auction rotations
  • if pierced significantly price should move quickly through it

Directional Performance - is the market doing a good job?

• Volume - once direction is known volume, is the primary means to determine performance
• • lack of volume indicates rejection
• Value Area placement 
• • higher, lower, inside, outside
• Trading Brackets
• • All trades should be placed responsively
  • Markets test the bracket extreme 3 to 5 times before moving to new levels
  • Markets fluctuate mostly in the bracket, not at the extremes
  • Must wait for price acceptance before buying breakouts
• Trend
• • the stronger the trend, the greater the beginning of the trend's move
  • must just get on in the initial stages of the trend and monitor for continuation 
  • later in the trend you enter responsively
  • volume on days against the trend will help you determine if trend is healthy
• Auction tips
• • markets need to auction too high to know they're too far
  • pay attention on these days to see if prices are accepted or rejected beyond their composite values areas

Long Term Profiles

• Start these profiles when a significant change has occurred

Special Situations

• 3 to 1 days - initiative tail, TPO count and range extension
• • following day should open within or above value
• Neutral Extreme - days are likely to open in the direction of the closing activity
• Value Area rule
• • gap outside previous value offers support / resistance against price probes
  • if price makes double TPO points within value, it is likely to test all the way through value
  • • closer distance to value makes it more likely to trade through
    • value area width is a sign of poor trade facilitation and lower volume, higher probability it will trade through
    • long term market direction
• Spikes
• • If spike occurs at the end of the day
  • • if open in or beyond the spike, most likely price was accepted, look to enter a the long at selling spike high
    • if opens in the other direction price most likely rejected
• Balance Area Breakout
• • Some of the best trades to take where risk is minimal and reward is great because it is the start of a big move
  • if the move is accepted go w/ the breakout
• Gaps
• • day gaps usually filled within the 1st hour, if not higher likelihood it will hold
  • gaps too far away usually are met with responsive activity to narrow the gap, wait for the initiative activity to return before entering

The Daily Trading Coach - Steenbarger

ch. 1 - change

• Recognizing Emotions: There is no way to block feelings / emotion.  All you can do is recognize you have them.  This will give you information into how you can shift your perspective.
• Make an emotional thermometer.  When we're most frustrated and most overconfident, is when we're likely to make our worst trading decision.
• When you identify an elevated frustration temp, turn away from your screen, and fixate your attention on something else, music or imagery.
• You must sustain the changes you make, do no relapse back to old habits.  Use whatever emotion force that makes you desire to choose trading as a career to fuel this change.

• Goals: Performing efficacious at work that is important to us generates mirror experiences of competence and self-worth
• structured pursuit of goals is one of the best means for creating positive mirrors because we generate construct opportunities for power, self-affirming emotional experiences
• goal is something you can have control over - a trading process, not profit target.  goals:
• increase size incrementally, exiting trade in stages, limit trades to setups w/ market trend
• at the end of the day, make a report card based on how you achieved the goal
• if you fail to achieve a good grade, improvement becomes the goal for the next day.  if not, make new goals
• Visualize your goal before you start trading
• Upon reaching your goals you must experience yourself as a success.  If you see yourself as successful you will feel the joys of success.  Goals are not making lots of money, goals of good trading are things like controlling position sizing, entering long positions on a pullback, ect.
• Process goals answer the question - what would make my trading day a success today, even if i don't make money?

• Confidence:
• You must prepare for the market, this will make you feel as though you deserve to win
• self-confidence is knowing that you can handle the worst - surviving the many occasions of being wrong
• Make memos of what you did wrong, send it to a trading buddy to follow up w/ you a couple days later
• Change
• You will only change when you're ready to change
• Choose 1 goal to work on intensively at a time, if you choose too many they will become watered down
• Don't relapse when you first make the change.  Double your efforts to keep the change going
• Perform specific exercises and actions that are consistent w/ the change, don't just think about it
• As you complete one goal, find the next.  You can always become a more consistent trader.  Self improvement never stops

ch. 2 - stress and distress

• Our interpretation of situations turn normal stress into distress.  Trading is always stressful, but should not turn into distress
• How to prevent distress
• Position sizing guidelines, per trade loss limits, per trade price targets, and daily loss limits
• risk per trade should be meaningfully smaller than potential reward of profit targets
• amount of money of daily loss should be a fraction of the money you make on your best days
• no single daily loss should be so large to prevent you from making money for the week
• Journal
• Every time you experience a distinctly negative emotional reaction to a market event, ask yourself, "How am I perceiving the current market as a threat"
• Identify the perceived threat and turn it into an opportunity.  Write it down in a journal
• Journal has 3 columns, it must be detailed enough to understand what is going on in your mind at that time: 
• Specific situation in the market, 
• transcribe your exact thoughts / feelings / actions taken in response to the situation, 
• consequences of the particular cognitive, emotional, or action patterns taken in column 2. => goal is to become aware, not change, do for 30 days
• You can add a 4th column, with what a friend might say to you that was positive about your thinking / trade idea
• It is an emotional exercise, not logical.  It needs to have the power of emotional force, and vigorously reject the negative thought patterns.  These thought patterns have sabotaged your trading, cost you money, and threatened your success
• Trading rules - to create repetition
• rules for risk management; taking breaks after large or multiple losses, entering at defined signal points, preparation for the day.
• review rules before trading and visualize yourself in different trading situations following the rules
• review rules during the day
• grade your rule following at the end of the day, if you get less than a B, it is an explicit goal for next days trading
• Fear
• Fear is a cue to examine your trade more deeply, not make changes.
• Make a checklist of things you look for to make sure your trade is working, and whether it makes sense to be in it.
• Performance Anxiety
• Thinking about the outcome of a your performance will interfere with the process of performing.  Focus on the doing, and the outcome takes care of itself
• Know your niche and only trade that product, time frame, and setup.  Most of the time bad trades come from trading out side your performance zone
• Label trades as A,B,C.  A are home runs, B are good setups, and C are marginal setups.  When you lose your edge or start a slump, only take the A trades are reassess the market
• Volatility will cause anxiety if you are not aligned w/ the market.  If you expect high volatility, but market is low, you will expect moves that never occur.  If it is high and you expect low, you will get stopped out too easily.  You will also not size your positions correctly
• You need many fulfilling activities in your life, so if trading isn't working out particularly well, you have other things you are being successful at
• Rate yourself on spiritual interests, artistic activities, athletic pursuits, social life, intellectual life, family, community and hobbies.  Select 1 area for cultivation to improve emotional diversification
• Maximize Confidence
• It's easier to stay in a trade if you have a defined profit target because you get less caught up in the up and down ticks of the market
• You must know the historical odds of the market acting in your favor.  Without this it is hard to have confidence in the ideas.  Markets experience normal retracements on the way to to a profit target, and those adverse excursions will be difficult to weather
• these pullbacks can be viewed as threats to paper profits or opportunities to add at favorable prices
• It takes more confidence to sit through a trade than to enter it
• Most people will choose a 100% chance of making $1000 vs 75% chance of making $1500, even though on avg you get $1125
• Processing retracements
• a lost paper profit is not a threat to your account
• most criticize themselves for missed opportunities or lapse into a state of frustration
• it is the self blame and discomfort of second guessing you are avoiding  when  you take a profit before your profit target
• Confidence is trust
• you must act on your trade ideas and see through to their planned conclusion to develop trust in your ideas.
• Leave on a small portion of your position to your intended target to help you build trust in your ideas

ch 4 - How to Journal

• How to review your trading journal to self diagnose
• divide entries into 2 clusters, successful trading and trading at your worst
• look for things such as trade frequency, trade size, coping with market challenges
• Compare best trades vs worst trades w/:
• emotional patterns - distinct differences in how you feel before and during trades
• behavior - differences in how you prepare trades, manage them 
• cognitive patterns - thought process or concentration level
• physical patterns - energy level, tension, relaxation, posture
• trading - sizing, times of the day, mode of entering (scale vs all in), instruments traded
• Watch for:
• impulsive of frustrated trades after losing ones
• risk averse / failing to take good trades after a losing period
• overconfident during a winning period w/ marginal and unplanned trades
• anxious about performance and cutting winning trades short
• oversizing to make up for losses
• ignoring stop-loss levels to avoid taking losses
• working on trading when you're losing money, but not when you're making it
• caught up in moment to moment action vs actively managing a trade, preparing for the next trade
• beating yourself up after losing trades / losing motivation for trading
• trading for excitement / activity rather than making money
• trading because you're afraid of missing market move, rather than favorable risk / reward
• Best traders continue to compete against themselves long after they have made enough to retire.  They are constantly trying to improve rather than make money
• Journaling is an emotional exercise, not a cognitive one.  You must learn to hate your worst trading habits so you do not repeat them because they disgust you.
• Keep yourself solution focused:
• What did I do well today/this week? What did I do right about this trade?
• Usually many trading problems come from 1 core problem: ie: negative self talk causes missing good trades, sizing position too conservatively, cutting winning trades too quickly
• Imagery
• Mentally summoning stressful market scenarios and imagining in detail how  we want to respond to these, we inoculate ourselves against those stresses by priming our coping mechanisms
• Visualize specific market / situation, levels, and PA.  the realism enables the exercises to substitute for real experience
• Visualize like a movie, playing out real time
• Imagine from beginning to end, until the entire situation no longer evokes emotion
• Slightly vary the scenario
• Repeat the visualization daily
• Imagine how FT or Lak would trade the same market

Ch 5 - breaking old patterns

• Past relationships are the basis for your identity.  How you reacted to past relationships will affect how react to current relationships. Relationships can be with anything people or markets.
• One trader defended against loss by never getting too close.  He lost a sibling when he was young and his parents tried not to dwell on the tragedy.  He never committed to anyone, to keep his from experiencing his pain of loss, but never had a fulfilling emotional life.  He traded with ludicrously small size, and was distracted by chat rooms / reading web sites.  He avoided loss in relationships, dabbled at the edges of markets, and never achieved anything close to his potential.
• To crystallize your pattern you need to understand the underlying need.  The trader above had an overwhelming need for safety and took the safest path in relationships and trading.  He is guarding against the vulnerability of investing in oneself and losing that emotional investment.
• Patterns can be broken down:
• Need - what we are missing, what we crave
• Feeling State - distress associated with not having that need met
• Defense - what we do to cope and avoid the painful feeling state
• repetitions - how we replay defenses in current situations
• consequences - negative outcomes from our current defensive efforts
• Schemas are habits of negative thought patterns that hijack your mind and the way your process information.  You need to feel the horror of losing control of your mind / behavior
• justice - i put in my work, i should make money
• catastrophe - it would be terrible if my trade didn't work out
• safety - i can't act the market is too dangerous
• self-worth - i'm a total failure, i can't make money
• rejection - i'll look like a fool if i can't succeed at this
• Market is not about you
• When you start using "I" and "me" your attention is becoming self-directed. 
• Need to break this thought process
• Worry
• visualize worst case scenario and how you would handle it constructively.  
• What are you really fearful of?  what unresolved situation is looming?
• until you face it, it will intrude in your work and affect your mood
• worry reinforces a sense of hopelessness and helplessness in the face of those scenarios
• worry masks larger concerns
• once you anticipate the worst case scenario, you can take catastrophe out of the situation
• you don't drive on the opposite side of the road because it is dangerous, you don't have to think about it, you just do it.  You should have the same rules with trading.  Internalize the rules so you it doesn't even occur to you to do dangerous things
• make sure you are emotionally connected to the rule, ie: remember the times you violated the rule and what happened
• Common rules:
• • Position sizing
  • limiting losses - per trade, day, week
  • adding to position
  • when you stop trading or limit size / risk
  • when you increase size / risk, per trade / per day
  • entering and exiting
  • preparing for the day / week
  • diversification among position
• during every change process you will relapse to your old ways, this is common and expected, until they become automatic
• Imagine situations where you feel fear, greed, frustration, and boredom.  Imagine yourself tempted to react in your normal patterns, and the vividly envision keeping those negative patterns in check

Ch 8 - coaching as a trading business

• trade management - the market generates information once you are in the trade, use this to your advantage
• he has 6 units, and only enters trades w/ 1 or 2.  If his ideas are confirmed, he adds units on pullback
• you must cultivate an aggressive mindset when you know you have the market nailed.
• add to your position on paper after you've entered and track how well these 'nailed' positions perform
• Experienced traders know when they are right and wrong.  Beginners try to avoid being wrong.  Experienced traders know they'll be wrong on a significant portion of their trades.  Their coaching is designed to help them anticipate and manage losses