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RAMBLING THOUGHTS ABOUT MY FUTURES INSIGHT/OBSERVATIONS

I trade it all, but this is in regard to futures. I trade /ES, /NQ, and /UB every day. US open, Europe close, US close and Asia Open are when I do the majority of my volume. I end every session flat.

I work for a small L/S fund. I trade futures outside of work. I like trading options in conjunction with an equity portfolio, but this post will be about my thoughts regarding my futures trading that I have written down over the past 5ish years.

I trade the DOM (depth of market) chart and ladder, while following the Market Profile and occasionally the Volume profile. Candlesticks mean nothing to me because buyers and sellers interact vertically on DOM, not horizontally. This is what works for me, it may not work for you. I trade aggressively without stops in place and deal in absolutes when trading (i’m aware i come off as blunt but this is how i think about trading on all levels).

I have written these tidbits down over the years. I review them when I’m in a rut/can’t get in a groove. These are the best notes I have in my trading journal in my opinion:

  • Only thing that matters is book depth and positioning wind/unwind. it will go both ways. The range is too small for terrible liquidity once underlying gets going outside of expected distribution. the narrative will solidify or change again. Markets not saying anything concrete at the current moment
  • It doesn’t matter the market if you can size up/down on path, volatility/range, utilizing an edge in a somewhat predictable manner. Dial up or down risk, Spooz, gold, crypto, shitco, don’t matter to me.
  • Better off caring less about the underlying when trading, but keep that product/participant knowledge in the back of your head. Seek to capture range/percentage move because of participant factor, or time factor, etc. What is the probability this moves in my expected manner? is a question I ask myself before EVERY trade.
  • If you are so inclined to trade sectors, care less about the name, care more about the catalyst that moves that name. Disassociate from becoming so emotionally invested in being right and wrong – this is not sports
  • E.g. I trade UB at certain times of day, trade ES certain times of day – because different players are active at different times of day – and there’s decent repeatable chance I capture some rotations or a drive. It doesn’t bother me which one I end up getting positive p&l in. Kill is a kill.
  • Know the players. Know the times and nature of the product. Try to care less about the underlying.
  • If there’s reduced liquidity and size is trying to get done. You gonna get wild moves. It’s as simple as that – Markets are just positions.
  • You don’t “need” to stare at a price ladder or “just” trade with a DOM. If you want to add an element to your trading and you’re visual, using some chart setup/trigger etc, watch the time and sales + footprint + DOM to see the participation during your setup or at your level.
  • If you have a bread and butter setup with bands/levels/vwap/pattern and the time & sales isn’t flashing in your direction, be vigilant with stops and TP. You need orders to confirm whatever mousetrap you are using….. E.g. you like this level, you get filled long but there is a player that is iceberging and reloading the offer 2 ticks/pts etc and eating the market buys. Consider getting flat or reversing, it’s an art not a science, sometimes just gotta go with gut. Really – this is all there is to it. Simplify your trading. Focus only on what can affect your trades in the moment and in your timeframe. If the market isn’t reacting like you expect it to when scalping. Get out. Get back in, Ensure you’re here for the next trade.
  • This is a game of incremental optimization. What you think doesn’t matter, nor matters in the long haul. What you think matters, isn’t as high ROI as you think. For everyone it’s different, and you only find out through testing and benchmarking yourself.
  • Buying the highs after a move you know is extended is fomo.
  • Trying to fade strong flow in the hopes of top/bottom ticking a move is ego.
  • Refusing to close a position you’re well offsides on is fear of loss.
  • Sizing too large is ego.
  • Here is something counterintuitive to what’s taught in the various trading books: When I’m just scalping low-medium conviction action, it pays for me to be max size and layer out. When I’m ultra high conviction on a turn or a break, I’m in 1-2 lots to start, and then ladder in with full size.
  • Intraday trading can be summed up in 3 words:

    • Build = volume being done, Markets move from liquidity pocket to liquidity pocket
    • Rotation = volume moving through low liquidity pockets or drives/thrusts until it hits a build.
    • Backfill = market reverses from build to test liquidity between builds.
  • Confirmation of moves: Watch the DOM, thick vs thin on the bid offer, look for the volume nodes at key areas. Look for velocity and aggression. Look for icebergs. This awareness keeps you out of getting chopped up buying highs and selling lows. Be Hawk eyed on Buyer/seller activity/velocity.

  • Everything in markets is positions and unwinds, simple as that. Don’t need to go reaching around for the reasons why. Stay on top of the narratives and use them for triggers to get tactical and execute.

  • When the ladder starts to get flashy/slippery, that will probably tell you that a move is coming sooner rather than later – HFT risk managers just kick the power plug out the wall and say fuck it, lol.

  • Volume and aggressive flow are your friends. Look for low volume nodes to get sucked up/down and through. First time usually doesn’t work as offers get re-loaded. If buyers aggressive, they’ll get filled or pulled causing the aggressive suck It’s how you get onside rapidly

  • Look for participation and activity at the right time of day/session. You don’t want to get stuck when the algos are playing hot potato

  • Just know if you’re trying to trade futures, you are a very small small percentage. You need tenacity and a curiosity that very few people on the planet have. Be proud of that.

  • What’s a market? A place where buyer and sellers come to do business, Everyone posts charts and some bullshit reason or narrative. That will not help you recognize what’s happening at the bid/offer. extract some pts from discernible patterns. Aggressive buyers lifting the offer/aggressive sellers hitting the bid. What’s the participation at levels? easily visualized from the footprint or imbalance candles. Context. Price spikes on no participation? Probably gonna backfill. Get the Newtonian/linear framework horseshit out of your head.

  • Fast twitch, fast observation. I am aware of news and sentiment, which is obviously important and that keeps me trading in the direction the markets want to go. Sometimes you join the narrative, other times you fade it. I don’t really care where things go in 6-12 months since 95% of my futures trades are intraday.

  • Narrative and news catalysts are very important to me intraday because they cause aggressive volume to enter the market. Seeing the market as a series of rotations constantly seeking liquidity to fill orders was a big paradigm shift for me vs spinning my wheels figuring out why. Who cares!?!?!

  • My style of intraday scalping requires patience and guts. You either take extreme range extensions and play the rubber band snap back, or go for the breakpoints, where market looks like it will drive through and chew up bids/offers. They are violent and volatile moves. This style suits my mentality and allows me to size up, all size in, ladder out. Sometimes I get taken out in a flash, my avg hold before killing losing trade time is about 20 mins.

  • In trading, everything works and everything doesn’t. Gotta match the trading style to your mental makeup – that’s the holy grail. I work at this everyday.

  • Think of a kid with an active mind that is told they have adhd. Their entire lives now spent repeating over and over, “I have adhd. I’m this way because adhd”. That is an incredibly strong belief and spell to break – all done via language, and self-talk, “I can’t do x because I’m y” over and over again. Notice where you do this in your life, that is restrictive, it’s a limiting belief. You are quite literally molding your reality to it. Be aware. Change it. Evolve. Use your language to your benefit. Self-talk. Placebo. Intent. Be as sharp and absolute as you can be.

  • Why I hate technical analysis and anything other than horizontal lines : The only reference points that matter are the levels that a lot of algos trade off of. You think they give a shit about some pennant or flag? What’s a flag/pennant anyway? Consolidation through time. E.g. an area of balance in an auction at the current point in time. You gauge those using just horizontal lines at visual or round figure references. I’m only concerned with flow going on at the current point in time, flows of bid and offers over $30mm footprint. To me, with candlesticks you see patterns that don’t exist or your brain’s pattern recognition is getting tricked into seeing something that’s not there. When you start to trade just with flow you’re looking to see if size lords are entering the market against the algos or with the algos, sometimes the algos sniff em out and just cancel the orders, e.g. spoofing – you can detect that.

  • Ever wonder why 90% of traders lose money? It’s because they are using tools designed to trade markets pre 1980’s and they don’t have their own psychology handled. Ok, you have a rising wedge let’s say; and it breaks to the downside. Participants that use classical TA will swear it’s from the predictability and efficacy of the pattern – what a load of shit. Markets are an auction – focus on the interplay between bids and offers. Markets go down when the bid vanishes or is overwhelmed by offers, vice versa for a rising market, e.g. offers get pulled. Everyone always shares these normal price charts without ever talking about the thickness of a move – or participation of the move. /ES will generally rip on thin or little participation relative to the day – which makes sense since you can think of a rip as a sort of gap. It will then either backfill or respect that “gap” This is a look into how I see and trade shit. Participation at and through levels is more important than the level, e.g. the thickness of the move You can’t see this on a normal candlestick/bar chart. This took me years to realize, absorb, and put into execution. Why do you think a move rapidly retraces? LACK OF PARTICIPATION, End of story.

hope you found this helpful/insightful.

submitted by /u/shortedsharted
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