Existing user?

Sign In ) Sign Up

' Forums / Activity ) . Browse ) 0 Guidelines Search... -

Home Technical Topics Market Profile Trading with Market Statistics VII. Breakout Trades at the PVP ! All Activity

" Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer #
suggestions please post to the Support forum here.

Welcome Guests . Topics

Insights from Learn2.trade

Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members,
access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account
A By analyst75 86
here. Started August 18, 2019

Newbie looking to start investing

$ Sign In or + Sign Up S By shijuv 3
Started October 19, 2019

Learning FOREX
C By Chanell94 4
Started August 17, 2019

ForexfastronEA
J By Jonh Smith 2
Started January 7

walt equals forex profits

By mitsubishi 6
Started January 31

' Posts

Trading with Market Statistics VII. Breakout Trades at the PVP % Sign in to follow this Followers 29
Daily Analysis
By jperl, August 12, 2007 in Market Profile
By HFblogNews · Posted 15 minutes ago

Date : 12th March 2020. Morning Update

– March 12 2020 12th MarchFX News
&&&&& Start new topic ' Reply to this topic Today – Wednesday washout is
becoming Thursday fallout. Equities
closed down 5% and now down 20%
1 2 3 4 NEXT ( Page 1 of 4 )
from February peak and in a BEAR...

Never Lose Again!! TheRumpledOne

jperl Posted August 12, 2007 
By TheRumpledOne · Posted 15 hours
ago
We are now in a position to discuss trading aspects at points in the volume distribution function near the PVP.

Daily Analysis
By HFblogNews · Posted 23 hours ago

WARNING!! This is not for new traders. If you have not read and understood threads [thread=1962]I[/thread], Date : 11th March 2020. Central Banks –
[thread=1990]II[/thread],[thread=2008]III[/thread],[thread=2101] IV[/thread],[thread=2130] V[/thread], Race to the Bottom – Again? 11th
MarchGBPUSD, H1The latest Central
Members and[thread=2189] VI[/thread], and practiced with entries, exits and scale-ins using simulation mode until you are
Bank to act (in another surprise and
* 10 comfortable, then entries described in this thread are not for you (click on the thread numbers to see them). This is a unscheduled announcement) is the Bank
363 posts
dangerous place to be entering a trade. Anything and everything can happen and you can be caught with your pants of England. The BoE slashed rates by...

down.
Understanding Forex Market
F By fxeconomist · Posted yesterday at
04:15 AM
You are probably asking, why is JERRY telling me about this place to trade if it is so dangerous? Two reasons. If you are I wonder why didn't they include such
a basic trader taking entries at the VWAP and 1st SD, you might find yourself caught in this trap and not know what to popular and reliable brokers as Hotforex,

do. IB or Tickmill. They all have FCA license.

Secondly, if you like excitement and like living on the edge, like the bikers in the first attachment (a picture I found on Become a Better Trader
F By fxeconomist · Posted yesterday at
the internet), and if you have a correct entry, there are lots of bucks you can pull out of the market by trading here.
04:14 AM

Yes, you are right you should improve

your market analysis skills and you
So what's this all about? Well it has to do with price action at and around the PVP. The PVP as you've learned in should also learn how to trade using
demo account for example from
[thread=1962]part I[/thread], is the dividing line between the low volume zone and the high volume zone. All of the
Hotforex. This should help you to enter
trades we have discussed so far have been in the direction of the skew at the VWAP or its 1st SD in the high volume
into the real world of Forex
zone. When price action is around the PVP, it's decision time for the market. The market has to either move back into
the high volume zone and continue trading there, or look for new territory in the low volume zone. Thus like the bike
riders in the picture, you as a trader will be riding a fine line between the safety of the high volume zone, and the
sudden fall into the abyss.

How does price action end up at the PVP anyway. There are only two ways: a)the PVP suddenly jumps to where the
price action is or b) Price moves there. In either case, if you are in a trade, you are going to want to know what to do. If
you are not in a trade, but want and exhilarating experience, here's your chance to do or die.

In case a) the skew suddenly flips its sign from positive to negative or vice versa. (Remember the skew is proportional to
VWAP - PVP). While skew flips can occur anytime during the day, they usually occur early in the trading day when the
volume distribution is beginning to form. Sometimes this is a sign of an imminent reversal. What should you do if you are
in a trade and find yourself in this situation? Simple answer: GET OUT!, Dump the trade, win, lose or draw.

When price action is near the PVP, price is sandwiched between the VWAP and an SD or betwen 2 SD's. You might
notice that price will tend to oscillate back and forth for a while between the VWAP and the SD, across the PVP line or
oscillate between the 2 SD's. The market is thinking. Do I want to go back to the safety of the high volume zone where
most of the trading has taken place or am I adventurous and want to discover new territory in the abyss of low volume.
Don't trade in this region unless you are a scalper. Just wait. Wait for the market to decide what it wants to do, before
you decide what you will do.

In the first video, we see price action in the PVP area with the VWAP on the downside. The Video shows when to take a
trade to the upside on the break out of the 1st SD.

YM BREAKOUT TRADE

In the second video, we again see price action in the PVP area, but this time price breaks through the VWAP. We show
how to apply the Shapiro Effect discussed in post 16541 to enter the trade.

YMVWAP WITH SHAPIRO EFFECT TRADE

And finally in the third video, we show a skew flip, where the PVP suddenly jumps to the price action. A trader may have
taken a trade just before the flip as shown in the video and exited before the flip occurred, but if he didn't he should exit
at the flip price.

ESSKEW FLIP

Regardless of whether price action has moved to the PVP or the PVP has moved to the price action, the effect is the
same. You are now looking at a zone where trade entry is precarious, so be cautious.

In the next thread [thread=2285]Part VIII[/thread], we will discuss what to do when the skew is close to or equal to zero
and the volume distribution function is symmetric.

YMbreakoutAug10.swf
Unavailable

YMVWAPTradeAug10.swf
Unavailable

ESskewflipAug10.swf
Unavailable

+ Quote

BlowFish Posted August 13, 2007 

I haven't digested this properly yet Jerry, but just wanted to say hurrah hoping that it will answer some of the questions I

B
raised in the previous thread.

Cheers,
Market Wizard

* 10
3308 posts

+ Quote

Dogpile Posted August 13, 2007 

Jerry,

D seems to me that each contract has its own nuances relative to VWAP. for example, the S&P futures really seem to react
as you would expect around the VWAP price -- generally finds support or resistance there -- unless its a strong move --
Market Wizard whereas other contracts (NQ/YM) seem to violate the VWAP without the same regard for it. has this been something
you have noticed?
* 10
584 posts

+ Quote

jperl Posted August 13, 2007 

+ Dogpile said:

Jerry,

Members seems to me that each contract has its own nuances relative to VWAP. for example, the S&P futures really seem to
* 10 react as you would expect around the VWAP price -- generally finds support or resistance there -- unless its a
363 posts strong move -- whereas other contracts (NQ/YM) seem to violate the VWAP without the same regard for it. has this
been something you have noticed?

I haven't investigated this in any detail Dogpile, but my feeling is that the nature of the instrument your trading shouldn't
matter that much. As long as the statistics are valid, any violations of the VWAP or SD should occur in a random fashion.
Use of the Shaprio Effect should help find those.

+ Quote

darthtrader Posted August 14, 2007 

Haha, the cliffs of moher image. Those guys look like they are out in full force to try to win a darwin award.

keep it coming. Great examples for the Shaprio Effect. I didn't get your text explanation but those videos made total
sense. Seems like a great way to have a little system to make sure to get in on a retrace.

Members
* 10
344 posts

+ Quote

johnbain Posted August 14, 2007 

Just found this thread. Fascinating stuff - kudos to jperl for the clear and cogent lessons!

J
Members
* 10
4 posts

+ Quote

jperl Posted August 14, 2007 

+ johnbain said:

Just found this thread. Fascinating stuff - kudos to jperl for the clear and cogent lessons!

Members Glad you like them John. Hope they help you in your trading
* 10
363 posts

+ Quote

O66 Posted August 14, 2007 

1 valid short on the russel today. (setups i know)

O Vwap seems to slow for russel and is most of the day above vpv

Members
* 10
18 posts

+ Quote

Nvesta81 Posted August 14, 2007 

When using Shapiro Effect trading with the skew, how often have you seen prices breakout against the skew and stop

N
you out, and how much wiggle room should one allow the market to have before you bail? I know in previous threads
you mentioned a %2 risk of your account balance, which makes sense. So let's say I enter at VWAP retest, put a 100
point stop, and prices go against me back to PVP, this would be a very scary thing...

Members
* 10 I also assume that when prices do go your way, you immediately place a break-even stop when you're up 10-20 ticks? I
90 posts
know this system is difficult to back-test so I'm just curious to know what kind of stats you have accumulated using this
method... I'm wondering if a 100 point stop gives the market enough room to revert back in the direction of the skew if I
were unfortunate enough to get caught in a break-out... but at that point you wonder if the trade was good to begin
with, very hard on the nerves I imagine... at that point discretion comes into play would you say?

Great threads, keep em coming!

+ Quote

jperl Posted August 14, 2007 

+ Nvesta81 said:

When using Shapiro Effect trading with the skew, how often have you seen prices breakout against the skew and
stop you out, and how much wiggle room should one allow the market to have before you bail?

If you are afraid of using risk tolerance as a trading philosophy, then you need to have a nearby hard stop for your trade.
Members If you entered short using the Shapiro Effect, then you entered below the low of a nearby up bar. Set the stop 1 tick
* 10
above the high of that bar. Simlarly for longs.
363 posts

+ Nvesta81 said:

I know in previous threads you mentioned a %2 risk of your account balance, which makes sense. So let's say I
enter at VWAP retest, put a 100 point stop, and prices go against me back to PVP, this would be a very scary
thing...

If that's your risk tolerance, then by definition you are comfortable with it. If you are not comfortable with it, then you
need to redefine a different risk tolerance.

+ Nvesta81 said:

I also assume that when prices do go your way, you immediately place a break-even stop when you're up 10-20
ticks?

The number of ticks up where I would set a break-even stop depends on what I'm trading. For me a break-even stop is
discretionary, it depends how the trade is going.

+ Nvesta81 said:

I know this system is difficult to back-test so I'm just curious to know what kind of stats you have accumulated
using this method...

I hope you are not thinking that I am giving you a method to trade, rather than a tool to use for understanding price
action. The "method" will depend on your trading style. Exact entry, stoploss points, and profit targets will depend on
your trading style which only you can develop for yourself.

That being said, the stats for trading wil be based on your trading style. If you know where and how I trade, then you
know my stats. But my stats won't be anyone else's stats using the same tools.

+ Nvesta81 said:

I'm wondering if a 100 point stop gives the market enough room to revert back in the direction of the skew if I were
unfortunate enough to get caught in a break-out... but at that point you wonder if the trade was good to begin with,
very hard on the nerves I imagine... at that point discretion comes into play would you say?

If you have to wonder whether the trade is any good, then you probably shouldn't have been in the trade in the first
place. Before you enter a trade you must have all your ducks set up so you know exactly what you will do when the
market decides to move against you.

+ Quote

Nvesta81 Posted August 14, 2007 

+ jperl said:

N If you are afraid of using risk tolerance as a trading philosophy, then you need to have a nearby hard stop for your
trade. If you entered short using the Shapiro Effect, then you entered below the low of a nearby up bar. Set the
stop 1 tick above the high of that bar. Simlarly for longs.

Members
* 10
90 posts

If that's your risk tolerance, then by definition you are comfortable with it. If you are not comfortable with it, then
you need to redefine a different risk tolerance.

The number of ticks up where I would set a break-even stop depends on what I'm trading. For me a break-even
stop is discretionary, it depends how the trade is going.

I hope you are not thinking that I am giving you a method to trade, rather than a tool to use for understanding price
action. The "method" will depend on your trading style. Exact entry, stoploss points, and profit targets will depend
on your trading style which only you can develop for yourself.

That being said, the stats for trading wil be based on your trading style. If you know where and how I trade, then
you know my stats. But my stats won't be anyone else's stats using the same tools.

If you have to wonder whether the trade is any good, then you probably shouldn't have been in the trade in the first
place. Before you enter a trade you must have all your ducks set up so you know exactly what you will do when the
market decides to move against you.

Good reply. I should have probably put more thought in my post. I'm still very new to this game and I have so many
questions... . I am just really impressed with this information you have forwarded to us and I really hope someday I can
include it in a method of my own. So many ways to trade the market it's really overwealming at first, I admire you veteran
traders who stuck with it for so long and became successful. Props!

+ Quote

jperl Posted August 15, 2007 

+ O66 said:

1 valid short on the russel today.

Members Yes that would have been a good basic short trade O66.
* 10
363 posts

+ O66 said:

Vwap seems to slow for russel and is most of the day above pvp

"VWAP seems to slow" is an interesting way to put it. What you are observing is the slope of the VWAP is going to zero
with price action sitting in the PVP zone as described in this thread. A difficult place to initiate a trade as you are
learning. There were several attempts at a break out to the downside from this zone starting at 12:42 (East Coast time)
with the final break out occurring at 13.54.

Here is where risk tolerance plays a crucial role. The first false breakout at 12:42 was below the SD @ 774.92. Could you
have tolerated the market moving back to the VWAP at 778.76? which it did at 13:36. That's $400/contract. If the
answer is yes and you stuck with it, you would have had a good short trade of at least 4 points and more to the
downside. If the answer is no, then you would have been stopped out.

+ Quote

dbntina Posted August 15, 2007 

Jerry,

D I really like the concept of risk tolerance over using stops and quickly moving your stop to breakeven because of
constant bleeding of account and getting stopped quickly before catching a good move.
Members
* 10
61 posts
That is what attracted me so much to this method. I like the concept of scaling in at 1st SD and VWAP with stop at PVP
or opposite 1 SD.

Most of the time the market may have a general drift bias but the way it moves is back and forth, back and forth rotating
between levels with a slight bias. Trying the trade the conventional way for me has been an exercise in futility and
constant stopouts and breakeven trades with an occasional runner that you hope compensates you for the stopouts.

It seems that the breakout trade goes against the risk tolerance, give the market room situation that you described
earlier in your posts. It seems like you would have a lot of breakeven or stopout trades that would not be made up by
taking the trade off at the next standard deviation.

Anyway, with the introduction of the shapiro effect, if you had a skew to the downside and the market retraced up to the
lower 1SD and gave a valid shapiro signal and you went short, would you put a stop at the high bar or if it comes all the
way up to the VWAP scale in short again on another shapiro signal if you get it? It seems that if I start using these close
stops again...I am in the same boat I was in before? I was under the impression that was what you were cautioning
against using these close stops all the time (which I can definitely resonate with).

I understand some may be more comfortable with tight stops but were you just showing others how they could use the
tools with tight stops, but you still use the risk tolerance scale in method? Just want to make sure I understand
correctly.

Also, Howard said that as far as Ensign computing the volume distribution bars they are taking the price if it trades over
three price levels and the volume is 3000, then the volume is 1000 at each price level. When I compare the PVP based
off tick by tick to the 2 minute coded PVP on my charts there are times when they are considerably different.

Thanks,

dbntina

+ Quote

jperl Posted August 15, 2007 

+ dbntina said:

It seems that the breakout trade goes against the risk tolerance, give the market room situation that you described
earlier in your posts. It seems like you would have a lot of breakeven or stopout trades that would not be made up
by taking the trade off at the next standard deviation.
Members
* 10
363 posts

Yes, this is the problem with breakout trades against the skew in general. There can be several pseudo breakouts that
fail. This is why they are so difficult to execute properly and why I don't like them.

+ dbntina said:

Anyway, with the introduction of the shapiro effect, if you had a skew to the downside and the market retraced up
to the lower 1SD and gave a valid shapiro signal and you went short, would you put a stop at the high bar or if it
comes all the way up to the VWAP scale in short again on another shapiro signal if you get it?

If you are using risk tolerance, then yes, wait for the market to retrace to the VWAP and scale-in. If risk-tolerance is not
your cup of tea, then you have to set a hard stop and it might as well be the high of the entry bar.

+ dbntina said:

It seems that if I start using these close stops again...I am in the same boat I was in before? I was under the
impression that was what you were cautioning against using these close stops all the time (which I can definitely
resonate with).

Correct, that's why I suggest using a risk tolerance approach to trading

+ dbntina said:

I understand some may be more comfortable with tight stops but were you just showing others how they could use
the tools with tight stops, but you still use the risk tolerance scale in method? Just want to make sure I understand
correctly.

Correct, I use risk tolerance with scale-in rather than tight stops for trades in the skew direction. For break-out trades
against the skew, I will use a break even stop quickly, but if I can't do that, I will put a stop just below the VWAP. There
really is no good scale-in point.

+ dbntina said:

Also, Howard said that as far as Ensign computing the volume distribution bars they are taking the price if it trades
over three price levels and the volume is 3000, then the volume is 1000 at each price level. When I compare the
PVP based off tick by tick to the 2 minute coded PVP on my charts there are times when they are considerably
different.

That's interesting. How many ticks different are they?

+ Quote

steve46 Posted August 15, 2007 

I thought this might be of interest. I have modified the setup a bit because I don't have all the indicators in place just yet.

S
I use another chart showing time at price to tell me where the PVP is, and I have a volume weighted MA on my chart to
estimate the VWAP. As can be seen this trade worked well, betting against the breakout. I should have stay in longer.

Market Wizard

* 12
1617 posts

+ Quote

steve46 Posted August 15, 2007 

As can be seen by this next chart, there is good reason (in my opinion) to use the "Shapiro Effect" rule for exits as well

S
as entries. Staying in this trade, either by scaling out, or simply holding would have resulted in a significant additional
profit. Given that volatility has expanded so much this last month I will have to remember to scale out rather than exit in
one piece.

Market Wizard

* 12
1617 posts

+ Quote

O66 Posted August 15, 2007 

+ jperl said:

O Here is where risk tolerance plays a crucial role. The first false breakout at 12:42 was below the SD @ 774.92. Could
you have tolerated the market moving back to the VWAP at 778.76? which it did at 13:36. That's $400/contract. If
the answer is yes and you stuck with it, you would have had a good short trade of at least 4 points and more to the
downside. If the answer is no, then you would have been stopped out.
Members
* 10
18 posts

Thanks for your comments jperl.

Important Information
" I accept
By using this site, you agree to our Terms of Use.
vwap was above pvp and i thought only longs were allowed in this scenario.