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Intro to the TTP Trading Methodology

Introduction

Some of the main goals for the TTP Trading Methodology are to maximize the R-multiple (Reward:Risk) of our trades and increase the average expectancy per trade while keeping the percentage of winning trades high enough to limit drawdowns and the maximum consecutive losing trades. We want to take only those trades with the perceived propensity to yield a significant reward of at least five times the initial amount risked. Of course, not all your winning trades will have a realized R-multiple of five or more. Still, when your targets are consistently much larger than your stops, your average trades will have a very high Win:Loss. Therefore, your percentage of winning trades will not have to be nearly as high as the typical retail trading strategies require. However, when traded according to plan, your win rate will still be high enough to avoid many consecutive losing trades and large drawdowns. Our trading methodology and risk model provide an excellent approach for instilling confidence and empowering traders to execute trades based on a probabilistically favorable outcome rather than emotionally charged reactions. If you implement our system, you will position yourself with a sound, financially advantageous methodology that promotes psychological stability. Few things can thwart a trader’s success faster than the account-destroying, knee-jerk reactions brought on by the intense emotions that arise from trading a scalping-type system. Traders must win the psychological game before translating skill into consistent returns, and we believe that our trading system best equips traders to achieve that goal.

Learn in a Simulated Account

If you’re somewhat new to trading or have been trading for a while but with little success, and you’re new to our way of trading, please allow me to take a moment and recommend that you do something that has helped me tremendously. Take at least six months and trade only in a simulated (SIM) account while learning the TTP Trading Methodology. Depending on how much time you can dedicate to studying and trading, you may find that you understand our methods pretty quickly and start to feel confident enough for live trading after only a few months. But please, don’t rush it. Continue trading in SIM until you have tailored a solid trading plan for yourself by which you can measure your results and gauge your progress. Try to grow your SIM account consistently over at least six months (preferably a year or more) with minimal drawdowns. Developing the skill required to treat a SIM account like a real account and grow it over time requires a lot of discipline and dedication; if you can manage to do it, you will be much better equipped to deal with the rigors and psychological strain of trading and managing a real money account.

General Overview

Our trading method can be divided into three simple categories: Context, Area, and Confirmation. Satisfying the requirements of each of these three categories is necessary for taking a trade.

Context

Context refers to the overall market direction (trend) and its current position relative to its prior market structure. To determine market context can be broken down into the following two

  1. Identify the overall trend of the market across each timeframe (each Minute chart) with reasonable targets for the expected duration (time) and distance (price) of the trend.
  2. Identify potential corrective patterns (retracements) within the trend in each timeframe.

Preparing proper context based on the market’s historical movements equips the trader with an educated expectation of where a market’s price will potentially be in the near term and how long it might take to get there. Continually building context on each timeframe helps the trader grow more attuned to each particular market’s idiosyncrasies and volatility to more quickly and accurately differentiate between trending and corrective price movements across the charts. A proper market context is essential to identifying high Reward:Risk trades. For entries, context helps identify the ends of corrections/retracements; for targets, it helps identify reasonable market movements in time and price as the market resumes its trend.

One of the analysis tools we use to develop market context is the Elliott Wave Principle. While Elliott Wave analysts tend to implement their analysis with a rigid, often counterproductive approach, our approach is much more generalized. We use Elliott Wave simply to build a roadmap for the markets to help us develop a sense of where a market lies within its overall trend. The most important aspect of the Elliott Wave Principle, for us, is the identification of the various corrective wave patterns, as we trade only retracements/pullbacks/corrections (whatever you want to call them) within the trend on each of the various Minute charts, from a 2-hour chart down to a 2-minute chart.

The chart on which the potential correction is signaled becomes the Operative Timeframe (OTF) for the trade. In other words, each trade taken is ‘assigned’ an Operative Timeframe, so if the correction is identified on the 10-minute chart, the 10-minute chart is the OTF for the trade. The required trade confirmation conditions from the different charts depend on which chart is identified as the Operative Timeframe for the trade.

The TTP Logic Manager is the tool that automates this process for us (thank heaven).

The Logic Manager, pictured below, acts as a kind of ‘container’ for the Operative Timeframe (OTF) corrective pattern recognition code (conditions sets) for each of the labeled minute charts (LOGIC COMPONENTS) for each ‘activated’ instrument (LOGIC).

The data grid shows the states of the different LOGIC(S) (left column of instrument symbols) and LOGIC COMPONENTS (right column of minute chart timeframes).

The LOGIC COMPONENTS column will display a ‘Long’ or ‘Short’ for any timeframe that is currently signaling a potential end of a correction. The > arrow on the right side of the column to the right of each timeframe will perform the selected ‘Window action’ when pressed, bringing the chart to the right edge of the Logic Manager or maximizing it, etc., then sending it back to its previous position. The left column, LOGIC, also shows the cumulative signal value of the Logic Components, showing ‘-3 short’ when three of the timeframes currently have potential short signals or showing 2/-1 when two of the timeframes now show potential longs and one shows a possible short.

We developed the Logic Manager to help identify the potential ends of these corrective wave patterns across the various minute charts.

Taking the chart below as an example, notice the dark red bars in the lowest indicator panel (together with the Divergence Analyst, below the Volume Analyst). The Logic Agent plots those dark red bars whenever the OTF logic (Operative Timeframe) identifies a potential C-wave of a correction/retracement within a trend.

The Logic Manager will find corrections of between 25 and 115 bars from the start-bar of the retracement. Once the potential A (or W) wave is broken, the Logic Agent will begin to plot either the red signals at -1 (for potential shorts) or the green signals at +1 (for potential longs), as long as all other internal conditions sets aren’t broken. The Logic Agent is the indicator on each Minute chart that sends the chart’s data (from all indicators on its chart and all data points from the price bar) to the Logic Manager, which then runs the conditions sets to solve for and identify the corrective waves for that chart. Once a potential correction is found for a particular chart, the Logic Manager sends the signal to its Logic Agent, which then plots the red or green bars for the potential corrective swing high or low, respectively.

The charts below show the output from the Logic Agent on each of the Minute charts, starting with the MIN (5), a 60-Minute chart of ES.

*Aside: If you’re curious why we use chart labels, such as MIN (1) and MIN (6), please see THIS ARTICLE.

*Note: Just because these OTF Correction Pattern signals show ‘Long’ and ‘Short’ doesn’t mean “Take a Long Trade Here” or “Take a Short Trade Here.” Two other elements besides ‘Context’ must come together before a trade should be taken, the next of which is the ‘Area.’

Remarks on the Elliott Wave Principle

Identifying corrective patterns across all the Minute charts is one of the keys to the TTP Trading Method. Thankfully, the Logic Manager helps us identify these potential corrective waves. However, the Logic Manager can take us only so far, as programming out all the many rules, guidelines, and nuances to the Elliott Wave Principle (EWT) would be a lifelong and monumental undertaking. So, we recommend learning at least the basics of Elliott Wave.

Lay aside, for a while, the platitude that “if I ask ten different Elliott Wave analysts for their market projections, I get back ten different answers.” Every market analysis tool comes with both positives and negatives. Elliott Wave analysis is no different. Considerable study time is required to become a proficient Elliott Wave Practitioner, and yet the industry is full of people purporting to be expert wave analysts. Discerning correct and incorrect wave counts can prove challenging for many, especially when analysts present their projections with certainty and a lack of alternatives.

While Elliott Wave counts may not always be as accurate and predictive as their proponents would have you believe, considerable experience and insight into many important and valuable market concepts can be gained from studying Elliott. You will learn about the fractal nature of market movements, why it’s so important to trade with multiple timeframes, how to quickly identify corrective versus motive waves, the typical characteristics of volume and market internals data within certain waves, and even the basic application of trend lines and channels.

The way we use Elliott Wave, now, is with a much more simplified approach, attempting to separate the good from the bad. I suppose purists would deem our use of EWT as heretical, and that’s fine; I would have likely agreed with them in the past. But then, we’re not too obsessed with being ‘right’ or making elaborate, often unreasonable, forecasts. We’re focused on finding the ends of corrective waves to trade, and that’s it.

If you don’t feel like spending night after night studying EWT, that’s okay. But at least try to learn the basics and memorize the four different corrective patterns and their variations; doing so will help you tremendously when searching out these (see THIS PAGE for more detail):

  1. Zigzags (5-3-5; includes three variations: single, double, triple)
  2. Flats (3-3-5; includes three variations: regular, expanded, running)
  3. Triangles (3-3-3-3-3; four types: ascending, descending, contracting, expanding)
  4. Double threes and triple threes (combined structures)

Area

The general ‘Area’ refers to the location in time and price from which we would anticipate the market to turn. A market ‘turn’ can refer to any type of swing high or low, whether a complete reversal in trend or a minor corrective wave. For example, suppose the market’s price is moving up in a correction of a significant downtrend. In advance, we would attempt to identify the area from which the market will make its final swing high to end the corrective wave and then turn back down, resuming the downtrend. We define these areas using Market Geometry and, to a lesser degree, Volume Profile and Fibonacci Confluence Zones. Market Geometry is the primary tool to find the areas for our entries and exits. Volume Profile and Fibonacci Confluence Zones also provide areas, but we use them more as confirming tools to accentuate or weight areas already defined by the Market Geometry.

The tool that allows us to perform our multiple timeframe analysis so quickly is the TTP ToolBarPro.

Without the ToolBarPro, performing Market Geometry, Volume Profile, and Fibonacci Confluence analysis would be much too time-consuming to complete; with it, we can analyze multiple charts per market is record speed. ToolBarPro is the backbone of the TTP Trading Methodology and makes our work 10x more accessible and faster.

Market Geometry (MG)

MG is an underrated supply & demand analysis method that is unmatched in the degree of precision it provides in pinpointing anticipated swing highs and lows. Market Geometry is comprised mostly of trend lines, trend channels, Andrew’s Median Lines (pitchforks), and their ‘warning lines.’ Warning lines are the +50%, -50%, +100%, -100%, etc. expansion lines of the channels and median lines. A few other analysis tools fall under the umbrella of Market Geometry but are beyond the scope of what we teach. We are simply looking for MG confluence zones where the lines produced from different trend channels and median lines drawn from different swing highs and lows across multiple timeframes overlap in a fairly tight zone in time and price. So, once we have a solid working context, we use Market Geometry to pinpoint the area in time and price where a potential trade entry could occur.

We start by marking up the larger timeframe charts – MIN (6) and MIN (5) – with trend channels and median lines, working our way down to the smaller timeframe charts – MIN (1) and TICK (1) – until all the Minute and Tick charts have been analyzed and adequately updated with Market Geometry. The highest probability trade setups occur at areas of confluence across multiple timeframes where two or more trend line(s), channel line(s), and median line(s) intersect in a reasonably tight range in time and price with a price bar touching two or more areas. Preferably, the area(s) on the larger timeframes will be sloping in favor of the trade, and the area(s) on the faster timeframes will be sloping against the trade.

Let’s look at a couple of trade setup examples, starting with the largest possible trade setup that the TTP Trading Methodology can identify and ending with the smallest.

Example 1 – Swing Trade Short Setup on the MIN (6) Chart

We’ll start with the Area for the short setup, showing all possible areas beginning with the MIN (6) chart and going through all the faster charts down to the RTH (1). In the process of marking up the charts to find the confluence zone for the Area, the Context for the setup – which includes identifying the Operative Timeframe for the trade – will become apparent. Finally, we’ll cover all of the Volume and Momentum Divergence confirmation signals that come together across the charts and confirm our short entry.

The chart below is the MIN (6) chart of the ES (S&P 500 E-Mini Futures), a 138-Minute chart. I have drawn a downsloping trend channel with its baseline (tan) drawn from Major High to Major High, with its channel line (cyan) starting from the broadest perpendicular swing to its baseline.

The market has already reached the bottom of the channel and turned back up in what we anticipate will be a corrective wave. Now we need to identify the most likely area from which the correction will end, and the market will turn back down. The apparent area on the chart below for the end of this correction is the baseline marked with the cyan dot.

Before entering the trade, we want to ascertain the trade’s reasonable target(s). Of course, in this case, since we’re planning on shorting the top of the channel, one obvious target would be the bottom of the channel. However, we need to check and see if there are any other significant areas for support that are closer to the entry price. One such area would be the yellow trend line from low to low, which is visible in the chart below. Even with a tighter target, the expected R-multiple for this trade is still quite large.

The chart below shows the most significant area on the Daily chart to which we expect the market to move before finding substantial support. In this case, we should search out at least one more short trade setup since there is plenty of room to the next area, and the market would likely make at least one more new low before we would expect to meet considerable demand.

*Note: The workspaces do not include the Daily and Weekly charts, as they are not a required part of the system (but can easily be added). I use the daily and weekly to monitor the much more significant trend and any critical areas nearby.

The chart below is the MIN (5), a 60-Minute chart. I’ve drawn a downsloping trend channel with its baseline from low to low, and its channel line is a little bit lower than the baseline on the MIN (6) chart (marked by the cyan dot at the far-right edge).

The following chart is the same timeframe as above but with the median lines (in white) drawn from the same trend channel. With the ToolBarPro, we can draw both trend channels and median lines simultaneously – with two mouse clicks – using the MG button.

If you notice, the median line will come in a bit lower than the channel line if the market were to go straight up from $4,002.75. Still, if the market took a bit longer to make it to the top of the channel, the median line would come in just above the channel line, slightly above $4,100 at the cyan dot aligned with the baseline on the MIN (6) chart. Until more bars plot and there is more of a retracement back down, we don’t have any swings from which to draw upsloping areas.

The RTH (4) chart below is a 15-Minute chart using the US Equities RTH (Regular Trading Hours) session that eliminates the overnight session, leaving only the price action from 9:30 AM to 4:00 PM Eastern Time for each day. We draw the same areas on this chart, as the areas will frequently align better on the RTH chart. In this case, though, the areas are very similar.

The chart below is the TICK (2) chart.

*Note: The TICK (2) chart has about as many bars during the RTH Session as a 7.5-Minute chart would. We use the TTP Timeframe Tuner to modify the values of the Tick charts at least once per week to adjust for volatility (see the method on THIS PAGE).

Market Geometry should be drawn on both the Minute and the Tick charts, as both tend to produce very different results. The more sessions (days) that an MG’s baseline has between ‘Swing Point A’ and ‘Swing Point B,’ the more closely related the same MG drawn on a Minute chart would be. In this case, because there are more than seven sessions between Swing Point A and Swing Point B, the MG drawn on the TICK (2) chart is nearly identical to the same MG drawn on the MIN (5) chart. When the distance between Swing Point A and Swing Point B is less than about five sessions, the difference between the MGs drawn on Tick charts versus MGs drawn on Minute charts becomes more and more pronounced the fewer sessions.

The chart below is the TICK (1) chart.

*Note: The TICK (1) chart has about as many bars during the RTH Session as a 2.5-Minute chart would.

As mentioned earlier, we prefer to have at least one area sloping in favor of the trade and one area sloping against it. The areas sloping in favor of the trade tend to be from the larger timeframes, and the areas sloping against the trade tend to be from the faster charts. The areas sloping against the trade are usually drawn using the swing highs and lows that make up the corrective wave. Because the initial move up (marked with the dotted red arrow) is such a strong one and the retracement is so shallow, any upsloping area drawn using the lowest low on the chart would produce areas much too vertical and useless. We would have been waiting for either a deeper retracement or some sideways type of price action (like a triangle), as is pictured in the chart below. Once the swing points present themselves, a new upsloping channel can be drawn – one that provides a realistic target. The channel line also aligns reasonably well with our major downsloping areas from the other charts.

The screenshots below show the RTH (1) chart (a 1-Minute chart using the US Equities RTH session). Chart ‘1’ shows the first upsloping trend channel that can be drawn. You can see how well the upsloping channel line aligns with the final swing high.

The Elliott Wave labels are shown for context and are quickly drawn using the ToolBarPro.

The second chart shows the last upsloping channel drawn from wave 2 (of C) to wave 4 with the parallel from wave three high.

The third chart (below) shows both channels and the yellow trend line drawn from high to high. All three areas align on the same MG confluence zone for the potential short entry.

The following is the MIN (2) chart – a 5-Minute chart. The MG drawn on this chart is a bit more advanced, as I have moved the ‘auto line’ (channel) automatically drawn from the broadest swing to the higher swing high to the right. The median lines (in white) track the subsequent price action well enough, but the channel’s parallel, drawn from the new swing high (dashed line) after the break of the original channel, aligns perfectly with the final high.

Volume Profile

The Volume Profile button on the ToolBarPro allows us to draw range-select volume profiles on any chart/market, yielding all of the typical areas, such as the Value Area High and Low, Volume Cluster High and Low, Point of Control (POC), and VWAP with Standard Deviation bands (Volume-Weighted Average Price). The level of on-the-fly customization of these volume profiles is second to none.

The chart below shows that the ‘Value Area Low’ (VAL) also aligns with our MG confluence zone.

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The TICK (2) chart below has a Volume Profile drawn from the first major swing high back down to the low. The area I have marked by the pale green horizontal line around $4,093 is simply a high-volume node above the low-volume node of the value area.

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Fibonacci Confluence Zones

The Fibonacci buttons on the ToolBarPro allow us to draw in all of the Fibonacci retracements and extensions from prior swings and then quickly delete all of the lines that do not overlap, thankfully making quick work of our Fibonacci Confluence analysis that would otherwise be very time-consuming.

In the chart below, the Fib Confluence zone is at a 100% extension of the preceding up-swing and a 161.8% extension of the up-swing before that. Just lower is another confluence of the 50% retracement from the first major swing high to the left, with the 23.6% retracement from the highest high on the chart.

The MIN (4), 20-Minute chart of the ES below shows another Fibonacci Confluence zone at $4,097 created from the swings that make up the ABC correction. The 61.8% extension is of wave A from the end of wave B, and the 100% extension is of wave 1 of C from the end of wave 4, such that wave 5 = wave 1. Both Fibonacci extensions, in this case, are textbook Elliott Wave guidelines for a ZigZag correction.

When the B wave has a very shallow retracement, as in this example, and to draw a standard trend channel would yield a channel with a very steep, unreasonable slope, the Schiff Median Line should be drawn instead. You can see the half-opacity dark grey baseline of the Schiff Median Line drawn from the starting point of the correction to the B wave low, with its median line intersecting the 5th wave high of C, right near the ultimate high of this correction.

The areas identified beforehand for this retracement swing high within the larger downtrend are numerous and tightly grouped, yielding a very high probability confluence zone for the anticipated end of this corrective wave and potential trade entry. All we need now is the volume and momentum divergence confirmation to stack probability in our favor for a very low-risk, high-reward trade setup. The chart above shows the Extreme Churn Bar with a Volume Divergence Setup from the TTP Volume Analyst, as well as a very strong Bearish Regular Divergence Setup from the TSI in the TTP Divergence Analyst, both of which start a strong case for confirming a trade entry from this major confluence zone.

Confirmation

Confirmation is the final information required before placing a trade. In our case, we’re looking for price-action and volume to confirm our ‘Context’ and ‘Area’ with specific Relative Volume and Momentum Divergence signals at the anticipated corrective wave high or low.

Confirmation is the component that turns a potential trade setup into a low-risk, high-reward, actionable trade entry.

We look for confirmation signals from the TTP Volume Analyst and the TTP Divergence Analyst, starting with one larger timeframe than the Operative Timeframe for the trade and then including all subsequently lower timeframes (faster charts) down to the RTH (1), TICK (1), and ROE (1) charts.

Before showing all the confirmation signals for the short trade setup we’re covering, allow me to describe some of the signals produced by the Volume Analyst and show why Relative Volume is essential to intraday charting. Afterward, I’ll briefly describe the ROE Bars and Divergence Analyst.

The TTP Volume Analyst

Our Volume Analyst tool runs the market’s volume & range data through various algorithms to reveal precious details about the behavior of major market participants that would otherwise go unnoticed. The Volume Analyst’s relative volume, range, and density algorithms work on any chart (not only on Minute charts) to remove the intraday ‘seasonality’ to the volume & range data and convert previously concealed information about supply and demand into actionable signals. By isolating various relative climax, churn, two-bar patterns (climax followed by churn), and volume divergence signals, we can confirm – with much greater accuracy than with raw volume – whether or not demand is entering the market at a swing low, or supply is entering the market at a swing high.

Relative Volume

Analyzing volume on daily and weekly charts is much more straightforward than on intraday charts. Even a quick look at simple volume spikes on a daily chart can be helpful.

Below is a Daily chart of ES – The S&P500 E-Mini Futures market. You can see how the volume spikes coincided with most of the major swing lows.

However, once you attempt to compare the volume of intraday charts from one bar to the next, the usefulness of volume analysis begins to break down. Intraday charts pose a severe issue when using the raw volume as an indicator – ‘raw volume’ meaning total and unfiltered volume, such as with the standard VOL indicator that shows the number of contracts/shares/lots traded.

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The issue with the intraday volume data is the problem of ‘seasonality.’ Many traders will understand that ‘market seasonality’ refers to generally recurring cycles in investor behavior from one season of the year to the next. We’ve all heard the old saying, “Sell in May and go away.” However, ‘intraday seasonality’ may be somewhat unfamiliar, and while fewer traders may have heard the phrase, I imagine all are familiar with its effects. For instance, we all know and understand that volume is much higher during the first 15 minutes and last 15 minutes of the RTH session (Regular Trading Hours) than during the rest. And volume typically is much lower during the two hours or so around lunchtime than during the morning and afternoon. For the ES, volume is relatively low during the overnight session until it picks up a bit during the European session. Once the RTH session opens, though, volume explodes into the market. These recurring patterns in the typical quantities of volume traded from one session to the next are referred to as the ‘seasonality of intraday volume data.‘

Below is a 15-Minute OHLC bar chart of the ES using the US Equities RTH session (9:30 to 4:00 PM Eastern Time). The half-opacity, dark grey vertical lines on the chart mark each session’s close at 4 PM. The VOL indicator in the lower panel – the light cyan bars – represents the volume traded per 15-minute bar. Notice the intraday seasonality of the volume data with the enormous volume spike for the first bar of each session, followed by gradually declining volume (on average) into the lull during the midday ‘lunchtime’ session, and then increasing progressively again through the afternoon until we see another considerable volume spike for the last bar of each session.

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The chart below is the same ve, but I have overlayed a blue ‘U’ drawing on the first session’s volume and then copied it to every other session to clarify this intraday seasonality issue. Aside from minor variations in volume for certain bars – bars that we want to identify – each session’s volume data follows a generally recurring cycle.

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Below is a 15-minute chart of the ES using the ETH (Extended Trading Hours) session, which includes the overnight session. Gold horizontal arrows mark the European sessions. Black horizontal arrows mark the rest of the overnight sessions. White horizontal arrows mark the RTH sessions, but I’ve also overlayed the ‘U’ drawings on the volume of the RTH sessions. You can see right away that the volume in the first session (in red) stands out compared to the following two sessions. The first RTH session has a considerable amount of increased volume leading into the lunchtime part of the RTH session from about 10:45 AM to 12:00 PM, coinciding with a massive price reversal ‘V’ bottom. This huge midday volume into that significant reversal is one of the scenarios we’d like to identify programmatically. However, if we were to overlay the raw volume – VOL – indicator with moving averages and standard deviation bands, or MA envelopes, we would find signals for every single bar after the open and every single bar before the close, and the resultant signals would be worthless. But once we convert the volume and range data to relative volume and range, we can isolate some rather amazing, and previously unknown, signals that help us identify turning points in the markets.

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To properly isolate the signals, we need to eliminate the intraday seasonality by comparing the volume for the exact time duration of each bar of a session to the average volume of the same exact time duration from the preceding X number of sessions. So, rather than comparing the raw volume from one bar to the next, as we would on daily and weekly charts, we would instead compare the raw volume of a bar to the average volume of that bar over the past five sessions or so, setting the average volume equal to 100% and displaying each bar’s raw volume as a percentage relative to the average, hence the name ‘relative volume.’

In the chart below, the Volume Analyst with the bare Relative Volume output is shown above the raw VOL indicator. Notice the dark 100% horizontal line. The 100% line represents the average volume for each individual bar, such that if a bar’s relative volume is equal to 350%, that bar’s volume is 3.5 times larger than the average volume for that bar.

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The Volume Analyst runs these ‘relative’ calculations not only for each bar’s volume but also for each bar’s range and volume-per-range (what we refer to as ‘density’) to find specific supply and demand signals such as climax bars, churn bars, two-bar patterns (a climax bar followed by a churn bar), and volume divergence signals.

Using the signals produced by the Volume Analyst, together with the regular divergence signals from the Divergence Analyst, we can determine when the market has a much higher probability of reversing away from an identified confluence zone for a trade entry. When the volume and divergence signals stack up near the area for the trade across multiple timeframes, we know that the likelihood of the market rejecting away from that area in favor of the trade is even greater.

Below is an example of Relative Volume on a Tick chart showing a Two-Bar Pattern (a selling Climax Bar followed by a Churn Bar), which indicates robust demand entering the market at the low. The raw VOL indicator in the bottom panel shows how useless it is. Relative Volume on the Tick and ROE Bars charts is a very impressive confirmation indicator.

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The chart below shows how the market turned straight up from that 2-Bar Pattern low (on the left) on extreme bullish regular divergence using the Balanced Momentum indicator in the Divergence Analyst. At the subsequent high is an Extreme Churn Bar – a significant indication of supply entering the market at a high – after which the market retraced nearly half the preceding upswing. The following high was on an Extreme Density 2-Bar Pattern with Extreme Bearish Divergence.

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Volume Divergence

Volume Divergence is one of our most valuable and consistent confirming patterns. Without relative volume, we would be unable to find these patterns, especially on the larger timeframes, such as the 20-minute chart pictured below. The Volume Divergence in the chart below starts with an Extreme Spike in the relative volume followed by a retracement. What we want to see next is for the market to go back up and retest the high on much lower relative volume, indicating to us that the buying pressure is much lower than it was during the initial volume spike high. Once the volume spike high is broken, the market runs into very strong supply as signaled by the burgundy Extreme Churn bar with the price-bar closing off its high for a Doji candlestick pattern (closing price is equal to its opening price), added confirmation of significant supply entering the market.

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The TTP ROE Bars is our custom bar-type that we developed to accentuate the volume and divergence signals by blending different attributes from Range, Tick, and Second chart via setting minimum and maximum values for each input.

The ROE Bars chart below is just one example of many that show some of the Volume Analyst’s relative volume signals that occur immediately before price retracements and even price reversals. Adapting the relative volume algorithm for non-time-based charts was a pivotal breakthrough for us which yielded even better confirmation signals on the Tick and ROE Bars charts.

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TTP Divergence Analyst

The Divergence Analyst indicator allows us to identify both Regular (Type 1) and Hidden (Type 2) divergence patterns between price and any other instrument or indicator. We use the Divergence Analyst to find bullish and bearish Regular Momentum Divergence setups between price and the TSI (True Strength Index) on the Minute and ROE Bars charts, and between price and the Balanced Momentum on the Tick charts. On the RTH charts, as well as the Daily and Weekly charts, we use the Gapless RSI.

*Note: The latest version can now be used with Cumulative Delta. Divergence Analyst can even be used within NinjaTrader’s Market Analyzer as a market scanner.

Now, back to the short setup in the ES…

As previously stated, we look for confirmation signals from the Volume Analyst and the Divergence Analyst, starting with one larger timeframe than the Operative Timeframe for the trade and then including all subsequently lower timeframes (faster charts) down to the RTH (1), TICK (1), and ROE (1) charts.

For example, the short setup in the ES we’ve covered so far is a setup on both the MIN (5) and the MIN (6) charts, as the Logic Manager gives the OTF signals on both charts. However, if the Operative Timeframe for the setup were only the MIN (5), then we would allow confirmation signals for the trade starting with one timeframe larger than the MIN (5), which is the MIN (6). Another example is if the Operative Timeframe for a setup were the MIN (2) chart, we would allow confirmation signals starting with the MIN (3) chart down to the MIN (1), RTH (1), TICK (1), and ROE (1) charts.

Usually, confirmation signals will start to appear on the charts that are faster than the Operative Timeframe for the trade. However, for the current short setup in the ES, confirmation signals appear on the MIN (5) chart, which also happens to be one of the Operative Timeframes for the trade. This short trade example happens to be one where almost every single chart has confirmation signals. I went ahead and pasted a screenshot of each chart’s confirmation signals below, but having so many is not required.

On this MIN (5) chart, we have a Regular Momentum Divergence (from the TSI) setup and a Volume Divergence setup ending on a Churn Bar – great-looking confirmation, already, from the Operative Timeframe itself.

You can see from the chart below how the VOL indicator yields little to no valuable data on intraday charts. The Relative Volume from the Volume Analyst turns what would be otherwise useless volume data into actionable and accurate confirmation signals.

The MIN (4) chart below has a Volume Divergence Setup ending on two Extreme Density Churn Bars with Extreme Bearish Regular Divergence.

The MIN (3) chart below has a Volume Divergence Setup ending on three Extreme Density Churn Bars with Double Bearish Regular Divergence from the TSI. Double Bearish Regular Divergence is when two bearish regular divergence signals are found, back-to-back, with the start-bar of the second equal to the end-bar of the first, while the momentum indicator (or whichever oscillator is used) has consecutively lower highs. The Divergence Analyst also finds Triple Regular Divergences, which help to identify the Three-Drives-to-a-High (or low) patterns.

The MIN (2) chart below has a Volume Divergence Setup ending on an Extreme Density Churn Bar.

The TICK (2) chart below has a Volume Divergence Setup ending on an Extreme Churn Bar with Double Bearish Regular Divergence from the Balanced Momentum = solid confirmation of a swing high on this chart.

The TICK (1) chart below has a Volume Divergence Setup ending on a 2-Bar Pattern (Climax followed by Extreme Churn).

The RTH (1) chart below has a Bearish Regular Divergence from the Gapless RSI ending on a 2-Bar Pattern (Climax followed by Extreme Churn) = very clean confirmation of the areas on this chart.

On the ROE (2) chart is where everything comes together. The red stripes on the price panel are from the D+V+OTF confirmation BloodHound template. ‘D’ stands for the Divergence Analyst’s Regular Momentum Divergence Setups from all the charts. ‘V’ represents the Volume Analyst’s signals from all the charts. ‘OTF’ stands for Operative Timeframe signals from the Logic Agents on all the Minute charts. To access the OTF signals from the Logic Agents, we use the TTP Replicator, which can access any data series from any indicator on any chart and workspace.

*Note: BloodHound is a drag-and-drop visual programming interface that we use to build out the condition sets required for the Operative Timeframe plus Volume and Divergence confirmation logic, as well as for Market Geometry confluence logic.

The image below is of the Logic Board of the D+V+OTF confirmation BloodHound template, showing the various solvers and logic nodes that are sectioned according to groups of the Operative Timeframe signals.

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The Volume and Momentum Divergence signals required for a trade depend on which Minute chart is the Operative Timeframe for the setup. Once enough of the necessary confirmation conditions have been met, the D+V+OTF BloodHound template will throw a signal (on the price panel).

The ‘MG Confluence’ BloodHound template is on the lowest indicator panel overlayed in the same panel as the Divergence Analyst, which accesses all the Market Geometry from all the Minute and Tick charts (we don’t draw MG on the ROE Bars charts).

When a bar is touching two or more areas from the Market Geometry across two or more charts (one sloping in favor of the trade from the larger timeframe and one sloping against the trade from the faster charts), the MG Confluence BloodHound template will throw a signal (on the same panel as the Divergence Analyst) – red for shorts, and green for longs.

The image below is of the Logic Board of the MG Confluence BloodHound template, showing the various solvers and logic nodes that are sectioned according to groups of the Operative Timeframe signals.

The confirmation signals on the chart below (on the preceding bar) are [1] a Double Regular Momentum Divergence Setup from the TSI and [2] a High-Density Climax Bar closing off its high in the lower third of the price bar – a strong indication of supply entering the market there.

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*Note: The faint red bars (barely visible) from BloodHound (outlined by the red rectangle) show when almost enough conditions have been met but not quite enough to plot a ‘full’ signal

Trade Entry

Once the signals from both BloodHound templates align within two bars, a trade can be taken. The first signal (where the trade was entered) was close to 14:09 and $4,085.00. However, since this setup is such a massive Swing Trade Short, the area is much larger (both in time and price) than your typical day-trade. The ES continued to creep a bit higher, with signals aligning again just before the close and just after the market reopened.

The ROE Bars charts will typically have very pronounced volume confirmation signals for most trade setups, as is their purpose. The ROE Bars were developed to accentuate the volume signals by blending attributes from Minute, Tick, and Range bars using minimum and maximum values per bar for each input.

You can see in the ROE (2) chart below that the second entry signal coincided with two Churn Bars on a Volume Divergence Setup. The first was an Extreme Churn Bar, and the second was an Extreme Density Churn Bar, both on Volume Divergence – beautiful added confirmation for this massive, short trade setup.

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The final high was at 17:22 and $4,097.50, which is fine because the stop loss would be above $4,108, as the highest Fibonacci Confluence zone and more significant downsloping baseline were around $4,105. The stop loss may sound as if it’s rather large, but in the context of this trade setup, it is pretty small, as is explained further down in the section on ‘Placing the Stop Loss for the Trade.’

The ‘MS ROE (1)’ BloodHound template on the ROE (1) chart will display a signal once both BloodHound templates from the ROE (2) chart align within two bars of each other. The ‘MS ROE (1)’ BloodHound template has two instances of the TTP Replicator indicator – one reads the signals from the ‘D+V+OTF’ template, and the other reads the signals from the ‘MG Confluence’ template. I added this ‘MS ROE (1)’ BloodHound template to make it abundantly clear when the signals from both templates on the ROE (2) are in sync.

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Placing the Stop Loss for the Trade

To determine the value for the stop loss order(s), we look to the average range indicator from the Operative Timeframe(s) for the trade. As this trade is potentially a multi-day Swing Trade setup on the MIN (6) and MIN (5) charts, we should take into consideration the average range values from both charts.

In the top right corner of each chart are three sets of values produced by three different lookback periods of the Average Range indicator – the free TTP Average Range indicators, to be precise. The value to the left is the 50-bar simple moving average of the range data (range = (High – Low) / tick size). The value in the middle is the 100-bar average range (AR). The value to the right is the 200-bar AR. Whichever value is the largest is colored bright pink. The second highest value is colored silver. The lowest value is dark grey. All values are displayed in ticks. We want to take the largest of the three values and set it as the approximate stop loss size. The stop loss should be within 25%, plus or minus, the size of the largest average range value, depending on how close your entry is to the confluence zone. For example, if your entry is precisely on the confluence zone, your stop loss should be very close to the size of the largest AR value. If your entry is a bit beyond the confluence zone, meaning the area has been overthrown, your stop can be smaller. You don’t want your stop loss order too small, though. Otherwise, slight overthrows of the areas can stop you out of what would have been an otherwise excellent and profitable trade. Suppose you wait for the market to turn away from the confluence zone, or you enter just before reaching it while still inside the confluence zone. In that case, your stop loss should be a bit larger than the largest AR value to allow for pullbacks and slight overthrows beyond the area(s) for the entry.

The MIN (5) chart below shows the largest AR value of 91.0 ticks at the time of the entry.

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The MIN (6) chart below shows the largest AR value of 139.0 ticks at the time of the entry. So which value should we use, 139 ticks or 91 ticks? When you have more than one chart as the Operative Timeframe, treat the AR value from the faster chart (lower timeframe) as the minimum size of the stop loss and the AR value from the slower chart as the maximum. As long as the stop loss is large enough to be beyond the majority of the significant areas protecting the trade while being no smaller than 91 ticks and no greater than 139 ticks, we’re good.

Assuming we entered the trade short at $4,085 around 14:09 in the afternoon, that entry would be just inside of some of the larger areas for the trade, so we should favor a stop loss that is closer to 139 ticks than 91. In the chart above, I added a Risk:Reward object showing an entry price of 4084.75 (two contracts short) with the stop loss at 4115.75 – 124 ticks from entry. A 124-tick stop may sound like a huge stop loss, but relative to the potential reward for this swing trade, it is rather small. Target 1 is at 3875.00 – 838 ticks from entry – on the upsloping lower median line. Target 2 is at 3836.75 – 992 ticks from entry – on the trend line from low to low. The potential R-multiple for the trade is 7.38R, which is huge and exactly the kind of trade we’re looking to enter.

The image below is a close-up of the Risk:Reward Meter, showing all the prices and multiples.

The final high was at 17:22 and $4,097.50 precisely on the majority of MG areas. If the first entry was missed, or you were attempting to scale into the trade, then the second entry could have been initiated just before the close or just after the reopening (pictured in the chart below).

Target 1 would have been filled two sessions later either during the overnight session, as pictured on the MIN (6) chart below, or during the RTH session at a bit higher price of $3,878 or so (RTH session low was at $3,876.50), as pictured on the RTH (4) further down.

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The RTH (4) chart below shows a perfect touch of the lower median line at $3,876.50, after which the market turned back up and went sideways for the rest of the session, until breaking lower to Target 2 the very next session.

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The MIN (6) chart below shows where Target 2 would have been filled around $3,820.00, with the final low of the session coming in at $3,810.00

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The same trend line from low to low on RTH (4) chart come in at roughly the same price, close to $3,820.00.

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So that’s it for this first example of the largest swing trade we can find using the TTP Trading Methodology. Let’s now turn to one of the smaller day trades we can find.

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Updated on 2022-07-18