The Professor’s Principles: An Introduction to my Trading

The Professor’s Principles: An Introduction to my Trading

Hi, all:

My name is Tim; most of you know me as “autumnalcity.” I have been trading stocks, options, futures and forex for the better part of a decade now. I trade fx here. In any other career, 10 years is a solid start on the path of longevity. In the career of trading, one is either a rookie, or retired. If you are retired from trading, you either made or lost enough money to quit. If you still wake up in the morning to buy and sell financial instruments, you are, in my eyes, a rookie. One can certainly be a “veteran” trader, but all of the “veteran” traders I know insist that they are rookies. The traders that I have known that one day decided they had crossed the line from “novice” territory to “expert,” are now retired. And so the cycle continues.

The intent of this post is to provide a thorough guide to what I consider to be the fundamental components of my trading strategies. While this post will be broad in scope, I am going to do my best to keep it as simple and accessible as I possibly can. Those of you that know me know that I am passionately committed to humility and introspection as a trader. I am allergic to the ego-driven circus of finance social media that fetishizes “calls” and self-promotion. I am an avid student of the auction, nothing more. While I may have more experience or technical knowledge than some of you (and certainly less than many), please remember that because the totality of what is unknown in the global markets so completely dwarfs the known at any given moment, you and I will always be more or less equal in our relative understanding of the Great Auction. When it comes to the task of navigating the market, we proceed perennially as peers. 


The Three Questions

There are three main pieces of analysis that I apply when charting a financial instrument. I call these The Three Questions. I ask myself these questions each and every time I sit down to review a new chart.

  • Question #1: Where is conviction on all time frames? A “conviction” or “initiative” move on a chart signals which side of trade is more actively engaged. Initiative attempts are characterized by powerful, fast moves on big volume, usually emerging from a range. “Initiative” forces are always in conflict with “responsive” forces. An initiative attempt seeks to resolve a range with a large directional move in price, while a responsive attempt seeks to “fade” that directional move back into a range. The biggest moves in ONE direction are often caused by an initiative attempt in the OTHER direction that is met with a much more powerful responsive effort. When initiative moves DO prove powerful enough, however, they can be incredibly violent and last a very long time. When in doubt on a potential trade, we can always WAIT for the initiative hand to show itself. We can be early/wrong a thousand times trying to anticipate an initiative move, but it is very, very hard to be LATE to participate in a true initiative move, especially one that is emerging from a mature balance. I use conviction moves as reference points for entries and stop losses, as well as to help answer Question 3. Conviction moves and rotationWe should expect ROTATION of a conviction move, insofar as we’re using it as a reference point for a potential trade, but the conviction move should NOT be retraced entirely. This is because a conviction move can only be retraced entirely (or more than entirely) by a conviction move in the opposite direction, and when we get a NEW conviction move, we shouldn’t be trading off of the old one. The rotation of a conviction move often offers tremendous trade locations. You can trade WITH the big money by picking spots within the countertrend rotation of a conviction move, and risking AGAINST the beginning of the conviction move. Keep in mind that an instrument can display conviction on one side of trade on one timeframe, and the other side of trade on another. Equally as often, an instrument will have”conviction on all time frames”  aligned in one direction.


  • Question #2: Where do people OWN this instrument? What is the anatomy of the auction? The method of analysis I use to answer this question is called “Volume Profile,” also referred to as “Volume by Price.” Volume Profile, put simply, is a representation of volume on the Y Axis (volume at the PRICE it traded) instead of on a horizontal subgraph (volume at the TIME it traded). Market profile was invented for use in futures trading, and the vast majority of futures traders use it to some extent. There are only two primary indicators in trading: price and volume. All other indicators are secondary: DERIVATIVE of either price or volume, or both. RSI, MACD, and Moving Averages are examples of secondary indicators. Volume Profile is useful to me because it is NOT a secondary indicator: it is simply a way of illustrating the two primary indicators in a different fashion. Volume profile is relevant on all time frames and is used by intraday, swing, and position traders alike. I find that its most compelling use is with higher time frames (I will usually look at a daily or weekly chart with 3-5 years of information), in helping to anticipate outsized moves in the price of an instrument. The time frame to which you apply a volume profile is called the “composite.” I use thinkorswim for my volume profile charts, although there are many other (and many, many better) charting packages for volume profile (I’ve attached information on how I set up my VP at the bottom of this post*).
    • While a complete walkthrough of volume profile is outside of the scope of this post, here are the basics. What volume profile shows us is the price levels at which there is congestion–where many shares or contracts have traded hands–and at which levels there is clearance–where few shares or contracts have traded hands. A price level where a lot of volume has traded is called an HVN: a High Volume Node. A price level where little or no volume has traded is called an LVN: a Low Volume Node. An LVN is also known as a “volume pocket.” A profile will also show you a shaded area called the Value Area: the Value Area is the range where 70% of the volume on THIS composite (time frame) has traded. Within that Value Area, you will see the composite VPOC: the Volume Point of Control, which is the single price where the MOST shares have traded hands on THIS composite (time frame). Here is a 3 year chart of FEYE with these components labeled: FEYE VP
    • When price moves through a High Volume Node, it moves slowly and ranges around, like a golf ball landing in grass**. This should make common sense: if price moves up into overhead supply, as represented by an HVN, we know that it will encounter sellers since we can see that many participants own at that price, and will want to sell for break-even. It will take time for existing supply and new demand to work through each other. Similarly, if price moves down into a congestion zone, as represented by an HVN, we know that it will encounter buyers, because we can see that many participants chose to buy at that price in the past, and will likely buy more at that price now that they have another chance. It will take time for existing demand and new supply to work through each other. To say it differently, an HVN is a level where price has significant “memory.” 
    • When price moves through a Low Volume Node,  it has the potential to move very quickly, like a golf ball smashing through a window. This should also make common sense. An LVN, or “volume pocket,” is a pocket in the instrument’s profile where price has little or no memory. If price shoots upward into a volume pocket, it will not encounter responsive sellers, because little or no participants own at those prices. No one is selling for break-even, and no one has any reason to take profits. Similarly, if price moves downward into a volume pocket, it will likely not find responsive buyers: if no one chose to buy at these prices in the past, why would they now? And why would short sellers choose to cover their position when they know that the next level of actual demand is much lower (at the next HVN)?
    • Volume profile is incredibly valuable in helping to confirm answers to Question #3, as you will see below. Rangebound trade and trend trade create very different patterns of volume by price, and these patterns help us to confirm what visual assessments of price action, or drawings, suggest.


  • Question #3: Are prices in ACCEPTANCE (consolidation) or DISCOVERY (trend) mode? When an instrument is ACCEPTING a range of values, we call this “consolidation” or “balance.” Most so-called “chart patterns” are some form of price acceptance, such as wedges, bases, and flags. When an instrument is REJECTING values in succession–in other words, trying to DISCOVER value elsewhere–we call this a trend. Periods of price acceptance lead to periods of price discovery: instruments consolidate, building a balance between buyers and sellers, until one side of trade is sufficiently strong to resume (or reverse) trend. ALL continuation patterns are forms of balance, but NOT all reversals happen from balance. This is because reversals are often caused by EXCESS moves that are characterized by speed and directional volatility, NOT the patient, balanced action of a range. Instruments are always consolidating trend moves in order to CONTINUE them (“an object in motion…”), but they are NOT always successful in doing so, even if excess is not encountered.
    • One of the most important traits of a pattern of price acceptance is contraction of range. As the balance between buyers and sellers within price acceptance becomes more and more mature, volatility subsides, and range narrows. This is what leads to what you have probably heard described as the “coiled” look of a chart. The maturity of a balance and the tightness of its contraction are the most impactful determinants of how powerful the breakout (the price discovery move) will be.
    • Just like with conviction moves, an instrument can be in price acceptance on one time frame and in price discovery on another, and vice versa (this is quite common). Correctly distinguishing the price action that characterizes range trade from that of trend trade, and identifying the transitions between the two, is probably the most important thing I do as a trader. Trading a range using range rules and methods is profitable and painless. But trying to apply trend rules and methods when an instrument is stuck in a range is unprofitable and stressful. Accordingly, if that instrument breaks out and begins to trend, and you continue to apply the rules that worked to trade the range, you will find yourself constantly cutting winners early, and fighting on the wrong side of the trend.
    • The task of distinguishing a pattern of price acceptance from a pattern of price discovery is helped ENORMOUSLY by volume profile. Patterns of contraction will be confirmed by an HVN (usually VPOC) at their apex and LVNs on either side of the rangeTrends will move quickly through–and, thus, leave behind–LVNs, as price does not stop to digest any values on its journey to discover a new value. Here is the same chart of FEYE from above, except that I have drawn in the patterns of contraction that sync perfectly with the volume profile structure: FEYE VP with ranges
    • “Contraction” can be subjective, less than readily apparent, and a matter of feel at times. Price acceptance can almost always be drawn EITHER as horizontal boxes with support and resistance that correspond with the Value Areas from volume profile, or as a pattern of contraction, or both. Neither is inherently correct; you should use whatever helps you feel in tune with the auction. Take this chart of the Euro/Dollar currency cross for example: what’s “coiled” to me may be rigid support and resistance to you: EURUSD


Setups, Style, and Execution

Finding Setups: I am often asked what scans I use to find setups. Like all of my mentors, I don’t use any scans. Over the years, I’ve gained a fairly thorough knowledge of many sectors, industries and countries, as well as their individual components. As Michele is fond of saying, “My scans are my eyeballs.” I go through many hundreds of charts every day, trying to get a feel for what is up and what is down, what is quiet and what is loud, what is trending and what is ranging. I will usually assess an entire bucket of correlated instruments (like a certain sector or country) all at once, trying to find patterns of leadership, divergences, or structure. I go into this in much more depth below under “Correlation and Reflectiveness.”


Entries: People often approach me with a trade idea where I can’t find any reference point whatsoever from which a trade could be placed. There’s never any reason to “take a stab” and place a trade without a solid reference area against which to place risk. Why? Because the concept of “Price Acceptance” or “balance” discussed above applies on all times frames. An instrument is just as likely to form a balance on a five minute or 30 minute chart as it is to form one on a 5 year chart. If you can simply be patient, a reference point within the context of a lower time-frame balance will invariably appear. Once it does, you can deploy capital with a well-defined trade location and well-defined risk. A trade placed against a precisely-defined reference point is EASY to manage. A trade that is NOT placed against a precisely-defined reference point is much harder to manage. It doesn’t matter how far or how fast a trend has gone: if you wish to participate in it, you can find a pattern of balance or contraction on a lower time frame against which to assign your risk. All you have to do is adjust your risk as you adjust your reference point.


Sentiment: I am also a huge proponent of the importance of SENTIMENT in trading. You will often hear that economies and financial markets are driven by supply and demand: this is unquestionably true, true by definition. But what is the nature of supply and demand? Some might answer that valuations, scarcity, innovation, or geopolitical events are their chief determinants. And while these things certainly play a role, I believe that sentiment is king. If supply and demand govern the market, it is sentiment that governs supply and demand. That said, it has been my experience that sentiment is the most difficult of the things I seek to discern about an instrument. That’s why sentiment, while an important component of my analysis, doesn’t have its own Question. While I believe zealously that sentiment–and sentiment alone–is the catalyst of the trends and reversals that I watch play out in front of me, I have not yet found a way to remove myself from the biased sample of my day-to-day interactions with other market participants to the extent where I can objectively measure it. Uniform sentiment in an instrument will always cause that instrument to reverse, but the timing of that reversal is often inscrutable. The stock market is a see-saw that becomes a catapult when everyone sits on one side. The problem is that everyone on the playground is blindfolded.


Conviction, and Commitment to Big Picture Setups: This is entirely personal and a matter of preference and style. All of the tools discussed in this post (volume profile, conviction, acceptance vs. discovery, Fibonacci levels) can be used on any time frame, including time frames much, much lower than the ones depicted by most of the charts in this post. In fact, these tools will give you dozens of setups every day, even if you are trading only a handful of instruments. Combining structure and Fibs alone on intraday charts will make you a handsome living. As a matter of completely personal predilection, I do my best to spend most of my energy on big-picture setups in which I have a high degree of conviction. They are, in my experience, more lucrative and less stressful. The setups that I like to trade reward high-conviction participants, at the expense of low-conviction participants. Lower time-frame setups reward low-conviction participants, at the expense of high-conviction participants. There is nothing disparaging about the label “low-conviction participant.” It simply means one who is nimble, tactical, and applying a very systematic approach to risk/reward, usually on lower time frames. He is much more outcome insensitive than a high-conviction participant might be. In the time it takes a high-conviction participant to take a long entry, participate in a move, have the move fade on him or her and stop out for break-even, the more nimble trader has longed, taken profits and reversed his position, and then taken profits again. The low-conviction trader calls it a day while the high-conviction trader goes back to work, stalking his entry for the move he knows is coming. Some might say the opposite of conviction is “fluidity.” In my opinion, the opposite of conviction is noise. When you approach the structure of an auction scientifically, the difference between being right and being wrong is often simply a matter of timing. The only thing that can deteriorate and endanger the merits of conviction is noise, such as the randomness that often characterizes lower time frames. The most important things a conviction trader can do are to eliminate noise, and make sure to find out as soon as possible what things in which he has conviction are, in fact, wrong


Missing Trades and Chasing Trades:  Chasing trades is highly destructive to your account and is the mistake I see made most often by other traders. You must be content with missing tradesWhy is it so hard to RESIST chasing trades instead of letting them go? It’s because of how your brain is programmed. Missing something makes a MUCH more indelible negative impression on the brain than WAITING for something does. How many times have you waited 45 minutes for a plane or train? More times than you could possibly remember, right? How many times have you MISSED a plane or train? I’ll bet you remember those instances MUCH more clearly. The anguish and anxiety of missing something that was important to you is much more powerful than the inconvenience of waiting for it. Your brain is hard-wired to collect data in a way that is sabotaging you as a trader. Every time you miss a trade, your brain collects a data point and adds it to pattern that it sorts under “highly negative experiences.” It’s the same way we learn not to touch a hot stove. Then, the next time a trade starts to go, your brain swamps you with the negatively associated memories of the last trades you missed and you think, “I missed the last one and it ran huge. I’m not missing another one.” And you chase. Again, you must be learn to be content with missing trades. Never chase.


Trendline Purism vs. the Reality of Structure: I see a lot of people get caught up in what I call “trendline purism,” which is the need to draw a trendline in an rigorously precise way, as if it is a sacred line in the sand. Don’t get me wrong: trendlines can be incredibly useful on lower time frames. Algorithms DO use them, and if you watch carefully, you will see that the exact location of a trendline almost always receives a response (these spots can be found most effectively in ToS by using the “Snap Drawing to: OHLC” option under Style/Setting/General). These locations are often great locations for scalps or quick trades, but a trendline by itself is not a high-conviction setup for me. In fact, I think some traders–trendline purists–can be a bit myopic with trendlines, ‘missing the forest for the trees,’ so to speak. When I look at a chart that has a well-established range, I can SEE the boundaries of the range and the pattern of contraction. I can essentially feel it. I see this so quickly and easily now, that it’s assumed immediately as I digest a chart. In almost all cases, volume profile will CONFIRM the contraction that I see visually in price, with big concentrations of volume at the apex of a wedge and LVNs to either side. I do not much care if the trendlines fit perfectly to the tick when I draw them to define the range, and I think it’s a bit ridiculous to think that the algos that are programmed to trade exact trendline locations outweigh the organic and random excess of normative price moves in either direction. Thus, I’m perfectly content to draw my lines in a way that, in my opinion, highlights the real and important processes of price, such as whether price is rangebound or trending. If an instrument violates the line I’m using to depict a range, and is met with a responsive move back into the range, that, to me, is still rangebound trade. Nothing has essentially changed. The trendline is arbitrary. Likewise, if an instrument breaks the exact path of a “trendline” I have drawn to depict trending conditions, I would never count that immediately as a trend break. Nothing has essentially changed (yet). The trendline is arbitrary. All of this comes from conviction in the auction; conviction in the behavior and structure of the auction market’s process.


Correlation and “Reflectiveness”: One method I use to confirm whether the designations I have made about an instrument, such as whether it is undergoing Price Acceptance or Price Discovery, are valid, is to analyze that instrument in the context of a basket of instruments that are correlated to, or in some way reflective of, that instrument’s behavior. Examples of correlated or “reflective” instruments would include a commodity and the shares of companies in that underlying commodity’s sector, or an equity index and its sector components, or a sector and its individual components, or an individual equity and its peers by market capitalization, industry, or placement in the risk cycle. Any instruments that are correlated or reflective of each other in any way can help provide information, whether through divergences, causal relationships, or simply as a form of confirmation and symmetry.  If a contraction is valid or “real,” it should be visible on and confirmed by related or reflective instruments. If a trend is REAL, it should be visible and confirmed on many correlated instruments. In other words, if we are going to assert that Price Acceptance is a real market dynamic that trades according to unique and distinct properties, we should be able to recognize those properties in several instruments that trade in a correlated or reflective way. If we believe that Price Discovery is ANOTHER real market dynamic that trades according to DIFFERENT unique and distinct properties, we should be able to recognize those properties in several instruments that trade in a correlated or reflective way. Let’s see some examples:

  • US Dollar/Yen currency cross and the 2000-2013 secular bear in US stocks: this is one of the most amazing macro charts in the world, in my opinion. Here’s why. Many of you have heard me talk about secular bull and secular bear markets. This is what I mean: secular cyclesThe Yen has long been considered–especially by older-school macro traders–as an omen of risk; an instrument with a profound, but hidden, correlation to US stocks. Let’s compare the price action of the US Dollar relative to the Yen and the price action of the S&P 500 during the 2000-2013 secular bear market in US stocks. Here’s the SPX: secular bear

And the Dollar/Yen over the same time period: USDJPY

I’ll let you decide if the colossal breakout in the Dollar/Yen’s falling wedge pattern of contraction had anything to do with the end of the secular bear in the S&P (hint: it did).


  • US Dollar Index Futures and commodities: here is the contraction and breakout that sparked the massive run-up, silenced the hyperinflation crowd, and dismantled the commodity complex: (this is also an exhibit in the case against trendline purism. I had to draw right through months of price action, but the range is correct: volume profile tells me everything I need to know here): DX

Since the dollar is inversely correlated with commodities because commodities are PRICED in dollars, let’s take a quick look at some commodity charts concurrent with this breakout in the currency.

Crude: “You can be early trying to anticipate an initiative move many, many times. It is very, very hard to be late.” crude breakdownGold: (if you look closely, gold traded up WITH the dollar as the dollar’s trend accelerated, showing tremendous relative strength. It didn’t last.)gold breakdownCoffee: a LOT of interesting things going on on this chart: coffee


  • Derivative instruments: The concept of correlation and “reflectiveness” also applies to derivative instruments, such as the much-maligned 2x and 3x leveraged ETFs. Many will say it’s folly to chart these, as they are derivatives: their price action is derived through an underlying instrument, not an organic auction process. Indulge me by taking a look at the rising wedge pattern of contraction in Crude Oil futures from the beginning of this year through the end of April, which evolved into a sideways contraction in Crude that eventually broke down:CL
    The same dynamic is very much reflected in the Proshares Ultrashort Crude ETF, SCO, wouldn’t you say? It took a while to play out, but it did. SCO



Fibonacci levels: Fibonacci levels are a technical tool based on a sequence of numbers that was discovered by some Italian guy a long time ago. More important than the sequence are the ratios between the numbers in the sequence. A Fibonacci retracement is created when you divide the vertical distance between two points by one of these ratios. A Fibonacci extension is created when you multiply the vertical distance between two points by one of these ratios. If you are new to, or just now hearing about, Fibonacci levels–or ‘Fibs,’ as they’re often called–I hope you are reacting the same way I did when I first was exposed to them: with eye-rolling skepticism and distaste. In fact, I completely discounted the utility of Fibs for years, despite some of my dearest mentors swearing by them. ‘You mean to tell me,’ I would say, ‘that there is some divine architecture of ratios and patterns that’s built into the stock market the same way it’s built into the spiral of a seashell?’  One day, I started with fiddling with them, and the rest is history. For anyone who took a philosophy course in college, you will perhaps remember the philosophy of “pragmatism” as espoused most notably by William James. In essence, pragmatism means that UTILITY is the most important metric of truth. Put simply, if something works, it is true. Fibonacci retracement and extension levels WORK: in fact, they are miraculously effective. I still wholeheartedly reject the idea that these levels are some kind of natural architecture that apply to capital markets. But I DO believe wholeheartedly that they are used extensively by institutions when deploying large amounts of capital. Whatever you believe, it should be enough that they work. And don’t take my word for it: try the applications and determine for yourself.

  • As with volume profile, I prefer to apply Fibonacci levels to higher time frame charts. They’re certainly absolutely fractal and can be used on any time frame, but it’s the bigger picture applications that I find most reliable.
  • The Fibonacci levels I use are: 38.2%, 50%, 61.8%, 78.6%, 88.6%, 127.2%, 141%, 161.8% and 200%.
  • One of the most compelling applications of Fibonacci levels for me, is in helping answer Question #3: is price in a range, or trending? You might ask how Fibs are related to this question. Think about the characteristics of rangebound trade. One way to describe a range would be: directional moves that are being repeatedly and deeply retraced. Thus, one would expect to find lots of 100%, 88.6%, and 78.6% retracements within a range. Now, think about a trend. One way to describe a trend would be: directional moves that are being only shallowly retraced before being continuedAs a balance tries to resolve with a directional move and RANGE becomes TREND, price will, by definition, undergo shallower retracements. As an instrument starts to trend, one should expect to find 61.8%, 50%, and 38.2% retracements, since shallow retracements of directional moves characterize a trend, by definition. Fibonacci levels are just a tool to help us recognize this change in price behavior. 
  • Fibonacci levels are also incredibly compelling tools to help find price targets, as trend moves end or pause at Fibonacci extension levels or >100% retracement levels with alarming consistency.

Let’s go over some examples:

  • PCLN: the 61.8% retracement of the falling wedge breakout was the level where it found responsive demand for trend continuation. PCLN is still setting up for ATH’s. PCLN


  • CMG: the apex of the falling wedge contraction pointed right at the 50% retracement of the 2014 uptrend, a level which catalyzed a violent move up to new highs. CMG


  • WDAY: a great example of a stock in a very mature balance. Very coiled. Check it out without Fibs first: WDAY clean

What’s amazing about the Fibonacci applications on this chart is that they paint the picture of a battle between a downtrend trying to be born, fighting with an uptrend trying to be born. Look how well price respected the BEARISH 61.8% retracement of the enormous move down from the early 2014  highs:WDAY bear 61.8

But the attempt at bearish continuation of that move was met with strong responsive demand, and where? The BULLISH 61.8% retracement from the low of the range:WDAY bull fib

This chart reads like a war narrative: A strong uptrend that ends in an excess high and a violent decline. Responsive demand creates a strong bounce that terminates at the 61.8% retracement from the high. A balance is born and a contraction starts to emerge. Bears attempt continuation of their trend retracement level, only to encounter responsive buyers at the 61.8% retracement from the low. This is the BULL’S trend retracement level. As I said above, “The biggest moves in ONE direction are often caused by an initiative attempt in the OTHER direction that is met with a much more powerful responsive effort.” Make no mistake, the resolution of this chart will be swift and furiousAlso as stated above, “When in doubt on a potential trade, we can always WAIT for the initiative hand to show itself.”


  • WYNN long-term trend: the breakout of the falling wedge pattern of contraction in 2012 created a powerful multi-year trend. That trend stopped almost exactly at the 200% retracement of the falling wedge pattern countertrend move.



  • Remember the chart of the US Dollar Index I posted above in the correlations section? Yeah: DX fibs



The Retest: the retest is the most misunderstood market dynamic in the world because very few market participants have any CONVICTION in the science or structure of the auction. I don’t know that I have a particularly profound explanation of WHY this occurs, or WHY this is such an integral part of the auction’s transition from price acceptance to price discovery. I believe that it has something to do with providing one last ‘juke’ to shake the LOW-CONVICTION participants out from an instrument before the initiative follow-through rewards the high-conviction participants handsomely. For me, it is enough that I know it IS an integral part of the auction: I have seen it play out like clockwork a hundred times.

  • Gold futures weekly chart: Breakdown from a two-year contraction, responsive buying and a retest of the apex of balance, initiative follow-through.



  • XLF: do you remember all of the doom-and-gloom chirping about a failed breakout in financials recently? XLF


  • AAPL: or Apple’s “head and shoulders breakdown:”AAPL


  • FB:  I saved the “failed breakout” tweet that bottom-ticked this retest and put it above my desk. FB retest


  • iShares China Large Caps: an admittedly precipitous decline–and all of the egregious analysis that comes with a sentiment extreme–just looks like a retest to me.

FXI retest


  • The Shanghai Stock Exchange singing the same song. Why aren’t the pundits talking about a structured auction instead of fearmongering? Because structured auctions don’t sell advertising. (Yes, Shanghai went farther, faster–the elevator will go down the LVN as fast as it went up). SSEC



Big-Picture Setups, Past and Present: using the whole toolbox

  • iShares MSCI Germany ETF is coiled on the highest time frame, with VPOC confirming the contraction that is visually quite clear. The initiative move here will be generational. EWG


  • iShares MSCI Taiwan ETF appears to me have already broken out and is displaying retest properties. 



  • iShares MSCI Italy ETF is very coiled, with plenty of room above and below. Also a good example of trendline purism: I have a very high degree of conviction that the range I have drawn here accurately depicts the current behavior of this auction, despite the license I have taken in drawing my downtrend line. The line is arbitrary, the structure is not. Italy


  • Emerging Markets are at a critical reference point here. This is truly the “last chance” reference area before this very mature balance starts to display conviction down. Notice the value area: EEM


  • BZH: very coiled. The active Fib here is a bearish 61.8%: BZH


  • GOOGL: this recent breakout was a confluence of contraction, structure, and a 61.8% Fib retracement: GOOGL


  • TSLA was the same thing earlier this year: TSLA


  • BIDU: 2013 breakout. Volume profile is difficult to see because of the 10 year chartBIDU


  • AMZN: early 2015 breakout AMZN




*My Volume Profile settings in thinkorswim: The study is called “Volume Profile” in ToS. I change the “price per row height mode” setting from AUTOMATIC to TICKSIZE (for precision). If you want a volume profile for the ENTIRE composite, “time per profile” should be “CHART” and “on expansion” should say “Yes.” If you want the profiles for individual days, weeks, or months, “time per profile” can be adjusted to DAY, WEEK, or MONTH, and “on expansion” should be changed to “No.”

If you want BOTH a composite profile and individual time interval profiles, put two Volume Profile studies on your chart. Change them both to TICKSIZE. On the first one, set the “time per profile” to CHART and “on expansion” to “Yes.” On the second one, set the “time per profile” to your desired interval, and change “on expansion” to “No.” Here’s an example of how this looks: a five day, five minute chart of Facebook with a COMPOSITE PROFILE (5 days of information, on the expansion) and DAILY PROFILES (each day’s information): FB


**Credit to Futures Trader 71 (@FuturesTrader71) for the “golf ball” analogies as they relate to volume profile, and his role in basically singlehandedly trailblazing this method into the mainstream consciousness.


***Here is where I hang out during the day: Trade on the Fly  If you would like to learn more about Trade on the Fly, feel free to check out the 5 day trial.



  1. skeed

    Great post. Thanks Tim.

    • jopel

      Tim your a machine nice write up

  2. hezseltine

    Thank you! Very helpful.

  3. Branrich

    Wow Tim! There is so much quality content to digest here. Great way of looking at the big picture!

  4. InvestorsLive

    Great post Tim

    Well done!!

    “Missing Trades & Chasing Trades” must read

  5. Alice

    Tim you’ve given me some weekend reading. Thank you for your generosity and humility it’s refreshing and most appreciated.

  6. Jonathan

    Excellent writing and probably a good start to a book.

  7. Omniplastic

    Another macro gear meshes like magic. Thanks Tim!

  8. Cesar

    I have a friend who mentioned about volume at price the other day. Your explanation is lucid and I shall save this for future reference. Much has been said about identifying where the demand and supply areas are . A fellow from Online Trading Academy here in Irvine,CA has always lectured about it. I am going to study a lot about the above areas. Can you point me in the right direction? Is Trade On The Fly your website?

  9. Arttus

    Great post, no doubt i will be coming back several times to digest all this great analysis. Looking forward to giving volume profile and fibs a closer look.

  10. Christopher Boulas

    This made for great Sunday morning reading. Interestingly enough, check out where $EWG is ending up. Amazing.

  11. Adam White

    I’m sure this is great for many but I’ll have to re-visit this blog when I’m more up to speed. So much of it read like Rumsfelds known me.

  12. provotrout

    excellent work, thank you for sharing!


Submit a Comment

Your email address will not be published. Required fields are marked *