Wednesday, July 29, 2009

Nice View of a Range Day in the Stock Market

I wanted to post this Market Delta view of today's ES market, because it very nicely captures the central identifying features of a range market: a relatively flat volume-weighted average price (VWAP; red line); a narrow trading range and value area (histogram at right); mixed transactions at offer vs. bid (bottom histogram); and price oscillating around VWAP.

So much of pattern recognition simply boils down to seeing many variations on particular patterns. With enough exposure, you can learn to identify patterns relatively quickly in the market day, giving you the framework to either trade market moves or fade them.