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We naturally feel attracted by blinking lights and numbers. They provide stimulation. One of the reasons casinos use vibrant lights and colors in their games is because they know it can influence people’s perception and behavior.
Unconsciously, when setting up our trading workspace, we tend to fill the computer screen with charts, DOMs, all blinking different colors. We feel stimulated, excited, our eyes jump from chart to chart, DOM to DOM without realizing that all this is affecting our perception of what the market is doing, leading to wrong behaviors or analysis-paralysis.
In today’s video, we want to guide you in simplifying your trading and your decision-making.
Notes:
Hi everyone,
In this video, we’re going to look at screen setup and trading. We frequently hear from our Jigsaw Trading community asking questions like:
Which tools should I place on my screen?
What aspects should I focus on?
The answer to these questions is “it depends” – and it depends on your trading style. In this first of series of videos, we will show you how to set up Jigsaw daytradr for different trading styles. We will share some screen layouts and tool placement examples.
Let’s break down a typical setup for trading a single instrument that has correlated markets – in our case, the ES with the NQ and YM being the correlated markets we’ll be looking at.
Over on the top-left, we’ve got two 1-minute charts for NQ and YM. These handy visuals give us insights into market correlations. We prefer NQ and YM to move in the same direction as the ES. When the NQ and YM are moving together, the chance of a directional trade on the ES increases. If the NQ and YM are moving in opposite directions, we expect more choppy, range-bound action on the ES and less follow-through for a directional or trend trade. When looking at correlations, we are looking at them just before trade entry and focused on the last few minutes of action. That’s going to give you an improved edge on your entries.
Moving to the center, above, we have our Swing chart, which helps us to tune out some of the ‘noise’ in the markets. You can see the chart is a bar chart with light gray bars and the swing indicator/chart is overlaid on top of it. What we are trying to do here is take focus away from the individual bars and concentrate on the swings in the market and how much volume and how many ticks were in each swing.
So, the way the swing charts work is quite simple:
- A swing will be blue if the move is UP and the volume in the up move is larger than the previous move down.
- And a swing will also be blue if the move is DOWN and the volume in the down move is LESS than the previous move up
- For red swings, the logic will be reversed
This helps us spot pullbacks and reversals. Pullbacks will generally have less volume and be smaller than ‘with trend’ moves. When the market reverses, it usually does so with a swing against the trend that has much higher volume and size than the previous ‘with trend’ swings. One good way to use this is to always go with the trend until you see a large reversal swing, and then start stalking trades in the direction of the new trend.
Next is the Cumulative Delta indicator, in which we stripped any color from it also, and what we want to see is a small delta shift during pullbacks, mirroring what we seek in the Swing chart – minimal participation in the countertrend swing.
Moving now to the lower part of the screen, we find the Auction Vista, which shows us important price areas based on trade execution size and resting orders. This chart provides insights into the recent actions of traders and their behavior.
The heatmap presents an ongoing visualization of resting limit orders on both the buy and sell sides. The intensity of the color reflects the magnitude of resting limit orders, the lighter the color, the higher the resting limit orders are, and the large trade circles indicate significant volumes traded, with size directly correlating to trade volume.
As previously mentioned, this feature enables us to look over the behavior of other traders. By examining the heatmap and identifying areas with elevated resting limit orders, we gain insights into how traders responded to these levels. Did they successfully absorb all the orders, thereby pushing prices further? Alternatively, did limit orders continue to be refreshed, leading to price reversals? When trade circles appear in these regions, they form a potent combination. It serves as an indication of high interest in those price levels, allowing us to assess whether the market is poised for a reversal or a continuation of its previous trend.
Naturally, our main focal point is the D&S (Depth & Sales). This is where we see the momentum enter and exit the market, as well as identify if the market is changing its state, if traders are getting trapped if the pullback points are holding or breaking, and of course, it’s where we pull the trigger and manage our positions.
We tend to focus our attention on the current trades columns. This is showing the volume being traded right now at the current price points. We closely monitor the inside market, analyzing the interplay between the trading volume and the resting limit orders on both the bid and ask sides, are they being pulled or stacked? Simultaneously, we keep a watchful eye on the immediate resting orders positioned just above and below the inside market. Once more, look if they are being pulled or stacked.
When we are looking to trade at price levels where we might anticipate either a price reversal or the continuation of the prevailing trend, it’s important to know how traders are behaving. It is essential to observe the dynamics of orders being pulled and stacked, in conjunction with the trading volume that interfaces with these orders.
In the top-right corner, we have the Power Meter, which we use only in the early parts of the trade. We have two meters: the trades meter on the left, which shows the cumulative volume for the current trade’s column, and the depth meter on the right, detailing the first 5 levels of limit orders
We can set these by going to the D&S settings, and then the Power Meter tab. We have enabled the Depth Power Meter, and it’s set to show 5 levels of depth. It shows us the total limit orders on those 5 levels.
We have also enabled two other options: Reset the trades meter on a new position, which we will see later on, and also reset it when we Clear the Current Trades columns.
Since we are looking at the settings, in the Trading tab, we also have enabled the Clear Current Trades on New Position and also the Re Center on new Position, again, we willl see them working later on.
And lastly, in the lower-right corner, we have the Reconstructed Tape with a filter, showing only trades of 20 lots or more. It’s like a magnifying glass for identifying the side and progress of large traders.
It’s another essential tool, both pre-trade and in the early stages of trade management. As you enter the market, watch for fellow traders backing your play. It’s a sign you’re on the right track.
And to set the filter size in the Recon Tape, go to its Settings, and set the number of lots you want, in our case, we set it to 20 lots.
Let’s quickly review two trades executed during the preparation of this video.
If you have been following along, you have observed NQ, YM, and ES moving in sync. Initially, all three markets moved downward and have since traded within a range.
Examining the trades meter, we notice nearly 2 thousand more contracts traded on the sell side than on the buy side, signaling a robust selling commitment throughout the entire move.
As the recon tape starts to show strong sell-side volume hitting the market, we open a short position near the range high. Notice how opening the position triggers a reset in the trades meter and current trades columns, providing this way a clear view of the volume traded from our entry point, and also the subsequent price centering by the D&S, allowing us to see which way the markets move first, against us or in our favor?
After entering, our ideal scenario involves prices moving in our favor, supported by a strong sell volume surpassing the buy volume. However, this wasn’t evident, and we were eventually stopped out during a pullback after our stop loss moved to breakeven plus 1 tick.
A few minutes later, the markets are trading at the range high again. The market correlations continued to persist, with NQ, YM, and ES moving in tandem, and despite the trades meter showing a balance between the buy and sell volume at the moment, we need to remember our initial observation which remains unchanged, we continue to have almost 2 thousand more contracts traded on the sell side.
Looking at the recon tape, we could see strong sell volume hitting the market again so, we opened a new short position, and this time we can see the sell volume almost immediately overwhelming the buy volume from our entry point. The range low is breached, accompanied by stronger sell volume, reinforcing this way our position.
In summary, it’s crucial to tailor your tools to your preferences and screen layout. If focusing on one instrument, limit yourself to one screen. Too many tools and charts can lead to analysis paralysis, complicating decision-making. The goal is to minimize decision points for more consistent decision-making.
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