14 July 2016 – ES E-mini S&P 500
This example came about while capturing a screen shot for the Ratio Display indicator page and shows how a patient trader using multiple Order Flow Suite indicators can profit from clear setups, low-risk entries and defined price targets with favourable risk:reward ratios.
ES opened and formed an initial balance range of 2163.00 – 2155.50 trading lower and higher than the opening price (2161.50). The 09:41:24 price bar shows a High Ratio (63.615) with negative delta. Two bars later at 10:01:27 another down bar prints with a High Ratio (34.727).
The real power of the emoji trading Order Flow Suite comes from combining multiple indicators. Aside from these ratios, we can see that:
- the Initial Balance Low (2155.50) formed on the 08:43:17 price bar has Unfinished Business at the bottom of the price bar. Note how the Daily High (and Initial Balance High at 09:15:07) does not have Unfinished Business. The market ran out of buyers at this price level. Correspondingly, at the time High Ratios started to appear, we had more likelihood of the Initial Balance Low being revisited than the Daily High.
- the 09:15:07 bar’s Point of Control is one tick below the Daily High and the bar closed lower. The POC at Extreme and POC near Extreme indicators highlight these situations which can be extremely powerful reversal signals.
- the same bar also has a Buying Imbalance of 2477 contracts at the Point of Control. As price moved lower, these 2477 contracts were held by Trapped Traders who started to exit their long positions causing price to fall further. The Trapped Traders at Extreme and Trapped Traders indicators highlight these situations.
- The 09:36:38 price bar has a Stacked Imbalance over four prices with significantly more selling than buying.
- both High Ratio price bars (09:41:24 and 10:10:05) show selling imbalances at the top of the bar and negative Delta. Good confirmations of the selling pressure.
Here’s the same chart adding POC near Extreme and Trapped Traders:
The 09:15:07 bar gave a good warning of a possible trade defining a level for a hard stop at 2163.25. The Initial Balance low 2155.50 provided a price target 8 points away. It was just a matter of waiting for a favourable entry. The 09:41:24 price bar closed with a High Ratio showing a lack of demand at the top of the bar. At this point there are five pieces of Order Flow information based upon the market’s traded volume indicating selling pressure: Lack of demand at the top of the most recent bar, a sell Stacked Imbalance in the prior bar, Trapped Traders at the daily high, POC near the daily high from which price moved away and Unfinished Business at the Initial Balance low.
The next two up bars at 09:51:09 and 10:01:27 had positive Delta and Unfinished Business at their upper extremes. The 10:10:05 bar however finished this upward move – note how its highest price was at the POC of the bar with the sell Stacked Imbalance. An immediate entry at the open of the next bar (2159.25) had a hard stop at 2163.25 (16 ticks) a soft stop at 2162.00 (9 ticks) and an initial price target of 2155.50 (15 ticks). A reasonable risk:reward ratio. In reality, when trading with Order Flow, the trader makes entries and exists not at the immediate open or close of a price bar but by watching the market’s movement once a setup has been identified. The 10:18:13 bar traded back to the previous High Ratio bar’s POC enabling an entry with 3-4 ticks lower risk and a probable risk:reward ratio of 6 ticks risk to 18 ticks profit.
As can be seen, as the morning developed, the high of the 10:18:13 entry bar was not breached until after the Initial Balance Low price target had been reached and a new Daily Low established. A patient trader using the emoji trading Order Flow Suite was able to secure a relatively low-risk, low-stress trade with a favourable risk:reward ratio and 3-4 points of profit.