Trading room charts
This post is a brief write-up to new subscribers to understand the charts in the Trading Room.We would urge you to be patient as you go through this material as you represent today, a very small minority of the trading community who uses such charts ( the edge in the markets is by doing things which others do not know about) . So Congratulations and let’s get started.
Please understand the information provided below by looking at charts in the trading room.
There are a total of 4 charts to be viewed at any time in the trading room. These would be 2 for the Nifty and 2 for the Bank Nifty current month Future charts. We also have bigger displays for these charts through 2 links which are updated in the Trading Room at the open.
We watch these charts live during market hours
OrderFlow- Basic 5 mins
In Orderflow, the volume of the instrument is more important than the time frame, like a 5 minute or a 30 mins.
We are focussed on Volumes.
Volumes Precede Price.
A quick primer on Orderflow is at – https://vtrender.com/what-is-order-flow/
What the Order flow chart does is that within the intra day sphere, eliminates a lot of guess work by showing precisely the movement of volume within the bar and especially the quantity traded at the bid and the ask. Put sequentially this has edge in showing us if Buyers are controlling the market or sellers.
Thus instead of being restricted to just the Open, High, Low and Close of a small bar ( say 5 minutes or even 30 minutes) we go inside the bar and get an inner view of the kind of volume which traded within the bar.
It can be used to confirm or deny our bias for an entry or even an exit location by looking at whether the broader market participants covered positions or added new at a particular price point
The chart above represents traded volume and hence traded prices. Hence we are looking at only traders who have committed positions in the market already.
World over the definition of Order Flow varies from what is coming into the market in the form of buyers and sellers and typically called the Order Book to the other extreme which is Traded Quantities and Traded Prices and representing transactions which have occurred.
In India when it comes to getting the Order Flow Book most of us do not get to see beyond the top 5 volumes and prices. Whilst this study of the Order book adds a new dimension to trading, often it is not accurate as many individual traders and even institutions occasionally cancel orders or put them up front only for reactions and not trade. Thus this study has lots of uncertainty even if we had a deeper DOM or depth of Market as it is called.
Vtrender believes in going with Traded prices which shows the commitment of traders during the day and their bias. We work forward after knowing how traders are positioned at any point of time in the market.
On the chart above we have
- a) Volume of a 5 min bar represented as Sellers x Buyers. The sellers are on the left and buyers on the right. Since the Order Book is read vertically by the market with sellers above and Buyers below it makes sense to read the traded prices as well, diagonally to see how many sellers are there below for a buy order. The buy side and the sell side prices are tracked diagonally not horizontally or same side.
In reading the OrderFlow it does not make sense to track every bit of volume in a 5-minute bar but to observe closely what the Market is doing at important reference points like the day vwap or previous day VAH or current DPOC or previous day low or even the hypo levels. The objective being to see that if we are buying into the market, we do not buy into a sea of sellers or the other way around. If more buyers show then we will see quick shades of green.
- b) We look at the volume traded in the bar to see the impact the Buyers x Sellers are having on price. The Higher the volume, the bigger will be the impact.
- c) The total traded volume in a bar is noted and the difference between the buyers and sellers is painted at the bottom in a pane which will give us a quick idea of buyers and sellers in the past columns of prices. This is a sum picture of the difference in volume between buyers and sellers and is a proprietary indicator we use called the COT. Generally, if the COT is big green it means more buyers have shown intent and vice versa.
- d) Chart Ref lines like the Open, previous day high, previous day low, Current week High/ Low and previous week High/ Low are marked on the chart. Also, the IB ( high and low of the first hour)is marked as a black band in the chart. The developing value areas will be shown as light blue for value high/low and dark blue for dpoc. These will be moving lines on the chart. The firmer brown lines are the previous day value high and low and will be visible on the chart as brown dotted lines.
- e) The duration of the chart candle is set at 5 minutes on the left chart and at 30 minutes on the right which is the Profile
- f) The IB range and the Day range are in the left bottom
- g) The previous day vwap is also highlighted as a price point in the chart.
VWAP is in orange. VWAP is volume weighted average price. We have added TWAP to this as well. TWAP is Time Weighted Average Price. This line represents the ratio of value and volume and is an important balance point for the day.
Above VAH buyers are in control and Below VAL, it’s the sellers. In between VAH and VAL price action can be random.
It always gives you a picture of the balance of the market.
The trend for the day can be said to be positive above vwap and negative below vwap.
This can be further confirmed by a price move above VAH or below VAL.
That is you buy above previous day VAH and VWAP
And…
Sell below VAL and VWAP
The thick blue line is the Point of control (POC)for the current day. The POC represents the point at which the largest volume has been traded. It is called the developing POC or DPOC as the day is still developing.
The Order Flow indicators are trend indicators and will tell you that buyers are having more control than the sellers and vice versa.
A few keys to understand the way OrderFlow information is to be utilized are discussed in a recent webinar. Please login with the Trading Room ID and password mailed to you
Webinar link – https://vtrender.webinato.com/archives/332248
The above information can be used in all the remaining charts as the indicators used have all similar colors and functions.
Market Profile charts
We also have the market profile charts, where, instead of bars or candlesticks, the alphabets A, B, C etc represent 30 min intervals of the day.
A quick primer on MarketProfile is at – https://vtrender.com/what-is-the-market-profile/
Here we like to see the buyer-seller equation again in terms of market time and see where control is being established or who is driving prices.
You have volume profile values represented in this chart..
To Conclude
Go through the previous day’s analysis posted on the blog and use the Market Profile charts to understand the structure of the market.
Use the Order Flow charts to position your self for an entry or an exit. The order flow chart is to time the purchase or the sell and is to be used for an accurate execution of the strategy .
Wish you the best…