TOTD – Context is Critical

Merritt BlackFutures TOTD

We hope you learn something as we share trades from our new Futures Desk as a Trade of The Day! Today we’re focused on using Market Profile to frame an awesome contextual view in the ES Futures. Let’s dive in.

Context is critical. It allows us to see the circumstances in which intraday trade is developing within! This, again, is critical.

We’re going to build a story here, piece by piece. In fact, I’m not even going to share with you an entry or exit for this trade. If you can put all the pieces together, pulling the trigger on an entry is really not the hard part in the long run. It’s knowing where to pull the trigger, and in what direction.

1. We establish an overnight balance area prior to the open (green box), then we establish a higher balance area once the market opens up (yellow box):

So what is the significance? Well, on one hand we broke higher out of the overnight balance. That is bullish in itself. It’s important to simply recognize these balances as they form though, the balances give us “edges” to trade from, know where we’re wrong, and identify what the market is doing in real time.

2. Let’s look at more context of WHERE this is developing. It’s holding above vwap (purple line):

In fact, we held vwap at least three times on retests once we got above it. This is bullish.

3. Finally, we get to an even bigger contextual piece. You guessed it, the Market Profile! Where was all of this occurring within? What was the overall context that the price action was happening inside of? That’s right, back above a key MP line in the sand that we identified in the room before the market ever opened.

We knew the odds were in favor of the market trading back across the prior day’s range if we failed to hold below the prior day’s main balance area. This was a part of premarket prep, and we were ready to then look for signs of this happening.

Here is that key line in the sand for the day drawn on our 5min chart (big green dashed line):


So we were prepped and ready for the day, ready to look for signs of our thesis being confirmed….Ahem….. like establishing an intraday balance holding back inside the prior day’s balance! Holding above vwap! Holding above an overnight balance!

If you nail your context, then monitor multiple, non-related variables to see what’s unfolding at the hard right edge of the chart, you can achieve very awesome things as a trader.

Trade well,


*No Relevant Positions