Adjustments for

Faster/Thinner/Volatile
Markets
The liquidity and queue position analysis explained in the previous sections is
more related to slower moving markets.   Now we will examine how to apply
The Norden Method to faster/thinner/more volatile markets.
Whether a market is thin or thick is a relative term.
It depends on the average trade size that goes through the market.

Of course, markets with 20 contracts or less on each bid and offer would be
classified as being thin, a market with 150 on each might be considered thin if
that market trades 500 contracts every few seconds. 

In reality many if not most equity index futures today have insufficient
liquidity on each bid and offer when their underlying market is open.  This
creates the condition for quick market moves of  2/3/4 or more ticks because
the liquidity per price is insufficient relative to volumes coming through.
For markets that move several ticks at a time,   
queue position is no longer of such importance. 
While we could examine the volume per time period, there is an easier way for
us to examine where to place our orders.  Since there is greater likelihood of
the market going to the price where your order is, you are more likely now to
get filled (it may even go a tick or so through you).

So rather than work out a queue position per se, we adjust our method to
something that is still linked conceptually to queue position but easier to
measure at the speed these markets move.
Our adjusted approach is still linked to queue position but easier to
measure in fast markets.
We look at how much the market has just moved and we want to place our
orders just above (for longs) or below (for shorts) relative to the departure
price.

For example, if our market was trading 15b/16o and jumps to 19b/20o (and
other information confirmed that going long remains the trade) we should
look to place a bid around 16.  We are expecting (if filled) to be able to sell at
19 or 20. 
If filled, we should look to exit immediately on any bounce.  So while we
expect to sell 19 or 20, if the market just jumps to 18, we will sell there. 

In fast markets, profits can be lost just as quickly as they came so take what
the market gives you and move on.  In a slower market that only moves 1 tick
at a time, it is only possible to scalp for 1 tick. Holding any more would
essentially be position trading.
But how will we get filled at 16 if the market just traded 19/20?
For the market to move several ticks, all the offers (in the above case)
must have been taken out.
 For a short time there could be an effective vacuum in the spread and
some traders could still be trying to execute on the old price.
 These tend to be times when retail traders complain of 'slippage'.   
 Remember, when retail gets hurt by slippage, someone is profiting.
 Professionals make it a part of their business to profit from retail traders'
slippage.  
The market will sometimes quickly sweep back towards the previous
price, which provides a good opportunity to trade.
We are not saying this happens every time; but it happens often enough. And
when it does, a good trading opportunity can materialize because  we should
be trading against slower traders who are still trading at the previous
price (using slower platforms) in these circumstances.  
In fast markets we want to get filled the first time or not at all!
There is one golden rule here though which must be obeyed in faster markets.
That is we must only accept a trade on the very first sweep.  If we are not filled
on the first sweep we must cancel the trade.  
 If you trade the first sweep you might be picking someone off, but if you
trade the second or third, you're likely the one being picked off. 
For example, if the market jumps from 15b/16o to 19b/20o and we decide
to place a buy order at 16...
If the market sweeps down straight away and trades 17 we are not filled so
we must cancel the order.

If it sweeps down and trades 16 but doesn't fill us, we must also cancel the
order!
This keeps to the belief that we want a quick fill.  But in faster markets a quick
fill is even quicker than in a normal or slower market.  

In very slow markets we might be prepared to wait 60-seconds or more for a

fill (if that market trades slowly and infrequently).  But fast markets are
always trading, so we want a fill within seconds.
 Order Placement Refinements
First, place your order close to where the previous two-way action
was. Don’t place your order in the vacuum area (the prices in between where
it was and where it now is). We should not expect the market to go back
through the area where there was two-way flow a moment ago; so this acts as
a good way to know if we are wrong.
Second, don’t be afraid to place your orders far away from the last print. If
the market is moving 6,7,8 ticks at a time then you will need to place your
orders accordingly a similar distance away. In the same way that we must
constantly analyse liquidity and queue position, we should constantly adjust
our order placement depending on how much the market is moving.  In a fast
market like the Dax it is not uncommon for us to adjust our order placement
(length) 3 or 4 times an hour.
For example, the market quickly drops from 19b/20o to 10b/11o
Here we would place our sell order around 18 or maximum 17.   A market
that can drop 9 ticks can bounce that much too.  Again we set up a good
risk/reward on this trade with 19 or even 20 being our stop ( but scratch
being our preferred bad exit).   
We expect a maximum profit of 6 to 8 ticks with exits at 10 or 11, but we will
take less if that's what the market provides. 
We often see too many of our new traders keeping their orders too close in
these faster markets.  They want to take too many trades and are scared of
missing trades, and resultantly the market often trades a few ticks through
them giving them a poor risk-reward profile.  It also means their losses can be
3 or 4 ticks!
If you are trading a faster/thinner market and you find your profits are
only 1 or 2 ticks, but your losses are 3 or 4 or more then your orders are
likely to be too close.
Don’t be afraid to miss trades – particularly in the early days when you are
still learning.   We don't get all of these types of trades or even most of them. 
Furthermore we are likely to cancel more than we get filled because of our
"first time fill or not at all" rule above.

But, when we do get filled, we tend to have good risk/reward and a high-
percentage win rate.
Avoid One-way Business
One other point, if your market is just continuing to jump higher (or push
lower) in wave after wave – don’t chase it.  This is one-way business and you
either won’t get filled or we get long at the top (short at the bottom).
For example, the market was 15b/16o and jumps to 20b/21o
We place a 16bid but there is no sweep.  The market then jumps again to
25b/26o and then jumps again to 30b/31o...

It is dangerous to chase these one-way moves.   If/when you get filled it will
likely be bad.  If we elect to chase the second move by placing say a 20bid, we
will leave this in only a very short space of time before pulling it.    
Sometimes we just have to leave markets alone; the above example is one
time to sit out until business goes two-way again.

In all the above examples, we only place a bid or offer after a move if we see
other evidence from correlations etc. 
Just chasing each and every move when there is no other supporting
information is just a form of gambling.  If you chase each move and each
sweep you will overtrade and have a much lower win rate.  In the Norden
Method, we "Observe, Orient, Decide, and Act" on higher probability set ups.
Summary
The Norden Method enables you to 
trade at any price.
By now, you see that The Norden Method can be applied to wide range of
futures markets - whether fast such as Dax, NQ or slow such as the UB - at any
price.

Most retail traders hope to predict and catch big moves.  We instead happily
embrace random ebb and flow - and more specifically, look to pick off poorly
placed market orders rather than try and guess direction.  This in turn allows
us to trade more frequently, which compounds our edge.

Of equal importance, our style of trading makes us 

invisible to other market participants.
We do not rely on less frequent "price levels" or unreliable "indicators"; both
of which are very visible to all participants.  Instead we aim to trade against
smaller, slower, and more often than not less skilled chart-traders (of which
there is no shortage).

We play a different game.