Predictor

I see our society becoming more and more competition based. Many in the conservative sphere promote a strongly competition oriented view. Most politicians have embraced that the rich should be allowed to take what they can. But it extends beyond rich/poor but also into every facet of society.. from education, science, jobs, schools. Dangers are already becoming evident in that scientist forced to compete for grants apply for low-risk, low-reward research. Organizational sickness was evident in the corporate world at places like Enron. The growing number of elderly people living in poverty is another example of competition gone wrong. Athletes are routinely testing positive for banned substances. China, Japan, and Korea are engaged in a high stakes contest to capture contested resources. How can we as a society promote meritocracy and collaboration without fostering destructive levels of competitiveness? -- Some organizations have recognized the value in non-competitive structures. One example would be Google's 20% projects.

Think about this... There are any number of things that can end the human species... asteroids, plague, nuclear annihilation, environmental change (natural or man made). Let's say X% of the Earth is populated with humans. If an event kills off people on Y% of the Earth then the higher the X% is then the greater the chance of survival. The optimal state for survival for the species will thus be at the maximum resource utilization. There is argument over whether we have passed that, not there yet, etc. There is another argument. The end result for the human experiment is ultimately extinction. It could be on this planet, in this solar system, or maybe beyond but the end result is known (according to scientists). If we say the value of the experiment is the total sum happiness/experience then it also makes sense that we would want for as many humans as possible to be able to experience a quality life during the finite window that is available. Also, every species on this planet will eventually go extinct. Only humans (to date) have the possible potential to move these species off planet where they might live longer.. Something to think about.

Let's agree that each human brain has a certain capacity for solving problems then it is easy to see that the more brains the world has then the greater the computational POWER of the human race becomes. In fact, somethings that we have today aren't going to be possible with a smaller population. Imagine that a true genius that could solve a pressing problem is as rare as 1 out of a 100 million. The more "100 millions" we have then the greater the odds that such a rare genius will exist. Humans have outgrown our resources many times in the past. Our best chance for meaningful survival requires a large and intelligent population. If we could increase the intelligence of everyone by just a small measure then the net processing power increase would be dramatic. This might allow us to figure out how to solve these sorts of problems you mention. Why waste time on 1 or 2 problems when you can solve every problem ? The solution to every problem is a more intelligent population. I don't mean education, either -- though that's useful. I mean fundamentally an inherently smarter species. The conscious field is very narrow.. doubling our 6-7 item short term memory would give humans tremendously more ability. Even just that little bit of improvement, in effect a 14 item limit, would enable a complete novice in many fields to perform as an accomplished expert. The other problem is that people see themselves as inherently separate.. always at competition. There is a lack of respect for differences of others and others rights. A growing imperialist mindset that could be very dangerous for our species. Also note that water is a renewable resource..

I think this thread is interesting but would be more interesting if someone actually took the work to create a hypothetical or pick some previous dates to see how this would play out. While not exactly like this, I used to run hypothetical experiments on what type of drawdown I might have to take if I could predict a 2-3 day market swing. I used focus on predicting 1-2 day swings in the market. I had an incredible win ratio in predicting 1-2 day market swings. For the backtest, I used a look forward method so that I only took some % of winning trades. So, first I just took the winning trades and then randomly decided I will win say 70% of winning trades. But, even with 100% win ratio... I found some startling data. One of the things I found was that even with perfect prediction.. the drawdowns were very steep for anyone holding overnight. I was able to compute from this various theoretical maximum profit ratios. Even when choosing that the profit would need to clear some threshold, the drawdowns were still larger then I expected. Due to this analysis and other factors, I decided to focus more on my day trading. As it is, this thread is just amusing but if someone were to do some more extensive analysis then the results could be quite useful.

DAVT, I suggest you stop this nonsense. And, I will give my reasons: #1 You really have found a super profitable method. If true there are people in this thread that would steal it from you, scale it up, and make it worthless for anyone else. So why risk giving away any information? #2 You believe you've found a super profitable method but aren't sure and would like more information, help, etc. This is not the way to go about that. #3 You are looking to sell something. This is a very poor way to sell something because you just keep repeating nonsensical statements. #4 You are already successful and are looking for others who trade in a similar way. Again, you don't provide the evidence or the information required for anyone to know that. --- So you see.. whether you are a great trader or can't trade your way out of a paper bag: this thread is pointless. I suggest you stop posting this nonsense and decide what you really want and just state it clearly.

One thing that most people assume is that the markets aren't controlled or manipulated. I am not so sure of that: although I've always felt that feeling they were fair helped my performance. One hint may be that many proprietary firms are often the largest firms in the markets they make. This may allow them to push the market around within constraints contrary to what most believe. If true then it basically means the markets are rigged but may be somewhat predictable for those who can read what they do and may be even more predictable for the firm that controls the orders. An example of one advantage, if a firm holds most the orders in the book then they should be able to estimate the remaining orders at a higher probability then a firm that only held fewer orders in the book. It also worth questioning if any firm is solely trying to profit from the spread (in futures). I am not so sure they are. I mean that most liquidity providers are going to be selective to a degree. They could be selective on price and hold many orders above and below the market. They could be selective on time and move their orders often. I suspect there are two types of these providers operating in the market.

In general, I advise watching the market when it is open and working on that stuff after market hours. I also advise to watch the market when not in a trade... after taking a loss or a profit. The best times to pay attention to are near the open and some people find it useful to watch near the close. I find the pre-market and open to be of more use, personally. Of course, taking a break at times is worthwhile. But, you are correct, the low volatility makes for limited opportunity.

Difficult day today for trading the ES. I did manage to hit my profit target but it was stop-and-go. Mostly professionals trading only. AAPL appears to be masking some overall weakness in market.

This is an interesting question because often traders have an "end point" in mind but don't know the path the market will take. As stated, options might provide one with the highest leverage to play this. The other technique could be to wait until the very day and then go all in. One problem with #2 is that if the day was very flat then it may OPEN at the CLOSE. But the market is never completely flat.. The nice thing about going all in on the very day would be that you could fade any move away from where the market would close. With futures... 10k account, you could leverage up to 20 contracts but maybe you could scale and add more. One strategy would be to scalp at maximum leverage... take the profits that come and just hold all the losers... The best way to play this might be a binary option weekly on the SP500 though. This would give you a limited loss and guaranteed profit... you could still lose in the futures. In either case, borrowing money, selling everything you have, getting multiple credit cards, etc would all be advisable. I would probably play this with a combination of options and scalping.... just keep pyramiding all day...

The algorithm for tracking position in queue is not very complicated. First, you record the queue position the moment before your order is placed. Let's say 500 are offer and you add 1. From here out.. you don't even need to monitor the book (for the most part) There are 3 cases: 1. Adds -> These will be above your position. We can ignore. 2. Subtracts -> These could be above or below your position. We can only know if the total drops below our count. 3. Transactions -> These can always be subtracted from our recording. Now, you track the market orders that execute at that level and subtract them from the first value that you recorded. You, also, monitor the total depth at the level and if at any time the value is below your running total then you reset it to new value (it means that orders were pulled underneath your own). It is shown that as more orders transact then the more accurate your estimate of your position will be. Of course, this won't give a perfect estimate. I estimate about 50% of the orders in the ES book are fleeting.

First, let's be clear what you are asking because there are a few scenarios. Let's take the first scenario where there are imbalances in the book. Let's imagine there 500 offered, 300 bid, and the market ticks up. First, supply/demand is not a fixed value but a curve. If a trader is offering 500 above the market then they are implicitly stating that they believe the market will move UP to their limit order. They may be bullish and have an open position or be bearish but price sensitive. So, there is different supply/demand for each price level and this also can change rapidly. A second explanation is that the buyers were more aggressive or more urgent to get filled. This could be because they anticipate the market to move up or because they are forced to close short positions (stop losses). That covers the first scenario. If you are referring to orders transacted at market then there are reasons for that too. These are the sorts of scenarios that I study and reviewed closely in my course materials and won't go into too much detail at this time. But, basically, imagine a group of day traders short aggressively. There is always a trader(s) on the other side. In this case, an institution is sitting on the other side with a limit order (which they like to use). These aggressive traders have now created a hidden demand in the form of open interest stop orders just above their entries. All it takes is for the institution to move the price a few ticks to trigger a short covering rally. There is a third scenario, as well. In this case, a seller starts to transact against a liquidity provider. The liquidity provider monitors the rate of the transactions and adjust his book (lower) and so the price drops. As soon as the selling abates, he figures it is safe to offer liquidity again, and he refills his orders causing the market to splash/pop back to where it was to start with.

Tape action today is somewhat more erratic then usual... lots of programs triggering against each other.. suspect that new types of relationships are forming which may be the reason.. -- LQ providers will often pull the offer making the market jump 2-3 ticks to run stops and B/E entries before the market starts a new leg down.

It is possible to estimate your own position in queue, obviously. There isn't 100% way to know however because orders underneath your own can be pulled while simultaneously new orders can be added at the back. Fx.. you are at 1000, 500 pulls, and 500 adds... the order book can many times per second... Icebergs do not reload (typically) on a loaded order book. They reload at the end. That's the purpose is to disguise how many orders are for offer/bid at a level. A trader might decide to reload 50 whenever the offer drops below 50 lots. When the bid/offer becomes imbalanced then it encourages traders to go to market in front of the imbalance. There is risk to trying that though because the bid may drop before the market is executed. Likewise, you can't just grab the price if it ticks down because your limit is going to be at the back of the queue... For a myriad of reasons.. I think it will be difficult for retail trader to operate in this space. I think if you are interested in HFT that you are better off looking at stocks, rebate strategies, NASDAQ (I hear they give HFT's special information on WHO the order was from), and possibly Forex where semi-martingale strategies could be tried.

I think that too much insurance might drive up the costs too high which we don't want. Futures are highly leveraged and as such we don't too keep too much in the account. This would encourage brokers to offer better incentives to those who kept more in account. By not requiring 100% insurance then this still encourages traders to review their broker.. The other option is to enforce the segregated accounts at a structural level and require the NFA to hold the accounts. This option wouldn't require insurance and could still offer protection for client funds.

A bit late... noticed the LP's pulled out just before another buy program. I've detected what they may be detecting now but not interested to share it just yet.. need to see if they use to init new shorts or if encourages buying... bias is still to downside but need to remain flexible.. some signs that some inst. are buying.

Today my bias is to go against the order flow to establish some short positions. This is a bit more risky and will need to see development to downside or pull out.

There is a story that humans are constantly improving. There is belief that today we are bigger, faster, stronger, smarter, and that we're making scientific breakthroughs everyday. World records are broken and that reinforces the story. There is another story that humans haven't changed all that much and that most of the improvement we've seen, for example improvements in world records, are primarily due to technology and drugs. If you look at say life expectancy then it appears to have risen sharply but I can go back to the 1920's and find stories where people generally felt that a good life expectancy is similar to what we have today. This is causing me some doubts that the top life expectancy has changed and like today we had people claiming/believing they could live forever if they ate right, didn't smoke etc. Speaking of smoking, the story goes that in the 1970's or 80's or whatever that it was uncovered that the cigarette companies discovered and hid that smoking caused cancer. But, there were reports from the 1900's that linked smoking and cancer. It was well established even in the early 1900s. Ask yourself why did the media create a big story out of it as if a question even existed? It was already established. I believe that humans haven't changed that much. Now, there are more of us then ever, and we still haven't solved even basic problems. One idea is that as we get more people then we get more capacity to meet our needs, more geniuses, and more discoveries. The competing idea is that we over populate and die out. In my mind, the people who view over population as a core problem (rather then a temporary issue) have it all wrong. The problem is that we're too stupid. There is a need for transformative technology. Technology that improves the brain but doesn't have the normal conditions associated with drug use. Bernanke has mentioned gross national happiness. Why do you think that is? Is it because he recognized that our current consumer mentality isn't producing happiness and isn't sustainable? that its simply not working...

The other problem associated with the great problem is that we humans aren't very good at transferring experience. Death robs us on many levels but especially it robs our experience. Yes, we have written records, education, etc but there is no direct way to transfer experience. So, people with experience spend years trying to convey that experience. Much better to transfer it directly.. Now, in terms of nootropics already available. The weight lifting supplement creatine is readily available and can provide some benefits. Obviously, we need something an order of a magnitude more powerful. One problem is that our culture/society tends to shun assistance and enhancement whereas, imo, we need to encourage enhancements. Look how most models look and most will admit they are taking steroids. Now, let's ask ourselves a question, obesity is the epidemic we are facing and we don't have any drugs that work. But, how much attention has steroids received as a possible treatment option? Computers help but they don't expand our narrow conscious processing abilities. Think about this.. let's imagine it cost 50 billion to produce a significant intelligence enhancing drug.. but no matter the cost, once its produced and distributed widely then the net productivity of our world will increase by an order of a magnitude.

There is a cancellation ratio that is set by the CME. It is ratio of cancelled vs placed trades. If a trader cancels too many trades then they can be fined. Many HFT programs are suspected of placing and cancelling a high number of trades. As noted there are non primary liquidity providers (traders), as well.. This means that anyone trying to profit from the spread will need to be able to keep enough orders out to ensure good queue position... moving the order will push one into the back of the queue.

A clue might be the volume and liquidity drops off significantly after hours. .. whatever they are doing they want the cash market open. There is a cancellation ratio/fee in futures that doesn't apply to stocks... I'd imagine that many HFT's want to capture the spread.. I imagine the very best orders would never move the market, right.. Small orders... Any LQ provider needs to manage inventory, needs to manage directional exposure, and needs to be able to maintain good queue position in the book...

One of the problems with the "go it alone" approach is that without a structured program, one can spend a long time running in circles. I believe the ops method actually makes a lot of sense. Of course, it is not the way to develop the type of "read" I've developed. But a structured program, i.e systematic study may reveal unique insights that others don't understand or know. One caveat is to understand that most statistical measures don't faithfully apply to the markets. They can still prove useful but without a strong statistical background then it may be difficult to understand everything. For example, correlation only models linear versus non linear relationships. Many functions assume the normal distribution. Many functions assume a stationary time series. Beyond the usual reservations, I find that even basic statistical measures can sometimes prove useful. Also, if there are certain laws that govern these measures that aren't understood then it is even more difficult, i.e without a framework. A degree in randomness be would useful.. I imagine. I would say regardless of whether you go it alone, try to build a system, or intend to "stare at quotes" that one tries to build some sort of systematic and structured program.

One of my interpretations is that often there are large firms that day trade the equities. These firms have significant buying power but typically close by EOD. Longer term traders often trade the futures and use the intraday extremes to establish positions using limit orders. It may be that the day trading robots can't hold overnight due to leverage.. As for how they knew the buy program would trigger.. I don't know. I can't always detect patterns in the book but today my interpretation was that the LQ providers were the more primary trader and more easily had influence.. less activity overall.

--- That program looks like the last of it... anticipating a run down

My bias is to the downside. My read tells me that longer term traders are selling to shorter term traders... However, not a strong conviction just yet --- Not a lot of activity.. LQ's pulling sell orders from book... try to run some more stops. Shorts pulling back to mid 41's. --- Did you see that? The LQ's pulled out just before the buy program triggered. These patterns aren't always detectable as much as today. That program looks like the last of it... anticipating a run down

My opinion is that this thread works best when it is used to share your real-time analysis of what the market is going to do next. Not what you could have done, should have done, or wished to have done.. nor generally for posting cherry picked past trades. Intraday trading requires maintaining a sense of flow and staying in market centric feedback loops. The analysis, self critic, etc should be saved for post market analysis. By sharing what you are anticipating, what you are looking at, etc then others can do a quick read and may get ideas. I'm going to be busy the next few weeks and plan to cut my posting back. But just trying to share something that may help Just my 2cents.. I think the discussion is good and all but maybe would better for other threads.