Predictor

Shorts pulling from book when selling couldn't move market down. Expect a pop.

We've what 6 billion+ people. As our population increases, IF we are smart enough then we find new solutions: we get stronger not weaker. But if we're not smart enough then we reach a tipping point and die out. Beyond that,. the fact that so many problems aren't solved today presents a real question of what's gone wrong. The first step is to raise the intelligence. This will help to solve all other problems. I am not talking about education either. I'm talking about overcoming our basic limitations. Maybe, it boils down to an empathy test. What's the nature of humanity?

Bias to the upside... not anticipating a lot of movement either way

It looks like 3,000 traders/contracts used a 3 tick stop loss. Just triggered..

The results are in: humans are too stupid to solve the greatest problems we must solve. The only answer is that people must develop methods to increase their intelligence. The most pressing problem of our time is how we can develop the human CAPACITY for intelligence. Unfortunately, this isn't talked about anywhere. Nootropics, drugs, human/machine interface, and eventually genetic manipulation may be candidates. Why isn't this realized? What will it take so that our culture will embrace this sort of self improvement?

Market looks primed to move higher. A low risk entry would be just below the 99. There is still strong sell pressure above 1400. The market could turn here but I think the odds are starting to favor a move higher. --- Re-evaluating... may be too much selling above 1400.

Why Bounding Losses Doesn't Work Well The basic strategy for choosing a stop loss size is to categorize trades into 2 groups: winning trades and losing trades. The optimal stop is in theory set where we can separate the groups best. The problem with this basic strategy is that it forgets about type 3 trades: losing trades that are essentially winners -- that is losing trades that have a greater MAE then the closed loss. Good systems, like good traders, are usually able to exit losing trades gracefully and that can add up to a lot over time. The Tight Stop Worked As I was running my trades through the analyzer, the trend was clear: larger stops were more optimal. I remember reading an article some years back that strategies that were at near extremes tended to do better (in a strategy game), and decided to see how my trades would have worked with a very tight stop. Surprisingly, the system kept a good deal of the profits and even some risk-adjusted metrics improved. The larger stops worked better overall but very tight stops, based on my overall assessment, were working as well as the moderate sized stops. Yet, the win ratio dropped significantly. Explanations The explanation was that I was skilled at exiting my losing trades at favorable prices. However, if I set a stop tight enough then my losses became very small in relation to my wins. In other words, I was always exiting losing trades at favorable prices. The cost for this was that my win ratio dropped from 80% to below 50%. Having monitored several systems, I have developed a feeling that systems with win ratios below around 55% can be trouble. New Understanding The sample that I tested was a volatile month. I was thinking about that and something from a blog that I read when I realized that tight stops are essentially a bet on expanding volatility while large stops are a bet on constrained volatility. The bets are similar to options but are path vs end point sensitive. Dark Swan Of The Large Stop The requirement for using large stops is to ensure they only rarely get hit. It is obvious that if the market becomes too volatile and the stops are hit then large losses can occur. Imagine a logical stop placed by imagining a bollinger band, as the markets volatility increases the size for the stop needed grows beyond reason. Dark Swan of The Tight Stop Okay, so it may seem that the tight stop reduces the risk. Yet, the tight stop is essentially betting on expanding volatility. There are 2 reasons that this is the case. The first reason is that if one sets a tight stop then one obviously anticipates the market might continue to move against them: its just an assumption built in. The second reason is perhaps less obvious but systems using tight stops rely on out-sized winners. Any decrease in volatility can wreck havoc on any such system, and the small losses can grow into an avalanche. Possible Takeaways One possible takeaway is that during volatile markets that traders should pull their stops in and accept lower win ratios or sit out if they prefer larger stops if the volatility grows too great. Likewise, in less volatile markets traders should prefer the larger stops because the volatility isn't likely to produce the out-sized winners (or sit out). Both of these implications are counter intuitive. ----- http://themarketpredictor.com

lol.. this is funny for me to read as a tape reader. I read tape for over several years and it was always something I felt I was good at before I developed the skills that I have today. If you are gifted tape reader then I think it will take 6 months to 2 years to develop the basic skills (without training and 6 months minimum regardless). But in order to advance to the higher levels, it requires a lot more then just staring at quotes. My 2 cents..

Tape reading goes way beyond the order book... it doesn't require lightning fast reflexes, either. I wouldn't claim myself an expert at much but tape reading is one of my strongest abilities. As others stated, as a short term trader I am not interested in the arbitrage anomalies that are gone before I can even trade them. But, I don't want to be the most ignorant trader of the bunch... as i wrote in my newsletter, the goal isn't to be the most informed (as a trader) but I don't want to be the least informed. As for HFT-type solutions for retailers.. I'm interested in such capabilities and am surprised there aren't more offerings in that space. On the other hand, I see many types of hurdles for anyone trying that style of trading... I don't see true HFT coming down to retail levels but "retail" algorithmic trading in the sub second space should be possible.

For sure not an expert on HFT here or market micro structure. Only know what I've read at NANEX etc.. Not a stock trader either so I don't much experience on that. With equities futures.. you might think a move like that was maybe driven by changes in underlying..perhaps the quotes in the baskets the underlying were changed. See arbitrage.. triangular arbitrage etc. I also observed what appeared to be 2 distinct ways of executing market orders in futures. Dropping sell bombs on upticks and driving in small orders on up ticks at a fast clip.. One hypothesis is that the stream of orders is generated by equities bots whereas the larger sell orders are generated by institutions or the futures LQ providers. Suspect most institutions sit limit and refill... or define a range they sell into.. LQ providers tend to sit at extents of that range.. from my tape reading skills I notice that the order flow tends to often be highly serially correlated while the price tends to be the opposite.. not sure what that means either.

I rarely focus on the absolute price levels. Much of the time, I'm not even sure what the price is. This is true today as a day trader but also applied when anticipating longer term forecasts. The market is often an interplay between short term traders and longer term traders. As longer term traders initiate positions, shorter term traders drive the market away from those locations. This is a cost but they are always required to cover which is what creates many of the dynamics in the markets. The true LQ providers are always providing some liquidity. They were able to reset their positions lower as the institutions sold into them. I suspect they use semi martingale and layering... ---- There seem to be 2 market order execution strategies. For market orders, some will feed in markets at a specific rate... others will execute a large single order at MIT (sell on uptick and buy on downtick) --- Bias is down again. Not always updating my bias.. obviously it hasn't been down this entire time but looking for possible drive back to previous lows. -- Anticipating a close near 96.50... --- HFTs seem to use a strategy of sending in orders at a fast rate to drive price beyond where it should go. This just conjecture but there are 2 order strategies in use. ---- Didn't quite get there... tested but moved higher.

I do not think the retail trader even plays a role in the markets. Of course, I may be wrong.. But the institutional trader isn't that fast either which is a good argument for the market to slow down. The situation is that the HFT's have made it difficult for the institutions to do business in the open markets and so they've went to dark pools. The idea is that by imposing some limitations on the HFTS and enforcing the institutions back into the market that we will have a fair and open market again.. Doesn't mean that traders won't lose but we'll be sure we know what the price is at any given time and that some aren't outright cheating the system. ---- I would also add additional rule to consider congress insiders in areas where they have non public information.

The longs seem to be broken here by strong limit resistance. I look for a drive down very quickly if my hypothesis is correct.. possibly take out the entire buy side book. --- Questioning my outlook... need to see development. The bots seem to be very aware of where traders enter and look to target the break even stop extensively. The best patterns is when the order book is flooded and traders are driving with market orders.. not seeing that here.. seeing some sellers but no book flooding... yet --- LQ providers are taking other side to institutions.. need to see a drive lower here.. anticipating it

Much of what I do is reading the order flow.. Reading the order flow involves reading the book supply, market orders, and the tape (price action). There aren't many patterns I've learned in the book but there are a couple. My bias is toward the downside... I am weighing if we may run back to the 92ish level. To me it looks like a buy program triggered the run to the upside.. institutions seem to be leaning short still. I'm weighing many possibilities though. I don't want to get set in one mindset. ---- A buy program was just exhausted by institutions.. look for a run down here if my hypothesis is right. LQ providers have turned on the book now... feel a higher probability to the down side... (turned seller) --- Buy programs are often set to go off near new highs... speculate may involve buying specific baskets of stocks.. likely designed to run stops

I propose the following simple steps are urgently needed to restore confidence in the markets: 1. Insure all futures deposits up to 25k at 100%, 25k to a maximum at 85% 2. Require all futures FCM's to electronically report on segregated funds every 24 hours. 2. Require all posted quotes to be valid for at least 300 MS before being cancelled. 3. Ban all darkpools. Require all orders to take place on open market. 4. Remove regulation barring US citizens access to foreign futures exchanges. 5. Ban sub penny quoting.

Some of these are believed to be quote stuffing patterns.. Some HFTS arbitrage across the fragmented markets. One might even speculate that the markets were purposefully fragmented to allow these risk free profits. I am interested in these sorts of things. They can have an impact. But there is still opportunity for the skilled day trader that is willing to assume risk. The HFT's in general seem to want to operate in a lower risk space then the traditional speculator.

Just my 2 cents but this thread works best when everyone focus on what the market is actually doing right now versus our differences in philosophies.. ---- I am seeing some problems with my short bias. Higher probability I am wrong. Evaluating the data.

Market is getting a bit heavy at the top here. My bias is to the downside.

One of the experiences I had that led to this thinking, actually came from another performance field, computer programming. I started programming at an early age, learned many programming languages, many ways of structuring programs -- first structured programming and later object orientation. Yet, technology changed over the years. The skills that I started with, programming in assembly language were replaced with programming in C/C++ whereas today I use even higher level languages. I was rather good at this from an early age.. not that I didn't struggle a lot too-- after about a decade of experience I tried to figure out what exactly I had learned. It was hard to really put my finger on. As best I could tell, I had mainly gained a sense of confidence that I could solve the problems that I needed too. Not that I "knew everything" but that I could go and learn it. Of course, now it is easier with the internet to get answers to problems. I also knew other programmers over the years. Some had more experience then I did but couldn't do as much. I recognized that most people learn for about 1-2 years and then they just rely on what they already know. I notice that some of these people are very good at "taking shortcuts" which is productive but doesn't really allow them to develop further. One of the subscribers to my newsletter (no longer published) was always concerned if he were doing things the RIGHT way. He was thinking too much. I realized that when I over thought trading that it produced additional stress and anxiety that made it difficult for me to perform at my best. I encouraged him, as I do myself, to take it 1 day at a time: focusing on the process.. focusing on developing the read... and the opportunity..

Worth a read.. Anchoring - Wikipedia, the free encyclopedia

EQ bots have started selling... ----- HFTs flooding offer.. not good for marking moving higher

I think we are more likely to roll over here... I've hit profit target and the volatility is too low to warrant for me to go short... we might reverse in the 90-91 range. course.. could be wrong.. I was biased long earlier but most of the equity bots have gone quite now. Institutions have been leaning short at the highs at all day.

My bias has shifted to neutral. The longs seems to be having some problems.

Market looks like it is ready go higher here.I still think he could get a large sell off given the general conditions but no evidence yet -- that could be in days or even weeks. -- There is more selling at these highs but strong bid so far. Need to move higher pretty quickly.. --- Futures institutional traders or lq providers often don't trade in-line with equities bots... equities bots are getting exhausted here. It may be the LQ providers also use strong market orders to drive market. Some bots detected liquidity at 94.25 and executed against each other. In my view equities are probably the biggest driver of futures markets... 3 types of drivers, institutions (buy low/sell high), lq providers (fade narrow range), and equities bots (typically buy high/sell higher). The EQ bot activity rapidly change from moment to moment. -- Market very likely to break out here.. eq sell bot activity was exhausted by institutions. In this case I think it may have been the LQ providers trying to clear their short inventory... difficult to say...

I know this isn't going to sit well with most -- especially the vendors here who like to attack me -- but one of the most important lessons I learned as a trader is that it is not possible to learn how to trade! This is why I don't claim to teach others how to trade. Something that can't be learned surely can't be taught! One of the big breakthroughs I had in my performance was when I recognized that the effort in spent on learning how to trade was a mistake. In order to learn anything then it must be finite and it must be static. So, if we are to learn anything (completely) then it must be completely contained and never changing. If it changes or if we can't completely bound it (constrain) it then it is not possible to know it completely which is exactly what "learning to do something" implies. Most professions are both unbounded and changing. There is no "learning how to program" either. It is not possible to learn how to program because if one truly learned how to program then it means (to me) that you can program anything in the world under any possible scenario. Nobody can do this! There are many specializations and new develops on a regular basis. Let me give another example, it is not possible to, in general, "learn how to be a doctor". It only may appear that way. But, do you think the doctors of today would be able to practice medicine 200 years from now without additional training? Surely not...A good example can be found even today, I was reading some months ago that heart surgeons who had a decade of education and had expected to make 300k-500k per year were unable to find work because stints had replaced most of the work they would do. Many of these surgeons were going back to school to get additional education. So, what does a trader who claims to have learned how to trade really mean? Really its not a objective measure but a measure ones own self confidence. A measure of how competent they feel and capable. Let me back up and also say that I have produced materials on developing specific types of skills that have helped me. There are specific types of skills that one can develop, and that can take off years from the learning process. The psychology that the average trader has, and promoted by average vendors, is so much different then the psychology that I believe the elite performer embraces. My psychology is one of a process. It is not a learned but a learning. Instead of focusing the idea of "learning how to trade": focus on taking great opportunities. Focus on the process. Focus on listening to the market. Focus on building skills. As well, there is no single way to trade. I trade in multiple paradigms, on multiple levels.. As I encouraged my students in my newsletter, focus on the opportunity.. focus on the process.. If I think about "learning how to trade", I draw a blank but I know how to find opportunity in the markets on a regular basis. --- http://themarketpredictor.com