AgeKay

This is great. I just read it and he confirms a couple of things I said in my last post and earlier posts. Isn't it funny how all professional traders keep telling the same thing, but the retail traders refuse to listen? I've summarized his quotes in this thread.

I've found this excellent link in the Is 100% Mechanical Trading Possible? thread that someone shared. It's a Q&A with an independent retail trader that has automated his trading and trades around 800k to 1.5 million shares a day and make 2cents per trade on average. He made 7 figures profit in 2008 after expenses and taxes. I know it's everyone dream to automated trading, but he gives you insights in how this looks like in the real world. Other than that, he's confirming many things other professional traders say but since retail traders refuse to listen I thought it might be worthwhile summarizing his answers here. (These aren't all his responses just those I found interesting) So here it goes:

X_Trader on the TTSIM gateway is the most realistic simulator you will find because they use EPIQ to fill you. X_Trader can replay historical data but then you have to use another product, I don't remember the name. NT has the most unrealistic fills I have seen. The developers don't seem to even know how orders are matched on most exchanges. No experience with CQG or TWS, but the X_Trader API is ok. There isn't anything you won't be able to do. And if that's still not enough, they also offer a FIX API which is free. NT does have a static DOM. They call it "Static Price Ladder" if I remember correctly. I don't know about NT 7 but how did you do it with NT 6? There was no way to communicate with NT outside of NT. Go way, we don't need programmers from the real-world that actually know what they are talking about. All of our dreams will be shattered. Another excellent point made. There is definitely profitable automated trading but it's different from what people on these forums think. It's not your 1-2-3 indicator combination that is automated, these algos go way beyond that. And going back to your earlier point, this is an significant undertaking and extremely competitive space.

The most comprehensive source I know of is FuturesIndustry.org They seem to be a bit outdated though lately. The most recent survey I managed to find on their site was from January 2009. Let me know if you find a more recent one. All published volume surveys can be found here (which ironically doesn't even show the January 2009 survey I referenced above).

dsalas, before you go over board with market profile, I think that you should know that real-time volume was not available back in the 80s so market profile was a useful approximation for the actual volume back then. Nowadays we do have real-time volume so you might want to look at the actual volume distribution instead of the time-based market profile. This will also negate the 24h problem because there is less volume traded in the overnight hours. Btw, Eurex trades most volume from 9:00-17:00 CET (12:00-13:30 less though), the underlying exchange closes at 17:00 CET so that might explain why volume drops off so much after that most days. P.S.@market profile lovers: I am not attacking market profile, just pointing out the facts. You can apply the same market profile concepts to the volume distribution.

I've contacted IQFeed yesterday about the latency issue I am experiencing. They said it's unusual because they haven't had any other reports but I've had it for a long time with different computers trading from 3 different countries. I do like the feed though because it's very cheap and the data is complete. Anyway, they told me they are investigating it. I'll post here if they get back to me. In the meantime, you might want to trial them and see if you are also experiencing this latency issue and let me know so I am not alone on this one. It usually lags by about 1 second, but today was extreme where around at 11am CET it lagged behind TT's feed by about 5 seconds for about 10 seconds.

I've had latency issues with IQFeed for Eurex data. I am trading from Europe though.

I've read all those old books that fall under the "tape reading" category including Neils' book. I haven't really gotten anything out of these books. One of my charts I am still using though is based on Whykoff's "Volume Figure Chart" in Chapter 8 of "Studies in Tape Reading" (also floating around the net with the ridiculous title "The Day Trader's Bible" ) If it's bid 2000 and you see 2000 1 lot orders, then I wouldn't classify that as trade intensity because these computers won't show their size and they will be refreshing the bid, not hitting it. If the market is going down, all you have to look at is the bid and the Volume At Price (VAP) at the bid. In MD Trader it's just another column that you can move around so you can move it next to the bid or ask column. So all you really have to look at is one row made up of 2 cells (bid and VAP or ask and VAP). If the depth of the bid is 300 and the VAP at the bid price is 3000 and 1 second later the bid is still 300 but the VAP is 5000, you know that it has traded 2000 contracts at the bid without it going offer.

I guess you mean large depth with 'walls'. I don't know this Hershey guy, but I've read Rollo Tape, they didn't have something like a DOM back then. All they could do is to call the broker to find out how much depth was sitting there. You wouldn't be able to see it with T&S only, because you wouldn't know that when 2000 contracts traded that someone just simply bid 2000 with one order. The point of trade intensity is that you won't see the size in the DOM until it has actually traded. It will be an average bid since these guys don't want others to know that they just bought that many contracts. I don't even have T&S up on my screen. I don't think it really matters if someone is passive or aggressive. The end result is that both traders got in or out at the same price. In the case of trade intensity, these computers have a good reason to buy or sell at a certain price.

The initial prototype I programmed wasn't really helpful but I have to admit my implementation wasn't that good. Right now I am just sticking to see it by watching the DOM. It's not as hard as you might think. All trade intensity is is a lot of volume in a very short amount of time. Of course, there is no spike to look for, but if the inside market is bid 300 and all of the sudden you see that 2000 contracts have traded on that bid very quickly and it's still bid 300, you know that some program was just waiting there to get hit on the bid and absorb all market orders. No human being could have refreshed his bid so quickly. It's as if someone had entered an iceberg order there, but knowing that Eurex doesn't support iceberg orders natively, I had to conclude that these are "synthetic iceberg orders" which are just limit orders that keep being refreshed by programs. It really clicked when I saw this post by UrmaBlume: -------------------------------------------------------------- Yeah, I trialed them before I even started programming my own charts but I don't recall them having any charts that could visualize this because they don't incorporate the time factor in their footprint charts. After having watched the DOM now though I realized the "flaw" of their buying vs. selling designation what I pointed out earlier in the "Volume Splitter" thread or what UrmaBlume also describes in the same post referenced above:

Kiwi, I noticed your always quick to come to conclusions like that but if you had checked his blog then you would see that you can actually watch him trade live for a week and then decide whether you still want to take him up on mentoring. He also doesn't sell mentoring course for a fixed fee, but takes a percentage of your profits. If he wasn't a profitable trader and if he didn't think you wouldn't make any money after that mentorship, why the hell would he take a percentage of your profits? If you made nothing, then he would also not made anything. I think that is the only mentorship that actually makes sense. If you think otherwise, well, then you're a retard.

I love how every time you get a real trader on this forum who's got information to share that is not completely useless, people just chase him away. No wonder, there is so little useful information to find on forums.

Well, he definitely sucked me in, but unfortunately he's not offering to sell anything, is he? Instead me and others have actually found the information he has shared so far to be very useful and I thank him. Call me a fan boy or whatever, but I wouldn't even be visiting this forum any more if it wasn't for him because I find all the other information completely useless.

I'd like to take that back (as I can't edit my post anymore). His explanation is actually the same as mine. His explanation in earlier posts were a bit vague which I incorrectly interpreted but I am catching up on his new posts where he does explain it exactly the same way that I see it. Sorry for misrepresenting your words, UrmaBlume.

DugDug, I agree, his attitude might offend some people, but I think I know where it comes from. According to him, he's an old guy, he's been trading over 30 years, he's actually met the inventor of the Market Profile and slept under one roof with him, he's seen it all and I think he is just sick of all the bullshit (as am I though I am still very young) out there. You can call it bitter, but the fact is that he could point out the flaws of every type of information that retail traders base their decisions on using reason and logic. And if you've read some of his posts where he goes into detail, you'll see that he knows what he's talking about. He calls others idiots because he can see all the flaws but these people refuse to acknowledge them. Sure, some people still manage to be profitable, but that is not because of the flawed information they use, but despite of it. Instead of being offended, people should use his criticism to question their beliefs and they will find that their are mostly based on what other people have presented (usually using anecdotes, flawed logic and after-the-fact charts) and not their own thinking. I could give examples but that would just start another flame war. Like you said, it's like religious debate, it's very emotional and you don't get anywhere. After all:

I've used .NET almost exclusively since 2003 and NT's hiccups have nothing to do with .NET. The developer of NT have just haven't done a good job. That this thing even works is probably due to .NET, I can't imagine these guys having developed it with something like C++ because then nothing would work. Nevermind that they don't even understand how orders are matched on most exchanges. I'd like to see that documentation. But you always have to know your tools no matter what technology or language you use. All myths aside, managed languages like C# are in fact faster than unmanaged languages like C++ in most real world applications because the runtime knows the system its running on (where it can do system specific optimizations) and it knows the resources available on the system. Especially in trading applications where processing isn't constant but dependent on the amount of data at that time, it can be much faster because the garbage collector can suspend the freeing of memory in favor of processing the data faster during peaks of data and then when it notices that the CPU isn't used that much, it will free the memory, thus not affecting the processing. Common problems like memory leaks are almost impossible in .NET unless you really don't know anything about it. You'd think that the largest software manufacturer in the world knows what they are doing when there are putting so much money and so many resources behind. I mean, even Visual Studio 2010 is a complete rewrite in .NET. This is probably the second largest and one of the oldest code bases after the Windows operating systems from Microsoft. They wouldn't do that lightly. Agree and I've also noticed that performance (as in how quickly your app executes) almost never comes down to the language but the developer. A good developer can always write faster code in a slower language than a worse developer in a faster language. Totally agree. But I'd say 10x the time and money with C++ compared to .NET. I can write a complete new custom chart that you have never seen before in 3 hours. And most of that time I spend making it pretty.

BlowFish, thanks for your compliment earlier. I wasn't aware that UrmaBlume still posts here and I am actually surprised after all the criticism he always receives. I am actually on UrmaBlume's side. Call it what you want (indicators, methodologies, charts, math, quant models), in trading it all comes down to the information that you base your decisions on and you won't be able to tell which information is more useful unless you've looked at all the different information or ways to visualize it. I think I am qualified to give an opinion on what kind of information is more valuable than others as I've gone from learning all the indicators and methodologies (the one's that UrmaBlume criticises) to creating fully automated trading systems based on that, then went 100% discretionary, then to something in-between, then spent years coming up with different ways to process data (similar to what UrmaBlume presents) which then turned into custom developed visualizations and charts that are unlike anything you can find in the public all the while thinking I knew what I was talking about, but the fact is that I was wrong (consider 99% of my posts wrong and outdated except the very recent ones). Sure I had successes which I attributed to the method I applied at the time, but I later realized that it wasn't the method but things I acted upon subconsciously from looking at the market for some time. That led me to discard almost everything I had believed about the market and used for trading and ended up using the DOM only with the support of some of my custom developed charts which was a huge epiphany to me as to what really moves the markets. I think I've done more work on everything and changed beliefs more often than most traders. I think the reason UrmaBlue gets so much criticism is because he is challenging our beliefs and whenever that happens it gets emotional (I think I've read someone mention Hitler earlier in this thread?) because changing belief ultimately means that you have to admit that you wasted time on your old belief and everyone hates to admit that they have wasted time holding on to a wrong belief. I do too, but the fact is I've wasted most of my time with regards to trading research and until one realizes that, one will just keep wasting more time. Sorry, for the huge prelude, I just wanted you to know where I am coming from and the reason I am making this post here is that I think that UrmaBlume does an incredible service to the trading community. Almost everything you find on this forum and other trading forums has been talked about before and you have to agree that there are almost no original ideas. This is the reason why I don't even read any trading forums (or book for that matter) anymore, the only threads I participate in are those that I had subscribed to earlier and where I get update notifications. I've read all the earlier threads by UrmaBlume because he was the only one who posted something really original and innovative, but I had forgotten all about him until yesterday where I had another epiphany while looking at the DOM. You know, when you look at the DOM, you see everything, every trade and every order book change. And I saw this one "thing" happening over and over again. I noticed that my best exits were based on it (they were simply perfect) and I always wished that I had not only exited by reversed my position because it always turned out to be the exact local top or bottom. Then I remembered this fortunate time when I had no losing trades for 6 days in a row (and I trade intraday) and yesterday I realized that I had based all my trades on the exact same "thing". Well, this "thing" I am talking about is exactly what UrmaBlume calls ''trade intensity". I have a different explanation for why he sees these spikes, but fact is we do mean the same thing and it's definitely done by computers that have a very good reason to enter there. Most of the time, it doesn't even go 1 tick against them and in the market I trade it's good for 9-10 ticks which is pretty big in that market. I've spent the afternoon looking for this "thing" yesterday and I called almost every top and bottom to the tick even though we had these crazy news about greece. It requires very high concentration which I won't be able to sustain for a long period of time so I am working now on incorporating the detection of that "thing" that into my software. Anyway, he's definitely got useful information to share. And if you disagree, that just means that you're still on a different path (as I was) and you might or might not get there, but if you do, you'll see why all the retail software is total crap and that people like UrmaBlume do have an edge. Btw: I know nothing about quant trading and my math skills don't go beyond basic statistics so that stuff definitely goes way above my head and I can't really comment on the validity of that stuff. But I doubt people would put put so much money and resources into it if it wasn't giving them a good return.

No, I do agree with you. I used the wrong word, I meant value as DugDug pointed out. It's obvious that we care about entry and exit prices just not necessarily what these prices mean. I still don't know what the price of the Bund means when it's trading at 122.05 with regards to the interest rate or whatever, and I don't need to. I do think anyone could learn the skill. Even though it might seem very subjective, almost everything can be described objectively and logically and should thus be relatively easy to learn/understand. All we try to do is try to read supply/demand and apply logic/psychology. No matter what traders base their decisions on, it has to go through the order book, so we see everything (even if that means that there is too much information). Applying the skill shouldn't be much different than using other trading approaches. It's still mostly discipline, i.e. cutting losses quickly when you're wrong although most of the time you know you're wrong before it goes against you. One thing that might be different is that you do have to be very quick and be willing to exit or even reverse positions at a drop of hat, so having no opinion at all times definitely helps. I even use a gamepad that is mapped to MD Trader's keyboard shortcuts to be able to execute very quickly and modify orders on both sides (bid/offer) at the same time. PM if you want to know what gamepad I use and how I have set it up. A low latency internet connection is also required as you'll be trying to hit market prices just as they leave or enter limit orders just as they get taken out to get the "edge".

I wouldn't try to compare it to a physical market. Futures trading is quite different from real markets. First, speculators don't care about price. There is nothing like "expensive" or "cheap" in Futures. You always put up the same amount of margin. I am even more likely to buy when the market went up ("is more expensive") because I know traders will be puking at some point. In a real market, you don't have to sell your oranges back to the farmer. In trading you also have double auctions. Try to visualize that in a real market. No one said that scalping is any easier than other approaches to trading. You have to be really fast and there is a lot of information you have to pay attention to. You can be very consistent though and achieve very high percentage returns.

3 weeks is definitely not enough, especially if you don't know exactly what to look for. Do you really expect to learn a profession in just a few weeks that has basically unlimited income potential? On day one you're up against the best traders of the world that have the best hardware, the best software, the best internet connection, the best staff, many years of experience and most importantly millions of dollars/euros/pounds. This is the NFL/NBA/WSOP/FIFA World Cup/Grand Slam/Formula 1/Olympics of speculation. Your choice of markets was probably also not the best. I don't think the DOM is going to help at all with Forex. The futures probably just follow the spot market and the spot market has no centralized DOM that you can look at. I've not looked at the ES, but I am not sure the DOM is going to be very helpful there either. ES is probably the most arbitraged market in the world and there are so many trades that occur because something else is happening in another market by hedgers, pair traders and large mutual investment funds. You have the mini futures, the big S&P 500 futures, ETFs, the underlying stocks, other highly correlated stock indexes with their own ETFs, underlying stock indexes and futures. I've told you that you should look at a market where you know that it's leading the market you're trading. I recommend Bund (looking at Bobl) or Dax (looking at EuroStoxx) if you trade from UK. You could also try the U.S. Treasuries if you like to trade in the afternoon. I like that large traders like Paul Rotter are there. They move the markets and they have a certain way of doing it. If it wasn't for them, it would be just a random mess of buying and selling of many smaller traders.

How long did look at the DOM? What market? Did you look to see which market influences the market you wanted to trade? Did you really read the book? Did you read what it says in "Chapter 12: Final Word"?: I give you an example of a trade this morning in Bund where I was sure what was going to happen. And I was right - to the tick on both the entry and exit. Bund and Bobl trading down slowly. Big bids in Bobl and offers keep getting lifted but it just won't break the high of the day in Bund at 122.59 which held 6 times. Big bids in Bobl but it just keeps going down, slowly. Meanwhile Bund should have been trading much lower but doesn't. Bobl is bid 2500 contracts at 116.63 and trades 11,000 contracts at 116.64 and only 164 on 116.63. Similar thing happening in Bund: trades 6,200 contracts at 122.54 and 1,600 at 122.53, 122.53 goes offer but no one wants to sell even one contract at 122.52. Why not? It's highly likely that this is as low as the market is going to go based on how many contracts traded and the huge bid in Bobl. So no one wants to be the one who sells the low of that move in either Bund or Bobl. So everything is telling you to buy. So you go long 122.54 or even 122.53 if you were lucky to get filled. Then Bobl is offered 116.64 for some, still no one wants to sell 116.63. Then you see 116.64 offering 1500 contracts to bully long traders into panicing and taking out that huge bid of 2500 on 116.63. It works: some one sells 50 contracts into 116.63 and its bid only 1000. But remember there is one guy who just bought 11,000 contracts in Bobl and probably a few thousand also in Bund and he was bidding 2500 below that. So the big guy cancelled 1500 contracts because some one sold only 50 contracts? No, because half a second after he cancelled his 1500 contracts he just lifts the entire offer at 116.64. Get it? He didn't really want to get filled on 116.63. He just posted this bid to keep the price up. And when he got challenged by the big offer, he quickly made sure that no one who was long had to worry about his position thereby avoiding traders puking into his bid and making him lose. Sure enough, everyone who was short and saw that knows their fucked and start puking. Market goes higher. This is the momentum the market needed to break the high of the day that I was waiting for. I know that after having traded so many contracts and having seen what I have seen that the market should move about 10 ticks. I don't remember the price in Bobl, but I do see a huge offer in Bobl a few ticks away and at the same price level in Bund (122.65) also. And sure enough it trades 5000 contracts at 122.64 and a few on 122.65 making it the high of the day for the next 15 minutes trading in a narrow range (where the long big guy probably dumbed his position). See, I risked 1 tick to make 10. Talk about risk/reward ratio. And I was sure it was going up. It did trade even higher (trading 166.77 now) but I don't care, I reached my daily target. This is what you have to look for. This is what goes on in my head. See why it's so hard to describe using words? It's all psychology. Who has the most money? When are traders going to puke? If they do, how far will that move the market?

I look at how much volume trades at each price and how the depth in the DOM reacts to it and vice versa. How quickly something happens is also important. It's hard to describe using text. There is a guy who has attempted to do it and even has videos. His name is John Grady. You'll find his book/video if you google for "no BS day trading". I don't own any other trading related book anymore and I've literally read it like 100 times until it sunk in, but I have developed my own style now so I don't specifically look for his "low risk entry strategies" but its the basics he talks about that are what's it about in scalping anyway. It talks about choosing the right market for scalping, commissions, hardware, software and internet connection you need, low risks entries, exits, position size and trading economic numbers. I am going to quote the second paragraph from his introduction which is all you really need to know to scalp profitably: I couldn't care less whether you buy it or not and I don't personally know him although I have exchanged e-mails with him. The real content is only about 50 pages and I bought it for like $30 so you're neither going to lose much time or money if you check it out. Completely agree. I like scalping because it suits my personality. The stuff I look for actually makes sense to me (logically) which is important to me. I can't sit there and look at a chart for hours because I get bored and start entering stupid trades out of boredom. If you are profitable, more power to you, whatever you base your trading decision on. & Here is the thing. You have to look at the right market. Looking at a market that just basically follows another one is obviously not going to help. Even if you trade outright, you need to look at correlated markets and find out which one is used to manipulate the one that you want to trade. For example, Bund is Bobl's bitch. Dax is EuroStoxx' bitch. And it's not as simple as just looking at which side has larger size. Every market has a personality. You have to get to know it. But also remember, there is only so much traders can do to manipulate markets. It's not rocket science. It just takes experience and insane discipline. I am still working on my discipline because if it wasn't for that, I wouldn't have any losing trades because sometimes I stay in a trade even though I know I am on the wrong side. It's simply human emotions, but I think I'll get better over time. I've dropped 3 of my 5 custom developed charts including the order book visualization because it was just too much information that just wasn't necessary for my style of trading. For example, I was looking at one to see trends and S/R, now I don't even think about it, I just know it. I later found out that I was even connected to the MISS interface of Eurex where order book analysis is useless because it updates only every 250ms and trades are coalesced. I also used it on the wrong market (Bund). I should have used it on Bobl. I might try it again in the future, but right now I am pretty happy with my setup. I think it's similar to product design: Take away as much as you can, but not less. There is only so much you can pay attention to, and for me it's 2 DOMs and 2 charts. I've even removed T&S from both MDs and one could certainly trade without charts at all if they could keep all the DOM information in their head. I can't, and I'll let my charts "remember" some of the information for me. To answer your question, I wish I could delete 98% of my posts since almost all of them except the recent ones are outdated.

Exactly. That's what I was trying to say with my post although your post describes it much better than mine and yours is easier to understand.

You won't see it on bar charts or candle stick charts. I developed my own time chart where it does show up consistently, but I am not going to post it.

It's funny how I am now trading exactly how this guy describes (but without indicators) - not because I read this post, but because that's how my trading evolved when I took a step back, looked at what worked and what didn't, and stopped looking at any indicators. You won't be able to really appreciate his advice until you trade the same way because your in a different frame of mind. I had read similar posts like this in the past and I just didn't get it even though they all tell you the same thing. The very largest and most successful traders don't need charts to trade. Some do look at them to remind themselves where S/R exactly was if it didn't trade there for some time but you do know S/R if you look at the DOM all day. They certainly don't base their decision to buy or sell on what they see on a chart. All we need is MD Trader (that's what the DOM is called in X_Trader). Best advice I can give anyone who wants to trade intraday is to try his exercise. You will feel like a clueless beginner again, but give it time. It will make sense at some point, just don't expect that to happen in just a few weeks.