BlowFish

Again seems like you have it. Examples of trades 'outside the market' (above and below) and 'inside' the market. Incidentally you should not really see these trades very often with centralised electronic markets.

Interesting discussion about what is essentially a data sampling issue. There are various common (and less common ways) to sample financial data series. You can choose to sample with respect to constant time, constant price (range) or constant volume for example. Depending on what you want to see and what you are less interested in seeing might make a particular sampling method 'best' for you. Seems like both Steve and the Prof know exactly what they want to see and have chosen the appropriate data sampling method for them. There is an important lesson in there but it is not 'x bar type is better than y'.

Isn't there a bit of a contradiction hidden away in there? I too like backing and filling so you can manage and scratch trades but again there are markets where that backing and filling is profitably tradeable in it's own right. Again ES's poor granularity works against it here. Chances are by the time ES has up ticked to allow you to scratch (an no one gets filled on limit in the ES unless they are on the wrong side) you will have taken $50 out of the Russell (for example). ES is the lazy old nag of course by any objective measure. Try trading Crude, or the Russell or the DAX or the 6E or the 6J.Tthey are wild stallions in comparison, you will be in the next county on any of those nags before the ES has left the stable. This is not really hyperbole sadly. It's not that it is 'hard' it's just that it is not great to trade using anyone of a variety of objective measures. One of the (few) exceptions is that it will take size but you actually need to trade size to make a decent return. (well in comparison to other instruments).

That looks about right rocky, seems like you understand pretty well how it hangs together.

Are you anticipating $32 ? Just wondering why you would hold long through such a dump?

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Just read them in sequence 1 occurred at the ask because at 9:15:36 you are told the ask is 5834. Two seconds later (at '1') you get a trade at 5834. Some of the other prints look screwy (trades occuring outside the BB BA). I'd contact your broker and ask what the &^%$ is going on

1-3 that is my understanding (I think it is correct but it would not be the first time I a wrong!) 4 I puzzled over too. If you have 20 bid and a trade of 3 at that price you would expect to see 3 traded followed by an updated bid of 17. This does not seem to be happening. I guess that they are either not reporting that or perhaps an 'iceberg' order is keeping the bid refreshed. On some feeds quotes (BB & BA) are sampled rather than every single change reported. It certainly appears that someone is adding limit orders to the book as trades go off. (so supporting that price).

Looking at the quantities that is not how it looks like things are being reported. Trade is an actual trade at the price reported. bid is an update to the total number offered at best bid, ask is an update to the total amount offered at best ask. They are not actual trades but updated quotes. If a trade is reported at the same price as the prevailing BB it was 'at the bid'. At least that is how I am reading it

Hehe indicates amusement. Sure the program is pretty good and will do more or less anything most of the other popular packages will. Esignal is a pretty poor data feed however and not really of 'professional' quality if you require full accurate and timely data that is. Of course these things can change overnight (litteraly) as companies do capacity planning and add new infrastructure. In my experience of esignalc(over many years on and off) It is not very timely either and often lags behind other data feeds. It also misses some trades and its bid ask data is even further lacking. Check the number of ticks you get against CQG if you do not believe me. Also check the current last against CQG after major news, it can lag. Anyway none of that was my point. I was commenting on your advice to dump your broker. Zenfire is not a broker (just like CQG is not) in fact they compete pretty head on with CQG in so far as they provide order execution infrastructure and real time quoting. CQG go above and beyond this as they also have ticker plant for historical data and provide charting and analytics (at a cost through commissions). Zenfire do not though are beta testing providing a small tick history. For what Zen/Rithmic do they do every bit as well as CQG (which is damn well, retail traders are spoilt nowadays ). They don't provide market internals and they don't provide brokerage services however. In fact many brokers who offer zenfire will switch you to CQG infrastructure if you ask (depending on what clearing arrangements they have). It will likely effect your commission a little particularly if you choose to use there charting but probably no need to 'change your broker' (unless they can not offer you decent order execution infrastructure e.g. Zen, Rythmic, CQG, TT)

Just saw the second part of your question. There is not that much written about it to be honest. The couple of things that spring to mind are Amazon.com: Studies in Tape Reading (Fraser Publishing Library) (Fraser Contrary Opinion Library Book) (9780870340642): Rollo Tape: Books and Amazon.com: Tape Reading & Market Tactics (9789650060411): Humphrey B Neill: Books At $15 and $10 respectively they wont break the banks

Actually looks like it is more like 240 / 250. I simply looked at the black prints marked trade (and totalled them roughly in my head). They all appear to be at the best bid.

The 'popular strategies' still involve pricing instruments (typically derivatives), managing risk, portfolio optimisation, model validation etc. Stochastic calculus is still a cornerstone of the discipline which means a good understanding of degree level mathematics is still really a pre-requisite to play the game.

I wonder why? Because they don't supply market internals? Even if that Is something you would expect to get from a broker surely it is right down low on the list when comparing them, after all your data feed provider is going to provide internals anyway? The speed and reliability of order execution and quote refreshes (in my humble retail opinion) are far far far more important than whether they supply internals or not. Incidentally Zenfire are not a broker they provide low latency connectivity and order execution infrastructure to various exchanges. Well they don't exactly, it is the same 'institutional' (I hate that term) infrastructure that R|tjmic provide. Mind you this is from some one that describes Esignal as 'professional level' hehe. Steve as I have said before I find your posts interesting and well reasoned, however when someone posts as an 'institutional' trader then personally I think their posts demand more scrutiny. Of course we all have aberrations but when these can influence the less informed one has to be careful.

I'll play Aggressive/impatient/anxious sellers have been prepared to hit the bid to sell/go short. They have traded about 200 contracts. Despite this the inside bid has increased from 150 offered to 800+ offered by patient potential buyers. Several things could happen from here. Impatient buyers could enter the market, Impatient sellers could withdraw or patient buyers could withdraw (cease bidding / pull contracts). Not much can be said about patient sellers from this section of the tape. Of course which combination occurs will determine what happens to price.

Hi MMS Just wondering what technicals exactly? Be quite interest to hear your thinking on that. Should it break down and depending on how it break) that may well be the case but I'd be interested why you might anticipate what is a major level, that remains untested will break. I am inclined to agree but wearing my traders head I would have to look for a buy down there until (if and when) the level actually breaks. OP your post seemed to be focused on the actual trade rather than analysis (bravo seems to be very few of those here nowadays) Does the trade meet the criteria in your plan? Is the RR OK? Does your plan allow you to sell into support? (and regardless of any ones opinion it is support until it is broken). It really isn't necessary to 'predict' to trade successfully. Regardless of my analysis my plan will have me looking for buys down there or selling pul backs after it is clear that the level is in fact broken. Finally even if we are ultimately heading lower there is a pretty good chance of a reaction (bounce) before price heads down, again wearing the traders hat I'd be looking to buy a pullback after the break.

Absolutely! ................

The trouble is (and this is through casual observation, albeit a lot of it) at interesting points is where things can be difficult to quantify. For example price can be halted an turned in a mix of two ways buyers can withdraw or sellers can hold firm or be prepared top offer lower. Of course in practice it needs a mixture of the two. Delta is not so good for revealing magnitude though plotting volume alongside helps. Plotting positive delta and negative delta separately might also reveal what's going on better. Another interesting metric is measuring 'delta shift', so you essentially reset delta when price makes a high or low measure delta from that point.

You know the same thing occurred to me. I think Thales is a pretty aggressive stop tightener but if you squeeze too tight you can strangle the golden goose. If I remember correctly (from how ever many hundred pages ago) Thales would generally wait for price to make a swing high/low to bring his stop down behind unless price had moved a 'good' distance without retracing in which case he would arbitrarily lock in some profit. Incidentally Cory, good job keeping going what is possibly the only thread posting charts let alone live charts!!

Personally I would not concern myself with that too much and take profits ahead of it. If I had to bet on it though I would assume that it is still support (until it actually breaks). Several currencies are at or coming up to interesting levels.

Not sure why anyone would scalp the ES, unless they need to trade a hundred at a clip. The granularity is awful (each tick is too big). Not only that it is so thick at each level you will need to pay the spread to get filled. Also it's range isn't that great (which coupled with the large tick size) means that there are not that many ticks high to low in any particular time frame (compared to some indexes). That forces you towards slightly longer swings (or more contracts). Oh and if you zoom in to 'fast' charts they are damn ugly and 'boxy'.

If you buy into the idea that delta is a decent proxy for order flow then it is not much of a stretch to use cumulative delta as a measure of inventory. (Have to credit Fulcrum trader for promoting that idea). If you accept that, then it is pretty easy to come up with strategies based on discrepancies when price revisits a supply or demand level (obvious from price alone) depending on what the cumulative delta (inventory) looks like when it revisits that level. (are people still holding short inventory from the area). Simply put you look for divergences between price and cumulative delta (inventory) at key levels.

"Smart Money" is one of the terms that amuses me. (Though it angers me that it might set struggling traders back). Anyone that uses the term as some sort of catch all is unlikely to have a good understanding of how and why the many different types of participants trade. I think what really cemented it for me was when Tradeguider made the term a cornerstone to their sensationalist marketing. On a practical level making such broad categorisations is unlikely to help a trader understand the markets. To be fair this particular advice may be good for long term speculators/investors whom it appears to target. I wonder if Paul Rotter (one of the more recent 'famous' traders) paid too much attention to such things? Now, these guys might well be respected economists and top notch market analysts for all I know, but I though "smart money largely ignores the blather from mainstream media" was pretty ironic coming from guys that make money selling main stream media. (Selling reports and newsletters since you ask). Maybe I am just an old sceptic, it keeps me amused though

Hi John, it sounds like you have come up with a pretty well defined process to arrive at some quite specific goals. It is difficult to work purposefully towards something if that something is not well defined or, as is frequently the case for newer traders, does not really move you towards your ultimate trading goals. (Some never get beyond looking for the indicator that is going to make them successful) There is nothing wrong with relying upon simple observation to come up with 'variables that help stabalise things'. This can be done in completely formal ways (the scientific method if you like) or in much more informal 'instinctive' ways. I think there are perhaps more potential pitfalls with the latter. For example simply getting distracted (particularly if one doesn't have as well defined specific goals as you appear to). Another biggy (which can creep in with formal approaches too but is more likely with informal approaches) is anyone of the numerous cognitive biases that can easily sucker punch traders.

A search for Lee & Ready algorithm will get you going in the right direction. For some reason they are credited with the original algorithm despite it being proposed a couple of years before their paper. There is a large (and ever growing) amount of research on these sort of metrics, there really is no reason to rely on anecdotal evidence.