Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

UrmaBlume

Why Market Depth is Useless As an Indicator

Recommended Posts

The ultra short term bursts of uber intense trade that often establish local intra-session extremes is never shown as resting orders it is auto-executed in a series of orders separated by only a few thousandths of a second.

 

The chart below shows a spike in trade intensity but while this high volume of trade was being executed it was never shown at any level as a resting order by market depth. This trade was auto-executed.

 

While commercial traders CAN successfully hide their method and whether the trade was an opening or closing transaction, they can't hide the fact of their transactions.

 

tradeintensity1.jpg

Share this post


Link to post
Share on other sites

This is quite fascinating stuff UrmaBlume. Thanks for sharing.

 

What platform are you using to write these indicators? Seems like everyone is out to win the volume analysis race.. trying to dig deeper into analyzing what lies within a volume bar. However, I do like your approach of analyzing the number of transactions with time.... or is this something else? Thanks.

Share this post


Link to post
Share on other sites

SoulTrader,

 

Thanks for the kind words. Not at all like the responses I got from one of your other, less informed, moderators.

 

You are right about volume analysis - it's all that really matters. After all it is volume that motivates price - Price doesn't motivate price and the passage of time does not motivate price, it is the occurrence of trade (buying and selling) that motivates price.

 

Knowing that it is not the passage of time but rather the occurrence of buying and selling that drives price makes one wonder why anybody would ever base their trade on indicators with price as the prime input (EMA, Bollinger, RSI, Candlesticks, Stochastic, CCI....) and to further compound the error, apply those indicators to time constant data vessels.

 

Three decades ago I was taught that the best indicators of future price don't have price as any part of their calculation.

 

As I have mentioned I run a small PRIVATE trading and technology company and the first thing I teach our new traders is that it is buying and selling that drives price. That none of our intra-session charts are time constant charts and almost none of our indicators have price as ANY part of their calculation.

Share this post


Link to post
Share on other sites
This is quite fascinating stuff UrmaBlume. Thanks for sharing.

What platform are you using to write these indicators? Seems like everyone is out to win the volume analysis race.. trying to dig deeper into analyzing what lies within a volume bar. However, I do like your approach of analyzing the number of transactions with time.... or is this something else? Thanks.

 

We use Trade Station. I am the oldest contiuous user of products developed by Bill Cruz. I even bought his Temp S&P system almost 30 years ago before there was TradeStation, SuperCharts or Omega Research.

 

TradeStations does have some issues. For us many are centered around the lack of granularity with the TS time stamp. For applications like our Market HUD we use dll's to export the data to applications we have written in C++. For finer granularity in the usage of time we access the windows kernel.

 

A couple of months ago we investigated the possiblity of changing to Ninja and ZenFire data. We were able to speak to management at both Ninja and ZenFire and found the ZenFire data stream to be great but that the way Ninja handled the data stream made the data not suitable for our purposes plus Ninja is very young software and needs a couple of more versions before it will be ready for real power users. The best we got out of the discussion was meeting with Mirus futures. Great attitude, great rates and super day margins. They even support member rates and the CME volume incentive plan that gets total round trips in the ES down to $1.80 round trip. While Ninja is not yet ready for our level of trade decision support processing we may have to get it just for executing trades at Mirus and keep Trade Station for the analysis part.

 

And thanks again for the kind words.

Share this post


Link to post
Share on other sites

TRO did share his indicators with the forum. I suppose Urmablume's will remain a secret although the concepts I suppose can be programmed by anyone with coding skills.

 

I find value in Urma's posts, for example I am quite interested in exploring more on tick charts. Lets say by using a 100 tick chart, I can simply program to count how many bars were drawn in lets say a timespan of 1 minute... this would somewhat be similar to what Urmablume is sharing?

 

I was just brainstorming right now of an historgram like indicator... not sure how effective this could be but perhaps someone else can expand on it? Thanks.

tick.thumb.png.5ae648b5ed9128fe3e460bc6a672c48e.png

Share this post


Link to post
Share on other sites

To get back somewhat on topic...

 

UrmaBlume, since your indicator/analysis relies greatly on speed I would highly suggest posting a short video showing several (since they only last a second or so) of these spikes thoughout the day. You could even stream your charts live for a day on ustream.com for free. It would also be helpful if you could post an intraday chart (full rth day) showing where these spikes occurred so an individual could get the bigger picture. These would be much more helpful to everyone. Thanks.

Share this post


Link to post
Share on other sites
...I was just brainstorming right now of an historgram like indicator... not sure how effective this could be but perhaps someone else can expand on it? Thanks.

 

Hi James,

Have you created an indicator for that? If so can you share the ELD?

 

Thanks

bakrob99

Share this post


Link to post
Share on other sites
Hi James,

Have you created an indicator for that? If so can you share the ELD?

 

Thanks

bakrob99

 

Oh no, Im not a programmer and I currently dont use TS anymore. But I suppose it wouldnt be too hard to code up for someone with programming skills?

 

If I can code this up in CQG I will share the code. Thanks.

Share this post


Link to post
Share on other sites
Lets say by using a 100 tick chart, I can simply program to count how many bars were drawn in lets say a timespan of 1 minute... this would somewhat be similar to what Urmablume is sharing?

 

I was just brainstorming right now of an historgram like indicator... not sure how effective this could be but perhaps someone else can expand on it? Thanks.

Or it is possible to plot simple time histogram to 100 tick chart, for example. I played with tick and CVB charts with time histograms when I was looking for a way to understand price movement. Hovewer, later I found that my brain easier processes or understands simple time interval charts with volume histogram. Anyway, you still get the same information, that is activity over time, or time over activity.

What is different in UrmaBlume's approach is imho just a speed of evaluation and hence a speed of his reaction, too. He doesn't wait for 100 tick, 100 CVB or 5 sec bar to finish. That's why the need for a low latency precise data feed. But the principle is still the same: A reversal on high activity.

Share this post


Link to post
Share on other sites
A couple of months ago we investigated the possiblity of changing to Ninja and ZenFire data. We were able to speak to management at both Ninja and ZenFire and found the ZenFire data stream to be great but that the way Ninja handled the data stream made the data not suitable for our purposes

 

Thanks for the great information. Can you go into details about how Ninja handles this data stream making it unsuitable?

Share this post


Link to post
Share on other sites
Thanks for the great information. Can you go into details about how Ninja handles this data stream making it unsuitable?

 

I don't know if this is why but I think I saw UrmaBlume or someone else mention in another thread that Ninjatrader changes the timestamp that comes in from Zenfire so you no longer get the microsecond granularity. That might be what he's referring to.

 

Not sure why it matters. Zenfire has an API you can interact with directly so any shortcomings of Ninjatrader are irrelevant. Doing the level of analysis that UrmaBlume is doing, I would just go direct with the API. Then you don't have to be stuck in some charting vendor's paradigm of how they think you should be analyzing the market. Paint anything you want (I prototyped a fun zoom panel you can zoom in and out of the market ad infinitum) however you want. You want higher timeframe data together with other data? Trivial in any way, dimension, etc. In fact, you could even define a non-linear time axis. To paraphrase Scotty on Star Trek: "Candlesticks? How quaint".

Share this post


Link to post
Share on other sites
SoulTrader,

 

Thanks for the kind words. Not at all like the responses I got from one of your other, less informed, moderators.

 

You are right about volume analysis - it's all that really matters. After all it is volume that motivates price - Price doesn't motivate price and the passage of time does not motivate price, it is the occurrence of trade (buying and selling) that motivates price.

 

Knowing that it is not the passage of time but rather the occurrence of buying and selling that drives price makes one wonder why anybody would ever base their trade on indicators with price as the prime input (EMA, Bollinger, RSI, Candlesticks, Stochastic, CCI....) and to further compound the error, apply those indicators to time constant data vessels.

 

Three decades ago I was taught that the best indicators of future price don't have price as any part of their calculation.

 

As I have mentioned I run a small PRIVATE trading and technology company and the first thing I teach our new traders is that it is buying and selling that drives price. That none of our intra-session charts are time constant charts and almost none of our indicators have price as ANY part of their calculation.

 

My comment to you is simply that buying and selling occur over time, so time is a factor. When the market is testing a top it may take 2 minutes to break through or 20.

 

Also the resting orders are extremely important as the market order hitting the bid is a buyer buying on the bid. sell 1 buy 1. When bids in a 5 tick range suck in 10 12 15 thousand contracts, where is the aggression. Buying or selling.

 

If you trade every ocurrance of volume spikes and change in Delta your bank account will go down.

Share this post


Link to post
Share on other sites
The ultra short term bursts of uber intense trade that often establish local intra-session extremes is never shown as resting orders it is auto-executed in a series of orders separated by only a few thousandths of a second.

 

The chart below shows a spike in trade intensity but while this high volume of trade was being executed it was never shown at any level as a resting order by market depth. This trade was auto-executed.

 

While commercial traders CAN successfully hide their method and whether the trade was an opening or closing transaction, they can't hide the fact of their transactions.

 

tradeintensity1.jpg

 

 

I use both bid/ask data as well as volume, trade events, and price movement. All these things impact future price. I trade the ES. I am very interested to hear about how you can possibly predict the market without taking price into consideration. Because of the tick size I had to specifically build my system for the ES. If I want to use my system on other instruments I would have to rebuild it with the other instrument price considerations. Any information about how to consider market sympathy without price data would be greatly appreciated.

 

Cheers

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • AMZN Amazon stock, nice buying at the 187.26 triple+ support area at https://stockconsultant.com/?AMZN
    • DELL Dell Technologies stock, good day moving higher off the 90.99 double support area, from Stocks to Watch at https://stockconsultant.com/?DELL
    • MCK Mckesson stock, nice trend and continuation breakout at https://stockconsultant.com/?MCK
    • lmfx just officially launched their own LMGX token, Im planning to grab a couple of hundred and maybe have the option to stake them. 
    • Date: 2nd April 2025.   Market on Edge: Tariff Announcement and Volatility Ahead!   The US economic and employment data continues to deteriorate with the job vacancies figures dropping to a 5-month low. In addition to this, the IMS Manufacturing PMI also fell below expectations. However, both the US Dollar and Gold declined simultaneously following the release of the two figures, an uncommon occurrence in the market. Traders expect a key factor to be today’s ‘liberation day’ where the US will impose tariffs on imports. USDJPY - Traders Await Tariff Confirmation! Traders looking to determine how the USDJPY will look today will find it difficult to determine until the US confirms its tariff plan. Today is the day when Trump previously stated he would finalize and announce his tariff plan. The administration has not yet released the policy, but investors expect it to be the most expansionary in a century. President Trump is due to speak at 20:00 GMT. On HFM's Calendar the speech is stated as "US Liberation Day Tariff Announcement". Currently, analysts are expecting Trump’s Tariff Plan to impose tariffs on the EU, chips and pharmaceuticals later today as well as reciprocal tariffs. Economists have a good idea of how these tariffs may take effect, but reciprocal tariffs are still unspecified. In addition to this, 25% tariffs on the car industry will start tomorrow. The tariffs on the foreign cars industry are a factor which will particularly impact Japan. Although, traders should note that this is what is expected and is not yet finalised. Last week, President Trump stated that he would implement retaliatory tariffs but allow exemptions for certain US trade partners. Treasury Secretary Mr Bessent and National Economic Council Director Mr Hassett suggested that the restrictions would primarily target 15 countries responsible for the bulk of the US trade deficit. However, yesterday, Trump contradicted these statements, asserting that additional duties would be imposed on any country that has implemented similar measures against US products. The day’s volatility will depend on which route the US administration takes. The harshness of the policy will influence both the Japanese Yen as well as the US Dollar.   USDJPY 5-Minute Chart   US Economic and Employment Data The JOLT Job Vacancies figure fell below expectations and is lower than the previous month’s figure. The JOLT Job Vacancies read 7.57 million whereas the average of the past 6 months is 7.78 million. The ISM Manufacturing Index also fell below the key level of 50.00 and was 5 points lower than what analysts were expecting. The data is negative for the US Dollar, particularly as the latest release applies more pressure on the Federal Reserve to cut interest rates. However, this is unlikely to happen if the trade policy ignites higher and stickier inflation. In the Bank of Japan’s Governor's latest speech, Mr Ueda said that the tariffs are likely to trigger higher inflation. USDJPY Technical Analysis Currently, the Japanese Yen Index is the worst performing of the day while the US Dollar Index is more or less unchanged. However, this is something traders will continue to monitor as the EU session starts. In the 2-hour timeframe, the USDJPY is trading at the neutral level below the 75-bar EMA and 100-bar SMA. The RSI and MACD is also at the neutral level meaning traders should be open to price movements in either direction. On the smaller timeframes, such as the 5-minute timeframe, there is a slight bias towards a bullish outcome. However, this is only likely if the latest bearish swing does not drop below the 200-Bar SMA.     The key resistant level can be seen at 150.262 and the support level at 149.115. Breakout levels are at 149.988 and 149.674. Key Takeaway Points: Job vacancies hit a five-month low, and the ISM Manufacturing PMI missed expectations, adding pressure on the Federal Reserve regarding interest rate decisions. Traders await confirmation on Trump’s tariff policy, which is expected to impact the EU, chips, pharmaceuticals, and foreign car industries. The severity of the tariffs will influence both the JPY and the USD, with traders waiting for final policy details. The Japanese Yen Index is the worst index of the day while the US Dollar Index is unchanged. Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Michalis Efthymiou HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.