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

    • Date: 3rd April 2025.   Gold Prices Pull Back After Record High as Traders Eye Trump’s Tariffs.   Key Takeaways:   Gold prices retreated after hitting a record high of $3,167.57 per ounce due to profit-taking. President Trump announced a 10% baseline tariff on all US imports, escalating trade tensions. Gold remains exempt from reciprocal tariffs, reinforcing its safe-haven appeal. Investors await US non-farm payroll data for further market direction. Fed rate cut bets and weaker US Treasury yields underpin gold’s bullish outlook. Gold Prices Retreat from Record Highs Amid Profit-Taking Gold prices saw a pullback on Thursday as traders opted to take profits following a historic surge. Spot gold declined 0.4% to $3,122.10 per ounce as of 0710 GMT, retreating from its fresh all-time high of $3,167.57. Meanwhile, US gold futures slipped 0.7% to $3,145.00 per ounce, reflecting broader market uncertainty over economic and geopolitical developments.   The recent rally was largely fueled by concerns over escalating trade tensions after President Donald Trump unveiled sweeping new import tariffs. The 10% baseline tariff on all goods entering the US further deepened the global trade conflict, intensifying investor demand for safe-haven assets like gold. However, as traders locked in gains from the surge, prices saw a modest retracement.   Trump’s Tariffs and Their Market Implications On Wednesday, Trump introduced a sweeping tariff policy imposing a 10% baseline duty on all imports, with significantly higher tariffs on select nations. While this move was aimed at bolstering domestic manufacturing, it sent shockwaves across global markets, fueling inflation concerns and heightening trade war fears.   Gold’s Role Amid Trade War Escalations Despite the widespread tariff measures, the White House clarified that reciprocal tariffs do not apply to gold, energy, and ‘certain minerals that are not available in the US’. This exemption suggests that central banks and institutional investors may continue favouring gold as a hedge against economic instability. One of the key factors supporting gold is the slowdown that these tariffs could cause in the US economy, which raises the likelihood of future Federal Reserve rate cuts. Gold is currently in a pure momentum trade. Market participants are on the sidelines and until we see a significant shakeout, this momentum could persist.   Impact on the US Dollar and Bond Yields Gold prices typically move inversely to the US dollar, and the latest developments have pushed the dollar to its weakest level since October 2024. Market participants are increasingly pricing in the possibility of a Fed rate cut, as the tariffs could weigh on economic growth.   Additionally, US Treasury yields have plummeted, reflecting growing recession fears. Lower bond yields reduce the opportunity cost of holding non-yielding assets like gold, making it a more attractive investment.         Technical Analysis: Key Levels to Watch Gold’s recent rally has pushed it into overbought territory, with the Relative Strength Index (RSI) above 70. This indicates a potential short-term pullback before the uptrend resumes. The immediate support level lies at $3,115, aligning with the Asian session low. A further decline could bring gold towards the $3,100 psychological level, which has previously acted as a strong support zone. Below this, the $3,076–$3,057 region represents a critical weekly support range where buyers may re-enter the market. In the event of a more significant correction, $3,000 stands as a major psychological floor.   On the upside, gold faces immediate resistance at $3,149. A break above this level could signal renewed bullish momentum, potentially leading to a retest of the record high at $3,167. If bullish momentum persists, the next target is the $3,200 psychological barrier, which could pave the way for further gains. Despite the recent pullback, the broader trend remains bullish, with dips likely to be viewed as buying opportunities.   Looking Ahead: Non-Farm Payrolls and Fed Policy Traders are closely monitoring Friday’s US non-farm payrolls (NFP) report, which could provide critical insights into the Federal Reserve’s next policy moves. A weaker-than-expected jobs report may strengthen expectations for an interest rate cut, further boosting gold prices.   Other key economic data releases, such as jobless claims and the ISM Services PMI, may also impact market sentiment in the short term. However, with rising geopolitical uncertainties, trade tensions, and a weakening US dollar, gold’s safe-haven appeal remains strong.   Conclusion: While short-term profit-taking may trigger minor corrections, gold’s long-term outlook remains bullish. As global trade tensions mount and the Federal Reserve leans toward a more accommodative stance, gold could see further gains in the months ahead.   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.   Andria Pichidi 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.
    • 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. 
×
×
  • Create New...

Important Information

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