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Volume Splitter

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I think the issue is with InsideAsk and InsideBid. Essentially you are 'peaking' at those values (which fluctuate) at a moment in time. They are not synchronised with last in any way shape or form.

 

 

exactly! they are unsynchronized, but synchronized "enough" when the market is calm

 

this is ome reason why it gets worse when the market moves because the Bid/Ask pushes in one direction relative to the closes and tricks the indicator. the second is that the link and code might have trouble keeping up. during quiet times, it does ok. in one of Tasuki's posts, it shows the bottoms overshooting the price, this is most likely due to this "increased activity effect." the only way to solve it properly is to received synchronized data.

 

comparing the closes to each other works relatively well; but one needs to make assumptions/avg through the up/down pressure (ie order book) based on relative closes and closes that don't move. That's where i magic will be, in my humble opinion

 

phall

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comparing the closes to each other works relatively well; but one needs to make assumptions/avg through the up/down pressure (ie order book) based on relative closes and closes that don't move. That's where i magic will be, in my humble opinion

 

phall

 

I dont know if this is what you search, but for Ninjatrader the jtRealStats indicator shows on the right side, tick by tick, how much volume is occurring above, at and below the previous bar's closing price. I am sure thsi could be also plotted as histogramm changing some lines.

 

Level II/Tick Volume Indicator for NinjaTrader

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attached is a MACD .ELD for the close based volume splitter

name: VS_MACD

 

this is not intended to be "the solution"; but to investigate whether the methodology is on the right track and could eventually be fine tuned.

 

if someone could test out today would be great

VS_MACD.ELD

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phall,

On your indicator which I called "271", I can't seem to change the colors of the open and close (DO and DC). I've looked at the code, but I'm not good enough to figure out what to do. Is there an easy fix for this? Of course there are two places where color is addressed in the indicator, one in the Inputs section (and the values here seem to override) and one in the colors tab, which seems to have been de-activated somehow. I'm sure it's in the code, but I don't know what to do. My reason for asking is that it's often very useful to put DC as Red, so that you can easily see where the bar closes, or where it is currently if the bar is still active.

I just saw your VS_MACD a few minutes ago, so I'll only get about 40 minutes of data for today, Friday June 12. I put it on two charts, a 1 minute and a 233 tick, hoping to see some kind of action before today's close. So far, after 10 minutes, I can't tell a thing. I'll post after the close.

Tasuki

Edited by Tasuki

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As requested, here's a very short snapshot of the VS_MACD by phall, from permalink #278. Just found it 40 minutes before the close, so the charts don't have much on them, but I'll do another one on Monday.

Both charts ES, first is 1 min, second is 233 tick.

Geez, looks like you got something here, phall! I'm groovin' on those divergences.

Your hippie turned trader,

Tasuki

5aa70ee61a3a8_ES1minVCMACD01.thumb.png.c393edeb18115a5c791069bb38d7939f.png

5aa70ee622eae_ES233tickVCMACD01.thumb.png.b3647962dc2b1a932098b7810b80fb47.png

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As requested, here's a very short snapshot of the VS_MACD by phall, from permalink #278. Just found it 40 minutes before the close, so the charts don't have much on them, but I'll do another one on Monday.

Both charts ES, first is 1 min, second is 233 tick.

Geez, looks like you got something here, phall! I'm groovin' on those divergences.

Your hippie turned trader,

Tasuki

 

You also get divergences at the same place with 8 period RSI, 8 period Momentom (ROC) and regular MACD with default settings and my guess is that you will see that with any type of oscillator.

 

I am not saying the indicator is not useful, but in this case it is not giving you anything different you cannot get with a regular indicator. Also if you look at the chart, you will see the 2nd bottom is made on much less volume than the previous one, indicating that there might not be much interest taking it lower.

 

Be careful not to fall into a trap that just because an indicator sounds complicated and fancy, that it will give you anything different than you already can get with less fancy indicators, or just by looking at what the chart is telling you.

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You also get divergences at the same place with 8 period RSI, 8 period Momentom (ROC) and regular MACD with default settings and my guess is that you will see that with any type of oscillator.

 

sevensa et al,

Compare the chart I've attached here to the chart of the ES 233 tick from my previous post (permalink #280). Indeed, both the RSI and the MACD did pick up the second divergence, but they were MUCH less clear than the beauty created by the VS MACD. However, neither the RSI nor the MACD picked up that first little gem of a divergence.

 

I will be the first to admit that phall's new VS MACD needs alot more testing that what I was able to give it today, but it's initial test beat the pants off the two oscillators.

 

Once upon a time I had a trading friend who told me that no trader should use an indicator unless he understood the math behind it. Looking at the code for the MACD or RSI, and comparing it to the code for the VS MACD, you'll find very little similarity. Most glaringly absent from the regular MACD is anything to do with volume. The regular MACD is just a standard lagging oscillator. The size of the trades being placed does not influence the math of the regular MACD at all.

 

Philosophers like to joke that there are only two types of people, lumpers and splitters. Lumpers are always grouping things together, saying, "This is similar to that", whereas splitters are always saying, "No, these two things are different." Well, sevensa, I'm a splitter. I say that, just because indicator A and indicator B both are able to create divergences does NOT mean they have a damn thing in common.

 

One thing we should do is to alter the block size on the VS MACD and see how the indicator changes. That's something else the regular MACD can't do.

 

So, I appreciate your note of caution, sevensa, but I think (current working hypothesis) that you're way wrong here. Further testing will tell!

5aa70ee6404e4_ES233tickregularMACDandRSI.thumb.png.44c4f5cf92c5edcae764c3bf0a494af0.png

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The regular MACD is just a standard lagging oscillator.

 

Well, to be fair, so is the splitter. That's not really the point, though.

 

I've been watching all this discussion about oscillators. I think someone went so far as to declare that my indicator was actually an ROC?!? Funny. It's no surprise that the overall shape of the big trader activity is similar to the overall shape of a detrended price graph, is it? I mean, if they weren't strongly correlated, we couldn't use them like we do. As such, pure price oscillators will often tell a similar story if all you watch is the amplitude.

 

However, I find that usually a couple times a day the big traders will turn a bit before price does, so for simple divergence I find them to be quite good compared to pure price oscillators. Worth a look for divergence traders, anyway.

 

Divergences aside, my focus with the EOTPro splitter has always been to read the ebb and flow of commitment from the big traders. That's also our main focus in the room. As such, we have always had at least one additional dimension of data in our splitter, beyond the simple amplitude (displayed as the thickness/color of the plot). That is one thing that clearly sets it apart from your everyday, run of the mill oscillator. I guess changing the trade sizes is another thing that sets it apart, but since I pretty much only follow the big traders I don't think it counts for much other than the "let's laugh at the small traders" gimmick.

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One more thing to remember is that the time horizon for small vs big traders is very different. Traders trading small lots almost invariably have small stops because, as a general rule, their account size is relatively small. By contrast, traders trading large lots generally have, or can tolerate, much wider stops because their account sizes can tolerate larger losses. They will frequently engage in campaigns of accumulation and distribution, holding their positions over drawdowns which would wipe out the bank accounts of smaller traders. As a consquence, their trading style is very different from those of us with moderate sized bank accounts, and this needs to be taken into consideration when assessing the actions of these big traders.

1) They may drag the price around simply for the purpose of catching stops--this is something that small traders cannot do, and this behavior by large traders should be reflected in any functional volume splitter.

2) They may hold fast when price dips because they believe that higher prices lie ahead and they are using a drop in price to accumulate further shares/contracts. In this instance, one might see price dive, but large traders holding firm.

3) I presume the opposite would be true for distribution at the tops of a market---the vol splitter should show the big traders selling eagerly while price stalls at a high.

 

Basically, the vol splitter (set for big traders) should reflect the principles outliined by Wyckoff. The two techniques for reading the market should dovetail because they are both looking at the same thing--the actions of the large traders. They're just using different methods of displaying the same information...that is, if the vol splitter is working properly.

 

Those of you who have followed the VSA thread will know that it is based on Wyckoff's principles, and also that VSA seems to work best on longer time-based charts, such as 15 minute charts. The incredible drag of the vol splitters is that they don't seem to be able to handle historical data, but maybe even an intraday 15 minute chart of the vol splitter, coupled with a volume indicator and Wyckoff/VSA analysis, would be instructive. Worth looking at, anyway.

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1) They may drag the price around simply for the purpose of catching stops--this is something that small traders cannot do, and this behavior by large traders should be reflected in any functional volume splitter.

2) They may hold fast when price dips because they believe that higher prices lie ahead and they are using a drop in price to accumulate further shares/contracts. In this instance, one might see price dive, but large traders holding firm.

3) I presume the opposite would be true for distribution at the tops of a market---the vol splitter should show the big traders selling eagerly while price stalls at a high.

 

Well, I'll just say... Never forget that you are only tracking the large market orders with the splitter. Of course big traders will also trade in small market orders and small/big limit orders. So, do not expect a whole story. I've tried to remind people several times that the main purpose of the splitter is to show when the big traders act like there is no time to spare, because otherwise there is value in hiding their actions.

 

As a consequence, it will show you when they run stops, and it will show you when they push hard directionally, and it will show you when they eagerly attack highly liquid areas (presumably because they are racing to be the ones who get to avoid slippage). Since our eotpro splitter shows ebbs and flows in their commitment, we can also see when they kinda just stand aside. But, in my opinion, when people claim they can see accumulation and distribution via our volume splitter or market delta type approach, I suggest that they are misleading themselves, at least a little. I can't think of a reason why big traders would consistently broadcast accumulation and distribution in such an obvious fashion. Maybe they do, but I'm skeptical, and I certainly don't use our splitter that way.

 

(not to mention, most splitters I've seen in forums have such fast averages on them that the horizon effect should cause their indicators to completely miss any lengthy accumulation/distribution on a fast chart, even if the big traders are being obvious about it).

 

So, I'd never discourage anyone from looking into any trading angles they can imagine, but I want to remind people to consider the limitations of their algorithm. The human brain can always find a pattern if it wants to, even if there's not one there!

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phall,

On your indicator which I called "271", I can't seem to change the colors of the open and close (DO and DC). I've looked at the code, but I'm not good enough to figure out what to do. Is there an easy fix for this? Of course there are two places where color is addressed in the indicator, one in the Inputs section (and the values here seem to override) and one in the colors tab, which seems to have been de-activated somehow. I'm sure it's in the code, but I don't know what to do. My reason for asking is that it's often very useful to put DC as Red, so that you can easily see where the bar closes, or where it is currently if the bar is still active.

Tasuki

 

Tasuki

 

at the top of the code there is a line that says:

[LegacyColorValue=true] (or something similar.)

 

just delete this line and reverify.

 

Phall

Edited by phall

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With respect to the splitter divergences: i agree wholeheartedly that the user must understand the context of what the large trader group is trying to do; this can't be accomplished without using other indicators and techniques to sort out the behaviours. Just relying on this one is not a strategy; you will get killed.

 

i think it's Jon Carter who always emphasizes that if you don't understand what the other players are doing in detail; you will be a-hole in the room. This is one adds one piece of the puzzle i guess, but the puzzle has many pieces.

 

Reiterating what Blowfish said many posts ago, i would encourage everyone to take the basic "engine" and build it into their favorite indicator types. The MACD version is one VERY simple implementation, comparing the relative strength of two trend lines of differing periods; but there are many others of course and can be modified by averaging, momentum techniques, ROC etc...

 

in short, anything that operates on the OHLC of the price, could be implemented on the OHLC of the splitter

 

phall

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Tasuki, that looks like it to me.

 

it looks like the basic "close compare" engine is doing its job.

 

The difference in behaviour is probably due to refinements in post processing, including potentially a more sensitive "close compare" methodology, sensitivity to changes in volume traded, and the computation of the end line.

 

i don't want to start speculating too much, but i think comparing trendlines like MACD is on the right track and building a composite of trendlines, with corrections scaled to volume, will speed it up/slow it down at the correct times

 

phall

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here are some charts from today. The white is the blowfish macd and the purple the EOT. The chart is a 1 min. chart.

volsplit.thumb.jpg.096949742d995c9c6a667b8cc03b661a.jpg

volsplit2.thumb.jpg.2a18b911496be9eda84ea750e8f27ee9.jpg

 

 

I also wanted to add that although I'm not sure how to do it the setplotwidth could potentially be used to set the thickness of the macd line.

 

For example if # of trades > then x then setplotwidth. I'm not sure what coding to use to determine the actual amount.

Edited by pimind

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Hey nice simple settings without all the stuff I saw in the room. I understand its important to look at non-correlated indicators. That said the more I trade the more I believe if you have good tools to track order flow that's about all you need.

 

The folks at EOT are a good group of folks with some very good tools.

 

Is that Curious George Pimind?

Edited by dandxg

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hi all

 

found a minor bug today in VS_MACD. attached is the fixed ELD.

 

Name: VS_MACD2

 

not major, but it should improve the performance; the resetting of the block sizes was slightly off

 

posting some test results would be greatly appreciated

 

phall

VS_MACD2.ELD

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phall,

 

I will run it on monday, Done trading today. Have you also taught about adding the width feature to the lines. setplotwidth. I was thinking that blocks per trade could be used.Blocks per trade uses trade volume. The more blocks the thicker the lines.

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From what Richard Todd has already written, I am guessing that maybe line thickness should be determined based on the ratio of large trader activity to all other activity for that particular market. For example, there might be some kind of average ratio between "total delta" and "large trader delta" for a given period (such as prior 3 cycles). From time to time, the "large trader delta" might be proportionally greater or smaller compared to all other activity. Just a thought.

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