Commercials Very Active Today - Filtered Intensity

[UrmaBlume 10]

We have been working on our indicators of the intensity of trade and have developed a couple of new filters.

 

Today the commercials were more active than normal. We found 13 trades based on intense commercial activity - 11 were profitable here are charts of the 3 best of the day (Times are PST). Hint for filters - size and threshold.

 

 

 

 

[BlowFish 10]

Interesting charts UB you would have taken a couple of ticks heat on the last one haha

 

I wonder what you mean by 'threshold' in this context. Minimum size?

 

I guess you have seen the volume splitter thread? Some of these concepts are applicable in numerous applications.

 

Finally I notice that there is always a lot more blue than red in your histograms which means that I might not have figured that Without completely giving the game away (though you have been quite generous so far) does the blue/red on the filtered chart represent the same as on the unfiltered ones? I seem to remember they always had more blue too.

[UrmaBlume 10]

Interesting charts UB you would have taken a couple of ticks heat on the last one haha

 

I wonder what you mean by 'threshold' in this context. Minimum size?

 

I guess you have seen the volume splitter thread? Some of these concepts are applicable in numerous applications.

 

Finally I notice that there is always a lot more blue than red in your histograms which means that I might not have figured that Without completely giving the game away (though you have been quite generous so far) does the blue/red on the filtered chart represent the same as on the unfiltered ones? I seem to remember they always had more blue too.

 

BlowFish,

 

Thanks for the kind words.

 

Yesterday certrainly was a great day for those that use this type of indicator. Ours finds 6 -12 such trades per day session in the ES.

 

As to the color you will notice blue bars at the tops and red at the bottoms. This demonstrates rare instances when what is shown as selling volume is really buying by the commercial and vice versa.

 

These bottoms (reverse for tops) are not made by traders suddenly taking the asked they are made when downward momentum runs into commercial buying that is bigger than the market at that moment in time and price. This size is executed by automated order placement and the size is almost never shown on market depth.

 

We also read this on our HUD as CPM (contracts per minute) which is measured as of every transaction and with time granulated to milliseconds. During a normal day session in the emini if CPM is < 3k price is not going to go very far and begins to have more drive above 6k.

 

cheers

 

[BlowFish 10]

Thanks. When I dabbled with this before I noticed that when the market pauses (or even just slows) that the intensity at that time drops to zero. This is as you would expect if no trades cross the tape for a few seconds the intensity is zero at that moment in time. I presume you are setting a minimum threshold for the intensity itself? Did I ever ask if you smoothed? I think perhaps I did but can't recall an answer, that might be intentional of course

 

I have a hunch smoothing and filtering are pretty important to get the best from this stuff.

 

As a complete aside I wonder if you notice when these conditions tend to occur?

[UrmaBlume 10]

Thanks. When I dabbled with this before I noticed that when the market pauses (or even just slows) that the intensity at that time drops to zero. This is as you would expect if no trades cross the tape for a few seconds the intensity is zero at that moment in time. I presume you are setting a minimum threshold for the intensity itself? Did I ever ask if you smoothed? I think perhaps I did but can't recall an answer, that might be intentional of course

 

I have a hunch smoothing and filtering are pretty important to get the best from this stuff.

 

As a complete aside I wonder if you notice when these conditions tend to occur?

 

 

BlowFish,

 

If "when" refers to time of day, the answer is anytime that the price and momentum models these guys use trigger - and that can be anytime.

 

They also occur with some regularity during the night session but the thresholds and other settings are entirely different and are adjusted according to time of day normalized volume measurements. These measurements are seen in Blue on our HUD.

 

I couldn't be more delighted that the brightest among you, like Blowfish and the others that are actually doing some work in this area, are finding value in our work.

 

cheers

[BlowFish 10]

One might guess that when the intensity is a couple of standard deviations from the mean (of a suitable sample) that someone is up to something.

[UrmaBlume 10]

One might guess that when the intensity is a couple of standard deviations from the mean (of a suitable sample) that someone is up to something.

 

Right on Mr. BlowFish. The commercials are the only traders with size & technology strong enough to do this kind of trade and it is this very small percentage of traders who make almost all the money. This is our way of looking over their shoulders as they act. One entity I know does 20,000 ES round turns per week.

[honvly 10]

UrmaBlume,

 

Thanks for the theory and the screenshots. I compared it to screenshots of my own for that day, and it is clearly apparent that I have much work left to do in order to achieve the numerical accuracy that you have.

[UrmaBlume 10]

UrmaBlume,

 

Thanks for the theory and the screenshots. I compared it to screenshots of my own for that day, and it is clearly apparent that I have much work left to do in order to achieve the numerical accuracy that you have.

 

Honvly,

 

I am delighted that you find value in this work. Keep after it - you WILL be rewarded.

 

If the mods would take it as news and not spam, let me say that I am saving some level of detail for my next 2 books "Practical Short Term Trading - Techniques & Technologies" and "Practical Technical Analysis of Price & Volume - a New Era." My publisher is on my ass to get these out so it wont be too long. While these will be available to the public, they are primarily designed to help develop & train our own in-house traders.

 

cheers

[honvly 10]

As to the color you will notice blue bars at the tops and red at the bottoms. This demonstrates rare instances when what is shown as selling volume is really buying by the commercial and vice versa.

 

These bottoms (reverse for tops) are not made by traders suddenly taking the asked they are made when downward momentum runs into commercial buying that is bigger than the market at that moment in time and price. This size is executed by automated order placement and the size is almost never shown on market depth.

 

I have noticed this behavior, and it is immensely confusing. Bid intensity at bottoms results in upward swings in price, and vice versa. However, it may be possible to use this behavior to filter out stop market orders, which one would expect to trade at the ask as price moves lower.

[UrmaBlume 10]

I have noticed this behavior, and it is immensely confusing. Bid intensity at bottoms results in upward swings in price, and vice versa. However, it may be possible to use this behavior to filter out stop market orders, which one would expect to trade at the ask as price moves lower.

 

Indeed, it can be very confusing. When I first started tinkering with this indicator I was expecting to find buying volume at the bottom and selling at the top - instead I found another form of volume/buy/sell/price divergence.

 

As you might know from other posts we use an indicator that is our calculation of session net new trade by longer term commercial traders.

 

Below is a screen shot of a divergence between that indicator and price that proved to be good for 20 S&P points. We think of this behavior on the extremes as just another form of divergence - i.e., lots of selling volume and price not going down.

 

As a fairly accomplished poker player let me say that this game we play is the one true "Big Game," the greatest treasure hunt ever, an honorable pursuit and best of all anybody can take a shot, all you have to be is more right than wrong.

 

When I compare it to poker I say it is a heads up match where there are no antes or blinds, the opponent can never bet, raise or re-raise and must call your every bet and can never fold. You on the other hand can always limit your risk, can bet after you see your hand, can raise and can even re-raise your own bet. Plus maybe ever more valuable is that unlike poker it doesn't get tougher as the stakes increase - if you can beat it for a 2 lot, you can beat it for a 100 lot.

 

good luck

 

cheers

 

[BlowFish 10]

I have noticed this behavior, and it is immensely confusing. Bid intensity at bottoms results in upward swings in price, and vice versa. However, it may be possible to use this behavior to filter out stop market orders, which one would expect to trade at the ask as price moves lower.

 

If you want to understand more you might want to get a copy of Harris (or O'Hara). He does an excelent job of describing different types of trader why and how they trade, different dimensions of liquidity hwo provides it who takes it etc. It is a tangled web. of course this wont allow you to say ah ha that spike must be x y or z but personally I found it a fascinating read. "Trading Exchanges & Market Microstructure for Practitioners" is the title. Mind expanding, and in places mind blowing.

[taotree 10]

I have a hunch smoothing and filtering are pretty important to get the best from this stuff.

 

Yeah, that's one of the things I'm struggling with. I'm taking on the challenge to avoid parameters as much as possible. I have some historical data I can run this stuff on (to about 2 microsecond timestamp), I've done an intensity calculation, but working out how to sum it without choosing an arbitrary window size is a fun challenge.

[taotree 10]

Indeed, it can be very confusing. When I first started tinkering with this indicator I was expecting to find buying volume at the bottom and selling at the top - instead I found another form of volume/buy/sell/price divergence.

 

Below is a screen shot of a divergence between that indicator and price that proved to be good for 20 S&P points. We think of this behavior on the extremes as just another form of divergence - i.e., lots of selling volume and price not going down.

 

This sounds like what I've been calling "cost per move" that I've been working on. At first I did it based on bid/ask moves, but I have a new value that "smooths" out the fluttering of last between bid/ask and am using that instead now. The idea is as you describe, as it gets more and more "expensive", to move the market in a certain direction, than we might expect it to turn because it means it's hitting heavy resistance.