Trade Imbalance >>> Future Prices

[UrmaBlume 10]

A family of indicators that can oftentimes lead price are those based on order flow or the balance/imbalance of trade. We find measures of trade imbalnce are much more predictive of future prices than measures of high or low volume

 

The blue pusle bars in the app below reflect percentage of normal volume for 6 different intra-session time frame and normalized for time of day. The red and green bars to the right of the pie charts reflect our measure of trader commitment over these same six time frames and again normalized for time of day. This measure of trader commitment is but one more way to express the balance of trade.

 

This pic was taken during today's (09/28) price run up. Please note that the blue/volum bars show volume well below average in all buy 1 very short time frame while trader commitment is well over average and to the buy side in all but 1 time frame.

 

The point here is that it is not the velocity of total trade or the amount of total trade or even the movement of price itself that predicts future prices but rather it is the degree to which that trade in imbalance to one side of the other that will most often chage before price tops or bottoms.

 

[MidKnight 12]

Hi UB,

 

If I understand this correctly, you are saying it is the ratio of commitment to volume? This is something I have explored in the past but failed to get much illumination on future prices with...

 

I guess it depends how we can define 'commitment'. I was defining it as the net buy/sell at bid/ask at the timeframe under analysis. I think I've read you are doing it some other way though.

[clmacdougall 11]

A family of indicators that can oftentimes lead price are those based on order flow or the balance/imbalance of trade. We find measures of trade imbalnce are much more predictive of future prices than measures of high or low volume

 

The blue pusle bars in the app below reflect percentage of normal volume for 6 different intra-session time frame and normalized for time of day. The red and green bars to the right of the pie charts reflect our measure of trader commitment over these same six time frames and again normalized for time of day. This measure of trader commitment is but one more way to express the balance of trade.

 

This pic was taken during today's (09/28) price run up. Please note that the blue/volum bars show volume well below average in all buy 1 very short time frame while trader commitment is well over average and to the buy side in all but 1 time frame.

 

The point here is that it is not the velocity of total trade or the amount of total trade or even the movement of price itself that predicts future prices but rather it is the degree to which that trade in imbalance to one side of the other that will most often chage before price tops or bottoms.

 

 

UB, good to see you posting again!!! Your indicator is not based on the speed of buying/selling, the volume of buying/selling or even the impact of volume on price, you must be focusing on a slowing of momentum then, an understanding of resistance as a slowing of the imbalance of trade. Please reply.

[MidKnight 12]

UB, good to see you posting again!!! Your indicator is not based on the speed of buying/selling, the volume of buying/selling or even the impact of volume on price, you must be focusing on a slowing of momentum then, an understanding of resistance as a slowing of the imbalance of trade. Please reply.

 

Yes this is what I was meaning in my prior post. I was measuring the ratio of commitment (as I defined it above) vs volume and assessing that to the amount of ticks it moved. At the time, I was calling this 'efficiency'. I never saw much use with what I had, but I'm not the brightest spark in the fire. Maybe more illumination can be given in this thread.

 

With kind regards,

MK

[UrmaBlume 10]

The point here is that it is imbalance that drives price not volume.

 

The concept behind this point comes straight from market profile theory and addresses how such big moves can happen during the night session when there is so little volume.

 

When there are buyers and sellers of equal conviction then volume is high and price movement is low. When there is only buying, price can only go up as successive offerings are taken out.

 

Night session trade is done mostly by commercial traders and because of that we take the night balance or net trade, the night range and night support and resistance as very important numbers for the coming day session.

 

These indications have nothing to do with velocities - simply how much more buying than selling across different time/volume frames.

 

While during the first hours of today's trade (09/28) there was much less than average volume, there was a much greater than average buy side imbalance in the order flow.

 

Our calculations show net new longs of +73,694 contracts, not record but certainly above average and about what you would expect in a reaction to the reversal day on 09/23.

[MidKnight 12]

These indications have nothing to do with velocities - simply how much more buying than selling across different time/volume frames.

 

So basically, you are saying that it is simply the net delta across various timeframes normalized by time of day?

[Kiwi 16]

The point here is that it is imbalance that drives price not volume.

 

The concept behind this point comes straight from market profile theory and addresses how such big moves can happen during the night session when there is so little volume.

 

When there are buyers and sellers of equal conviction then volume is high and price movement is low. When there is only buying, price can only go up as successive offerings are taken out.

 

Night session trade is done mostly by commercial traders and because of that we take the night balance or net trade, the night range and night support and resistance as very important numbers for the coming day session.

 

These indications have nothing to do with velocities - simply how much more buying than selling across different time/volume frames.

 

While during the first hours of today's trade (09/28) there was much less than average volume, there was a much greater than average buy side imbalance in the order flow.

 

Our calculations show net new longs of +73,694 contracts, not record but certainly above average and about what you would expect in a reaction to the reversal day on 09/23.

 

 

 

The most frequent reason for a big move in the US futures at night has nothing (zero) to do with who or what type of traders are involved. And the volume is low for the simple reason that most US market traders are asleep, eating, watching the box or hunting one.

 

The big moves occur because the Asian and European markets make big moves and the US market, cute puppy's tail that it is, dutifully follows its new leaders. That is of course, imbalance or pressure. But it certainly isn't magic.

[UrmaBlume 10]

So basically, you are saying that it is simply the net delta across various timeframes normalized by time of day?

 

If it was that easy, I would just subscribe to Market Delta. Some misguided soul even suggested that tick ratios in delta would reporoduce intensity as we read it.

 

Add about sixty lines of code and 2 more data feeds to market delta and you are there.

[MidKnight 12]

If it was that easy, I would just subscribe to Market Delta. Some misguided soul even suggested that tick ratios in delta would reporoduce intensity as we read it.

 

Add about sixty lines of code and 2 more data feeds to market delta and you are there.

 

Yeah, that is what I had thought. But your prior comment quoted in my post implied otherwise.

 

Thanks for the reply though.

 

With kind regards,

MK

[davewolfs 10]

If it was that easy, I would just subscribe to Market Delta. Some misguided soul even suggested that tick ratios in delta would reporoduce intensity as we read it.

 

Add about sixty lines of code and 2 more data feeds to market delta and you are there.

 

I wouldn't knock Market Delta yet, there are a lot of things that can be rapidly prototyped within it. I will agree with you that you cannot properly calculate trade intensity, but that might all change in a future release