Today's Action by Intelligent/Predictive Agents

[idetsc 10]

Hello to all contributors!

 

I would like to thank everyone who contributet to this thread and would like to draw your attention to my thought after reading this and thank UrmaBlume for the quote in his book.

 

Imagine you where on a poker table, sourrounded by e.g. 3 of the best players in the world.

 

You can analysed them hundreds of hour's on video or live, by BigBlue alike computers or any other technique full of expectation and you still never will spot their intentions so much, that you can gain an consistent edge, although they are only 3.

 

Why? They will deceive you. Everything they reveal will look like you discoverd it yourself. At that moment you are trapped.

 

(Thank's, next please. Ohh no, let me try again please because now I figured it out? Sure? Yes,... bang! Another try? Ohh let me take a look at my pocket,... yes please.... bang, bang, bang.)

 

YOU HAVE TO understand that:

 

-these players have an enourmous pressure, more than you with your one lot and 10 tick SL after three losses.

 

-their success is measured on customers order (e.g. urgency) and not VWAP only as many think

 

-everytime they get an customer order, they have to manage it under certain condtions which will naturally couse different approaches.

 

-they really want you, to track them - but only to mislead you and get their job done.

 

-they are playing very often among themselves, competing for... YOU!

 

Gosh! You dream about beeing a trader in a big bank? You know what? A lot of the "big boys" envy you (of course for you entity as a private trader)!

 

You don't have to trade, they have!

 

When you read about the "n-body problem", you will realize that only one..., yes only one trader in the world can turn the market with only one contract.

 

While they are stuffing billions in computers, and hiring very very smart people to get an edge for their effort on trying NOT to cause impact on their transactions with seemingly consistent success, YOU are trying to front run an event which is intended to at best, not occur at all. Kind of reversed, isn't it?

 

Demotivated? Well, don't worry.

 

“In the middle of difficulty lies opportunity.

Albert Einstein

 

Dog,

 

Thanks so much for the very kind words. A real treat these days.

 

And thanks for buying my book and thanks for the quote. Every author loves a quote.

 

 

Game Theory:

 

"Expressed in the specific terminology of advanced theorists,

poker (TRADING) can be defined as an asynchronous, non-cooperative,

constant-sum (zero-sum), dynamic game of mixed strategies.

While the game is played in an atmosphere of common

knowledge and no player possesses complete knowledge, some

players are better able to process this common knowledge into

a more complete knowledge than are their opponents"

-Pat Dittmar, "Practical Poker Math"

 

cheers

 

pat

[FulcrumTrader 10]

My answer will be very simple. Any indicator, any ultra high-speed quant trading system, as Urma's system or reproduced TI indicator which i'm using DO NOT provide ultimate edge. You can't automate these things.........

 

Actually I disagree, you SHOULD automate trade intensity derived higher probability trade entry determinations.

 

There are three primary signatures within dynamically expanding trade rates/intensity (when observing an extremely low latency higher end data feed down to the most granular sub second level);

 

1) CAPITULATION market order driven order flow.....this is when a mass of resting held inventory is bailing out of the market to go flat (the Losers at the moment turned into weaker hands).

 

2) COVERING market order driven order flow......this is when Commercials are systematically covering out profitable held inventory into various price levels or related supply and demand events (the Winners at the moment covering into optimal supply and demand events).

 

3) NEWLY INITIATING market order driven order flow......this is when Commercials initiate new directional trade into the effects of a related supply and demand event or at targeted pricing levels achieved (the Commercials jumping into the market while taking full advantage of at the moment supply and demand related activity or targeted pricing levels hit).

 

Once you know how to track the three primary supply and demand related signatues that can cause significant trade intensity increase, then you have something robust to work with. You next have to statistically determine which combination or sequence of the three signatures within the order flow are most optimal for automated trade entry points.

 

There is one exceptionally powerful combination of signature activity within the order flow that provides extremely powerful trade entry points. These very high probability trade entry points happen right as a significant grouping of held resting inventory get neutralized (Inventory Grab events).....these are the Losers bailing out of the market at the moment (trade rate starts to rapidly increase). At the moment of the Losers bailing, you will then also have Commercials (detecting weaker hands rapidly unwinding positions) then covering their own profitable positions into this supply and demand event.....this is Commercials taking advantage of Losers bailing, so they can cover their Winning previously held positions into a perfect sudden available supply (to optimize their exit while reducing profitable exit slippage). The next at the moment blast of signature within the order flow is Commercials now initiating new directional trade......right after they just covered their Winning positions into the Losers bailing. What a perfect time to join the market for a new directional trade, right after a bunch of Winners just covered into a bunch of Losers. Any time you have a significant group of Winners leaving the market at the same time a bunch of Losers are leaving the market, you have a brilliant supply and demand event signal to initiate a new directional trade.

 

With all the volatility in the markets the past months, these trifecta (all three signatures at once) order flow set ups have been taking place very frequently day to day. Ultimately, the tracking of the signatures within the order flow and the trade entry operations from these developed signals is most optimal in a fully automated mode imo. I sure in the heck don't know how to trade 40 markets at the same time, do you??? LOL! With proper trade intensity based signals......go fully automated, and go often!

Edited May 30, 2010 by FulcrumTrader

[TheDude 10]

I find all these assumptions and labels comical. I really do.

 

Lots of people here seem keen to fit everything in to boxes, in order to categorize everything, and to attribute rules to these 'findings'.

 

Unfortunately, it would seem apparent in some peoples beliefs that the 'commercials' behave in certain ways under certain conditions. Reading some of these posts, it would seem some of you set your watches by their anticipated activity!

 

When visiting a 'commercials' trading floor, we would see a few traders/execution monkeys, and row upon row of quant types. This isn't the case though. It's the reverse.

 

Believe me, the type of blips you peeps seem to be getting so excited about isn't commercial activity at all. If it were, we would be seeing May 6th almost every day. Thanks Waddell & Reed....

 

Please guys, before posting your opinions as facts, do think a little more about what your claiming. Who knows, I may be here on a secret mission from Goldmans trying to find people to employ and educate for my secret bedroom fund.... Who of you are worthy?....

[UrmaBlume 10]

Chris,

 

Nice post.

 

While this thread was started to discuss Inelligent Agents, certainly we use intensity as one of the inputs to those agents.

 

Whether the process is automated or not, the point you make is correct in that the proper weighting/filtering and verification to eliminate trades based on false spikes does indeed facillitate the use of this indicator as an input to almost any trading protocol.

 

While you use your readings from Cumulative Market Delta for this filtering, we use outputs from intelligent agents that have already weighted intensity as an input against the weights of a couple of dozen other inputs from other time frames.

 

We have said time and time again that intensity alone is never enough to trigger a trade.

 

 

cheers

 

pat

[UrmaBlume 10]

Dude,

 

All due respect but this thread was started to discuss the practical application of intelligent agents as it was manifested during one particular session's trade.

 

Don't you think your 6 posts to this thread and others over the last few days is a bit excessive? None of those posts offered the slightest bit of positive or constructive input and all were off-topic, personal and very negative in tone. Kind of like a stalker.

 

Some here are trying to have an on-topic discussion so I for one would humbly ask you to describe and demonstrate any comprable work of your own creation in the same level of detail as is in the text below:

 

Such a contribution would be much more positive to the tone and content of this thread and indeed the whole board than your perpetual off-topic, personal, bashing and stalking of the threads I start.

 

cheers

 

 

ecubru;

 

The first difference between your chart and the one displayed below is that the bottom 2 sub-graphs on ours have price as NO part of their calculation. By far the most heavily weighted inputs to our trade decision making process are those that have to do with the balance, velocity and acceleration/deceleration of those trades that we classify as comming from commercial speculative trade.

 

The process of the construction of the chart shown below is:

 

The signals on the chart specifically the text that recommends precise TradePoints or No Trade are the product of several layers of processing.

 

The first layer gathers data from seven different time frames, posts it to global variables, and uses some of it to form an index of weighted biases as described in this thread.

 

Other of these variables are then passed as inputs to a set of intelligent agents that range from genetically optimized neural networks, functions producted by MARS (Multivariate Adaptive Regression Splines) and CART which is "a robust, easy-to-use decision tree that automatically sifts large, complex databases, searching for and isolating significant patterns and relationships." Both MARS and CART are products of Salford systems and some of the easiest to use tools for the development of intelligent agents that we have ever found. We have developed a tool in house that can convert the functions from MARS to Easy Language and can put a newly developed model on line and producing the Trade Points you see on the charts in a very short time. This entire process is described in this thread..

 

While price is considered, the bulk of our decision making process is based on various measures of what we call commercial speculation. We first measure our calculation of time-of-day normalized commercial presence. This tells us that at this time of day the commercial precence is some percentage of what it normally is at that same time of day over the previous 72 market days. If that percentage is less than a certain number we do mean reversion trading, if that percentage is over a certain percentage then the trend following methods shown on the chart below are shown. We also measure the percentage of time-of-day normalized commercial speculative bias in those 7 same time frames.

 

We think in terms of portfolios of both methods and time frames for each instrument we trade. Some of our indicators indicate trade and some indicate method or time frame.

 

Some of these indicators of commercial presence for both method and time frame can also be used for instrument selection. For example if the S&P is only trading at 70% of normal commercial presence then it is for sure that smart money has found at least a couple of stocks in the S&P that are trading at 200% of normal commercial presence that is where the action will be on that day in that index.

 

There are many ways to evaluate the price volume relationship, implement VSA, follow Wyckhoff or implement the Market Profile. The notes above roughly describe how we input and process the concepts and information from all of the above to output the precise TradePoints on the chart below.

 

All of the indicators on the chart below are calculated in real time and the TradePoints and text recommendations are posted at the first tick of the bar and are updated every tick. The small red dots are stops, blue are scalp profit targes the + is a recommended entry price for that bar. The recommendations are for the last bar on the chart.

 

 

 

 

cheers

 

UrmaBlume

[FulcrumTrader 10]

Chris,

 

Nice post.

 

While you use your readings from Cumulative Market Delta for this filtering, we use outputs from intelligent agents that have already weighted intensity as an input against the weights of a couple of dozen other inputs from other time frames.

 

We have said time and time again that intensity alone is never enough to trigger a trade.

 

 

cheers

 

pat

 

Right...I know TI is only a component of your overall realtime observations....that makes total sense to me. Also, I do not only use Cumulative Delta in the order flow tracking for fully automated trade entry determinations. This stand alone project is more focused on events within the realtime order flow as the primary mechanism.

 

So how hot is Vegas these days? I will be out there from the 5th to the 15th of June for some vacation time at my place....looking forward to it!

[UrmaBlume 10]

Right...I know TI is only a component of your overall realtime observations....that makes total sense to me. Also, I do not only use Cumulative Delta in the order flow tracking for fully automated trade entry determinations. This stand alone project is more focused on events within the realtime order flow as the primary mechanism.

 

So how hot is Vegas these days? I will be out there from the 5th to the 15th of June for some vacation time at my place....looking forward to it!

 

Chris,

 

We have been lucky with the heat again this year in that it has been a bit late in coming. Tomorrow will probably start full time AC and over the next week our first 100+ days.

 

It is starting to get busy again in Vegas and what with the new super joints at the new City Center - Vegas feels like Vegas.

 

cheers

[davewolfs 10]

 

Actually I disagree, you SHOULD automate trade intensity derived higher probability trade entry determinations.

 

There are three primary signatures within dynamically expanding trade rates/intensity (when observing an extremely low latency higher end data feed down to the most granular sub second level);

 

1) CAPITULATION market order driven order flow.....this is when a mass of resting held inventory is bailing out of the market to go flat (the Losers at the moment turned into weaker hands).

 

2) COVERING market order driven order flow......this is when Commercials are systematically covering out profitable held inventory into various price levels or related supply and demand events (the Winners at the moment covering into optimal supply and demand events).

 

3) NEWLY INITIATING market order driven order flow......this is when Commercials initiate new directional trade into the effects of a related supply and demand event or at targeted pricing levels achieved (the Commercials jumping into the market while taking full advantage of at the moment supply and demand related activity or targeted pricing levels hit).

 

Once you know how to track the three primary supply and demand related signatues that can cause significant trade intensity increase, then you have something robust to work with. You next have to statistically determine which combination or sequence of the three signatures within the order flow are most optimal for automated trade entry points.

 

There is one exceptionally powerful combination of signature activity within the order flow that provides extremely powerful trade entry points. These very high probability trade entry points happen right as a significant grouping of held resting inventory get neutralized (Inventory Grab events).....these are the Losers bailing out of the market at the moment (trade rate starts to rapidly increase). At the moment of the Losers bailing, you will then also have Commercials (detecting weaker hands rapidly unwinding positions) then covering their own profitable positions into this supply and demand event.....this is Commercials taking advantage of Losers bailing, so they can cover their Winning previously held positions into a perfect sudden available supply (to optimize their exit while reducing profitable exit slippage). The next at the moment blast of signature within the order flow is Commercials now initiating new directional trade......right after they just covered their Winning positions into the Losers bailing. What a perfect time to join the market for a new directional trade, right after a bunch of Winners just covered into a bunch of Losers. Any time you have a significant group of Winners leaving the market at the same time a bunch of Losers are leaving the market, you have a brilliant supply and demand event signal to initiate a new directional trade.

 

With all the volatility in the markets the past months, these trifecta (all three signatures at once) order flow set ups have been taking place very frequently day to day. Ultimately, the tracking of the signatures within the order flow and the trade entry operations from these developed signals is most optimal in a fully automated mode imo. I sure in the heck don't know how to trade 40 markets at the same time, do you??? LOL! With proper trade intensity based signals......go fully automated, and go often!

 

 

I'm pretty sure I know pretty well what type of signals you are discussing here, short covering in particular has worked exceptionally well with this methodology, I like to believe that when one side is wrong and the bots/locals/whoever are taking advantage of that they will push the market in a specific direction until all these players are taken out, once they are gone and nobody is left to initiate is when we get rapid moves in the opposite direction. Market makers seem to love doing this first thing in the morning or during lunch

 

As for trade intensity, I don't see how it applies to this in anyway with regards to timing an exact entry.

 

Personally I'd rather see UB discuss when his methods failed and why. How the use of specific additional filters can aid with TI. We've only seen the perfect trades and I'm sure they are not always this way.

Edited May 31, 2010 by davewolfs

[madspeculator 10]

I find all these assumptions and labels comical. I really do.

 

Lots of people here seem keen to fit everything in to boxes, in order to categorize everything, and to attribute rules to these 'findings'.

 

Unfortunately, it would seem apparent in some peoples beliefs that the 'commercials' behave in certain ways under certain conditions. Reading some of these posts, it would seem some of you set your watches by their anticipated activity!

 

When visiting a 'commercials' trading floor, we would see a few traders/execution monkeys, and row upon row of quant types. This isn't the case though. It's the reverse.

 

Believe me, the type of blips you peeps seem to be getting so excited about isn't commercial activity at all. If it were, we would be seeing May 6th almost every day. Thanks Waddell & Reed....

 

Please guys, before posting your opinions as facts, do think a little more about what your claiming. Who knows, I may be here on a secret mission from Goldmans trying to find people to employ and educate for my secret bedroom fund.... Who of you are worthy?....

 

Dude,

 

I think you mean well when you wrote the post: providing a cautionary statement for readers. However, I think you miss the point. Your comments are very similar to some quants I used to work with in my "earlier life". They took things at face value even though they knew better. I don't know your background, but I am going to assume that you are new to trading and proceed from there.

 

As you are aware, all the intricacies of a financial market cannot be captured by a model. However, in order to trade one needs to "tell a convincing story" (a.k.a model) that one can subscribe to. All the terminologies that are used in these posts and others are just "labels" that model developers use inorder to develop a model (a.k.a "tell a convincing story"). These labels are very important for communicating the ideas behind a model. However, these labels should neither be interpreted at face value nor should be dismissed as "a vain attempt at categorization". What is really important is to really try and understand the intent of such labels.

 

For example, Wyckoff used the label "Composite Operator" in an attempt to communicate his ideas behind his model for market operation. The uninitiated dismissed that model sighting that there was no "Composite Operator" in the market. They completely missed the point; in fact, had they taken the step to understand the term "Composite Operator" they would have understood Wyckoff's reasoning.

 

In the case of "Commercials", unfortunately, there exists a duality. There are [real] commercials that operate in the ag. markets. However, the label "Commercials" used by most of the traders does not necessarily mean the [real] commercials, but means a block of volume that has the ability to move markets. This block of volume could be generated by any number of traders executing any number of strategies all acting as a group (for e.g. Fulcrum's trifecta defined above could be the result of Index arbs, but who cares; all we are interested to know is if that block of volume have the ability to move markets, and we label that block of volume as "Commercials").

 

As a non-relative-value trader, one has to monitor volume and anticipate future price action. So, carefully analyze what Urme, Fulcrum and others have to say without being bogged down by your own definition of labels, and you might learn something.

 

All the best with your trading.

 

Regards,

MadSpeculator.

Edited May 31, 2010 by madspeculator

[FulcrumTrader 10]

I'm pretty sure I know pretty well what type of signals you are discussing here, short covering in particular has worked exceptionally well with this methodology, I like to believe that when one side is wrong and the bots/locals/whoever are taking advantage of that they will push the market in a specific direction until all these players are taken out, once they are gone and nobody is left to initiate is when we get rapid moves in the opposite direction. Market makers seem to love doing this first thing in the morning or during lunch

 

As for trade intensity, I don't see how it applies to this in anyway with regards to timing an exact entry.

 

There are very clear patterns within rapidly increasing trade rate supply & demand events that ATTRACT Commercials participation......so yes, you can time entries as you then detect Commercials initiating new directional trade (and join them in the order flow). The whole point of the order flow signature tracking is to statistically identify the exact conditions in the order flow which attract Commercials to initiate new directional trade.....and then to track them as they initiate entries. To SEE when Commercials are initiating new directional trade in the order flow is very advantageous imo.

[davewolfs 10]

There are very clear patterns within rapidly increasing trade rate supply & demand events that ATTRACT Commercials participation......so yes, you can time entries as you then detect Commercials initiating new directional trade (and join them in the order flow). The whole point of the order flow signature tracking is to statistically identify the exact conditions in the order flow which attract Commercials to initiate new directional trade.....and then to track them as they initiate entries. To SEE when Commercials are initiating new directional trade in the order flow is very advantageous imo.

 

Correct and much of this can be seen visually on a footprint chart or DOM which shows volume transacted at a specific price.

[FulcrumTrader 10]

Correct and much of this can be seen visually on a footprint chart or DOM which shows volume transacted at a specific price.

Well a footprint chart will show the Cumulative Delta as the buyers lose control to the sellers (or sellers lose control to the buyers) but it does not at all show you, "hey everyone.....Commercials are joining the order flow for newly initiated directional trade RIGHT NOW!" if you know what I mean.

 

Now I have tracked and worked specifically with Cumulative Delta for 7 years, and I have a very good idea what I see in the order flow at various zones of resting inventory from all my experience (for discretionary trading). With TI there is an ability to have very specific information within a sub-second basis as to be perfectly set up for fully automated intraday scalping/position trading. I would never want to be sitting intensely focused on a DOM or Footprint chart all day long looking for the few second bursts of this TI activity I mention......no thanks. This is the exact type of trade activity perfectly left to full automation.......plus, full automation can scan 30 to 40 markets throughout the day at the same time (looking for specific statistically advantageous TI events to take advantage of).

[TheDude 10]

Dude,

 

I think you mean well when you wrote the post: providing a cautionary statement for readers. However, I think you miss the point. Your comments are very similar to some quants I used to work with in my "earlier life". They took things at face value even though they knew better. I don't know your background, but I am going to assume that you are new to trading and proceed from there.

 

As you are aware, all the intricacies of a financial market cannot be captured by a model. However, in order to trade one needs to "tell a convincing story" (a.k.a model) that one can subscribe to. All the terminologies that are used in these posts and others are just "labels" that model developers use inorder to develop a model (a.k.a "tell a convincing story"). These labels are very important for communicating the ideas behind a model. However, these labels should neither be interpreted at face value nor should be dismissed as "a vain attempt at categorization". What is really important is to really try and understand the intent of such labels.

 

For example, Wyckoff used the label "Composite Operator" in an attempt to communicate his ideas behind his model for market operation. The uninitiated dismissed that model sighting that there was no "Composite Operator" in the market. They completely missed the point; in fact, had they taken the step to understand the term "Composite Operator" they would have understood Wyckoff's reasoning.

 

In the case of "Commercials", unfortunately, there exists a duality. There are [real] commercials that operate in the ag. markets. However, the label "Commercials" used by most of the traders does not necessarily mean the [real] commercials, but means a block of volume that has the ability to move markets. This block of volume could be generated by any number of traders executing any number of strategies all acting as a group (for e.g. Fulcrum's trifecta defined above could be the result of Index arbs, but who cares; all we are interested to know is if that block of volume have the ability to move markets, and we label that block of volume as "Commercials").

 

As a non-relative-value trader, one has to monitor volume and anticipate future price action. So, carefully analyze what Urme, Fulcrum and others have to say without being bogged down by your own definition of labels, and you might learn something.

 

All the best with your trading.

 

Regards,

MadSpeculator.

 

Hi Mad,

 

I see your point. I admit that perhaps I do take things quite literally - such as the use of the term commercial, when it is clear the activity being discussed would never be the result of commercials.

 

As you ask however, here's a brief synopsis of my work in the industry:

- in an options pit for a small firm of locals. Blew up.

- in a closed fund trading futures. Fund was acquired, we're made redundant.

- working in market access/e-commerce (basically DMA & sponsored access). I saw it all in this role - commercials, bank prop desks, brokers, HFT, etc. Bored with the corporate life, so resigned to....

- back trading, this time my own account. Trading from home, but thinking of moving to a small firm/group

 

In total, 7 tears trading, 5 working in a bank as a consultant but not trading.

 

I wouldn't call my self an expert master trader, but I do ok. I'm happy with my progress. I do have a fair awareness of the industry though. I've seen a lot of other people struggle, a few succeed and a handful of super stars. I know how tough it is. I have blown up before and I know it isnt a great feeling to lose everything you've worked for for several years.

 

Thats why it angers me so much to see people come on here and discuss as if they are some authority when it is clear they do not understand what they are talking about. I say this as a trader (as someone else pointed out), and from an industry standpoint. It angers me when you point out to them that they can not possibly derive information they pretend to know, and they accuse you of being negative! Several people have already pointed out that things are being over-complicated. The reply comes back that with some intellectual detail for an excuse that resonates 'you're just not clever enough', 'only post if you think the square root of nothing is worth being discussed' etc. I could go on.

 

I just don't want to see people feeding someones ego who claims on one hand to be here to help people, and on the next hand he 'can't be bothered with 1 lot traders'. We all have to start somewhere. Another one of many seemingly contradictory standpoints. Anyway, this is indeed only my opinion. If people want to waste countless hours following someones attempts, good luck to them.

 

I admit I don't really have anything to add in the development of 'intelligent agents', because it's so alien to my way of trading - which is more intuitive and objective (and simple!). What I can add is to point out the failings and delusions of the approach. I'd hope that this could be taken as as constructive criticism instead of an attack on ones intellect. I'd hope it may be pondered for a moment rather than 'I'm right, get lost if you think otherwise'. If people are that easily offended, their ego has no place in the market. Believe me. Stick to the card games.

 

Viva internet!!

:helloooo:

Edited May 31, 2010 by TheDude

[BlowFish 10]

I find all these assumptions and labels comical. I really do.

 

 

I agree. Which is a crying shame as some pretty solid ideas are being obscured by hyperbole and hubris. There are many market participants that have a wide range of modus operandi depending on their immediate objectives and current market conditions. To lump a co-located, market making HFTs with someone accumulating a large hedge over days or longer (so motivated by temporal stability rather than 'profit') seems ...well pretty much what you said

 

Still if you are able to set aside the who and why and concentrate on the what there are some neat ideas to pursue.

 

Anyway, back on topic, I wonder if anyone has experience of tools and applications to aid in this sort of work? In the very distant past I used Neuroshell Daytrader, pretty promising though ultimately not successful (probably due to my inadequacies at the time). Worth a look. One thing I do recall is that some quite unexpected things made good inputs and if you let the genetic optimiser rip on a bunch of inputs and there parameters it would often pick rather counter intuitive inputs and settings.

[TheDude 10]

Hi Blowfish,

 

From what I have seen, typical applications that are used to build models around are Tango from RTS, Portware, and Apama. These are all 3rd party apps used by the serious traders who know what they are doing. Of course, the actual models themselves are proprietary to the individual traders. I have never seen Tradestation being used. This is because the support offered isn't suitable for someone managing upwards of 50 million (which is peanuts to most prop desks), not to mention execution speed and reliability. Other common solutions will be the app, that simply plugs into the TT, Fidessa, GL etc API. This assumes non co-lo solutions.

 

Generally, there are a few categories:

- Those based around stochastic modelling. These are typically quite short term in nature. They treat prints as random (lets not get into a random walk debate!! ). That should in itself be an interesting point for discussion here. In no way does any competent practitioner pretend, or care, if a print is from Tom, Dick, or JPM. The fact is, there was a print and it has removed liquidity. A stop would never be used here, it would simply cover. In machine cycles, it's faster to simply cover than to 1/ work out where a stop should be. 2/place the order. 3/ receive acknowledgement. 4/ relay that info back. 5/ receive market update. 6/ does this require adjustment of stop?..... Hardly HFT is it!!

 

- Event (quote) driven for arbing and market making where quotes and LTP's from related markets are the capstone. You can often see market quotes going crazy way off the inside market. This is a sign of such algo's adding and cancelling orders based on other events in other markets. We cant be 100% of this, but its the most probable explanation.

 

- Fundamentally based - these are typically longer term, and again driven off other markets. The quant develops the algo and execution price. A trader is employed to try and achieve better price through his intuitive awareness. The algo would for example look at Russell 2k, and generate trades based off its position relative to others in the complex (YM, ES, NQ, etc) Trades may last for hours, days.... Seasonality may also be a key. The execution of these is big business and where things like TWAP, Time slicing etc come in to play.

 

There are other ideas but you get the picture. The first two also look at dark pools, and gaming liquidity to detect icebergs. Note, this involves executing trades to see how the size reacts. It does not in any circumstance say 'ooh look, x200 3 lot trades just went off. There must be a commercial in da house!! None of them use charts. Nothing wrong with charts of course for other approaches, but it just aint in the mix.

 

You see, all of this is light years away, and very different to what our own little whizz kidz here do. There's nothing wrong in that. I'm sure they make ooodles of money and are very successful. There are many many ways to take advantage of the market inefficiencies as we all know. But to claim to be an authority and take a moral high ground when people enquire about the claim is a bit off isn't it. Especially when someone claims to be something they evidently are not, to try and play pied piper with those trying to learn and better themselves.

 

Anyway, I'm off now to start a new thread about my PC's. I know there is a perfectly good thread about trading set ups already here on TL, but I wan't my own, so suckers, (ooops, I mean people) can idolise me some more.

 

All the best,

[FulcrumTrader 10]

Hi Mad,

 

I see your point. I admit that perhaps I do take things quite literally - such as the use of the term commercial, when it is clear the activity being discussed would never be the result of commercials.

 

BTW, 1 lot traders all together from TL.com or ET.com do not interject 10,000 contracts into the market in a few seconds just perfectly after another group of 12,000 resting just turned into weaker hands going to neutral.......that IS Commercials. Also, 40,000 contracts do not sit held in a 3 point range of price for 8 days until either challenged (and unwound) or made exceptionally profitable with a trending move.......that IS Commercials.

 

If you plays with MILLIONS on up and use algorithmic automated entry/exit systems as a member firm....your ARE a Commercial. This is actually not at all that hard to research and figure out.....I already did that 7 years ago.

[madspeculator 10]

Hi Blowfish,

 

From what I have seen, typical applications that are used to build models around are Tango from RTS, Portware, and Apama. These are all 3rd party apps used by the serious traders who know what they are doing. Of course, the actual models themselves are proprietary to the individual traders. I have never seen Tradestation being used. This is because the support offered isn't suitable for someone managing upwards of 50 million (which is peanuts to most prop desks), not to mention execution speed and reliability. Other common solutions will be the app, that simply plugs into the TT, Fidessa, GL etc API. This assumes non co-lo solutions.

 

 

There are couple of other products that are worth considering if this route is taken: Streambase, and AMQP based products esp. RabbitMQ. While all these products except RabbitMQ are tailored towards building trading infrastructure, RabbitMQ gives a very high-speed, flexible and robust middleware that is worth considering. We evaluated RDT Tango, Streambase, Apama, and RabbitMQ, and decided to go with RabbitMQ.

 

My 2cents!

 

Regards,

MadSpeculator.

[TheDude 10]

BTW, 1 lot traders all together from TL.com or ET.com do not interject 10,000 contracts into the market in a few seconds just perfectly after another group of 12,000 resting just turned into weaker hands going to neutral.......that IS Commercials. Also, 40,000 contracts do not sit held in a 3 point range of price for 8 days until either challenged (and unwound) or made exceptionally profitable with a trending move.......that IS Commercials.

 

If you plays with MILLIONS on up and use algorithmic automated entry/exit systems as a member firm....your ARE a Commercial. This is actually not at all that hard to research and figure out.....I already did that 7 years ago.

 

As Madspeculator kindly pointed out, there seems to be a mix up with terminology here. Often these debates seem to get tangled up on semantics.

 

Personally, and the rest of the industry understand a commercial by their purpose and activity in the market, not by his manner of execution. That means you're WRONG, WRONG, WRONG!!! But who cares, it's just semantics, so you're forgiven. I've been wrong many times before so don't worry.

 

Louis Dreyfus (a large commercial) for example phone broke a great many of their order via JP Morgan. They also use TT for DMA and probably other methods as well. So what?

 

Hopefully you see now why it is so futile to try and categorise their activity from prints, and speed and size there of alone. For example, how do you know the 10x 5k orders given to the voice broker are not simply given to move the market into a place where the algo will kick in thus gaming the market? You don't. Why do they spend so much time and money on transactional technologies? So some smart alec with an ego can come up with an 'intelligent agent' and spot their little ruse in a few months. Of course! Silly me!

:crap:

 

Anyway,

 

I'm done with this thread for now. The way I see it, the more time spent chasing your tails the more likely you are to screw up for the more diligent trader to profit from. More for me!

 

Please carry on.....

 

PS - take a look at their web site and learn what a commercial is, what he does, and why he is in the market. http://www.louisdreyfus.com/

Edited May 31, 2010 by TheDude

[Tams 20]

the internet is a wonderful place...

it allows you to make a fool out of yourself

without having to feel embarrass about it.

 

;-)>

[FulcrumTrader 10]

As Madspeculator kindly pointed out, there seems to be a mix up with terminology here. Often these debates seem to get tangled up on semantics.

 

Personally, and the rest of the industry understand a commercial by their purpose and activity in the market, not by his manner of execution. That means you're WRONG, WRONG, WRONG!!! But who cares, it's just semantics......

 

Sorry pal....in a thread that was STARTED by UB going into more detail how he tracks order flow and trade set ups with his various methods I think you may be confused. How Commercials interject/withdraw their liquidity into the market is very important to track for TI based activity. The LIQUIDITY involved and the technological METHODS used are very important to QUALIFY who has the capacity to create the type of order flow events we are talking about (as we track for these Commercials activities).

 

While you may be improperly distracted by whether it is hedging or newly initiated trades that is your own problem. BTW, most Commercials do not initiate 40,000 lot hedge positions 10 to 15 points off a new low in a multi-day downtrend in the "ES". So if Commercials out of Chicago take a large order from a large Equities firm for a hedge position intraday, I don't care one bit....as long as I can see where that inventory was interjected during the trade day. How that type of order flow gets worked into the market is what separates very large Commercial activity from the rest of the pack.....that is all I need to know.

 

So who are the firms that could potentially pump some serious order flow during the day that could be detected as Commercials TI activity, well lets see;

 

https://www.cmegroup.com/tools-information/clearing-firms.html

 

https://www.cmegroup.com/tools-information/corporate-equity-members.html

 

AGAIN, manner of execution IS a very important aspect to understand for who is doing what and when.

Edited May 31, 2010 by FulcrumTrader

[FulcrumTrader 10]

PS - take a look at their web site and learn what a commercial is, what he does, and why he is in the market. Louis Dreyfus Global: Home

 

BTW, when louis dreyfus firm ever ends up on the CME member firm page let me know....

[davewolfs 10]

Well a footprint chart will show the Cumulative Delta as the buyers lose control to the sellers (or sellers lose control to the buyers) but it does not at all show you, "hey everyone.....Commercials are joining the order flow for newly initiated directional trade RIGHT NOW!" if you know what I mean.

 

Now I have tracked and worked specifically with Cumulative Delta for 7 years, and I have a very good idea what I see in the order flow at various zones of resting inventory from all my experience (for discretionary trading). With TI there is an ability to have very specific information within a sub-second basis as to be perfectly set up for fully automated intraday scalping/position trading. I would never want to be sitting intensely focused on a DOM or Footprint chart all day long looking for the few second bursts of this TI activity I mention......no thanks. This is the exact type of trade activity perfectly left to full automation.......plus, full automation can scan 30 to 40 markets throughout the day at the same time (looking for specific statistically advantageous TI events to take advantage of).

 

When price approaches one of your zones where you choose to do business based on whatever your hypothesis may be and you are entering a position, are you not intensely focused? I know I am, which is why I plan ahead and do not allow myself to be hypnotized by watching the tape all day long. When one of these pre-determined areas are visited and everything lines up right do you require TI in order to confirm that you should proceed with your order?

[FulcrumTrader 10]

When price approaches one of your zones where you choose to do business based on whatever your hypothesis may be and you are entering a position, are you not intensely focused? I know I am, which is why I plan ahead and do not allow myself to be hypnotized by watching the tape all day long. When one of these pre-determined areas are visited and everything lines up right do you require TI in order to confirm that you should proceed with your order?

Two completely different trade ops......statistically specific TI action is for automation imo, and typical price trading back and forth between zones of resting inventory I trade discretionary. The TI events I don't want to watch for (automation can do that) and the other typical intraday action I can trade it when I feel like it.

[davewolfs 10]

Two completely different trade ops......statistically specific TI action is for automation imo, and typical price trading back and forth between zones of resting inventory I trade discretionary. The TI events I don't want to watch for (automation can do that) and the other typical intraday action I can trade it when I feel like it.

 

Have you ever deployed an automated trading strategy that is based purely on TI?

[FulcrumTrader 10]

Have you ever deployed an automated trading strategy that is based purely on TI?

Yes.......I have a new system forward testing at this time that will be at a different level than what I have ever had before. In addition, I currently use Accordion trade entry/management systems I have developed so I am trying to blend the two concepts together for future use (as a stand alone fund only using these systems).