Today's Action by Intelligent/Predictive Agents

[davewolfs 10]

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).

 

I'd be interested to know your usage of TI especially when trading longs in a bear market. There is a ton of noise under these circumstances simply because of the nature of what is happening (stops being triggered etc..)

[madspeculator 10]

[.........]

 

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".

 

[........]

 

Fulcrum,

 

I, like many others in this forum, appreciate you sharing your trade ideas. However, please refrain from making comments like above, which is nothing but your opinion masqueraded as a fact. What you say above is incorrect. It makes me think that you dont understand what a "hedge" is. I used to work for a group that did exactly what you say does not happen.

 

Please keep up your otherwise good work.

 

Regards,

MadSpeculator.

[FulcrumTrader 10]

Fulcrum,

 

I, like many others in this forum, appreciate you sharing your trade ideas. However, please refrain from making comments like above, which is nothing but your opinion masqueraded as a fact. What you say above is incorrect. It makes me think that you dont understand what a "hedge" is. I used to work for a group that did exactly what you say does not happen.

 

Please keep up your otherwise good work.

 

Regards,

MadSpeculator.

 

Did you notice at all I said MOST Commercials.....I did not say ALL so attention to detail is very important. From those who I know in the Chicago futures industry, I have a very good understanding of the types of large Commercial trading activities. I did not actual have many opinions on how Commercials traded until about 7 years ago when I spent some time in Chicago. BTW, I may be there again this late summer working on a new project with several of my contacts there.....all I can say is the HFT game is growing.

[madspeculator 10]

Did you notice at all I said MOST Commercials.....I did not say ALL so attention to detail is very important. From those who I know in the Chicago futures industry, I have a very good understanding of the types of large Commercial trading activities. I did not actual have many opinions on how Commercials traded until about 7 years ago when I spent some time in Chicago. BTW, I may be there again this late summer working on a new project with several of my contacts there.....all I can say is the HFT game is growing.

 

Fulcrum,

 

You missed the point. The point is a "hedge" happens IRRESPECTIVE of where price is; otherwise, the hedger will be taking on grave position risk and the financing agency's risk managers will be all over the hedger (could result in an increased haircut). If you don't remember what you said, you said:

 

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". [Emphasis added]

 

Once again, please don't pretend to know more than what you know.

 

All the best with your trading.

 

Regards,

MadSpeculator.

 

Urma: Sorry for hijacking your thread like this. I will refrain from making any other off-topic comments in this thread going forward.

Edited June 1, 2010 by madspeculator

[FulcrumTrader 10]

http://www.traderslaboratory.com/forums/f208/massive-hedge-es-before-jan-22nd-7440.html

 

40,000 contracts accumulated 10 to 15 points off recent lows in a multi-day down trend is for the most part Equities firms (through their own desks if they have futures side or through others) getting very defensive (protecting equities LONG positions/portfolios). Most Commercials trading desks are not suddenly initiating heavy new directional SHORT trade just after the market has had a multi-day downtrend (near the recent lows). As I have mentioned in this thread before, I do not care if Commercials are hedging for themselves or taking orders from Equities firms. The bottom line is, there are specific order flow signatures created by newly initiated Commercials orders that CAN BE detected and used for high probability trade entry determinations.

[davewolfs 10]

http://www.traderslaboratory.com/forums/f208/massive-hedge-es-before-jan-22nd-7440.html

 

40,000 contracts accumulated 10 to 15 points off recent lows in a multi-day down trend is for the most part Equities firms (through their own desks if they have futures side or through others) getting very defensive (protecting equities LONG positions/portfolios). Most Commercials trading desks are not suddenly initiating heavy new directional SHORT trade just after the market has had a multi-day downtrend (near the recent lows). As I have mentioned in this thread before, I do not care if Commercials are hedging for themselves or taking orders from Equities firms. The bottom line is, there are specific order flow signatures created by newly initiated Commercials orders that CAN BE detected and used for high probability trade entry determinations.

 

I'm not sure to what extent you've back tested these types of divergences, it seems these setups failed miserably in 2009 and worked wonderfully in 2010 (both long and short even on smaller timeframes).

[FulcrumTrader 10]

I'm not sure to what extent you've back tested these types of divergences, it seems these setups failed miserably in 2009 and worked wonderfully in 2010 (both long and short even on smaller time frames).

 

If you can watch realtime whether a zone of resting inventory is building or dissipating, I am not sure what you mean by failed? Also, where is the divergence and how many contracts are currently held? Middle of a recent multi-day range of price, on the upper end of an up trending multi-day range of price, on the lower end of an up trending multi-day range of price, on the upper end of a down trending multi-day range of price, on the lower end of a down trending multi-day range of price? The context of recent price/delta volume action and where the divergence is in relation to a multi-day range of price are all components that have to be accounted for.

 

I have not seen any overall changes in the various Delta Volume Distribution patterns from 2009 to 2010 other than some volatility expansion again in 2010 (for the "ES" that is). The patterns have pretty much been the same for the last 7 years I have tracked the Cumulative Delta.....now getting into volatility changes, that is a separate subject (and how to account for the changes).

[FulcrumTrader 10]

Well I am getting ready to go on an extended vacation this week.....it was great to have these various discussions with everyone as we all look at the markets through our varied life experiences in trading. In the end, I have to say the TL forums have been a pleasant surprise this past year and there are some excellent traders here with some great backgrounds! It is VERY nice to see that a "Politics & Religion" section does NOT dominate the TL world......LOL! :haha:

[UrmaBlume 10]

UB, if/when you have the time, I'd like to see some of your charts which show false positives and why the signal was ignored.

 

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.

 

Dave,

 

Sorry I didn't get to answer these earlier but we did some maintenance and lost some intensity data.

 

However, over the last hours the market has posted an example of exactly what you are looking for.

 

In the first chart you can see thee nite session BUY spikes in a down market.

 

In the second chart of that same period you can see that the agents more heavily weighted sell information from the other inputs and gave nothing but sell signals all the way down in spite of the buys from intensity.

 

I have said again and again that intensity by itself wont get you there. What will are the intelligent agents that value/weight intensity in each particular instance against several dozen other inputs and are the topic of this thread.

 

Three Buy Spikes in a down market:

 

 

Nothing but sell signals in spite of the buy spikes in intensity

 

 

 

cheers

 

UrmaBlume

Edited June 1, 2010 by UrmaBlume

[Simple 10]

the internet is a wonderful place...

it allows you to make a fool out of yourself

without having to feel embarrass about it.

 

;-)>

 

Well, perhaps a little.

[davewolfs 10]

If you can watch realtime whether a zone of resting inventory is building or dissipating, I am not sure what you mean by failed? Also, where is the divergence and how many contracts are currently held? Middle of a recent multi-day range of price, on the upper end of an up trending multi-day range of price, on the lower end of an up trending multi-day range of price, on the upper end of a down trending multi-day range of price, on the lower end of a down trending multi-day range of price? The context of recent price/delta volume action and where the divergence is in relation to a multi-day range of price are all components that have to be accounted for.

 

I have not seen any overall changes in the various Delta Volume Distribution patterns from 2009 to 2010 other than some volatility expansion again in 2010 (for the "ES" that is). The patterns have pretty much been the same for the last 7 years I have tracked the Cumulative Delta.....now getting into volatility changes, that is a separate subject (and how to account for the changes).

 

The test was simple. A price double/bottom top which compared current inventory to inventory the last time the price was visited within a weekly time period - intermediate trend was ignored (perhaps it should not have been, but an optimizer was used to tweak certain values for defining how we find where the change in inventory began). Divergences then for both long and short were computed being triggered when divergence values of 0-X delta were met (this is where a GO can really save you time).

 

Failure was defined as one of these divergences occurring and price continuing to move against the diversion more then X points. Based on the example in the thread you posted, a failure would have occurred if that double top had been exceeded more then X points while the divergence remained in place.

[davewolfs 10]

Dave,

 

Sorry I didn't get to answer these earlier but we did some maintenance and lost some intensity data.

 

However, over the last hours the market has posted an example of exactly what you are looking for.

 

In the first chart you can see thee nite session BUY spikes in a down market.

 

In the second chart of that same period you can see that the agents more heavily weighted sell information from the other inputs and gave nothing but sell signals all the way down in spite of the buys from intensity.

 

I have said again and again that intensity by itself wont get you there. What will are the intelligent agents that value/weight intensity in each particular instance against several dozen other inputs and are the topic of this thread.

 

Three Buy Spikes in a down market:

 

 

Nothing but sell signals in spite of the buy spikes in intensity

 

 

 

cheers

 

UrmaBlume

 

So there are 27 inputs used here to compute - non of which involve price?

[boomerangas 10]

Chris, i'm using cum delta studies in my trading too and it would be interesting to hear your opinion regarding one phenomena i've observed for a long time. Today this short-term scalping setup occured on crude oil near 72.80 level. Usually you could ride it for 20 points on crude and this happened today too. So basic rules - if the price is trading near some important "delta inventory level" or some important swing point and current cum delta is HIGHER in downtrending market than it was when price started slide down from this point it's short-term bearish sign? One could say, instead, that if the cum delta is rising and HIGHER than it was when price last traded at this point it means that more asks was hitted than bids and thus it's accumulation and not distribution. Just maybe it's short-covering phenomena? You have showed this setup in one of your vides too but have not said why it occurs. Thanks for explanation.

 

 

If you can watch realtime whether a zone of resting inventory is building or dissipating, I am not sure what you mean by failed? Also, where is the divergence and how many contracts are currently held? Middle of a recent multi-day range of price, on the upper end of an up trending multi-day range of price, on the lower end of an up trending multi-day range of price, on the upper end of a down trending multi-day range of price, on the lower end of a down trending multi-day range of price? The context of recent price/delta volume action and where the divergence is in relation to a multi-day range of price are all components that have to be accounted for.

 

I have not seen any overall changes in the various Delta Volume Distribution patterns from 2009 to 2010 other than some volatility expansion again in 2010 (for the "ES" that is). The patterns have pretty much been the same for the last 7 years I have tracked the Cumulative Delta.....now getting into volatility changes, that is a separate subject (and how to account for the changes).

[FulcrumTrader 10]

Chris, i'm using cum delta studies in my trading too and it would be interesting to hear your opinion regarding one phenomena i've observed for a long time. Today this short-term scalping setup occured on crude oil near 72.80 level. Usually you could ride it for 20 points on crude and this happened today too. So basic rules - if the price is trading near some important "delta inventory level" or some important swing point and current cum delta is HIGHER in downtrending market than it was when price started slide down from this point it's short-term bearish sign? One could say, instead, that if the cum delta is rising and HIGHER than it was when price last traded at this point it means that more asks was hitted than bids and thus it's accumulation and not distribution. Just maybe it's short-covering phenomena? You have showed this setup in one of your vides too but have not said why it occurs. Thanks for explanation.

I will take a look at the CL latter today but there definitely may have been a Hidden Divergence you were looking at or some heavy covering distribution.

[TheDude 10]

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

 

Indeed they are not. I have already told you they go through JPM, so why would you expect them to be clearing members? Do you understand what a clearing firm is and does?

 

Lets investigate further shall we?

 

How about the energy market as an example. Some of the largest commercials are: Exxon/Esso Mobil,

Shell,

BP,

Total,

and smaller but still significant firms such as:

Sempra,

Louis Dreyfus

Mercuria

 

Low and behold Fulcrum, it would appear that only BP have membership. Hmm, why would that be?

 

C'mon Fulcrum, you're clearly a very intelligent person with lots of understanding about the industry, so please tell us all why this should be - that some of the largest trading firms (as you seem to think) do not have membership.....

 

Now then, lets get back to business.....

 

You seem to claim an awareness of how commercials trade, where they trade, and when, yet you clearly do not even understand their business or why they are in the market. It would appear that you are putting the cart before the horse wouldn't you agree?

 

Madspeculator has demonstrated this fact effortlessly, yet you ignore his wisdom which he graciously imparts upon you. Shame on you.

 

Please Fulcrum, I have no doubt that you are a clever chap. But please, PLEASE, for the sake of all here, and yourself, get your thinking straight. Madspeculator and others here are only trying to demonstrate that some of the foundations that are being put forward here are indeed built upon the sand. Whats more, the tide is coming in.

 

Please be careful out there in the market.

 

All the best,

 

Dude.

Edited June 1, 2010 by TheDude

[FulcrumTrader 10]

While you again go off in left field, it is very simple who we are talking about that ACTUALLY drive the order flow in the ACTUAL futures market where a TI event could at all be tracked. We are talking about the SPECIFIC entities that ACTUALLY initiate the trading activity in the futures market....to the point they could create TI events as they INITIATE NEW DIRECTIONAL TRADE (so WHO in the actual futures markets could initiate new directional trade that would create a TI event........large professional trading firms or a bunch of retailers with their one lots).

 

I think you are missing the entire point of the reasons why it is very useful to know when large professional trading firms are INITIATING NEW DIRECTIONAL TRADE.

 

Conversations of Louis Dreyfus and Exxon are out in the parking lot while I am talking about what is going on at the home plate after a home run event.

[TheDude 10]

And so how do you know that a string of prints is initiating and not covering, or, part of a longer term accumulation or distribution/ adding trimming of a position?

 

And in your earlier example of 40k lots sitting in a 3 point range (eg on the bid), how do you know that is a professional trading group (as you have now decided they are) sitting on the bid? Have you considered that it could well be 10k from a long term buyer initiating, 20k from a long term seller covering, and another 10k from an other participant, perhaps 'feeling lucky'.

 

I sincerely doubt that anyone would disagree that these are not 40k lots from smaller speculators/general public. My point is simply that to put a label on it and say it's from x market participant with y intention is a bit of a daft conclusion to come to. Don't you think? This is especially true when we consider all the tricks and games that these folk play to keep intentions away from the like of you and I.

 

Do you think there is a rule book the professional money manager follows when executing trades? Do you think if he is aggressively buying today he will dump it all in the market in one go, will he drip it in via time sliced orders, say 5 lots at a time every 30 mins over the next 2 weeks, will he have a policy of buying on declines only, etc, etc? You don't know. One day he may do one thing, the next he may do another. Some orders he may execute himself, some he may outsource to hide his tracks. You just dont know.

 

One rule of thumb you may find of use however is that these guys tend to be slower at getting in than getting out. Not all the time though. You just dont know.

 

Enjoy the rest of your holiday

[boomerangas 10]

Dude, so true words, but it's interesting what's your style of trading in details? What are you looking for to initiate the trade, which indicators are using and so on? Personally i'm pure order flow trader and it doesn't matter for me who are initiating trades. I'm just looking at cum delta have found no edge here. Really, if price goes up there is some reasons for it to go there and so on for the downward. Is it commercials, retail traders, hedgers, arbitrageurs does it really matters? There are so lot volume on ES and so many types of traders that we can complicate these things to the infinity. The big pool of liquidating retail traders could drive market much much higher or much much lower than any of the commercials but...Do you rememberg golden words of Livermore: "any commmercial, any big financial force can't hold price at the unfair level for the infinite amount of time. The market will be there where it should be."? So life is so difficult, why should we complicate it so much looking at who are initiating the trade...?

 

 

And so how do you know that a string of prints is initiating and not covering, or, part of a longer term accumulation or distribution/ adding trimming of a position?

 

And in your earlier example of 40k lots sitting in a 3 point range (eg on the bid), how do you know that is a professional trading group (as you have now decided they are) sitting on the bid? Have you considered that it could well be 10k from a long term buyer initiating, 20k from a long term seller covering, and another 10k from an other participant, perhaps 'feeling lucky'.

 

I sincerely doubt that anyone would disagree that these are not 40k lots from smaller speculators/general public. My point is simply that to put a label on it and say it's from x market participant with y intention is a bit of a daft conclusion to come to. Don't you think? This is especially true when we consider all the tricks and games that these folk play to keep intentions away from the like of you and I.

 

Do you think there is a rule book the professional money manager follows when executing trades? Do you think if he is aggressively buying today he will dump it all in the market in one go, will he drip it in via time sliced orders, say 5 lots at a time every 30 mins over the next 2 weeks, will he have a policy of buying on declines only, etc, etc? You don't know. One day he may do one thing, the next he may do another. Some orders he may execute himself, some he may outsource to hide his tracks. You just dont know.

 

One rule of thumb you may find of use however is that these guys tend to be slower at getting in than getting out. Not all the time though. You just dont know.

 

Enjoy the rest of your holiday

[FulcrumTrader 10]

And so how do you know that a string of prints is initiating and not covering, or, part of a longer term accumulation or distribution/ adding trimming of a position?

 

And in your earlier example of 40k lots sitting in a 3 point range (eg on the bid), how do you know that is a professional trading group (as you have now decided they are) sitting on the bid? Have you considered that it could well be 10k from a long term buyer initiating, 20k from a long term seller covering, and another 10k from an other participant, perhaps 'feeling lucky'.

 

I sincerely doubt that anyone would disagree that these are not 40k lots from smaller speculators/general public. My point is simply that to put a label on it and say it's from x market participant with y intention is a bit of a daft conclusion to come to. Don't you think? This is especially true when we consider all the tricks and games that these folk play to keep intentions away from the like of you and I.

 

Do you think there is a rule book the professional money manager follows when executing trades? Do you think if he is aggressively buying today he will dump it all in the market in one go, will he drip it in via time sliced orders, say 5 lots at a time every 30 mins over the next 2 weeks, will he have a policy of buying on declines only, etc, etc? You don't know. One day he may do one thing, the next he may do another. Some orders he may execute himself, some he may outsource to hide his tracks. You just dont know.

 

One rule of thumb you may find of use however is that these guys tend to be slower at getting in than getting out. Not all the time though. You just dont know.

 

Enjoy the rest of your holiday

 

Real simple......watch the Delta Volume Distributions for 7 years straight and then do specific research as to observed repeating events. Like I said, I have already verified key activities I see day after day or week after week through those I know within the large participant futures trading community. BTW, the 40,000 that day of the video WAS verified to me as predominantly Equities firm requested/initiated activity (for hedging). Also, after that area of hedging, the market did continue to sell off for several days......so Equities did very well for themselves hedging at those pricing levels.

 

Due dilligence is the means for proper verification, not assumptions.

[TheDude 10]

Dude, so true words, but it's interesting what's your style of trading in details? What are you looking for to initiate the trade, which indicators are using and so on? Personally i'm pure order flow trader and it doesn't matter for me who are initiating trades. I'm just looking at cum delta have found no edge here. Really, if price goes up there is some reasons for it to go there and so on for the downward. Is it commercials, retail traders, hedgers, arbitrageurs does it really matters? There are so lot volume on ES and so many types of traders that we can complicate these things to the infinity. The big pool of liquidating retail traders could drive market much much higher or much much lower than any of the commercials but...Do you rememberg golden words of Livermore: "any commmercial, any big financial force can't hold price at the unfair level for the infinite amount of time. The market will be there where it should be."? So life is so difficult, why should we complicate it so much looking at who are initiating the trade...?

 

Thanks Boomerangas. I think you're right in what you say. If price is taking a direction and it has some order flow behind it, then thats all you really need. Of course, if there is no real order flow, then you can start to look to fade. I was going to continue, but I'd only be repeating what you said! Generally, I'm looking for levels and trading off how order flow (volume, prints, quotes, pulling size, etc) acts around those levels. I'm not really into indicators, but I do use Market Profile for levels. Neither do I really have 'set-ups', patterns or shapes I look for.

 

It seems as if we are quite similar.

 

One of the great jokes in all of this, is that nowhere have any of our resident Market Wizards explained the importance of time frame of those they are keeping score on. A very long term pension fund may well execute 40k in one blast. He may be looking to hold that for several years. It could be a hedge fund looking to cover tomorrow. Of course, to you and I, that doesn't really matter. How the market reacts in the 40k in the next few minutes may well do. But, to concern ourselves with who it was, why they did it, what they had for breakfast, well quite frankly, it's for the birds. The only use it has it to try and put ones self on a platform and claim some sort of intellectual superiority over everyone else, while making a complete ass of oneself in the process.

 

Good trading to you! I'd also like to thank all those who sent PM's in support. You know who you are (Yes, even you Urma Blame, but I'm sorry, I'm still not recruiting yet :crap: )

[boomerangas 10]

Yeah, it seems that our styles are similar and really i'm concerned just with a timeframe on which i'm trading. And i trade range bars. No matter, what commercial do on 1 sec, 30 min or even daily timeframe. You could get spike in a matter of seconds like during flash crash and nothing else matters, just pure order flow from RETAIL traders. Value is either accepted or eithed declined. 80% rule works fine 80% of time, so you have 80% edge. MP VAL and VAH is everything i need. I'm just observing these levels and waching cum delta to decide if locals try to push price above VAH or below VAL. VWAP acts as a very good sup/res, so it's worth observing it. Also take a look on VWAP dev 2 and dev 3. You could earn your bread and butter just making counter-trend trades from just these levels. Put any ema to see the basic trend and you are ready for trading. Simple, no quant rocket science and i could to argue for a very long time that it's not worse in P\L than any of quant strategies.

 

Thanks Boomerangas. I think you're right in what you say. If price is taking a direction and it has some order flow behind it, then thats all you really need. Of course, if there is no real order flow, then you can start to look to fade. I was going to continue, but I'd only be repeating what you said! Generally, I'm looking for levels and trading off how order flow (volume, prints, quotes, pulling size, etc) acts around those levels. I'm not really into indicators, but I do use Market Profile for levels. Neither do I really have 'set-ups', patterns or shapes I look for.

 

It seems as if we are quite similar.

 

One of the great jokes in all of this, is that nowhere have any of our resident Market Wizards explained the importance of time frame of those they are keeping score on. A very long term pension fund may well execute 40k in one blast. He may be looking to hold that for several years. It could be a hedge fund looking to cover tomorrow. Of course, to you and I, that doesn't really matter. How the market reacts in the 40k in the next few minutes may well do. But, to concern ourselves with who it was, why they did it, what they had for breakfast, well quite frankly, it's for the birds. The only use it has it to try and put ones self on a platform and claim some sort of intellectual superiority over everyone else, while making a complete ass of oneself in the process.

 

Good trading to you! I'd also like to thank all those who sent PM's in support. You know who you are (Yes, even you Urma Blame, but I'm sorry, I'm still not recruiting yet :crap: )

[FulcrumTrader 10]

A very long term pension fund may well execute 40k in one blast. He may be looking to hold that for several years.

 

 

You are familiar with open interest and rollover I hope.....tough for that pension fund to hold the June 2010 contract for several years. If you track the Delta Volume Distributions from the first day a contract trades to the last (regardless of time frame), you never half to worry about a fund trying to hold a position for extended periods of time....who cares. You can sure tell though when a large liquidity participant is initiating new directional trade....the signature is there in the order flow.

[BlowFish 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.

 

The exchanges have a pretty clear definition of what a 'commercial' is. The emerging discipline of market microstructure has pretty clear definitions of types of participant too (more than simply commercial/ non commercial). The thing is they would both appear to be different from yours.....maybe that is where the confusion lies. It might be helpful if you offered a concise definition rather than anecdotal 'definitions'.

 

Is it simply a matter of size (10000+)? speed (seconds)? Account size (millions)? Is automatic execution mandatory for you to consider it commercial?

 

Finally, it doesn't really matter where the inventory comes from as long as you can track it, for the sake of discussion maybe it is better to leave aside the who and why. To be honest this all smacks of Tradeguiders 'smart money' rhetoric which is a shame as to me it devalues some pretty interesting work.

 

I would suggest that anyone that is interested in why & how different market participants trade, should take a look at one of the books on market microstructure. (Harris or O'Harra spring to mind).

Edited June 2, 2010 by BlowFish

[FulcrumTrader 10]

The exchanges have a pretty clear definition of what a 'commercial' is. The emerging discipline of market microstructure has pretty clear definitions of types of participant too (more than simply commercial/ non commercial). The thing is they would both appear to be different from yours.....maybe that is where the confusion lies. It might be helpful if you offered a concise definition rather than anecdotal 'definitions'.

 

Is it simply a matter of size (10000+)? speed (seconds)? Account size (millions)? Is automatic execution mandatory for you to consider it commercial?

 

Finally, it doesn't really matter where the inventory comes from as long as you can track it, for the sake of discussion maybe it is better to leave aside the who and why. To be honest this all smacks of Tradeguiders 'smart money' rhetoric which is a shame as to me it devalues some pretty interesting work.

 

I would suggest that anyone that is interested in why & how different market participants trade, should take a look at one of the books on market microstructure. (Harris or O'Harra spring to mind).

 

I did exactly give two links from the CME who I am talking about, and in other threads from the past I have stated that large liquidity participants (non-retailers) are those who can cause TI events. BTW, I do not at all like or use VSA and don't really care who VSA thinks is "smart" money.

 

For the sake of this thread, talking about Commercial trading operations, who are conducting both hedging and/or speculative directional trading, is only to point to the group that has the capability to cause TI events. It is not a big groups of players in the futures trading industry who can cause certain TI activities in the order flow as newly initiated directional trade (900 single lot orders strung together as separate orders all executed into the market in one second period of time.....through automation).

 

So while a few spend all their time over who you can or can't call a Commercial, the actual discussion should be on how to identify when large liquidity participants are getting into the market with newly initiated directional trade. Retailers don't have the means or liquidity to cause TI events as they initiate new directional trade (not even when many all at the same time decide to get into the market). Commercial trading operations (some of them) do have the ability to cause TI events as they initiate new directional trade......this is the group you want to look for as they join the market (and follow their specific TI event at the initiation of new directional trade).

 

BTW, just to throw in another wrench................LOL!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Who do large liquidity participants (Commercial trading operations......Oh no, I used that darn word Commercial again......LOL!) follow most of the day (in the "ES" that is)? One of my 5 filters as I track for TI events that I want to follow for trade entry signals, has nothing to do with anything in the order flow in the futures market.

 

Here is a good list on factors that you may or may not want to use as filters for building up your own TI indicator;

 

1) Time between trades (very detailed measurement.....using a very low latency high end feed like Bloomberg versus a typical retail feed will show differences)

 

2) Some rolling average of the rate of trade, going back say _____ days (to know when you are _____ times or greater above typical levels for instance)

 

3) Where is the order flow bias at the moment and what was it doing the past _____ seconds (bid/ask differential view)

 

4) Where is price and what was it doing the past _____ seconds

 

5) What in the heck are Equities doing right now and for the last _____ seconds (this is for ES, YM, TF trading set ups)

 

6) Was a capitulation order flow TI event active within the last _____ seconds

 

7) Was a covering order flow TI event active within the last _____ seconds

 

That should give you a very good idea of the factors needed to build up any TI capability......that would ever provide you the ability to properly detect when significant newly initiated trade events could be followed for automated trade entry. Of all the various TI events on a day to day basis (many signals) there has to be a mechanism to select which ones to actually follow.......so their is my $.02!

 

Enjoy the day....see you in the market!

[MtnDog 10]

Here is a good list on factors that you may or may not want to use as filters for building up your own TI indicator;

 

1) Time between trades (very detailed measurement.....using a very low latency high end feed like Bloomberg versus a typical retail feed will show differences)

 

2) Some rolling average of the rate of trade, going back say _____ days (to know when you are _____ times or greater above typical levels for instance)

 

3) Where is the order flow bias at the moment and what was it doing the past _____ seconds (bid/ask differential view)

 

4) Where is price and what was it doing the past _____ seconds

 

5) What in the heck are Equities doing right now and for the last _____ seconds (this is for ES, YM, TF trading set ups)

 

6) Was a capitulation order flow TI event active within the last _____ seconds

 

7) Was a covering order flow TI event active within the last _____ seconds

 

 

Thank you FT for posting this concise list. It is very close to what I have come up with on my own by reading through these various threads as well as trial and error/ experimentation. My challenge now is to put these inputs together to come up with some kind of tradeable edge that can be programed. This is where I hope some advanced computational methods can help ( ie neural, genetic, data mining, etc.) . I am experimenting with Ward Systems Chaos Hunter right now, with mixed results.

 

Simply by watching these factors in real time, and in a format that my brain can process (akin to UB's HUD), I have developed some intuition and have improved my tape reading skills.

 

Has anyone discussed how they trade using this TI info? Scalps, swing trades, etc.? I think it can lend itself to both, depending on the action you see.