Instutional "Shredding"

[jtrader500 10]

I hear you FT - I just don't buy into those theories personally.

 

The bit I don't buy is the claims that institutional players always enter with market orders. I saw that on a few webinars of yours. I'm not sure if you are still telling people this or whether your concepts have changed. I'd be more than willing to have an in depth discussion about the use of market orders and the claims that institutions always use them (and therefore show their tracks with CD).

 

If all of your theories rely on that, then it's all based on a false premise because it's fairly clear to anyone reading a DOM that this is not the case.

 

Still - that's not to say it doesn't work for you,

 

I dont mean to meddle but if you think about it, The ONLY thing that can move a market from one level to another is a market order. You cant have a limit order jump up and take out another limit order.

Since we all want to know only one thing in orderflow (which side want it more). Then measuring the aggressors by way of delta is the best way.

A limit order can only be traded into by a market order.

CD is a nice tool and gives you a running total of the aggressors so you know where they stand wrong or right. Its just a "bias tool"

thanks

[MightyMouse 12]

I dont mean to meddle but if you think about it, The ONLY thing that can move a market from one level to another is a market order. You cant have a limit order jump up and take out another limit order.

Since we all want to know only one thing in orderflow (which side want it more). Then measuring the aggressors by way of delta is the best way.

A limit order can only be traded into by a market order.

CD is a nice tool and gives you a running total of the aggressors so you know where they stand wrong or right. Its just a "bias tool"

thanks

 

The challenge is to figure out if the newly added order is an aggressive trader entering aggressively in the direction of order flow or a weak trader exiting with a stop loss. You also need to pay close attention to the range of price as the CD increases and be wary of volume. Delta by itself is simply going to measure what you already know; the fact that prices ticked up.

[jtrader500 10]

The challenge is to figure out if the newly added order is an aggressive trader entering aggressively in the direction of order flow or a weak trader exiting with a stop loss. You also need to pay close attention to the range of price as the CD increases and be wary of volume. Delta by itself is simply going to measure what you already know; the fact that prices ticked up.

 

If you want to measure the diff b/n stops being hit and aggressive orders. You need to step back and look at where it is happening in the pattern. Is it on the outside of the range or is price bouncing off the lows. If price is bouncing off the lows, then there should not be stops there, since price just went through that area. (its, not definate, only an edge) Most people search for indicators that work all the time. The key is to understand why it didnt work.

 

This is all only for a slight bias. (greater than 50%)

If we are in a range and I see more longs holding contracts as price comes back down to the bottom of the range. If thats all the info you had to work with, which side would you lean toward. Nothing is black and white, it's all grey

Thanks

[DionysusToast 10]

I dont mean to meddle but if you think about it, The ONLY thing that can move a market from one level to another is a market order. You cant have a limit order jump up and take out another limit order.

Since we all want to know only one thing in orderflow (which side want it more). Then measuring the aggressors by way of delta is the best way.

A limit order can only be traded into by a market order.

CD is a nice tool and gives you a running total of the aggressors so you know where they stand wrong or right. Its just a "bias tool"

thanks

 

You aren't meddling! Just differences of opinion!

 

I do agree that only market orders move from one price to another but that does not mean that only market orders move the market.

 

The market changes direction in a number of ways. One is that there's no 'steam' left in that direction as you mentioned. Another is that the players on limit orders step up and start absorbing the buying/selling. Many times with spoof limit orders on the other side.

 

We all know that every transaction is both a buy and a sell. A buy market order buys from someone with a sell limit order. Aggression can be in the form of market orders but it can just as easily come in the form of limit orders.

 

If you watch the DOM, you will see times where selling has no impact. You will see times where the offer is stacked and there is a lot of sell market orders going through but price is not moving down, someone has iceberg orders on the bid. It's a classic spoof and goes on every day.

 

Each market is very different in this respect - if you look at the CD on a short term chart for some thinner markets you will see CD running down for extended periods whilst price runs up. This simply reflects the use of market orders on that market.

 

The key to short term use of CD in my opinion is this - it SHOULD do what price does, when it doesn't, that is when it presents opportunity. Hence, when your pullback shows flat CD, it presents opportunity. It's not a strong pullback. If CD starts moving down and price doesn't, it simply means that we have buyers entering with limit orders. Sellers are hitting it but the buyers on limit are sucking it up. Like I said, my money is usually with the sellers in this case on the ES.

[jtrader500 10]

You aren't meddling! Just differences of opinion!

 

I do agree that only market orders move from one price to another but that does not mean that only market orders move the market.

 

The market changes direction in a number of ways. One is that there's no 'steam' left in that direction as you mentioned. Another is that the players on limit orders step up and start absorbing the buying/selling. Many times with spoof limit orders on the other side.

 

We all know that every transaction is both a buy and a sell. A buy market order buys from someone with a sell limit order. Aggression can be in the form of market orders but it can just as easily come in the form of limit orders.

 

If you watch the DOM, you will see times where selling has no impact. You will see times where the offer is stacked and there is a lot of sell market orders going through but price is not moving down, someone has iceberg orders on the bid. It's a classic spoof and goes on every day.

 

Each market is very different in this respect - if you look at the CD on a short term chart for some thinner markets you will see CD running down for extended periods whilst price runs up. This simply reflects the use of market orders on that market.

 

The key to short term use of CD in my opinion is this - it SHOULD do what price does, when it doesn't, that is when it presents opportunity. Hence, when your pullback shows flat CD, it presents opportunity. It's not a strong pullback. If CD starts moving down and price doesn't, it simply means that we have buyers entering with limit orders. Sellers are hitting it but the buyers on limit are sucking it up. Like I said, my money is usually with the sellers in this case on the ES.

 

You are right, an iceberg order is considered an aggressive order, but it in context, it is still less aggressive than a market order of the same size. I think the biggest misunderstanding in orderflow tracking is that most people look to close at specific orders and sometimes base trades on them. When I am wanting to get short in a range, I watch the battle go back and forth with lots of very convincing prints happening at times. But I hold off because I know that we shouldn't have a good breakout until the micro-volatility gets tired.

When I see the battle wear down, Sometimes, I can narrow it down to the next big big order that should be the tipping point. For people that just say "this area looks good" and then look for a convincing set of prints, 8 times out of 10, they are somewhere in the middle of the battle. And as you know, After you are in, price will push your emotions to the limit, then go in the true direction.

For me, trading is easy but mentally draining. The ONLY thing I concentrate on when i'm trying to enter where that one tipping point is(exhaustion) is it the second, third, fourth, fifth test.

One rule of thumb I go by is that if one semi-fast move is met with aggression from the other way and it turns price, you can bet that price will return to test that level (because the fight wasn't finished) That is one way that I boost my confidence to countertrend trade. It is very reliable and most of all, it makes sense.

[JohnBly 10]

If you want to measure the diff b/n stops being hit and aggressive orders. You need to step back and look at where it is happening in the pattern.

 

Yes this is the only way to tell I can think of.

It's not hard to see places where stops are getting hit, but then at some point market orders to open new positions may appear to capitolize on the move.

 

I think in the end one has to know the market well enough to know when that transition has occurred. To try and join in on a stop sweep before significant new market orders appear in that direction is to perhaps step right into a trap,

[jtrader500 10]

Yes this is the only way to tell I can think of.

It's not hard to see places where stops are getting hit, but then at some point market orders to open new positions may appear to capitolize on the move.

 

I think in the end one has to know the market well enough to know when that transition has occurred. To try and join in on a stop sweep before significant new market orders appear in that direction is to perhaps step right into a trap,

 

Your right, experience to know which way to trade a stop run. I try to incorporate stop runs into every trade that is in an area that alot of people are watching. Shorting swing highs are my specialty, I can pick them like friut. A stop run looks exactly like a breakout. I just focus on the offer side after the run. The volume and the micro-volatility on the pullback gives me a pretty good read. But then again, all I do is trade the ES from the short side. If someone knows the price action from the short side better than me, they can take my money...

If I can make money every day last week from shorting, on the biggest up week in history, I can say, I think my head is getting big. That means I will prob lose tomorrow:)

[FulcrumTrader 10]

I hear you FT - I just don't buy into those theories personally.

 

The bit I don't buy is the claims that institutional players always enter with market orders. I saw that on a few webinars of yours. I'm not sure if you are still telling people this or whether your concepts have changed. I'd be more than willing to have an in depth discussion about the use of market orders and the claims that institutions always use them (and therefore show their tracks with CD).

 

If all of your theories rely on that, then it's all based on a false premise because it's fairly clear to anyone reading a DOM that this is not the case.

 

Still - that's not to say it doesn't work for you,

 

In all of my various webinars, I have always stated exactly what I have been told by those who trade within large liquidity participant firms - "the predominance of large liquidity participants directional trade is with market orders"

 

I have never said all of their trade is with market orders...that would just not make any sense. The primary order type that most Commercial trading entities use for directional trade is market orders...this can run as high as 70% of the large liquidity participants directional trade order flow throughout the day.

[FulcrumTrader 10]

If you track and know where levels of price are tied to levels of remaining held inventory, I find it a logical and simplistic process to learn when increased covering or increased newly initiated activity is taking place (as a person builds screen time the first few weeks they really focus on tracking Cumulative Delta). Breakouts, failure to breakout with return back into range, heavy covering, chop, etc, are all patterns that you can learn in Delta/price action. When you can actually see the order flow patterns behind some of the crazy price action, the markets will start to make some sense.

[FulcrumTrader 10]

Now if you want a really in depth way to trade the markets here is something you can all debate about -

 

[ame=http://www.youtube.com/watch?v=nD8aHk-C4lY&feature=channel_video_title]$6010 Profit on Gold and Silver Futures Trading in 25 Minutes - Nov 17 2011 - YouTube[/ame]

 

[DionysusToast 10]

In all of my various webinars, I have always stated exactly what I have been told by those who trade within large liquidity participant firms - "the predominance of large liquidity participants directional trade is with market orders"

 

I have never said all of their trade is with market orders...that would just not make any sense. The primary order type that most Commercial trading entities use for directional trade is market orders...this can run as high as 70% of the large liquidity participants directional trade order flow throughout the day.

 

 

OK - so if MOST of the institutions are trading with market orders - who is it that's on the other side? Small retail players?

 

Or are you saying that limit orders = non directional players aka hedgers & market orders = directional players. So all day, hedgers put orders at all price/sides and directional players take them?

 

And you say this is the case in all markets, regardless of the amount of liquidity?

 

Finally - how did you come across this information? Did you poll all large institutions?

 

This isn't a poke at you, it's just a massive generalisation and I wonder how you came to it.

Edited December 5, 2011 by DionysusToast

[DionysusToast 10]

Now if you want a really in depth way to trade the markets here is something you can all debate about -

 

$6010 Profit on Gold and Silver Futures Trading in 25 Minutes - Nov 17 2011 - YouTube

 

 

Cool - someone placed a trade and won. I get those too.

 

Isn't that just a straight ad for somebodies service? Aren't you even going to comment on it?

 

Jeez - I thought T2W was bad!!!

[FulcrumTrader 10]

Cool - someone placed a trade and won. I get those too.

 

Isn't that just a straight ad for somebodies service? Aren't you even going to comment on it?

 

Jeez - I thought T2W was bad!!!

 

If you actually listened to the guys comments in the video it should have been VERY obvious it was a joke - COM'ON MAN!

[FulcrumTrader 10]

OK - so if MOST of the institutions are trading with market orders - who is it that's on the other side? Small retail players?

 

Or are you saying that limit orders = non directional players aka hedgers & market orders = directional players. So all day, hedgers put orders at all price/sides and directional players take them?

 

And you say this is the case in all markets, regardless of the amount of liquidity?

 

Finally - how did you come across this information? Did you poll all large institutions?

 

This isn't a poke at you, it's just a massive generalisation and I wonder how you came to it.

 

Every single question you presented here was exactly answered in my prior posts - attention to detail is key (go back through my last few posts and make sure you know what I am saying). Again, regardless of futures market the large Commercial participants have at times throughout the day up to 70% of their DIRECTIONAL TRADES with MARKET ORDERS. And again, yes I have friends who do trade within large Commercial participant firms so I know (and have vetted my method of tracking Delta) in detail how they run their liquidity.

 

If you want to track the DIRECTIONAL traders game, you gotta be watching the market order driven flow (limit order activity is frequently covers, market makers action, hedging, retailers, medium and smaller participants action, etc.).

[DionysusToast 10]

If you actually listened to the guys comments in the video it should have been VERY obvious it was a joke - COM'ON MAN!

 

Well - I didn't know if you might of been part of his cult.

 

Have you seen his website? Scary people, indeed.

[DionysusToast 10]

Every single question you presented here was exactly answered in my prior posts - attention to detail is key (go back through my last few posts and make sure you know what I am saying). Again, regardless of futures market the large Commercial participants have at times throughout the day up to 70% of their DIRECTIONAL TRADES with MARKET ORDERS. And again, yes I have friends who do trade within large Commercial participant firms so I know (and have vetted my method of tracking Delta) in detail how they run their liquidity.

 

If you want to track the DIRECTIONAL traders game, you gotta be watching the market order driven flow (limit order activity is frequently covers, market makers action, hedging, retailers, medium and smaller participants action, etc.).

 

I know what you said, I just don't see that myself. Also, if 30% of their trading is limit orders, that rather gives a huge margin of error in terms of returning to the same point delta-wise long term.

 

We will have to agree to disagree on this one.

[jtrader500 10]

Well - I didn't know if you might of been part of his cult.

 

Have you seen his website? Scary people, indeed.

 

I'm sorry but I have to jump in.

Please, Please don't look at cumu delta,

Your right, there is no edge with this crazy tool. When I place trades, I think I will go consistently in the opposite direction as the block traders who are holding onto contracts even on a pullback. thats a strategy that will work over time.

I just threw it on a chart a few weeks ago, and now you couldnt pry it from my dead lifeless hands. And all I use it for is to gauge the strength of pullbacks on the last couple of 2min bars.

[FulcrumTrader 10]

...and the exact reason why I choose that video...good for a laugh. Now in no way do I think "those people" are scary, it is just kind of funny to listen to that type of approach in trading...LOL!

[FulcrumTrader 10]

I know what you said, I just don't see that myself. Also, if 30% of their trading is limit orders, that rather gives a huge margin of error in terms of returning to the same point delta-wise long term.

 

We will have to agree to disagree on this one.

 

At times throughout the day it can be as low as 30% of their DIRECTIONAL trading through limit order entries.

 

All in all, we had a good conversation here and everyone can now go running off in their own selected directions - don't you just LOVE that FREEDOM!

[DionysusToast 10]

I'm sorry but I have to jump in.

Please, Please don't look at cumu delta,

Your right, there is no edge with this crazy tool. When I place trades, I think I will go consistently in the opposite direction as the block traders who are holding onto contracts even on a pullback. thats a strategy that will work over time.

I just threw it on a chart a few weeks ago, and now you couldnt pry it from my dead lifeless hands. And all I use it for is to gauge the strength of pullbacks on the last couple of 2min bars.

 

I use it myself - I agree entirely with what you say - for SHORT TERM trading on some instruments.

 

My experience is that on thick instruments like the ES, it works a dream in the short term but there are some 'gotchas'. The gotchas are mostly to do with some of the games played by people trying to establish large positions for short term plays - to the scale of thousands of contracts.

 

What you typically see is a market that will appear to be weak which encourages people to sell. They sell to the people that are making the market look weak, who are of course buying but on limit orders.

 

The size of delta shift in a pullback is an absolutely fantastic tool. There's more to get from it than that though. When delta starts moving down but price doesn't - this also tells you something - but only in a thick market. It tells you that for the moment, someone is quietly absorbing the selling. On thick markets, we get benefit when price & delta don't do the same thing.

 

In a thin market - like YM, CL, NQ, you will see extended periods where CD goes down but price is moving up. This can go on for hours. The explanation for this is fairly simple. Buyers on limit orders are taking all they can. You have to remember too that there's 2 good reasons for using limit orders in a thin market.

 

1 - Slippage can be an issue

2 - The general 'wiggle' in thinner markets will often get you a better price.

 

It's these sort of short term activities that make me wonder about long term use of CD. My use of CD is to use it when the CD diverges from the action (which actually sort of confirms Fulcrums 70% theory).

[DionysusToast 10]

...and the exact reason why I choose that video...good for a laugh. Now in no way do I think "those people" are scary, it is just kind of funny to listen to that type of approach in trading...LOL!

 

Hmmmmmmm....

 

Take a look at the site -http://www.christosavatartrading.com/

 

The word "Christos" represents the full potential self of an individual. It is not a religious or Christian belief, it is the spiritual identity associated with a person's 10th, 11th, and 12th dimensional aspects. Every person has this identity available and it is called the Christos Avatar self. When a person evolves spiritually through activating the dormant energetic DNA that corresponds to strands 10, 11, and 12 of the DNA template, then they can connect to and embody this level of themselves here in the 3rd dimension and become what is known as an Avatar or Ascended Master. Everyone on the planet has the potential and so the purpose of Christos Avatar Trading is to assist individuals in EMBODYING their Christos Avatar self and achieving self-mastery through trading.

 

I certainly wouldn't take a kool-aid off the man...

[DionysusToast 10]

At times throughout the day it can be as low as 30% of their DIRECTIONAL trading through limit order entries.

 

All in all, we had a good conversation here and everyone can now go running off in their own selected directions - don't you just LOVE that FREEDOM!

 

Yes - but I still need you to agree Christos is a lunatic.

[JohnBly 10]

Maybe someone can explain why cum delta is so important.

 

In any trade, one side will always be a market order.

No market order, no trade.

Basically every trade consists of a market order and a limit order.

(It may be possible for 2 market orders to hit at the same microsecond and offset each other, but that is probably rare).

 

If there is more aggression on the ask, price will go up.

If I have a long 1 minute bar that closes near the high and it's not in an area where lots of stops are resting, and the volume is 2x average volume, I have a pretty good sense of the supply/demand dynamic expressed in that bar. I can see it by looking at the range of the price bar, where it closed and the volume.

 

What else does CD tell me then that I do not already know?

[daVinciLite 10]

Yes - but I still need you to agree Christos is a lunatic.

 

I think the CFTC will be calling on him to do some DNA work. They may take it to the 12th demension as they create their own Avatar.

 

dVL

[jtrader500 10]

Maybe someone can explain why cum delta is so important.

 

In any trade, one side will always be a market order.

No market order, no trade.

Basically every trade consists of a market order and a limit order.

(It may be possible for 2 market orders to hit at the same microsecond and offset each other, but that is probably rare).

 

If there is more aggression on the ask, price will go up.

If I have a long 1 minute bar that closes near the high and it's not in an area where lots of stops are resting, and the volume is 2x average volume, I have a pretty good sense of the supply/demand dynamic expressed in that bar. I can see it by looking at the range of the price bar, where it closed and the volume.

 

What else does CD tell me then that I do not already know?

 

I am just guessing here but I think the underlying fundamental point to a delta divergence is that (say for ex. a daily 3min chart) when the sup/demand favors the downside for that day, then there are the larger players (the market movers) that dont want to just dump shares. They push prices down a little and then the limit orders lighten up so that the market can come up (and suck retail in) and then press some more.

 

So my theory is that when you see a short term divergence where prices go up more, relative to the offer differential (negative delta). what you are actually seeing is more like a slight vacuum effect that may pop back in line or diverge further because the limit side sees that there is still some up juice.

 

That would explain the effect of a stop run to the upside breakout and then the smart money pushes down harder after the move is exhausted. I used to think that the boxes would push into stopruns, but that would cost to much. its free to just pull offers and suck everyone in.

This is the basis of most of my entries, is to find TRUE exhaustion, then fade.

Now you are trading with them.

I think thats where the old adage down on the floor comes from. "If the market wants to go up, It must go down first".

I could be wrong, but it makes sense.