Order Flow Advice

[pbylina 10]

I wouldn’t mind learning to scalp ticks with the DOM, but someone is going to have to teach me one on one. The transaction costs would also have to make sense.

 

dVL

 

I heard 'No B.S. Day Trading' pdf and video is a good starter...Have you seen it?

[steve46 12]

The algorithms have made this more difficult. Big players now shred orders. This isn't to say it's impossible or not useful, but especially on the ES the tape flies now, usually in a flood of 1s, 2s, and 3s. Also, the CME has recently changed how they report data. Before, if somebody threw a hundred lot on the market, you'd see it, regardless of how many people took the other side. Now, if a hundred lot trades to fifty people who each buy 2, that's what you'll see. This is, at least, how I have been led to understand it.

 

Okay....so I guess one more comment than I call it quits for his thread...first, another bit of urban myth...yes particpants sometimes elect to take a large order and execute in smaller pieces.. but that is not what matters for futures markets...its the contrast between the roll of the tape when buyers step it, versus the roll of the tape when sellers come back into the picture...doesn't matter whether one side or the other tries to disguise their size, because sooner or later it is coming across the tape (on the Time & Sale strip).....for the record the equities markets are diffierent and then (if you are trying to read a DOM display), that distinction IS important because big volume CAN be disguised....OK I am done...good luck

[daVinciLite 10]

I heard 'No B.S. Day Trading' pdf and video is a good starter...Have you seen it?

 

Interesting site. He looks like a real trader to me. I can learn something from him. The 'guy in the cowboy hat' is Ken Roberts. Took his course in 1998.

 

...doesn't matter whether one side or the other tries to disguise their size, because sooner or later it is coming across the tape

 

I completely agree. It all comes out in the wash - especially if you are using a footprint.

 

dVL

[joshdance 10]

The CME also bundles orders. So if 100 one lots get stopped out at once, that process can show up as one 100-lot order.

 

Are you sure about this? I don't think this is the case. The CME reports (for certain instruments at least including ES) one tick as one transaction, so I don't think the above would show as one transaction.

[joshdance 10]

I heard 'No B.S. Day Trading' pdf and video is a good starter...Have you seen it?

 

He trades notes and bonds, and recommends them for tape reading. But don't count on reading a PDF and watching an hour long video of one or two days worth of trades to really show you anything. I've seen it myself and wouldn't pay for it, but that's just me.

 

I'm not sure what your intent with order flow / tape reading is, but it's what good traders have been doing for many years and is nothing new, though the "footprint" and all that stuff is the new buzz. Why not learn how the markets move and use the tape in conjunction with what you're already comfortable with as a way to see momentum, time entries, etc.? Just watching the tape from scratch may not accomplish what you are looking for.

 

As for orders being reported, more important than anything else IMO is the speed and momentum of the tape, rather than large orders. I can't speak for other instruments, but on oil, speed of the tape can be very important. Large orders may be placed, especially on something huge like ES, can be for varying reasons and have nothing to do with where price goes next.

[daVinciLite 10]

Are you sure about this? I don't think this is the case. The CME reports (for certain instruments at least including ES) one tick as one transaction, so I don't think the above would show as one transaction.

 

I heard it from a trader that I trust. I'll have to do a little research if I get the time. It does not really affect me one way or another, but I was under the impression that most brokerage houses could not handle all the data. If you have better information than I do, then I stand corrected.

 

dVL

[BlowFish 10]

That is typical of a retail broker....I would dump them..but thats just my opinion...

 

I wonder why? Because they don't supply market internals? Even if that Is something you would expect to get from a broker surely it is right down low on the list when comparing them, after all your data feed provider is going to provide internals anyway?

 

The speed and reliability of order execution and quote refreshes (in my humble retail opinion) are far far far more important than whether they supply internals or not.

 

Incidentally Zenfire are not a broker they provide low latency connectivity and order execution infrastructure to various exchanges. Well they don't exactly, it is the same 'institutional' (I hate that term) infrastructure that R|tjmic provide.

 

Mind you this is from some one that describes Esignal as 'professional level' hehe. Steve as I have said before I find your posts interesting and well reasoned, however when someone posts as an 'institutional' trader then personally I think their posts demand more scrutiny. Of course we all have aberrations but when these can influence the less informed one has to be careful.

[joshdance 10]

I heard it from a trader that I trust. I'll have to do a little research if I get the time. It does not really affect me one way or another, but I was under the impression that most brokerage houses could not handle all the data. If you have better information than I do, then I stand corrected.

 

dVL

 

Certain brokers may choose to compress or filter ticks, but this is a broker issue, not a CME issue. I have no good source to deny this happens, but I have seen no authoritative source that says it does happen, so I would assume that CME reports a big stop getting executed as a market order the same way they would report anything else, namely that if you see a 100 lot print, there was a market order that was at least, but perhaps more than, 100 lots executed, but not less than 100.

[steve46 12]

I wonder why? Because they don't supply market internals? Even if that Is something you would expect to get from a broker surely it is right down low on the list when comparing them, after all your data feed provider is going to provide internals anyway?

 

The speed and reliability of order execution and quote refreshes (in my humble retail opinion) are far far far more important than whether they supply internals or not.

 

Incidentally Zenfire are not a broker they provide low latency connectivity and order execution infrastructure to various exchanges. Well they don't exactly, it is the same 'institutional' (I hate that term) infrastructure that R|tjmic provide.

 

Mind you this is from some one that describes Esignal as 'professional level' hehe. Steve as I have said before I find your posts interesting and well reasoned, however when someone posts as an 'institutional' trader then personally I think their posts demand more scrutiny. Of course we all have aberrations but when these can influence the less informed one has to be careful.

 

What an interesting comment...

Perhaps you could take a moment to think before you post next time..

I use CQG for my primary and Esignal for my backup...since I am not able to show my primary screen, I use Esignal for posts to public sites. As far as Esignal goes, since they were bought by Interactive Data, they have taken the time and put significant capital into a complete re-write of the program...As far as I am concerned this is a professional (suitable for use by professionals) level product. Its only one man's opinion but thats how I view the subject.

Is HEHE supposed to mean something to me...?

[steve46 12]

I wonder why? Because they don't supply market internals? Even if that Is something you would expect to get from a broker surely it is right down low on the list when comparing them, after all your data feed provider is going to provide internals anyway?

 

The speed and reliability of order execution and quote refreshes (in my humble retail opinion) are far far far more important than whether they supply internals or not.

 

Incidentally Zenfire are not a broker they provide low latency connectivity and order execution infrastructure to various exchanges. Well they don't exactly, it is the same 'institutional' (I hate that term) infrastructure that R|tjmic provide.

 

Mind you this is from some one that describes Esignal as 'professional level' hehe. Steve as I have said before I find your posts interesting and well reasoned, however when someone posts as an 'institutional' trader then personally I think their posts demand more scrutiny. Of course we all have aberrations but when these can influence the less informed one has to be careful.

 

Well, my primary is CQG and my backup is Esignal...Since Esignal was bought out by Interactive Data, they put significant money into a complete re-write of the program...and in my

opinion it is professional level now.

As for the issue of keeping or dumping a provider, I have another comment...I think providers need to offer value for the money...if not (and in this case I don't see the sufficient value) I would look elsewhere...again just a simple comment...

Finally from my point of view, silly commentary about qualifications means nothing to me...I hope in the future you will have a little more substance to contribute.

Thanks

Steve

[BlowFish 10]

What an interesting comment...

Perhaps you could take a moment to think before you post next time..

I use CQG for my primary and Esignal for my backup...since I am not able to show my primary screen, I use Esignal for posts to public sites. As far as Esignal goes, since they were bought by Interactive Data, they have taken the time and put significant capital into a complete re-write of the program...As far as I am concerned this is a professional (suitable for use by professionals) level product. Its only one man's opinion but thats how I view the subject.

Is HEHE supposed to mean something to me...?

 

Hehe indicates amusement. Sure the program is pretty good and will do more or less anything most of the other popular packages will. Esignal is a pretty poor data feed however and not really of 'professional' quality if you require full accurate and timely data that is. Of course these things can change overnight (litteraly) as companies do capacity planning and add new infrastructure. In my experience of esignalc(over many years on and off) It is not very timely either and often lags behind other data feeds. It also misses some trades and its bid ask data is even further lacking. Check the number of ticks you get against CQG if you do not believe me. Also check the current last against CQG after major news, it can lag.

 

Anyway none of that was my point. I was commenting on your advice to dump your broker. Zenfire is not a broker (just like CQG is not) in fact they compete pretty head on with CQG in so far as they provide order execution infrastructure and real time quoting. CQG go above and beyond this as they also have ticker plant for historical data and provide charting and analytics (at a cost through commissions). Zenfire do not though are beta testing providing a small tick history.

 

For what Zen/Rithmic do they do every bit as well as CQG (which is damn well, retail traders are spoilt nowadays ). They don't provide market internals and they don't provide brokerage services however. In fact many brokers who offer zenfire will switch you to CQG infrastructure if you ask (depending on what clearing arrangements they have). It will likely effect your commission a little particularly if you choose to use there charting but probably no need to 'change your broker' (unless they can not offer you decent order execution infrastructure e.g. Zen, Rythmic, CQG, TT)

[sdoma 10]

Read post #17. "TheDude" talks about trading lower volume instruments as a solution to this problem.

 

That comes with its own risks. Thin markets are subject to wild moves and disruptions. If you are a trader your goal should be to eventually trade size. A thin market offers a lot of barriers to that.

 

Also, as for Dude's claim about speculators and noise, the ags are heavily spread traded. Whenever you have a lot of spread traders, reading the tape can be trickier. They can create a lot of non-directional noise as they leg in and out of stuff.

[sdoma 10]

Okay....so I guess one more comment than I call it quits for his thread...first, another bit of urban myth...yes particpants sometimes elect to take a large order and execute in smaller pieces.. but that is not what matters for futures markets...its the contrast between the roll of the tape when buyers step it, versus the roll of the tape when sellers come back into the picture...doesn't matter whether one side or the other tries to disguise their size, because sooner or later it is coming across the tape (on the Time & Sale strip).....for the record the equities markets are diffierent and then (if you are trying to read a DOM display), that distinction IS important because big volume CAN be disguised....OK I am done...good luck

 

Large participants almost always break down their orders, especially institutional level players and flow algos. Oftentimes large funds will also buy and sell to disguise their true intent, with the goal of taking a net position long or short when it's all done.

 

I agree that the speed of the tape matters, and you are actually making my point for me by bringing it up. I said that the patterns are there, but are not obvious because big players try to disguise their movement. If you don't realize the games that go on, you have no chance of reading the tape.

 

Now I'm thinking I need to put my own tape reading observations up in a new thread.

[johnw 10]

Large participants almost always break down their orders, especially institutional level players and flow algos. Oftentimes large funds will also buy and sell to disguise their true intent, with the goal of taking a net position long or short when it's all done.

 

I agree that the speed of the tape matters, and you are actually making my point for me by bringing it up. I said that the patterns are there, but are not obvious because big players try to disguise their movement. If you don't realize the games that go on, you have no chance of reading the tape.

 

Now I'm thinking I need to put my own tape reading observations up in a new thread.

 

Please do that .. I am sure people are looking forward to you starting a tape reading thread.

[joshdance 10]

Now I'm thinking I need to put my own tape reading observations up in a new thread.

 

That would be great sdoma.

[gcabrera 10]

I use CQG and have market internals with it (NYSE -TICK) in Ninja Trader.

 

If someone is interested in learning from a very honest guy about tape reading, I recommend you visit priceactionroom website of Joel Parker. One of his members has made a times and sales indicator that bundles the big orders again, the ones split by the big traders and the ones that CME does not report as a big trade anymore after October 2009 (If I remember correctly).

 

Good trading

[pbylina 10]

MD has an option on T&S to aggregate or add all bid or ask trades together at the current price. I guess It could be useful during high activity...

[joshdance 10]

One of his members has made a times and sales indicator that bundles the big orders again, the ones split by the big traders

 

Though the answer is, "this is not possible, especially with a retail platform and tools," I ask, how so?

[gcabrera 10]

How has he done it?

 

I guess he acummulated the trades in the same timestamp, maybe going under a second timeframe. I saw the indicator working in a presentation last week and seemed to work well. It was made in Ninja Trader. I will receive the indicator next week and can post some charts then.

 

I have taken some snapshots of a video of live trading of Joel.

 

The first chart shows a trade of 102 lot short.

 

The second one shows taking profit on 25 contracts as firts target. Ninja Trader shows all the limit orders that the 102 trade hit and also the ones on the first 25 contracts. That is what the tape shows now since CME changed the reporting.

 

Also in both pictures you can see the new Times and Sales indicator bundling the big lots orders again.

 

Looking for an explanation on how this has been done, I found this interesting thread in another forum.

 

CME Unbundling - NeoTicker Forums

 

 

 

Hope the charts are shown here and someone finds them useful

Edited May 15, 2011 by gcabrera
charts did not appear

[gcabrera 10]

Let´s see if this links work for the charts

 

https://rapidshare.com/files/2624918513/Joel_102_lot_short.png

 

https://rapidshare.com/files/978590407/joel_25_lot_first_target.png

[joshdance 10]

Why don't you just attach them to your post? ("Manage Attachments" at the bottom) Either way they just look like screen shots of someone trading, not even necessarily a live account, so not sure how they are relevant...

[steve46 12]

The unfortunate truth of the matter is that this won't help you to consistently identify opportunities. Professionals know that folks are watching the orders by size and they have ways of making it work against you. For example, I could show you a "size" execution and then offset it with much more size on the other side once you (and others) have "taken the bait". This is often done on the institutional side just before a strong countertrend move or reversal off a base....What does work is understanding how order flow is reflected in the display of candles (it all right there in front of you IF you know what to look for). As with all things in life, this of itself is not the only thing you need to participate profitably...Once you understand how to interprete order flow by looking at the chart, you need other tools to confirm your decision. That is why I posted about "time-based pivots" and tape reading in my threads. I am also doing this every day for my class...Well its Sunday and I have a family obligation to attend so I have to cut it short right here.

 

Good luck

Steve46

[joshdance 10]

The unfortunate truth of the matter is that this won't help you to consistently identify opportunities. Professionals know that folks are watching the orders by size and they have ways of making it work against you.

 

I agree steve. Why someone thinks that they can take orders interwoven into the mix by software that people spend thousands upon thousands of dollars on trying to hide their orders, and then write an indicator for ninjatrader that will automatically detect this, is beyond me. Especially using a timestamp. Really, as if they just do it sequentially all at one time? Yeah, that's a tough one to crack.

 

Taking it one step further, why does it even matter? X number of contracts traded. Grouping people into "institutional," "smart money," "professionals," etc., based on size traded is fruitless. There is not enough "retail" or "dumb money" or whatever else you want to call it, volume to be on the other side of these orders to fill them all, so at the end of the day it's big money trading against big money, and someone will win, and someone will lose. Why not trade what you see, and forget trying to group a trade group as "smart" or "dumb" or "retail" or "institutional."

[daVinciLite 10]

Though the answer is, "this is not possible, especially with a retail platform and tools," I ask, how so?

 

You’d be surprised what can be done. Programming languages do not change just because you are a retail trader. All you need is a quality data feed and a flexible programming language interface.

 

I am using a dog of a software package but I can code a lot of what I need.

 

dVL

 

 

"That sounds like over educated and under intelligent"

John Gotti NY Mafia

[gcabrera 10]

Thanks for your opinions guys.

 

The guy who sells this indicators includes enough instruction material and live trading so you can learn how to use it and maybe complement your own strategy.

 

I just wanted everybody to know about it. I don´t make a dime of it and enough trouble I had to upload the charts.

 

Take good care