The Tracking of Big Players in Futures

[isamel 10]

Hello,

 

I usually trade FX but is very interested in the order flow and as you already know that only is visible in futures (currency futures i.e. 6E etc).

 

I have seen (mainly on this site) that many of you "track" the commercial players in the futures market by div. tools. I am looking to discuss this as I find it very interesting. Some use proprietary velocity algos it seems, while others index benchmarks of cumulative delta.

 

Now I wonder, which one do you think works the best and do you really think you have found a way to track the large participants that move the market?

 

Thank you

[slick60 10]

Hello,

 

I usually trade FX but is very interested in the order flow and as you already know that only is visible in futures (currency futures i.e. 6E etc).

 

I have seen (mainly on this site) that many of you "track" the commercial players in the futures market by div. tools. I am looking to discuss this as I find it very interesting. Some use proprietary velocity algos it seems, while others index benchmarks of cumulative delta.

 

Now I wonder, which one do you think works the best and do you really think you have found a way to track the large participants that move the market?

 

Thank you

 

Isamel

Hello to you. I too attempt to trade the forex EURUSD and others but also have a futures account where I follow and trade the 6E almost exclusively. The futures is good because it does in fact give you a volume figure of trades. I run market profile software and follow the market generated information from it. The footprint charts I found confusing to me and I was probably not really able to understand correctly. Knowing how the market moves and why and what to look for is a better bet I feel. I believe you have to develop a feel for the market and be able to recognize a number of things taking place at a given time in order to be able to see the moves of the BIG MONEY. Markets including forex are manipulated and DO NOT let anyone tell you different. One simple, maybe not so simple thing I found was information from this site https://www.marketmakersforex.com/

This video about 2 hours long will shed a bit of evidence on what I am saying. By the way I am in no way connected with MMfx or have I paid them one cent. Just believe me and Steve that this shit really is what happens. Case in point is to look at a 15 minute chart of Fiber today (eurusd) as it is classic of what he says. Bloody amazing. This is a starting point for you - I do not know how much experience you have. I have tons.

 

slick

[joshdance 10]

Now I wonder, which one do you think works the best and do you really think you have found a way to track the large participants that move the market?

 

Thank you

 

What do you hope to accomplish by "tracking" large participants? When you see volume trade high in a market, you can be sure that this is a large participant (or large participants), and these are his (or their) footprints. However, if you're hoping to "track" by knowing what his position is, what he intends to do next, etc., you are wasting your time. Particularly in currency futures, when you are really interested in FX. The agenda of the multi-million dollar trader is often very different from the agenda of the retail trader; perhaps he is taking a very large position in futures simply to hedge an even larger position on the spot market or another contract; would you want to do what he does then? (no is probably the answer) No one knows, and anyone who answers affirmatively to the above question you asked is either selling something, or delusional. Just my

[isamel 10]

What do you hope to accomplish by "tracking" large participants? When you see volume trade high in a market, you can be sure that this is a large participant (or large participants), and these are his (or their) footprints. However, if you're hoping to "track" by knowing what his position is, what he intends to do next, etc., you are wasting your time. Particularly in currency futures, when you are really interested in FX. The agenda of the multi-million dollar trader is often very different from the agenda of the retail trader; perhaps he is taking a very large position in futures simply to hedge an even larger position on the spot market or another contract; would you want to do what he does then? (no is probably the answer) No one knows, and anyone who answers affirmatively to the above question you asked is either selling something, or delusional. Just my

 

Nice, thanks for getting it going. I don't necessarily believe that high volume equals large participants. It may be a area where many traders are interested of (large S/R + many retail) and larger traders can split up their orders with VWAP etc sending 1 lot orders X 1000 at different times.

 

No I assume there is no possibility in knowing what his position is, although it would be interesting to know whether he is entering long or short. Let's assume he is going long, that would either be gonig long (obviously) or getting out of a short position. Some delta guys around here, and particularly vendors, seem to "know" what type of position they get into and also if it is closing of old business or new business. That would be interesting.

 

For example, Fulcrum talks often of indexing players by Cumulative delta, I tried to ask him, but never really got an answer (don't get mad if you see this..) as to how this is done.

 

So what I am interested in is a discussion, in whether you really CAN know what they are up to? Maybe looking at correlated instruments? Sometimes 6E and ES cumulative delta differs, but they are still the same "risk-on"-trade..

[steve46 12]

You can't know who is really moving markets by cumulative volume, delta, or any processing of volume that retail traders have access to....sorry....

 

You can reverse the process and know that in general the top tier institutions are looking to move markets in a direction and you can even narrow down the focus to specific time periods....that is how I use my time based pivots.......the vendors don't like this.....for example I received a couple of nasty comments from Urma Blume among others asking me not to post in "their threads"....hahahaaa...right....

 

So its up to the individual....frankly I am not interested a long dialogue about it...you can read my thread "An Institutional look at S&P Futures" in the Emini Forum and if you have the ability to think critically it is all there in front of you....I use it to this day....and it works....because it is based on the motivation of professionals to make money....unlike using indicators, that motivation isn't going to change...

 

PM me if you need any clarification on the basics...and once again for the record....although I am listed as a vendor.....I don't have anything to sell....my class is full....

 

Good luck

[TheDude 10]

well, you could always look at the CoT report.

 

as Josh says - it's pretty irrelevant. i can tell you as a certainty that some big players are long, and others are short.

 

sure the vendors want to make you think they have the secret sauce - its called salesmanship.

 

they dont.

[steve46 12]

COT is of limited use to the retail crowd....Steven Briese's book is excellent on this subject...and if I can remember the name of the one trader I used to know who used it profitably I will post it later

 

With regard to who has the secret sauce....this is simple...I don;t think there are any "secrets" per se....ultimately all you need is an edge....I found mine....

 

Good luck finding yours.

Edited January 10, 2012 by steve46

[slick60 10]

I am going to address this post to Isamel but it can really apply to any trader out there trying to win. Have you read Tom Williams book Master the Markets? I am sure this has been mentioned and reviewed etc on the Volume Spread Analysis thread. I am less than a week in TL forums and have not read everything. Just starting. Also there is a Market Profile threadssssssssssssss here that probably have a wealth of information. Read the books by James Dalton, Mind over Markets and Markets in Profile. Tons of information. Take a look at what Steve Mauro is telling you. There are clues from Elliott Wave Analysis that help to answer your question. If you want to look at timing as to when will this market turn which is another clue as to who is playing the game at any given time study The Delta Phenomenon by Welles Wilder. Look at and study the Market Matrix by Steve Copan who has refined and expanded the Delta Phenomenon.

Using these tools I looked for a low in the eurusd of 1.2665-75 to come in Sunday night or Monday morning early this week. With delta I had a high due in that currency due to come in during the 9:00am 4 hour bar this morning. The London open reverse came in on schedule during the 3:15am bar this morning after a sharp move down by the market makers through the Asian session to a level of 1.382 times the Asian session range. The market makers then showed one of their footprints by doing a 1.144 retrace of a fake move to trap new shorts and breakout traders. Look at a 5 minute chart (shows there very well ) of how a "W" formed and the move went north. We topped out showing excess on the 15 minute charts (looks good) on 6 bars culminating on the 8:15am bar. This move was a to the pip .786 retrace in relation to a 2nd wave back in November. There is a good possibility that will be the high for this little advance north. If not it has little room to go before a reverse hits it again in my opinion. Market profile started out for most of the day after the last high looking like a "b" pattern which signified long liquidation or "old business". Now the pattern appears to be evolving into a nice balanced day and setting up an area of stops to be run by the MM's.

So - how can you tell who is playing the game. Market profile says day traders appear to be in charge since there is no initiative buying or selling BUT I also see this as an area of distribution taking place.

We are right on the brink of a substantial move north in this currency pair for about 4 weeks or so. It should have legs and I will be following it.

Isamel, there is a lot to learn about as to how this market or any of them work. Lord knows I am still trying to learn and hopefully I may pick up some tidbits from the guys in these forums who are closer to the "holy grail" than I am.

Good luck everyone with your trading and may THE LITTLE GUY WIN one of these days. Big money tells us when they are active in the market. Let's crack their code.

 

slick

click on link http://screencast.com/t/MrEeQOVao

Edited January 10, 2012 by slick60
Forgot-wanted to show chard of EURUSD 4 hr

[joshdance 10]

I was thinking about this thread today as the day went along and thought I would post this.

 

As I said before, it is impossible to accurately "track" anyone in the market; yet, big traders do leave big footprints sometimes, and I believe by looking at the footprints it's possible to determine when big traders are active. The thing is, often big traders are taking counter positions to other big traders; so, it's not that they are big and therefore are right. Rather, it's that they are involved in the market, and we get to see their involvement and then make our own decisions about what to do with that information.

 

The attached chart shows two black arrows indicating what I think is clearly professional activity. You don't get 20K contracts of ES traded in 1 minute without professional involvement, sorry. I have no objective or empirical evidence to support this; but isn't it logical? This isn't retail traders trading with other retail traders; at least one side of this trading involves someone with serious money.

 

I was already long from 84 when the first big volume entered, and almost was shaken out but I held on and closed slightly higher a few minutes later. But that big professional involvement kept me in the trade. There are about 15K buy limit orders filled in only one minute, over only about a 1.5 point range. The message is clear to me: someone wants to prevent this market from going down.

 

The second black bar shows 16K contracts traded, again, over about a 1 point range. Message is loud and clear again: big buyers abundant and ready to support 83/84.

 

Now, look towards the end of the chart, at the blue line. From 14:50 to about 15:20, a good half hour, you see a total of about 37K contracts traded. This is NOT professional activity. But, price is rising. What does that tell me? Well, I do not want to fade this market, since buyers were active as pointed out earlier. However, I am not interested in establishing some kind of long position here. What happens next is IMO the very opposite of professional activity, at the red arrow: 10-20K contracts bought 30 minutes before the close, looking for new highs, on a day with a previously 7 point range, in a market which has been incredibly in balance since the first trading day of January. This looks to me like lots of amateur traders jumping on the bandwagon very late in the game. This is really only confirmed by the lack of followthrough around 15 minutes before the close, I should note. But you have very late buying, following a push up that was NOT well supported, with no follow through.

 

So, both cases feature decent enough volume. However, one is buying the lows, and indicates big players; the other is buying the highs at the most inopportune time, and smells like typical retail activity; probably buying into the limit orders of those who got long in the low 80s earlier in the day. Given the lack of what I feel is quality buying at the top, I would expect to see 82-84 before we see 90 (and I did post this at 4pm on another forum before it has now dropped to 86 in globex). Maybe I'm wrong, maybe I'm not, but it's a working theory and does play out in real time quite often.

 

EDIT: one last thing I should point out is that this was a very neutral day. I could see big players on both sides of the market. Big time sellers defended yesterday's close and low about 15 minutes after the open, and at 10:40 you can see it defended again, lots of professional involvement there. All the more reason to NOT buy the high (hoping for a big trade anyway) near the end of the day, and rather get positioned earlier or stay out. So, while there were pros very interested in buying this market, they were also selling the highs, at least earlier in the day. Not a day to hope for a 20 point breakout, that's for sure.

 

These are just my thoughts, would love to hear your feedback. Only my and like anything else, you may find your view of the market to be different. But it works for me, and we all have to find a model that sings to us. See what conclusions you draw...

Edited January 12, 2012 by joshdance

[MightyMouse 12]

I was thinking about this thread today as the day went along and thought I would post this.

 

As I said before, it is impossible to accurately "track" anyone in the market; yet, big traders do leave big footprints sometimes, and I believe by looking at the footprints it's possible to determine when big traders are active. The thing is, often big traders are taking counter positions to other big traders; so, it's not that they are big and therefore are right. Rather, it's that they are involved in the market, and we get to see their involvement and then make our own decisions about what to do with that information.

 

The attached chart shows two black arrows indicating what I think is clearly professional activity. You don't get 20K contracts of ES traded in 1 minute without professional involvement, sorry. I have no objective or empirical evidence to support this; but isn't it logical? This isn't retail traders trading with other retail traders; at least one side of this trading involves someone with serious money.

 

I was already long from 84 when the first big volume entered, and almost was shaken out but I held on and closed slightly higher a few minutes later. But that big professional involvement kept me in the trade. There are about 15K buy limit orders filled in only one minute, over only about a 1.5 point range. The message is clear to me: someone wants to prevent this market from going down.

 

The second black bar shows 16K contracts traded, again, over about a 1 point range. Message is loud and clear again: big buyers abundant and ready to support 83/84.

 

Now, look towards the end of the chart, at the blue line. From 14:50 to about 15:20, a good half hour, you see a total of about 37K contracts traded. This is NOT professional activity. But, price is rising. What does that tell me? Well, I do not want to fade this market, since buyers were active as pointed out earlier. However, I am not interested in establishing some kind of long position here. What happens next is IMO the very opposite of professional activity, at the red arrow: 10-20K contracts bought 30 minutes before the close, looking for new highs, on a day with a previously 7 point range, in a market which has been incredibly in balance since the first trading day of January. This looks to me like lots of amateur traders jumping on the bandwagon very late in the game. This is really only confirmed by the lack of followthrough around 15 minutes before the close, I should note. But you have very late buying, following a push up that was NOT well supported, with no follow through.

 

So, both cases feature decent enough volume. However, one is buying the lows, and indicates big players; the other is buying the highs at the most inopportune time, and smells like typical retail activity; probably buying into the limit orders of those who got long in the low 80s earlier in the day. Given the lack of what I feel is quality buying at the top, I would expect to see 82-84 before we see 90 (and I did post this at 4pm on another forum before it has now dropped to 86 in globex). Maybe I'm wrong, maybe I'm not, but it's a working theory and does play out in real time quite often.

 

EDIT: one last thing I should point out is that this was a very neutral day. I could see big players on both sides of the market. Big time sellers defended yesterday's close and low about 15 minutes after the open, and at 10:40 you can see it defended again, lots of professional involvement there. All the more reason to NOT buy the high (hoping for a big trade anyway) near the end of the day, and rather get positioned earlier or stay out. So, while there were pros very interested in buying this market, they were also selling the highs, at least earlier in the day. Not a day to hope for a 20 point breakout, that's for sure.

 

These are just my thoughts, would love to hear your feedback. Only my and like anything else, you may find your view of the market to be different. But it works for me, and we all have to find a model that sings to us. See what conclusions you draw...

 

Josh,

 

I break the volume down into 4 groups. Highly capitalized short term traders, highly capitalized long term traders, lowly capitalized short term traders, and lowly capitalized long term traders. Each reacts differently and have different motives.

 

Sometimes highly can try to act like lowly, but lowly can never act like highly.

 

20k contracts in no time is certainly an indication of highly, but It could be lots of lowly The T&S will have given a better idea of that. They bought for a reason. it certainly wasn't a randomly generated order. It had a purpose. Was it a long term position? A Hedge against a short? Or, short term HC capitalized traders accumulating contracts to take advantage of weak shorts they perceive to be present?

 

If you accurately identify the group, then you know what set of circumstances you need to see to stay in or get out or get long or get short since you can anticipate what they might do or not do next.

 

This is not a science by any means.

 

MM

[joshdance 10]

If you accurately identify the group, then you know what set of circumstances you need to see to stay in or get out or get long or get short since you can anticipate what they might do or not do next.

 

I like the idea of thinking of the market in those terms; however, due to the impossible (IMO) nature of determining the actual motive of the buying or selling, all I really care about is that volume supported a direction of the market. Volume entered strongly twice and supported the long direction, and that is objective; when I start trying to think about motive, it adds an unnecessary layer for me of psychology. Yes, psychology is the ultimate driving force behind what any trader does, yet, there are too many complex factors and too many possible motives for me to make sense of it. Just look at commentary from economists and you'll hear so many different opinions that it boggles the mind; so, I like to steer clear of the "why" when it comes to why someone bought or sold because I can't know.

[Oldtimer 10]

If you watch the price action long enough you see prices go up on heavy volume and up on lite volume. Either resulting on the continuation of the uptrend. Same in downtrends.

 

While can add some information just following the trend will tell you what you need to know.

[MightyMouse 12]

I like the idea of thinking of the market in those terms; however, due to the impossible (IMO) nature of determining the actual motive of the buying or selling, all I really care about is that volume supported a direction of the market. Volume entered strongly twice and supported the long direction, and that is objective; when I start trying to think about motive, it adds an unnecessary layer for me of psychology. Yes, psychology is the ultimate driving force behind what any trader does, yet, there are too many complex factors and too many possible motives for me to make sense of it. Just look at commentary from economists and you'll hear so many different opinions that it boggles the mind; so, I like to steer clear of the "why" when it comes to why someone bought or sold because I can't know.

 

Sure you could. When you read order flow what are you looking for?

[TheDude 10]

I was thinking about this thread today as the day went along and thought I would post this.

 

As I said before, it is impossible to accurately "track" anyone in the market; yet, big traders do leave big footprints sometimes, and I believe by looking at the footprints it's possible to determine when big traders are active. The thing is, often big traders are taking counter positions to other big traders; so, it's not that they are big and therefore are right. Rather, it's that they are involved in the market, and we get to see their involvement and then make our own decisions about what to do with that information.

 

etc

 

 

These are just my thoughts, would love to hear your feedback. Only my and like anything else, you may find your view of the market to be different. But it works for me, and we all have to find a model that sings to us. See what conclusions you draw...

 

My ....

 

I dont think the activity on the (or any) close may be a bunch of retail traders. Generally, a lot of fund managers and other long only funds trade near the close every day for bench marking purposes. e.g. if a fund is trying to replicate the MSCI Barra World Index (or other index they sell as an investment vehicle) for example, they will be buying the stocks/futs/options/etfs etc on the close to get fills as near to the official index calculation point as possible.

 

then of course, you have the pro day traders at prop firms who generally dont like going home with a position. if theyve been holding all day, they'll ditch on the close right?

 

The close and settlement price is an important indicator to a lot of people. therefore there is a lot of professional money usually traded there.

[amanseo 10]

“Long Term Participants View” of The Market:

It shows us the activity from the “Big” players, Hedge funds, Investment banks, buyers and sellers that accumulate stocks of inventory, etc.

In trading, this kind of activity made from “big” player or “big money” is called Other Timeframe Participants

 

"Short Term Participants View" of The Market:

It is formed by small traders, Market Makers (they provide liquidity to The Market), Small proprietary firms, and investor of a short term view that hold positions from one day to 5 at a maximum.

[alibaba5055 10]

Thanks for the very interesting discussion guys.

 

@MightyMouse, Could you please tell which particular software do you use for breaking down the volume into 4 groups ? Do you use some tick level database tool or if you do it on the chart itself in the form of some indicator etc.

 

@joshdance special thanks to you for the valuable inputs.

[MightyMouse 12]

Thanks for the very interesting discussion guys.

 

@MightyMouse, Could you please tell which particular software do you use for breaking down the volume into 4 groups ? Do you use some tick level database tool or if you do it on the chart itself in the form of some indicator etc.

 

@joshdance special thanks to you for the valuable inputs.

 

Alibaba,

 

As I stated, it is not scientific. I use price, time, volume when available, and delta if if it gives me an accurate depiction. The more information I have the better. I have expectations of where certain groups of traders will act and where they will react. When the conditions are right, I take advantage of the weak. I suggest you do your homework and practice.

[alibaba5055 10]

Alibaba,

 

As I stated, it is not scientific. I use price, time, volume when available, and delta if if it gives me an accurate depiction. The more information I have the better. I have expectations of where certain groups of traders will act and where they will react. When the conditions are right, I take advantage of the weak. I suggest you do your homework and practice.

 

Thanks MightyMouse. It is very interesting.

 

Tracking the positions of certain market participants as a group. Then Anticipating their probable response at important price levels and taking advantage of it when the opportunity occurs. Although all this is very subjective and I do not think that such stuff could be automated. It is more like the Market Narrative kind of homework exercise which Jim Dalton recommends.

 

Thanks

[Patuca 13]

If you watch the price action long enough you see prices go up on heavy volume and up on lite volume. Either resulting on the continuation of the uptrend. Same in downtrends.

 

While can add some information just following the trend will tell you what you need to know.

there are always exceptions however, volume does tell a story. we have to ask ourself do prices go up "most" of the time on high volume or low volume. its not a matter of, do they occasionally do so. i take it you are a pure PA person in the strictest sense of the word.

[steve46 12]

Agree generally with Oldtimer's comment however...I would amend it by adding a word or two as follows;

 

Just following trend will tell you MOST of what you need to know....

 

http://www.traderslaboratory.com/forums/futures-trading-laboratory/13779-how-get-started-futures-2.html

 

(post #12)

 

One of the natural problems that occurs in this environment is that folks become dogmatic about what does and doesn't work....I think you need to look at a lot of possibilities and do sufficient research so that you have the option of seeing what works for YOU...

 

The post link above is just my opinion, and it works for ME....

 

Good luck

Edited October 14, 2012 by steve46

[MightyMouse 12]

Thanks MightyMouse. It is very interesting.

 

Tracking the positions of certain market participants as a group. Then Anticipating their probable response at important price levels and taking advantage of it when the opportunity occurs. Although all this is very subjective and I do not think that such stuff could be automated. It is more like the Market Narrative kind of homework exercise which Jim Dalton recommends.

 

Thanks

 

It is purely subjective and leads to bad reads and losses, but when the read is good, you can make more than your fair share. As far as I am concerned, it is easier to trade if you can be more certain when and where traders will be willing to buy when you sell or sell when you buy back.

 

Why would you buy if if is unclear that there will be buyers to buy your shares or contracts when you want to sell?

[michael45 10]

If you watch the price action long enough you see prices go up on heavy volume and up on lite volume. Either resulting on the continuation of the uptrend. Same in downtrends.

 

While can add some information just following the trend will tell you what you need to know.

 

Trading is always risk work. It is just like a game. But we can go back again as a game. First we should study and then we want experience. If some one have knowledge with experience, He/she is a winner.

[Predictor 11]

First, I think there is value in knowing who one is trading with. This ability to see WHO one was trading with was one reason traders used to pay big bucks to be able to trade on the floor. VOLATILITY and VOLUME have been shown to be correlated. While the true market behavior is an emergent behavior of all traders: not all traders are equal. There are some dominant traders. What I don't do is view the market as retail vs institutional. I view all traders as professionals. Think about it, you're not going to stay in the game long or be much of a factor if you're not a professional.

 

The goal isn't so much about identifying a particular trader- but being able to recognize the types of traders and how active they are to make better decisions. A simplification of the market participants follows:

 

Liquidity Providers: These are traders that are always in the market sitting on either side of the market with their limit orders. If you're a small trader, as most are, and you try to "buy a break out" or sell a breakdown and a liquidity provider is on the other side of your trade then you're likely to take a loss or be in the negative immediately. Some of these LQ providers use stops -- others average down. The market isn't likely to move much if these are the only guys active.

 

Institutions: When an institution buys or sells then they are able to buy enough to exhaust the liquidity providers.. They can also create trends. Now they don't go in and say I'd like to drive my prices up and get the worst prices but they have so many contracts to execute that the liquidity providers have to respond to them. If you try to fade an institution then there is a good chance you will take a loss. Institutions can also influence the market by PULLING bids or offers above or below the market. Of course, not all institutions are savvy. If a single institution executes a lot of orders then it might create a blip of a trend and the market could go right back where it was. But if as a group they re-value the market then you know it will trend.

 

Pit boys/Locals/Day traders: Everyone has a game to play.

 

 

I use my order flow software AlphaReveal and tape reading to make sense of the market. My ability is I imagine similar to being a local on the floor.. only much more comfortable. I'm pay close attention to the market order flow and the LIMIT ORDER RESPONSE. My software helps me to see by showing limit order imbalances, and I can also read it from my experience in reading tape.

 

Now, I also have quantitative researcher who conducts research for me, and we're looking at building systems based on these ideas. But, I think there is a great value in the discretionary approach. Context is king, as they say.

 

-

Curtis

http://orderflowdashpro.com

Edited December 8, 2012 by Predictor