Andre (Aug 26, 2004 4:27:48 PM)
Today we're pleased to welcome Jeremy Short of TradeMaven to the Elite Trader Chat Room.
Andre (Aug 26, 2004 4:27:55 PM)
Jeremy Short is Co-Founder and principal trader of TradeMaven. TradeMaven trade execution and management software was originally created for institutional use. It's proprietary volume tools date back to 1998, around the time when e-mini volume data was made available. TradeMaven was publically released in January, 2004.
Andre (Aug 26, 2004 4:28:04 PM)
Today, Jeremy will show us how to execute an intraday scalping strategy based on Auction Market Theory and Floor Trader rotation patterns. We'll discuss theory, application and trade execution with examples.
Andre (Aug 26, 2004 4:28:11 PM)
So let's get to it! Jeremy, welcome. Thanks for joining us today.
Jeremy Short (Aug 26, 2004 4:28:27 PM)
Hi everybody, thanks Andre
Jeremy Short (Aug 26, 2004 4:29:13 PM)
Today we are going to go over the theory behind the TradeMaven bid/ask anlysis
Jeremy Short (Aug 26, 2004 4:29:29 PM)
and how we use it to scalp the emini's intraday.
Jeremy Short (Aug 26, 2004 4:30:18 PM)
First you need a good futures firm to work with to facilitate your trades as well as support your trades.
Jeremy Short (Aug 26, 2004 4:31:16 PM)
Global Futures does an excellent job at this and we are happy to work with them with the release of the TradeMaven bid/ask analysis
Jeremy Short (Aug 26, 2004 4:32:34 PM)
We use our Bid/Ask analyzer and our PTA Program Trading Activity Indicators to read the market generated data
Jeremy Short (Aug 26, 2004 4:33:15 PM)
and use this to understand when the market is in a certain rotation pattern.
Jeremy Short (Aug 26, 2004 4:33:38 PM)
How many of you enter a trade for it to immediately go against you?
Jeremy Short (Aug 26, 2004 4:33:55 PM)
you dont have to answer because I already know what you are going to say
Jeremy Short (Aug 26, 2004 4:34:36 PM)
the reality is that 90% of individual/public traders are unsuccessfull in trading,
Jeremy Short (Aug 26, 2004 4:34:48 PM)
and 90% of institutions are successfull..
Jeremy Short (Aug 26, 2004 4:35:38 PM)
this is because of the information they use to base their trades is in depth and unique
Jeremy Short (Aug 26, 2004 4:36:22 PM)
With the TradeMaven tools, you now have insight as to what is going on and can take advantage of it.
Jeremy Short (Aug 26, 2004 4:37:05 PM)
This seminar is going to be used as a basis for future workshops on this subject given through Global Futures and TradeMaven
Jeremy Short (Aug 26, 2004 4:37:34 PM)
Please check the schedules for the upcoming workshops by visiting the websites: www.globalfutures.com and www.trademavenllc.com
Jeremy Short (Aug 26, 2004 4:37:38 PM)
ok
Jeremy Short (Aug 26, 2004 4:38:04 PM)
now I am going to explain the theory behind the TradeMaven bid/ask analysis.
Jeremy Short (Aug 26, 2004 4:38:27 PM)
The basic principle behind the Buying Interest (Bid) & Selling Pressure (Ask) Analysis is:
Jeremy Short (Aug 26, 2004 4:38:45 PM)
1. The purpose of any market is to facilitate trade
Jeremy Short (Aug 26, 2004 4:38:53 PM)
2. Trade is facilitated at a Price
Jeremy Short (Aug 26, 2004 4:39:02 PM)
3. Price is arrived at by acceptance; agreement
Jeremy Short (Aug 26, 2004 4:39:13 PM)
4. Acceptance implies a “Bid” and an “Ask”.
Jeremy Short (Aug 26, 2004 4:39:23 PM)
5. The “Bid” is always lower then the “Ask”
Jeremy Short (Aug 26, 2004 4:39:37 PM)
6. Acceptance of the “Bid or the “Ask” create a unit of trade (volume)
Jeremy Short (Aug 26, 2004 4:39:48 PM)
7. Volume creates price fluctuation
Jeremy Short (Aug 26, 2004 4:39:59 PM)
8. More volume at the “Ask” drives price higher
Jeremy Short (Aug 26, 2004 4:40:11 PM)
9. More volume at the “Bid” drives price lower
Jeremy Short (Aug 26, 2004 4:40:20 PM)
10. Lack of volume allows price to be driven
Jeremy Short (Aug 26, 2004 4:40:36 PM)
The “Bid” is the price at which someone is willing to buy. The “Ask” is the price at which someone is willing to sell.
Jeremy Short (Aug 26, 2004 4:40:49 PM)
Interested parties (market participants) conduct business by “offering” goods (securities) for sale and or “bid” to purchase them.
Jeremy Short (Aug 26, 2004 4:41:02 PM)
The Market’s Operational Procedure:
Jeremy Short (Aug 26, 2004 4:41:20 PM)
Markets operate through the “Bid” & “Ask” mechanism, which are either acceptance or rejection by market participants. Through this dual auction process a market attempts to accommodate trade by seeking a price level which the majority of participants can agree. This is accomplished by “price probes”.
Jeremy Short (Aug 26, 2004 4:41:38 PM)
At the most immediate level the “Bid” and “Ask” are dual auction process by which the market transacts business. In an attempt to attract buyers the market auctions higher; to attract seller the market auctions lower. The form of price rotation is referred to as a “price probe”.
Jeremy Short (Aug 26, 2004 4:42:06 PM)
Price probes higher (to the “ask”) to see if there is any interest in getting a rally started. Or price may probe the bid and find it triggering a sell-off. This is how the dual auction process works.
Jeremy Short (Aug 26, 2004 4:42:29 PM)
A market is made up of two groups; buyers and sellers. Buyers and sellers transact business by means of negotiating a price. Seller offers an item for sale at a given price: the “Ask”. Buyers present an offer to purchase the item at a given price: the “bid”. When the price of the item is agreed upon a unit of trade (volume) is created.
Jeremy Short (Aug 26, 2004 4:42:49 PM)
When the price is being “bid” higher, it suggests an increase in demand. When the price of an item is being “offered” lower, it suggests an increase in supply.
Jeremy Short (Aug 26, 2004 4:43:10 PM)
Thus price probes; alternatively, high and low in order find the level where there exits sufficient buyers (demand) and sellers (supply) so that business can be transacted. These price probes are referred to as rotation. The acceptance or rejection of the price probes reveals the “perception of value” in the minds of the market participants.
Jeremy Short (Aug 26, 2004 4:43:45 PM)
METHOD OF ANALYZING MARKET ACTIVITY:
Jeremy Short (Aug 26, 2004 4:43:54 PM)
The purpose of analyzing price movement is to determine which group; the buyers or sellers are in control of the market.
Jeremy Short (Aug 26, 2004 4:44:06 PM)
Analyzing price movement requires capturing the market generated data. The first data increment to appear is the unit of volume traded either at the “bid price” or the “ask price”. Unlike standard order entry system, TradeMaven has built in volume filters designed specifically to analyze bid & ask data.
Jeremy Short (Aug 26, 2004 4:44:22 PM)
The present of excess supply and demand in the market place will cause prices to go up (advance) or down (decline). The “excess” of supply and or demand is apparent by monitoring the number of trades at the “bid price” versus the number of trades at the “ask price”.
Jeremy Short (Aug 26, 2004 4:44:29 PM)
There are two types of buying and selling that occur in the market.
Jeremy Short (Aug 26, 2004 4:44:41 PM)
First, a trader (buyer or seller) places a (limit) order in the market and waits for market to trade at the stated price. This behavior of entering the market with a limit order is said to be passive. The trader does not exhibit an eager to enter the market. The trader runs the risk of never seeing the market trade at their price: the order may not get filled.
Jeremy Short (Aug 26, 2004 4:45:11 PM)
Second, a trader (buyer or seller) eager to enter the market will initiate action by accepting the seller’s asking price or the buyer’s bid. When sellers are eager to enter the market they accept the bid price of the buyer: this is called selling pressure. When buyers are eager to enter the market they accept the asking price of the seller: this is called buying interest. This type of behavior is aggressive. The trader is assured of being in the market at the accepted price: the order will be filled.
Jeremy Short (Aug 26, 2004 4:45:27 PM)
Bid/Ask Ratio (split-volume) displays the number of shares or contracts that traded on the bid and the number of shares or contracts that traded at the ask. The TradeMaven Bid/Ask Analyzer™ captures the date at each price allowing the trader to observe the bid and ask volume as it accumulates.
Jeremy Short (Aug 26, 2004 4:45:46 PM)
As a trading tool for analysis of market direction or the lack there of, the TradeMaven Bid/Ask Analyzer™ is the very essence of what makes price advance or decline. The result of trading activity is present in the “market generated data”. The buyers or sellers leave their mark in the form of volume trades at the bid and ask. It does not matter who the buyers and sellers are. Big and small a record of their trades is present in the “market generated data”.
Jeremy Short (Aug 26, 2004 4:46:40 PM)
The purpose of the Trade Maven Bid/Ask analysis is to determine who is controlling the price action; buyers or sellers. If sellers are in control (supply) prices are likely to decline. If buyers are the dominate group prices are likely to advance. The probing action of buyer and seller can be determined at a specific price. TradeMaven makes it possible for trader can tell exactly where the support or resistance to the move occurs, as well as how significant it was.
Jeremy Short (Aug 26, 2004 4:47:28 PM)
As the volume at the bid / ask accumulate during the sampling period (i.e. the bar interval) the dynamic between excess supply (sellers) and demand (buyers) can be determined. The Bid & Ask Analyzer™ let’s you know which ever group, buyers or sellers, are influencing price.
Jeremy Short (Aug 26, 2004 4:47:44 PM)
MASTERING THE PRICE VOLUME PATTERNS:
Jeremy Short (Aug 26, 2004 4:47:59 PM)
TradeMaven “data capture” function provides the trader the most comprehensive tool by which to mater the Price Volume Pattern. The information is stored by TradeMaven on the trader’s hard drive making it available for end of day review and analysis.
Jeremy Short (Aug 26, 2004 4:48:27 PM)
The Bid/Ask Analyzer’s™ capacity to capture the “market generated data” and store it for end of the day analysis would be the first step of the process in determining the “Threshold” in relation to the “minimum price rotation”.
Jeremy Short (Aug 26, 2004 4:48:51 PM)
The database can then be queried to pin point the degree of excess supply or demand (“Threshold”) require to move the market through the “minimum price rotation”.
Jeremy Short (Aug 26, 2004 4:49:20 PM)
SUPPLY DEMAND THRESHOLD & THE CONCEPT OF THE MINIMUM TREND:
Jeremy Short (Aug 26, 2004 4:49:42 PM)
We know from our study of market behavior that in order for demand (buying) to drive price up or for supply (selling) to drive price lower the balance of power must shift in favor of one group of the other; the number of Buyers must be greater than the number sellers or the number of seller be greater then number of buyers. The balance of power need only exceed a small percentage in order to cause a price change.
Jeremy Short (Aug 26, 2004 4:50:11 PM)
However, if indeed price is to advance or decline with any significant the ratio between buyers and sellers must exceed some “fractional percent” great enough to bring about a directional change of some minimal consequence.
Jeremy Short (Aug 26, 2004 4:50:30 PM)
This line of reasoning introduces two concepts. The first is the “Threshold”, i.e. the fractional percent ratio which will cause a minimal directional change. The second is the “minimum price rotation” or what Peter Steidlmayer, creator of the CBOT Market Profile refers to ad the “Key Idea”, i.e. the minimum trend.
Jeremy Short (Aug 26, 2004 4:50:54 PM)
TradeMaven is currently working on the creation of an algorithm which can be set to monitor the “Threshold” levels which in turn produces the “minimum price rotation”
Jeremy Short (Aug 26, 2004 4:51:04 PM)
For example:
Jeremy Short (Aug 26, 2004 4:51:14 PM)
When volume at the “bid” reaches a “Threshold” of 55% of the bid ask volume what is the “minimum price rotation”.
Jeremy Short (Aug 26, 2004 4:51:29 PM)
When volume at the “bid” reaches a “Threshold” of 65% of the bid ask volume what is the “minimum price rotation”.
Jeremy Short (Aug 26, 2004 4:51:40 PM)
When volume at the “bid” reaches a “Threshold” of 75% of the bid ask volume what is the “minimum price rotation”.
Jeremy Short (Aug 26, 2004 4:51:45 PM)
And Or
Jeremy Short (Aug 26, 2004 4:51:52 PM)
When volume at the “ask” reaches a “Threshold” of 55% of the bid ask volume what is the “minimum price rotation”.
Jeremy Short (Aug 26, 2004 4:52:00 PM)
When volume at the “ask” reaches a “Threshold” of 65% of the bid ask volume what is the “minimum price rotation”.
Jeremy Short (Aug 26, 2004 4:52:10 PM)
When volume at the “ask” reaches a “Threshold” of 75% of the bid ask volume what is the “minimum price rotation”.
Jeremy Short (Aug 26, 2004 4:52:28 PM)
In this way the trader can determine when the volume at the “bid” reaches a “Threshold” of 55% of the bid ask volume what is the “minimum price rotation” in relation to either the Buying Interest (Demand) Threshold or the Selling Pressure (Supply) Threshold.
Jeremy Short (Aug 26, 2004 4:52:43 PM)
The TradeMaven “Data Mining” capability makes it possible to statistically establish The “Supply Demand Threshold” and the “minimum price rotation” for any security or commodity.
Jeremy Short (Aug 26, 2004 4:52:58 PM)
The trader could then define the probability associated with each “Threshold” percentage and the likelihood of price achieving the “minimum rotation”.
Jeremy Short (Aug 26, 2004 4:53:44 PM)
Alternatively, the other side of the equation could be analyzed; the factors that would prevent the “minimum price rotation” from occurring, i.e. a sudden increase in the force (supply or demand) counter to the position. In this way the trader could established a criteria for the “unexpected” or the opposite reaction that would effect the likelihood of “minimum price rotation” being complete. If this criterion was met, that could serve as a signal to cover (exit) the position.
Jeremy Short (Aug 26, 2004 4:55:07 PM)
Conceptually, the” Threshold” may not occur at a single price but at a series of price levels which once triggered would extend the price rotation beyond the minimum. Once the data showed that the “Threshold” had been triggered at more than one price level in the direction of the trend, this data could be analyzed and used for determining support and resistance.
Jeremy Short (Aug 26, 2004 4:56:27 PM)
The Bid/Ask Analyzer™ incorporates Richard Arms’ Equivolume bar style with the enhancement of Split-Volume. The display below shows two types of trends. The first is a strong up trend, where the “Supply Demand Threshold” has been triggered on the ask side. The second is a weak up trend, where the “Supply Demand Threshold” is weakening as price reaches the high (resistance).
Jeremy Short (Aug 26, 2004 4:59:00 PM)
Here is a sample of the Equivolume bars colored in with the bid/ask analyzer info:
Jeremy Short (Aug 26, 2004 5:00:16 PM)
http://www.tmdownloads.com/pic1.png
Andre (Aug 26, 2004 5:00:47 PM)
Just a note here, folks...
Andre (Aug 26, 2004 5:00:49 PM)
If you cannot open the page automatically, it might be that your browser is set to not allow pop-ups. Trying holding the control button when you left click on the link to bypass the anti-popping software.
Andre (Aug 26, 2004 5:00:56 PM)
If that doesn't work, open a second browser window and type in the url manually.
Jeremy Short (Aug 26, 2004 5:00:56 PM)
This next pic shows a strong up trend encountering resistance at the high and pull back (retracing)
Jeremy Short (Aug 26, 2004 5:01:18 PM)
http://www.tmdownloads.com/pic2.png
Jeremy Short (Aug 26, 2004 5:02:07 PM)
The next pic shows how a strong down trend encounters support (demand) at the low, reversing, and trading back to the point of resistance.
Jeremy Short (Aug 26, 2004 5:02:59 PM)
http://www.tmdownloads.com/pic3.png
Jeremy Short (Aug 26, 2004 5:04:27 PM)
Now, we take our trades by scaling into a position when the "thresholds" reach certain levels on that part of the rotation cycle.
Jeremy Short (Aug 26, 2004 5:04:50 PM)
Then we scale out when they come back to the mean.
Jeremy Short (Aug 26, 2004 5:05:33 PM)
TradeMaven helps you to accomplish this by automating parts of the order execution process and having preset money management criteria.
Jeremy Short (Aug 26, 2004 5:06:02 PM)
Ok, I would like to open it up for Q&A at this point, so I would be happy to take some questions.
Andre (Aug 26, 2004 5:06:18 PM)
Great, Jeremy, thanks.
virgin (Aug 26, 2004 5:06:40 PM)
Are only best bid/ask are analyzed ?
Jeremy Short (Aug 26, 2004 5:06:50 PM)
We are going to reference this EliteTrader chat for future educational seminars. So please take the time to re-read the above chat.
Jeremy Short (Aug 26, 2004 5:08:38 PM)
We measure what is traded. We focus on the FACTS in our analysis
Jeremy Short (Aug 26, 2004 5:08:43 PM)
Also,
Jeremy Short (Aug 26, 2004 5:09:14 PM)
we are developing a radar detection system that will detect "fake"size or orders that are being worked in the depth.
Trader945 (Aug 26, 2004 5:10:05 PM)
do you trade off volume only? What do you use in conjunction with Bid/Ask Vol.
Jeremy Short (Aug 26, 2004 5:11:37 PM)
You can use any variety of tools, but we just use market generated data, which also includes studying the components which make up the major index.
FranceM (Aug 26, 2004 5:12:09 PM)
Jeremy, If I understand correctly you can program TradeMaven to enter the market and then exit the market based on criteria from the Bid/Ask Anaylzer. Is that correct?
Jeremy Short (Aug 26, 2004 5:12:13 PM)
In paticular our PTA indicator measures these rotation patterns on all the major stocks in the OEX.
Jeremy Short (Aug 26, 2004 5:12:28 PM)
Yes FranceM
jkd (Aug 26, 2004 5:12:54 PM)
Is there a difference in performance between securities on the NYSE and the NASDAQ?
Jeremy Short (Aug 26, 2004 5:13:03 PM)
parts of the analyzer are yet to be publically released, but anticipate that they will be out this fall, 2004
Jeremy Short (Aug 26, 2004 5:13:27 PM)
No jkd
Jeremy Short (Aug 26, 2004 5:14:30 PM)
We focus on the components that have the most influence on the futures contracts that we trade.
Jeremy Short (Aug 26, 2004 5:15:09 PM)
Program trading is now averaging approx 50% of the total daily volume of the NYSE
Jeremy Short (Aug 26, 2004 5:15:36 PM)
They move based on rotation patterns that we analyze.
jkd (Aug 26, 2004 5:16:04 PM)
How often does one have to rejigger the thresholds to match a particular market mood?
Jeremy Short (Aug 26, 2004 5:16:11 PM)
The end result is that we have intra-trend scalping opportunities
Jeremy Short (Aug 26, 2004 5:18:43 PM)
There are two phases in the market, trending and consolidation.
Jeremy Short (Aug 26, 2004 5:19:35 PM)
When the market is in one or the other the rotations may narrow when in a consolidation phase or elongate when trending.
Andre (Aug 26, 2004 5:20:44 PM)
Folks, we're going to cap questions. We've got plenty. We'll get to as many as we can.
Jeremy Short (Aug 26, 2004 5:23:49 PM)
So the answer is it changes when the overall market conditions change, and we use the market profile to determin when that happens.
Andre (Aug 26, 2004 5:23:56 PM)
Great.
Andre (Aug 26, 2004 5:24:08 PM)
Sorry folks... we'll get to 4-5 more questions here.
cibio (Aug 26, 2004 5:24:37 PM)
Jeremy do you have to know a lot about programming in order to use TradeMaven?
Jeremy Short (Aug 26, 2004 5:24:42 PM)
The information provided in the LDB (Liquidity databank) is factored into the analysis.
Jeremy Short (Aug 26, 2004 5:25:21 PM)
No, it is programmed by a series of drop down boxes, which make up conditional statements.
Andre (Aug 26, 2004 5:25:55 PM)
So you don't have to know a language to set up criteria, correct?
Jeremy Short (Aug 26, 2004 5:26:06 PM)
That is correct
progers82 (Aug 26, 2004 5:26:16 PM)
Why have you limited your great product to just jtrader?
Andre (Aug 26, 2004 5:26:27 PM)
and...
Jeremy Short (Aug 26, 2004 5:26:28 PM)
..be patient..
Guest (Aug 26, 2004 5:26:31 PM)
does your system only work with global futures?
Jeremy Short (Aug 26, 2004 5:26:33 PM)
more is in the works.
rambo11 (Aug 26, 2004 5:26:50 PM)
Is the analysis module of the software available separately, which I could use on the side, with my existing order entry system, i.e. RealTick?
Jeremy Short (Aug 26, 2004 5:27:12 PM)
No. It is a core part of TradeMaven
jkd (Aug 26, 2004 5:27:52 PM)
What is the most successful range of time durations for the bars when analysing securities?
Jeremy Short (Aug 26, 2004 5:28:53 PM)
In the context of scalping, 5 minute bars and position trading, 30 minute bars.
Jeremy Short (Aug 26, 2004 5:29:46 PM)
We do use shorter time frames when pinpointing an entry, ie 30 seconds
Guest (Aug 26, 2004 5:30:53 PM)
So is this system is geared more toward scalping than catching the larger waves?
Andre (Aug 26, 2004 5:31:28 PM)
So is TradeMaven more geared toward scalping than catching longer term trends?
Jeremy Short (Aug 26, 2004 5:32:25 PM)
Yes, Intra-day trading is what TradeMaven is geard & designed for.
Jeremy Short (Aug 26, 2004 5:32:37 PM)
But can be used for both scalping and trend trading
Andre (Aug 26, 2004 5:32:59 PM)
Jeremey, it's been great to have you on. I'd like to finish with on last question. What do you like about the TradeMaven / Global Futures combination?
Jeremy Short (Aug 26, 2004 5:35:09 PM)
It is a great combination because Global has great technical support, low commissions, low margins and account minimum requirements which allows anybody to get started. Their staff is trained on TradeMaven and we will be doing more advnaced workshops in the future with them.
Andre (Aug 26, 2004 5:35:32 PM)
Well there you have it, folks.
Jeremy Short (Aug 26, 2004 5:35:53 PM)
Thanks Andre & everyone who attended.
Andre (Aug 26, 2004 5:36:16 PM)
You bet.
Andre (Aug 26, 2004 5:36:27 PM)
Jeremy... thanks so much for joining us today.
Andre (Aug 26, 2004 5:36:38 PM)
Since 1998, Global Futures has been providing the best value for active traders: low day-trading margins, 24-hour in-house tech support, multiple trading platforms and extremely competitive commissions. For more information: http://www.gfetc.com
Global Futures (Aug 26, 2004 5:37:03 PM)
Here is the link for the TradeMaven platform from Global Futures Website http://www.globalfutures.com/platforms/trademaven2.html
Andre (Aug 26, 2004 5:37:46 PM)
And for more information on TradeMaven: http://www.trademavenllc.com
Global Futures (Aug 26, 2004 5:37:50 PM)
If you would like more information on the TradeMaven platform, our day magins, or competitive commissions please contact AaronCapps@globalfutures.com
NaCl H2O (Aug 26, 2004 5:38:07 PM)
Jeremy & Andre -- Thanks
gstrd (Aug 26, 2004 5:38:09 PM)
Thanks Jeremy, I have a TM demo and loveit...still learning
Andre (Aug 26, 2004 5:38:22 PM)
And while this chat session may have ended, the discussion doesn't have to. For additional questions and comments, please see the following thread on our message board: http://www.elitetrader.com/vb/showthread.php?threadid=37363
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