The ask/bid of many futures or stocks could change but the last price doesn't. Is it because there are many orders unfulfilled? The ask/bid size may be a few hundred bt the last size may be less than ten. Some people said the big players always enter some orders to creat a mood in the market. They will cancell them later. Is this true?
Yes. Most futures orders are never executed. If you can see the market depth for the e-mini's, for example, watch the levels away from the market. You'll see the size available at these levels going up and down and up and down. None of these orders are getting executed, just entered and pulled.
"You'll see the size available at these levels going up and down and up and down. None of these orders are getting executed, just entered and pulled." I would appreciate an explanantion of why traders do this. Surely if big players are trying to play games they would be using the inside bid/ask or perhaps one tick away at most. Is there really enough people watching the emini market depths for big players to bother playing false size games several levels deep? Thanks
there are also automatic orders. also, some may place orders based on model calculations. In that case the orders go at the calculated levels, not always at the inside bid/ask. When conditions change (and they change on a tick per tick basis with the underlying) these orders are pulled, readjusted etc.. these orders can and are executed in a fast market (well if not pulled fast enough anyway). so what you see in the market depth is real. it does not mean you can make decisions from it. in a slow market I'd say you can though. tntneo
no, the bid/ask size is just that, but the trade size is mkt orders (so to speak). 100 bid at .25 and 100 offered at .50, nothing happens. Someone has to want to sell at .25 or buy at .50. That's the 10 you see trade. If the bid /ask changes and the price doesn't, that means it first traded at the ask, then the bid moved up and so now it is trading at the new higher bid. But yes there are many unfulfilled orders out there belonging to many traders seeking fullfillment.
When orders are pulled before they are filled it usually isn't big players playing games. It is usually a computer program deciding that it wants to change the price it is bidding or that an arbitrage possibility isn't available anymore. I venture to guess most orders on the electronic exchanges are entered (and pulled) by computers. An institution, for example, might have a program to work a buy order at the bid and to get more aggressive as time passes. Maybe lifting the offer on a few lots here and there to get the trade done. The computer will have to modify orders to keep up with the changing bid price. Having computers do this submitting and pulling and modifying is a lot easier than having traders sitting around doing it and its the only way to get a large trade done without a lot of slippage. At Schindler Trading we use Tradepipe software to work our orders and we're only doing 50-100 lots at a time. Most of the orders we submit end up getting pulled.
Hi, I was wondering if someone knows an easy way to chart realtime the evolution of the cumulative ask/bid size for the ES... Presently, I got this information thru the IB show market depth feature and I would be interested to chart realtime the evolution of the cumulative bid and ask sizes (for example at 5th level, ie the deepest level available on IB).... Any ideas ? Thanks Eddy PS : By the way, among the "regular" data feed provider (esignal, quote.com etc), who else is providing such market depth information on the Eminis ?
I watch market depth a lot and find it to be very valuable. At first, I had no idea what I was looking at and used it completely wrong, but after some time I have grown very fond of it. One of the great things is to suddenly see a lot of bids or asks getting pull away several layers deep. If this happens a lot, then you know that as soon as the price moves against it, its going to clear a lot easier. Also, you can watch the number of contracts sitting at the immediate bid and ask. If the bid or ask drops away without the last price reflecting this, you know that its just someone pulling out. However, if you see this "pulling out" several tick depths, this could be a signal of a lot of traders / computers making new decisions. Remember, the best information you can get about the here and now is in the here and now. I would never use market depth to trade off directly, but I did use it today for my best profit day ever -- I saw people pulling out bids when NQ was sitting near the HOD for the second time of the day and then I saw the bid getting hit relentlessly without any strong support in bid depth several ticks down. That is when I made my best short trade ever.
My favorite way of looking at market depth, is the same way as time and sales (t/s much easier though). Basically the same as any trading. You look for patterns to repeat. My favorite, are spikes. You want to see a price trade into an area (especially an area that you have identified as supp/res for some reason) and stall then be rejected quickly, with orders going through at the market. If repeated big orders go through, even better. If you take into consideration how it behaves at different times/situations, that helps. It's kind of hard to describe, but after a while you get a feel for it under different situations and can identify opportunities.