Discussion in 'Index Futures' started by virgin, Sep 19, 2002.
What actions are the causes for the
bid/ask to move one tick higher or lower ?
Crazy people with a lot of money.....
really its self explanatory, think of an auction; people bid and offer and cancel and get filled, etc., also automated market making computers I'm sure.
let's say 5 people want to buy at .50 and 5 people want sell at .75. No trades are made until someone either throws in the towel and buys for more or sells for less.
If a market buy order comes in, it gets filled at the ask. If enough market buy orders come in then the 5 sellers at .75 are gone and it moves to the next best selling price which would be up to even.
So if you see 35 bids and 65 offers, it's a forgone conclusion that if 35 mkt sell orders come in, then after that we are going down to the next best bid price.
But it isn't that simple because bids and offers are constantly being entered and pulled.
Looks to me like 90% or more of the posted size gets pulled rather than executed.
Great explanation Profit!
Yeah, good observation, Stock777. I was surprised when I first noticed this myself. My best guess is that it is automated arbitrage orders that are quickly pulled if the arbitrage disappears. And they have to be automatic and computerized because no human can be entering and pulling orders that fast. What do you think?
You are no doubt correct and thanks for answering a question that was bugging me. Now let me ask another: what is driving the pricing, the big contract, the mini's or the ETF's?
NQ especially. But I think thats a very arbed market given that you only need do about 10 stocks to get practically the entire NAZ100. And also QQQ trades about the same $ volume each day as NQ. Took me a while to figure out that there is no size worth leaning on in either NQ or ES. In Es though I think most of that size comes from locals in SP. Keep in mind if a 50 lot is resting in the pit thats 250 on the screen. Also SP trades in .10 so locals can really have a leg up if they are offering size at .50 and the pit is offered at .40 As soon as the pit turns those ES orders are imediately pulled. You can't get much faster on the cancel button than a Globex terminal right in the CME building.
I say it doesn't matter unless you are going to try to arb them. All three are going to move together.
A more interesting question -- one that you can actually make use of and profit from if you can find it -- is what market leads another dissimilar market? Does the Nasdaq lead the S&P? Does the Dow lead the S&P? Does MSFT lead the Nasdaq? Or Nasdaq lead MSFT? By "lead" I mean a move in one is followed by a move in the other in a predictable way.
Of course all of these markets are correlated and most of the moves they make will match coincident moves in the other, but are there any lagged moves? That would be useful to find.
My observation is that there are times (a day or part of a day) when one stock or index seems to lead another, then for no apparent reason the correlation disappears . I could never figure it out in a way that made sense to me, that I could profit from, so I dropped it.
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