This is exactly why I mentioned earlier somewhere along the thread that there is some considerations to be aware of especially considering your last point about the markets heading for the highest volume... If I remember carefully, what you mention was what Scientist had understood. So he and I see slightly differently. There is directionality in the market with regards to volume, however I haven't observed direction being a matter of the greater bid/ask size. My observation is a bit different in that it is the smaller of the two in addition to the incoming VOLUME CAVEAT. The consideration that has to be dealt with is in fact a minority aspect. You'll have to pardon me since I had worked out this aspect after sorting through many questions I had regarding what is what at this particular junction several months back. I verified what I had come to understand as truth by doing simple continuous mechanical (programmed) trading on this small principle. The issue here is about the size of either side (ie. bid/ask) but not necessarily in the direction of the greater side as Scientist had understood, as a scalper mind you (read carefully the context of his posts). Continuous Trading was much later for him. When you look at either side BID SIZE, ASK SIZE, it is an either or of what's happening (ie. either net fluctuations of a particular side is yielding a general increase or decrease in the particular side). All price charts encapsulate this activity and thus it is at the heart of the matter for all trading. The majority do not like it because it is hyper monitoring and directionality changes are frequent. As usual, an illustration/analogy. My mind is geared to pictures. You can think of the matter as a tug of war. As in any tug of war, there is a minimal displacement required to defeat the opposing side. Trading is similar in many respects, how many individuals punch away at the bid with the presumption that the market goes up or punch away at the ask with the presumption that the market goes down. The subtlety here can be understood by looking at who lines up at the tug of war. When you look at either side of the rope, you can do a size up to see which side has the preferential to outpull the other. The issue here is that the individuals lining up is NOT the BID SIZE or ASK SIZE, but is in fact the immediately arriving orders that are punching away at the two sizes. For example, if bsize/asize is 100/900 and you get a 1000 contract bid, this order will tick the price spread (dP) down .25 pts. So this is where the T&S comes in VERY useful especially if you have BSIZE/ASIZE on your T&S. If you don't, well then the BID SIZE/ASK SIZE does just fine. When monitoring these things, and this is where scalpers would do very well if they would just get tuned to it, you'll notice that there is directionality in the change of both sides of BSIZE/ASIZE. Isolating just one side for the moment, only two things happen. Either the flunctuations in the size will be generally increasing or generally decreasing. Eventually, then there is a reset. The reset is a new price level (ie. bid/ask price depth). As an additional illustration, I liken the actions of a single side (ie. bid size) action to a boat with a hole in the bottom. The market orders which continually flow in (T&S) are equivalent to the water coming in through the hole in the boat. There is also a counter mechanism to this inflow which is continually scooping water out of the sinking boat. The scooping out is equivalent to the limit orders arriving at the bid side thus increasing the bid size. So now you see that on just the one side, you have two dynamics working on just the one side of the current price depth. You have bid volume flowing in, but you also have limit orders lifting bid volume (ie. 1 market order for 2 short contracts can be undone by a sequential order of 1 limit order to cover 2 short contracts at the current bid). This single sided net flow is in effect how fast the boat is sinking... To capture both sides, you have the same dynamics at play on the other side, in other words two boats. The idea then is to monitor, analyze, and decide which boat is sinking faster and act only when shifts occur. Oddly enough, you bank profits by siding with the quicker sinking boat. GO FIGURE! MAK!
Thanks Mak, I´m gonna re-read your post a couple of times and try to watch this, see if I can handle it
Nice Mak. I had issues with some of the statements on those threads too. I still have not got it straight but I will chew on your illustration too. I do not think t&s, dom, and sq/str are requirements for sct trading unless you are trying to squeeze out every last penny like the old man. I believe you can catch the primary moves with nothing but channels and volume. That is what I am attempting to do. We'll see how it goes.
There is also some str/neut/squ stuff that I need to touch up. After watching for a few weeks now, most of the pieces have settled in. I've attempted to screen capture everything but haven't been able to get a good daily set of the captures. I don't know how Grob does it bu the pieces fell as he has explained it. I just need to get the progressions lined up for a complete day so that people know what it is that their looking for... Soon... I hope... MAK!
That's great news Mak. I offer free cutting, pasting and dictation services to fellow Jackers...LOL. Keep up the great work!
OK... I think... Some prelim. There is one small caveat regarding str/squ/neut. Someone somewhere mentioned oil leading or something or other. I checked out OIL so as not to be ignorant (ie. crude light to be specific) and it didn't match up no matter how I diced it up. Conceptually, it shouldn't when I really thought about it. Commidity vs Stock Index??? Apples and oranges. I could have saved alot of screen time by just running a simple correlation analysis... ARGH! However, with str/squ, there are is one small minor readjustment. Grob, nothing here is changing what you had previously defined. The consistency and concept is exactly the same. Somewhere along the lines, something changed and I'm not sure if arbitrageurs had anything to do with it since arbing is also heavily correlated with str/neut/squ. If any of you recall, the str/neut/squ illustration Grob put forth was wrt to a rubber band. Str being (ie. the band being stretched down) the difference between INDU and YM (ie. INDU-YM) residing in the extreme lower range of the days range of differentials as a SHORT trend, (ie. small differential between INDU and YM). Squ was commented as the difference (ie. INDU-YM) being in the mid to extreme upper range of the days range of differentials and subsequently a LONG trend (ie. large differential between INDU and YM). This definition was consistent with the INDU/YM behavior since at that point, INDU prices were higher than the YM with the usual convergence at expiration date. I'm not sure where along history things shifted but in going back a few months, YM has been seen to always be converging down to INDU as opposed to up to INDU and hence the small change. In the former sense, YM, always and STILL is the leader, STRETCHED the differential (ie. rubber band) and thus the term/illustration. Somewhere along the recent lines, YM still remains the leader but flips to converging down to the INDU as opposed to up to the INDU price level. As a result, which will become clearer in the attached pic, SQU (YM-INDU) is the differential residing in the lower region of this range (ie. SHORT) STR (YM-INDU) is the differential residing in the upper region of this range (ie. LONG) There are a few items that must be understood properly when monitoring. The first item being that a LONG trend will have periods of SQU/NEUT cycling. Well this make sense. Usually what happens is that YM will jump out resulting in the differential residing in the extreme upper regions of the range. This momentary jump out is the result of SMART MONEY (ie. THE MINORITY). Their signal is easily seen and it is immediate. Eventually, a majority follows suit and so the INDU catches up thus driving the differential to NEUT. Periodically, the YM will STR out ahead and then INDU will catch up and NEUTralize the STR. This cycles for a while and constitutes the entire length of the LONG trend... The SQU is the same but reversed. So, ALL the while, I am holding SHORT thru the entire SQU/NEUT cycling until I hit STR. Then I am holding LONG thru the entire STR/NEUT cycling until I hit ___ (SQU). For simplicitiy, I identify STR as DIVergence since YM is leading away from the INDU price, and SQU as CONVergence since YM is leading in towards the INDU price. If using absolute values, then Negative DIVergence is SQU and Positive DIVergence is STR. By expiration, there is absolute convergence since YM eventually just collapses to the INDU price. So the chart. Well clearly, the easiest thing to do would be to just watch the differential. As I had done somewhere before but hadn't realize it, it is just a matter of matching up ranges. So, if you don't have QCharts and it's nifty feature, as identified by Grob, you can just overlap YM and INDU charts. Because, I am entirely convinced and have verified with lots of screen time in addition to alot of self Q's for which the answer was that YM DOES IN FACT LEAD, I layer my INDU chart over my YM chart. In the attachment, I have YM farthest to the right, then INDU, then ES. Setting my charts up this way, the offset is automatically accounted for and seeing the differential is just a matter of seeing where the highlight farthest to the right is in relation to the highlight to it's left. If the highlight farthest to the right is higher than the highlight to it's left, then the YM is DIVerging/STR (ie. "LONG"). If the highlight farthest to the right is lower than the highlight to it's left, then the YM is CONVerging/SQU (ie. "SHORT"). For some of the accustomed folks, it is the same as your +/- range that you usually setup in your preflight. The NEGative values of your setup is equivalent to the highlight being below it's counterpart and vice versa for the POSitive values of your range... The tool is only effective after synch... I'll need another post to detail out when this occurs. Lately, it is rather quick, usually before 10 mins if not 5... A clean up post is probably going to be needed... Once I'm synched, I usually have to do some work to keep the ranges matched up until the overnight HI and LOW are taken out... MAK!
PATIENCE dear watson... I am ever so slowly merging things. The process is really a mind thing. I am at it's mercy. You see how one or 2 simple truths requires several posts of explanation. I have a couple dozen of these and so it would take volumes. Rather than dispense volumes. I put out what I can and many in its entirity. If it doesn't click, give it some time... MAK!
Mak Heres a quote from Jack: [If you use the leading indexes to time the ES; the "stretch" applies to "short" trdes and the compression applies to "long" trades. I think several people here are using it at this point. Put the cash over the indexes to see strech and compression as an arimetic contruct (like subtraction is second grade). Nowadays the market offsets are "short". When they are long turn what I siad upside down.] Does the last two sentences apply to what you're talking about?
Dag nab it Grob... I see you posted on this juncture in the path 2 years ago. My previous post is apparently a rehash. Well, I'm glad to see that I found the same truth Grob did. Here was the post. It is precisely what you mention easy. THANKS... Here was the link of that post that easy quoted http://www.elitetrader.com/vb/showthread.php?s=&postid=362487 So today's market offsets are "LONG".... It's these minor things that can some times distort the whole picture... LONG MARKET OFFSET (same as previous post) SQU (YM-INDU) is the differential residing in the lower region of this range (ie. SHORT) STR (YM-INDU) is the differential residing in the upper region of this range (ie. LONG) SHORT MARKET OFFSET (haven't seen this yet) SQU (INDU-YM) is the differential residing in the lower region of this range (ie. LONG) STR (INDU-YM) is the differential residing in the upper region of this range (ie. SHORT) MAK!