I very much doubt that faking, flipping or whatever you want to call it is the main thing behind the so-called ACV behavior of "market moving towards size". It happens all the time, and I mean all the time in stock index futures and seems fundamental to the operation of these markets. In some markets it is a little more obvious than others. Attached is chart from friday's ER2 with some of my scribbles still on it. It is plotted with constant volume bars of 120 contracts. Lower plot is a smoothed ratio of number of contracts at ask (all five levels) to total number of contracts in the book (5 ask + 5 bid levels). Quite revealing is the marked point where price drops straight through the bottom of the potential rising channel and size is moving very much onto the bid. Notice that the down move reverses when the ask/total size ratio (all levels) in the book reverts to around the 0.5. This is typical behavior that happens over and over in SIFs. The lower plot is smoothed with a fast smoother, so there is a little lag.
I have observed price moving to size (on ES). An interesting question is how much profit should one look for over what period of time when fading the cumulative size. Another interesting question is: are there market internals clues that would be helpful to consider before the cum. size is faded?
dont the s&p 500 traders use the e-mini for arbing . my cousin was a broker at the cme he told me the large traders would sweep the e-mini using the large contract as the broom. when i look at the booktrader on I.B. and the most volume is on the selling side the market usually turns , i attribute this to the notion that the large contract traders see the discrepancy and realign the contract. and also what looks like weak hands is actually the strong . how else do 90% of traders lose ? bgp
You guys might consider the fact that markets are there to facilitate trade and for price discovery. This the primary function of the market. All day, every day, it auctions up and down to probe for interest from one side or the other. The market mainly trades towards size because those who bring serious capital in and out of the market do so over a range of prices and require that size for entry/exit. Markets trade towards size in any and all products, but this must be put into context relative to where it is trading at the time and what is trading. The flippers, flashers and fakers in the depth are short term and do not control market movement. They are generally trying to catch small fish and are looking for a few ticks. These guys don't control market movement except for brief periods in relatively illiquid markets (YM, ER2, EMD, FDAX, etc). Don't trade in a vacuum. Always consider what the market's main function is and how it is trying to do it. I hope that makes sense. FT71 PS: HAPPY NEW YEAR TO ALL.
Besides speculators, there are hedgers and arbs in the market (ES). At the end of every day, most hedgers and arbs probably think that they got a good deal. Even if a hedger appears on the ask with big size and it gets taken and price goes higher, the hedger got a good deal.
In the last two weeks I watched price (and made note of) at several of our recent daily HOD's (also at the High Of Year day) not "pull-back" more than 2 points until I saw the ACV ratio go to 2:1 or higher (to the bid side). Do not ask me why or how this happens but it is very clear to be seen imo, and I am very glad I have learned about this from VSTScalper (sharp guy). Actually the more I thought about this in an "auction market theory " sense, it is perfectly logical. My observations for the ES in this two week period seemed to note the ACV hitting 2:1 at very significant MP levels or after very strong directional moves (that just suddenly come to a DEAD STOP as the ACV goes to 2:1 or higher). I have watched the ACV ratio flips at support areas too, but in the last two weeks there seemed to be more of this at daily highs. I know that I will now continually pay attention to these ratio's as I am convinced there is a lot of credibility to this ratio.
This is a good thread to learn about several things: How the market works(moves). How to trade to make a lot of money. How some people who trade limit their performance by being "right". How several of the four major games that "show" are being played. How some people misunderstand what is going on an act upon it. Here and in other threads on SPM and "order flow" there are some good illustrations. what makes the illustrations good is that they are there to see. Unfortunately there is not much discussion beyond advanced beginner anywhere up to this point. If you want to learn about how markets work by watching, it is important to be able to see the markets. It is a slow process to grasp makrets and their operation and it is best to start with beginner stuff and then gradually overlay it with additional supporting sensory phenomena displays. If a person cannot get the fundamentals down first, then he generally rebels at going any further and is stuck out on the branch for a long time. Markets do not operate as gaming enterprises, they are much more serious and purposeful. Strategies abound. In gaming, a person knows the rules and gets dealt a hand. In markets, there are no rules and everyone gets dealt the same hand. This is difficult for most traders to understand until they get to intermediate or advanced intermediate levels. A big influence on traders is how much money they have. The more money you have, the more important it becomes to make money with a comparable strategy. The DOM is a tool that is part of strategies and it is used in a variety of ways, often according to the skills of the trader. One example. It is a sort of "fix" for the OP of SPM. The depth of market (DOM) alone is insufficient to tell the whole story. You have to code it with other data to make it understandable and automatic. The companion is T&S. Why is this? The reason is that you have to take into account those who do not "show" on T&S. It is importantto know why these people are not showing. It comes down to the srategy of the traders. Some strategies are based on price others are based on timing. "Timers" do not show because they do not have to. There are four basic games played by those who show. Their strategies are known far and wide by "timers" and they are "played" by timers. Lets put DOM and T&S together and see how this is like going from the first gear of "simple" to Second and Drive gears of making money. The manual version is very doable as well. There are two components, as mentioned: DOM and T&S. We have "tape reading" oriented flow display now available. Personnally, I use a leading indicaor of this stuff so I am just seeing the combo give me more the magnitude of the vector and the limits of the moves. So four showing games are going on and the "smart money" does not show until it plays a card. I truncate the T&S because I only want to see the "rich smart money". and how i affects the DOM since it is on the oppositie side of the "show" on the DOM. Ask yourself how Jak Broz misses this. Then ask how important is it to the balance of things. First gear makes so much mony; second gear makes more money; smart money is making a little more and is restrained to only parts of the day; rich smart money knows a lot more and is making correspondingly more; the Drive level players are pulling the money out of the pool. The money velocity comes in about 6 levels and the DOM and T&S do not tell you what the money velocity is. That is found elsewhere and not part of simple nor what is showing. So what is the DOM and T&S telling you? It tells you the two parts of the P, V relation: continuation and change. Why doesn't Jack Broz get this differentiation. Why doesn't the ratio measure work for this. Let's skip the answer of "being right" is more important than making money. Lets skip the "I make enough looking at this or that way. The gaming paradigm dominates and it is "showing" 100% of the time. The numbers that you see showing relate to what gaming major principle always in play by marginal and slightly better traders? Skip the losers here. Think about it. whch of the four major games is "showing" and caused by low grade player traders? Protection is "showing". At what quality level of trader who is successful does protection stop showing? I track 12 forms of strategies for doing stops. They ALL show. Protection is not going to get a "play" as the market moves except when? That is when is the only time protection is affected when the market is moving. Why did Jack Broz type this movement in in his litany and not discuss its occurrance? Looks like we have reached a point to discuss learning how to make money by using some displays on the screen. I called four trades in live trading in Vegas using what is below. the presenters and I made an agreement after the presentation. I get camtasias daily from them by email as a courtesy atthis point. They had DOM displayed and were not using it to make trades on the market movement turns. What is the DOM doing that is so terrific when it is coupled to the T&S? It is a leading indicator of price turns. Does anyone know why this is not mentioned by anyone who is published or is on the web in behalf of the market places? It is a secret apparently. Lets get down on this right now. Take a display of DOM in the form of a button and run along side it the TS tape, truncated at a good level. hang stalactites for the contract volume values going away from the middle outward. (bid on left offer on right). You are now viewing the range of the next move and the limits of the move and the direction the move is going in. You are also seeing the strength of the move (market pace) and the sentiment of the market as well. I have a vocabulary for this and I will not lay it out now. It is unique ad the descriptors are functional names that "associate" to what is going on. Here you get to call trades to the tick. That is what impresses presenters, too. What does making money look like when you get to this level of market display and understanding? Let me explain. MOST PEOPLE HAVE NEVER SEEN THE MARKET AS YET. I use the word "WALL" to describe the tick value of the reversal action that will be taken when the time comes to NOW. When a person says he prefers trading position over daytrading to make money, he is saying he cannot time the market and s is capable of proving he can't time. When a person is trading using the DOM and T&S to get reversals down to a tick level, he is saying he day trades, is leveraged, is trading the max contracts that, at that time, the market can bear and he is absolutely front running the rich smart money all day long for 6 1/2 hours of the RMH. Look at the T&S and truncate it so that you see the T&S "move" when the players are playing and the chicken feed is not there to even look at. Watch the DOM and see the WALL. See the WALL form; see the wall recede as the movement begin after the turn;see the next reversal appreamintues ahead of the nextturn; see the BS scalping miss the oppotunities. See the difference between protection and the "no show" traders who are opposite ALL shows. Get to see how the MINORITY controls the market. See how the MINORITY is running the plays on the market flow. Make absolutley sure at some point that you learn to separate the BS and mediocracy out of what you read, think and believe. First you have to get to see the market as a display on your sceen (No one is doing that so far as far as snagt are concerned). Second, you have to truncate out what is not important. Third, you have to learn that the trades that count do not show until after the tade AND you have to know that what is showing is PROTECTION for people who are margial and hardly successful in trading. Fourth, it is nice to kno the three other games being played on the DOM; they are all apparant if you have any retention and can see multicontracts migrating. We now have global real time market data in many degrees of freedom. at this point the market telegraphs to those that have the displays setup to see it. There is no platform that iscomprehensive. It take 3 or 4 and then you have to code the data to SEE THE MARKET. Do not even imagine that anyone has ever backtested anything that has to do with making money on the markets. Get it straight as soon as possible that the "regression to the mean" is not where money is made based upon price change. Money is made in the markets by continually being in the markets and by carving off the turns and carving them to the tick using leading indicators of price.
This is really getting interesting. If what you see on dom is protection as Jack says then price moving towards it certainly makes sense. A lot to think about.