Today's Extremes Foretold by Intense Commercial Trade

Discussion in 'Technical Analysis' started by UrmaBlume, Aug 24, 2009.

  1. As Peter Steidlmayer used to teach, there is a small set of commercial traders who trade with such volume and such intensity that their trade often forms local extremes.

    In the days of old these traders and their actions were easily spotted from within the pit. Today those traders whose action forms local extremes are often not traders but computer code.

    This code runs on data feeds that can cost up to and more than a thousand dollars a day. Orders are auto-executed in the microsecond time frame and backed by unlimited resources.

    Anyone with direct experience with the application of such systems will verify that great lengths are taken to 1) disguise this trade and 2) increase the effectiveness of the buy or sell by making both buys and sells - as they used to say in the past - "sometimes you can sell a few to help you buy many at a better price." When when backed by unlimited resources and done by very smart code executing in the microsceond time frame, this approach can be very effective indeed, plus it confuses the competition.

    The bad news is that a huge amount of resources and very fast, very smart code makes for very tough compeition. The good news is that when such trade happens - it is not hard to spot.

    We have built an indicator designed to spot this trade. We describe the calculation of this indicator as - - "When taken in combination, the acceleration and deceleration of buying and selling volumes, total volume and the velocity/rate of change in the balance of trade reveal a certain dynamic that we find present at many, if not most, intra-session extremes.

    Today's (Monday 24th) trade was no exception.

    The first chart below shows the session high which occurred at 0808 PST at 1035 up 5.5 points from the open of the day session.

    The second chart shows the session low which occurred at 1221 PST - down 13.75 points from the session high.

    In this chart of the session high please note that the spike in commercial selling occurred 2-3 minutes before the last tick at the high.


    Today's session low occurred at 1221 pst - down 13.75 points from the high and was, again, indicated by INTENSE comercial activity on the buy side. Note that this very detectable spike happened more than 10 minutes before but still within 1 point of the session low.

  2. So how are you identifying commercial volume?
  4. Charlie,

    Thank you

    It is not so much about commercial volume in general as it is about those very few seconds, several times each session, where this trade forms local extremes.

    This trade is conducted by computer and the operators go to great lengths to disguise this trade. The good news is that this kind of trade has certain properties that make it detectable by astute traders and certain smart technologies.

    It is not about total volume, volume over time or even concentrated one sided volume. It is about all of that an more as idicated by our description of how we calculate this indicator - "When taken in combination, the acceleration and deceleration of buying and selling volumes, total volume and the velocity/rate of change in the balance of trade reveal a certain dynamic that we find present at many, if not most, intra-session extremes."

    While we don't sell these indicators several readers from this and other forums have been able to successfully reverse engineer this and other or our indicators and report that this work has helped increase the efficacy of their trading.

    Here are a few more examples in market from soybeans to equities:



  5. Large trades show a much greater change than small trades with equivolume charts. I am interested in back tests of trend following systems using equivolume data.
  6. Thank you for your reply.

    A point here is that oftentimes these extremes are NOT made by large trades - they are made by an a very short, very intense period of small buys and sells that are issued by computer operating in the microsecond time frame.
  7. Which means your counterparty is probably GS or Citadel!

    Good luck making out on those trades!

    Have you traded these minute time frames? Oh, that's right, you're selling stuff.


  8. RiskTaker,

    Thank you for your reply.

    As to minute time frames - as this degree and nature of trade intensity only lasts a very few seconds we operate off a volume chart that is the rough equivalent of a bar that lasts 20 seconds.

    As to selling stuff, in NONE of my years, and hundreds of posts on TL and NONE of my posts here have you or will you see ANY sales or marketing ptiches.

    The reason is very simple - none of it is for sale, hasn't been and wont be. For over a year we have been getting daily requests from this and other forums to buy our technologies and the answer, as many from this and other forums can verify, has always been no.

    RiskTrader - I know you are known as the spam cop and that's great. It just so happens you got this one wrong as will happen from time to time with all true RiskTakers.
  9. I'm trying not to jump on board the haters bandwagon, but if you are not willing to disclose anything about what you are showing and you are not selling anything, whats the point?
  10. Charlie,

    Thank you for your reply/question.

    While I have been a member here for sometime, I left becasue of what you call the haters and moved to TL where they are much more pro-active in deleting such posts and banning such posters and have only recently starrted to again post here.

    I don't post code or specific algrorithms but I do post enough clues and answers to questions so that more than a few on TL have been able to reverse engineer almost all of our indicators. I applaud their effort and from their PMs and posts of thanks I gather that such work has increased the efficacy of their trading.

    As anybody involved in the management of either hedge funds or trading operations will tell you - their most important asset is not their money, their systems, their client base or their name recognition - it is their Intellectual Capital.

    I post here for 2 reasons 1) to try and get new players to think outside the box and 2) to try and spot and communicate with the really bright ones.

    It should come as no surprise that the ones with many, many posts and most of them of very light and mostly negative content probably don't get many calls or invitations from the hedge fund and other talent spotters that constantly prowl these forums and never post.
    #10     Aug 27, 2009