[jeffersondaarcy]

INTRODUCTION
By now most people know that the CME has changed the way that they distribute data (2.5 times as many trades/day, avg. size trade dropped form 12 to around 4 contracts, 80% drop-off in trades greater than 199 contracts). In the past, if I bought 100 contracts at market, the tape (time and sales) would directly reflect this. After the CME changes, the tape no longer shows my single 100 buy market order. Instead, my buy order is broken up on a per counterparty basis. Meaning, if it took 100 counterparties each offering a single lot to fill my market order, then the tape would show 100 one lot orders. As a result, filtering by trade size in an attempt to follow the smart money/institutional trader has become obsolete (sure, one can filter by 50 contracts, but there are retail traders that trade in 50 lots also, so I don't believe this method is very valid).

TAKING THIS A STEP FURTHER
If a large market order is executed (assume 100 or greater), this means that not only is someone willing to buy 100 contracts, but someone had a limit order of 100 contracts or more offered. Essentially, this is a zero sum game in regards to snuffing out the smart money. At worst, the big guys are playing games with the market, trying to manipulate the tape by getting people to follow large orders.

I have a lot more thoughts on these changes, how to adapt, potential solutions, etc. but I want to hold off for now so as not to pollute the creativity pool. So here is the question to the group:

Due to the CME changes, how does one now follow the smart money/institutional trader?



Note: UrmaBlume has a solid thread on "trade intensity" that many would find interesting. Definitely worth the read. However, I would appreciate it if the trading approach from that thread did not spill over into this thread as this thread's purpose is to generate new ideas and approaches. All ideas, no matter how outlandish, welcome.

[brownsfan019]

If you believe in support/resistance trading then nothing has changed w/ this data change from the CME. The bulls will still defend support and the bears will still defend resistance. Of course the name of the game is defining s/r levels that work.

Personally this data change did nothing to affect my trading - good or bad.

[jeffersondaarcy]

Browns-->So you don't read price action around support and resistance levels? Very often in the past the smart money would turn before the dumb money did at S/R levels. It was a great tell.

[zdo]

see post below... site came up with 'error on page' when I posted first time so I thought it didn't take and posted basically the same thing again.

[zdo]

Jefferson,

Excellent questions.

Has anyone gotten the official line from CME about why they did this change?

Are all CME instruments included?

Thanks,

zdo

[jeffersondaarcy]

Originally Posted by zdo »

Has anyone gotten the official line from CME about why they did this change?
Are all CME instruments included?
zdo

The change is for equity index futures only. The CME is also now providing transaction time data to the millisecond.

The official line is that it is more accurate trade data (I would argue it is less accurate since it allows institutions to hide their intentions by disguising themselves as many small traders).

[Kiwi]

Official lines are often just that --- tell the big li(n)e.

The CME is just serving the people who buy them lunch so they look after their friends. Obviously the small traders need to start buying them lunch (can you even get into the same clubs) or democracy will continue to act as it always has. It is moderated by the need to keep the peasants happy but it spends a lot of time figuring out how to support its supporters.

Follow the money and the free lunches

[brownsfan019]

Originally Posted by jeffersondaarcy »

Browns-->So you don't read price action around support and resistance levels? Very often in the past the smart money would turn before the dumb money did at S/R levels. It was a great tell.

Yes, I read the 'price action' at s/r levels. That's pretty much all I do. And for that, I don't need or use the tape or trying to find big orders. The big orders are there and it's fairly obvious (on most days).