[joshdance]

I was thinking about this thread today as the day went along and thought I would post this.

As I said before, it is impossible to accurately "track" anyone in the market; yet, big traders do leave big footprints sometimes, and I believe by looking at the footprints it's possible to determine when big traders are active. The thing is, often big traders are taking counter positions to other big traders; so, it's not that they are big and therefore are right. Rather, it's that they are involved in the market, and we get to see their involvement and then make our own decisions about what to do with that information.

The attached chart shows two black arrows indicating what I think is clearly professional activity. You don't get 20K contracts of ES traded in 1 minute without professional involvement, sorry. I have no objective or empirical evidence to support this; but isn't it logical? This isn't retail traders trading with other retail traders; at least one side of this trading involves someone with serious money.

I was already long from 84 when the first big volume entered, and almost was shaken out but I held on and closed slightly higher a few minutes later. But that big professional involvement kept me in the trade. There are about 15K buy limit orders filled in only one minute, over only about a 1.5 point range. The message is clear to me: someone wants to prevent this market from going down.

The second black bar shows 16K contracts traded, again, over about a 1 point range. Message is loud and clear again: big buyers abundant and ready to support 83/84.

Now, look towards the end of the chart, at the blue line. From 14:50 to about 15:20, a good half hour, you see a total of about 37K contracts traded. This is NOT professional activity. But, price is rising. What does that tell me? Well, I do not want to fade this market, since buyers were active as pointed out earlier. However, I am not interested in establishing some kind of long position here. What happens next is IMO the very opposite of professional activity, at the red arrow: 10-20K contracts bought 30 minutes before the close, looking for new highs, on a day with a previously 7 point range, in a market which has been incredibly in balance since the first trading day of January. This looks to me like lots of amateur traders jumping on the bandwagon very late in the game. This is really only confirmed by the lack of followthrough around 15 minutes before the close, I should note. But you have very late buying, following a push up that was NOT well supported, with no follow through.

So, both cases feature decent enough volume. However, one is buying the lows, and indicates big players; the other is buying the highs at the most inopportune time, and smells like typical retail activity; probably buying into the limit orders of those who got long in the low 80s earlier in the day. Given the lack of what I feel is quality buying at the top, I would expect to see 82-84 before we see 90 (and I did post this at 4pm on another forum before it has now dropped to 86 in globex). Maybe I'm wrong, maybe I'm not, but it's a working theory and does play out in real time quite often.

EDIT: one last thing I should point out is that this was a very neutral day. I could see big players on both sides of the market. Big time sellers defended yesterday's close and low about 15 minutes after the open, and at 10:40 you can see it defended again, lots of professional involvement there. All the more reason to NOT buy the high (hoping for a big trade anyway) near the end of the day, and rather get positioned earlier or stay out. So, while there were pros very interested in buying this market, they were also selling the highs, at least earlier in the day. Not a day to hope for a 20 point breakout, that's for sure.

These are just my thoughts, would love to hear your feedback. Only my and like anything else, you may find your view of the market to be different. But it works for me, and we all have to find a model that sings to us. See what conclusions you draw...

[MightyMouse]

Originally Posted by joshdance »

I was thinking about this thread today as the day went along and thought I would post this.

As I said before, it is impossible to accurately "track" anyone in the market; yet, big traders do leave big footprints sometimes, and I believe by looking at the footprints it's possible to determine when big traders are active. The thing is, often big traders are taking counter positions to other big traders; so, it's not that they are big and therefore are right. Rather, it's that they are involved in the market, and we get to see their involvement and then make our own decisions about what to do with that information.

The attached chart shows two black arrows indicating what I think is clearly professional activity. You don't get 20K contracts of ES traded in 1 minute without professional involvement, sorry. I have no objective or empirical evidence to support this; but isn't it logical? This isn't retail traders trading with other retail traders; at least one side of this trading involves someone with serious money.

I was already long from 84 when the first big volume entered, and almost was shaken out but I held on and closed slightly higher a few minutes later. But that big professional involvement kept me in the trade. There are about 15K buy limit orders filled in only one minute, over only about a 1.5 point range. The message is clear to me: someone wants to prevent this market from going down.

The second black bar shows 16K contracts traded, again, over about a 1 point range. Message is loud and clear again: big buyers abundant and ready to support 83/84.

Now, look towards the end of the chart, at the blue line. From 14:50 to about 15:20, a good half hour, you see a total of about 37K contracts traded. This is NOT professional activity. But, price is rising. What does that tell me? Well, I do not want to fade this market, since buyers were active as pointed out earlier. However, I am not interested in establishing some kind of long position here. What happens next is IMO the very opposite of professional activity, at the red arrow: 10-20K contracts bought 30 minutes before the close, looking for new highs, on a day with a previously 7 point range, in a market which has been incredibly in balance since the first trading day of January. This looks to me like lots of amateur traders jumping on the bandwagon very late in the game. This is really only confirmed by the lack of followthrough around 15 minutes before the close, I should note. But you have very late buying, following a push up that was NOT well supported, with no follow through.

So, both cases feature decent enough volume. However, one is buying the lows, and indicates big players; the other is buying the highs at the most inopportune time, and smells like typical retail activity; probably buying into the limit orders of those who got long in the low 80s earlier in the day. Given the lack of what I feel is quality buying at the top, I would expect to see 82-84 before we see 90 (and I did post this at 4pm on another forum before it has now dropped to 86 in globex). Maybe I'm wrong, maybe I'm not, but it's a working theory and does play out in real time quite often.

EDIT: one last thing I should point out is that this was a very neutral day. I could see big players on both sides of the market. Big time sellers defended yesterday's close and low about 15 minutes after the open, and at 10:40 you can see it defended again, lots of professional involvement there. All the more reason to NOT buy the high (hoping for a big trade anyway) near the end of the day, and rather get positioned earlier or stay out. So, while there were pros very interested in buying this market, they were also selling the highs, at least earlier in the day. Not a day to hope for a 20 point breakout, that's for sure.

These are just my thoughts, would love to hear your feedback. Only my and like anything else, you may find your view of the market to be different. But it works for me, and we all have to find a model that sings to us. See what conclusions you draw...

Josh,

I break the volume down into 4 groups. Highly capitalized short term traders, highly capitalized long term traders, lowly capitalized short term traders, and lowly capitalized long term traders. Each reacts differently and have different motives.

Sometimes highly can try to act like lowly, but lowly can never act like highly.

20k contracts in no time is certainly an indication of highly, but It could be lots of lowly The T&S will have given a better idea of that. They bought for a reason. it certainly wasn't a randomly generated order. It had a purpose. Was it a long term position? A Hedge against a short? Or, short term HC capitalized traders accumulating contracts to take advantage of weak shorts they perceive to be present?

If you accurately identify the group, then you know what set of circumstances you need to see to stay in or get out or get long or get short since you can anticipate what they might do or not do next.

This is not a science by any means.

MM

[joshdance]

Originally Posted by MightyMouse »

If you accurately identify the group, then you know what set of circumstances you need to see to stay in or get out or get long or get short since you can anticipate what they might do or not do next.

I like the idea of thinking of the market in those terms; however, due to the impossible (IMO) nature of determining the actual motive of the buying or selling, all I really care about is that volume supported a direction of the market. Volume entered strongly twice and supported the long direction, and that is objective; when I start trying to think about motive, it adds an unnecessary layer for me of psychology. Yes, psychology is the ultimate driving force behind what any trader does, yet, there are too many complex factors and too many possible motives for me to make sense of it. Just look at commentary from economists and you'll hear so many different opinions that it boggles the mind; so, I like to steer clear of the "why" when it comes to why someone bought or sold because I can't know.

[Oldtimer]

If you watch the price action long enough you see prices go up on heavy volume and up on lite volume. Either resulting on the continuation of the uptrend. Same in downtrends.

While can add some information just following the trend will tell you what you need to know.

[MightyMouse]

Originally Posted by joshdance »

I like the idea of thinking of the market in those terms; however, due to the impossible (IMO) nature of determining the actual motive of the buying or selling, all I really care about is that volume supported a direction of the market. Volume entered strongly twice and supported the long direction, and that is objective; when I start trying to think about motive, it adds an unnecessary layer for me of psychology. Yes, psychology is the ultimate driving force behind what any trader does, yet, there are too many complex factors and too many possible motives for me to make sense of it. Just look at commentary from economists and you'll hear so many different opinions that it boggles the mind; so, I like to steer clear of the "why" when it comes to why someone bought or sold because I can't know.

Sure you could. When you read order flow what are you looking for?

[TheDude]

Originally Posted by joshdance »

I was thinking about this thread today as the day went along and thought I would post this.

As I said before, it is impossible to accurately "track" anyone in the market; yet, big traders do leave big footprints sometimes, and I believe by looking at the footprints it's possible to determine when big traders are active. The thing is, often big traders are taking counter positions to other big traders; so, it's not that they are big and therefore are right. Rather, it's that they are involved in the market, and we get to see their involvement and then make our own decisions about what to do with that information.

etc


These are just my thoughts, would love to hear your feedback. Only my and like anything else, you may find your view of the market to be different. But it works for me, and we all have to find a model that sings to us. See what conclusions you draw...

My ....

I dont think the activity on the (or any) close may be a bunch of retail traders. Generally, a lot of fund managers and other long only funds trade near the close every day for bench marking purposes. e.g. if a fund is trying to replicate the MSCI Barra World Index (or other index they sell as an investment vehicle) for example, they will be buying the stocks/futs/options/etfs etc on the close to get fills as near to the official index calculation point as possible.

then of course, you have the pro day traders at prop firms who generally dont like going home with a position. if theyve been holding all day, they'll ditch on the close right?

The close and settlement price is an important indicator to a lot of people. therefore there is a lot of professional money usually traded there.

[amanseo]

“Long Term Participants View” of The Market:
It shows us the activity from the “Big” players, Hedge funds, Investment banks, buyers and sellers that accumulate stocks of inventory, etc.
In trading, this kind of activity made from “big” player or “big money” is called Other Timeframe Participants

"Short Term Participants View" of The Market:
It is formed by small traders, Market Makers (they provide liquidity to The Market), Small proprietary firms, and investor of a short term view that hold positions from one day to 5 at a maximum.