[paolfili]

The 2° method is the right one for the definition of asked/offered ( on hypothesys that the price and bid/ask feed are syncronized).
Your post let me suppose that you consider the two feed unsyncronized (by most data vendors that use the 2° method).
Am I wrong?

Originally Posted by UrmaBlume »

The 2 most common methods used to determine buy and sell volume by most data vendors are 1) "Up and Equal and Down and Equal" - that is if the most recent price is higher that the previous or equal to a price previous price that was equal to a price that was higher than the previous price it is designated as UpVolume 2) Bid and Asked - Trade on the asked/offer is designated as buy volume and on the bid as sell volume.

While we do not deal with or divide ticks, we do, indeed, designate volume as either buying or selling and yes we do use a different means/method.

[UrmaBlume]

Originally Posted by paolfili »

The 2° method is the right one for the definition of asked/offered ( on hypothesys that the price and bid/ask feed are syncronized).Yo ur post let me suppose that you consider the two feed unsyncronized (by most data vendors).Am I wrong?

Thank you paolfili,

Your question brings to light a little known dynamic that occurrs on many local extremes.

We feel that the bid/asked approach to designating buying or selling volume is flawed in several ways and the synchronization, or not, of these feeds is not part of our calculations.

To demonstrate one of those flaws, please consider the situation where a very large buyer places a limit order at the current asked price - the order is larger than the asked size so he is partially filled at the asked and as the order took all the asked size the asked moves up and so does the bid. Now the remainder of this large buyer's order is on the bid and trade that fills this large buyer, on his bid, is recorded as selling volume. Thankfully there are intelligent agents capable of sorting all this.

The formation of many local extremes, especially in the futures and options on the equity indexes, is a result of the bid or asked being replenished by auto placement at a rate faster than the market can absorb. Thus action at the top would not reflect this selling and show a top/reversal made on buying instead of the selling that is represented by this auto replenishment of the asked.

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.

This is an example of a strong move up that runs into opposing activity and demonstrates one of the main flaws in VSA - it shows in at least one instance that a move up on dramatically increasing volume is not bullish - it means that rising prices have found the seller and the volume recorded at this extreme is shown as buying when it is the opposite.

[paolfili]

Thanks a lot to you UrmaBlume.
Your post always spread light on some interesting high frequency trading aspects.
A new question arise from your words.
"The intelligent agents capable of sorting all this" (apart from any trade intensity indicator)
in a (impossible?) "perfect feed world" is a kind of a DOM analyzer?

i.e 10000 limit buy on 7000 first level asked lift bid on 3000 remaining with (more or less) the same (milli/micro second) timestamp on contract and DOM bid uptick?

Originally Posted by UrmaBlume »

Thank you paolfili,

Your question brings to light a little known dynamic that occurrs on many local extremes.

We feel that the bid/asked approach to designating buying or selling volume is flawed in several ways and the synchronization, or not, of these feeds is not part of our calculations.

To demonstrate one of those flaws, please consider the situation where a very large buyer places a limit order at the current asked price - the order is larger than the asked size so he is partially filled at the asked and as the order took all the asked size the asked moves up and so does the bid. Now the remainder of this large buyer's order is on the bid and trade that fills this large buyer, on his bid, is recorded as selling volume. Thankfully there are intelligent agents capable of sorting all this.

The formation of many local extremes, especially in the futures and options on the equity indexes, is a result of the bid or asked being replenished by auto placement at a rate faster than the market can absorb. Thus action at the top would not reflect this selling and show a top/reversal made on buying instead of the selling that is represented by this auto replenishment of the asked.

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.

This is an example of a strong move up that runs into opposing activity and demonstrates one of the main flaws in VSA - it shows in at least one instance that a move up on dramatically increasing volume is not bullish - it means that rising prices have found the seller and the volume recorded at this extreme is shown as buying when it is the opposite.

[Frank]

I am not tape-reader extraordinaire but I have seen so many games with bid/ask movement -- combined with fact that algorithmic shops have fiber optics and state of art systems that are just plain faster such that no matter what rule I write to try to capture if the last trade was a buy or a sell, their systems will continue to fool my rule.

That said, there is only so much you can do with those games if there is 'real' buying or selling -- so I propose this idea: is the bid/ask spread ticking up or down as a % of total bid/ask moves within a given time period? If there are 60 trades within a 1-min period, and the bid/ask moves up twice and down once, then there was net buying. Over multiple rolling periods of aggregated bid/ask movement, real buying or selling will have hard time fooling this 'frequency' rule...

comments appreciated

[taotree]

Originally Posted by UrmaBlume »

To demonstrate one of those flaws, please consider the situation where a very large buyer places a limit order at the current asked price - the order is larger than the asked size so he is partially filled at the asked and as the order took all the asked size the asked moves up and so does the bid. Now the remainder of this large buyer's order is on the bid and trade that fills this large buyer, on his bid, is recorded as selling volume.

Interesting. However... After the bid/ask moved up, someone else had to hit the bid in order to fill that large buyer. So... couldn't it still be considered selling volume--but from a different participant?

So, you're not measuring naive aggregate buying/selling trade volume, you're measuring buy/sell volume for specific participants or behaviors.

The formation of many local extremes, especially in the futures and options on the equity indexes, is a result of the bid or asked being replenished by auto placement at a rate faster than the market can absorb. Thus action at the top would not reflect this selling and show a top/reversal made on buying instead of the selling that is represented by this auto replenishment of the asked.

I have been watching exactly this recently. It's fun to see huge bid intensity right before the market turns up and vice versa.

[taotree]

Originally Posted by Frank »

I am not tape-reader extraordinaire but I have seen so many games with bid/ask movement -- combined with fact that algorithmic shops have fiber optics and state of art systems that are just plain faster such that no matter what rule I write to try to capture if the last trade was a buy or a sell, their systems will continue to fool my rule.

From what I understand UrmaBlume is saying, it doesn't really matter so much. Whether it hits the bid or ask is not the whole picture to determine buy/sell sentiment. So much is done at the bid and at the ask by replenishing and canceling of orders.

I wonder if we need a different term or something. Buy at ask happens: that's "buying", but we recognize that it doesn't necessarily mean overwhelming long sentiment. Because 100 more people might buy at that same ask price but there's a big buy replenishing the ask absorbing it all. So... although, yes there is "buying", the likely future is short because there are some deep pockets who are accumulating short (or exiting long).

That said, there is only so much you can do with those games if there is 'real' buying or selling -- so I propose this idea: is the bid/ask spread ticking up or down as a % of total bid/ask moves within a given time period? If there are 60 trades within a 1-min period, and the bid/ask moves up twice and down once, then there was net buying. Over multiple rolling periods of aggregated bid/ask movement, real buying or selling will have hard time fooling this 'frequency' rule...

Umm... I'm going to assume I don't understand what you're saying because it sounds like: if the price goes up then there was net buying. If in any period bid/ask moves up 5 times and down 10 times, that means price has now moved 5 ticks lower (assuming one tick per move).

[BlowFish]

All V@B or V@A really shows is who is prepared to buy/sell aggressively/passively or put another way who is patient (limit orders) and who is anxious (market order). People seem to assume that anxious participants are the ones who know where price is going.

[Kiwi]

I think Anxious may be a choice of word that has too strong a meaning. Active might imply a more positive view.
Although perhaps taking both views helps one to remove biasses in thinking. Genius, Blowfish.


Reading taotree's post reminds me that when the king was naked the peasants and merchants clothed him depending on their own assumptions about what he might be wearing.



Interestingly the OP decided to dump some of his pictures over at ET. The response was exactly what one would expect to such reused material. I renew my plea that should more threads be started we be treated to new pictures.