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estrader
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Posts posted by estrader
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Actually I don't believe I said anything of the sort and I guess that is where the main problems lies.
You are disagreeing with what you think I said. I simply described how orders are matched on nearly all centralised electronic exchanges and pointed out that stops are never traded against directly, they are converted to market orders. If you then treat limit orders that are submitted within there limit prices as market orders too (as the exchanges do) you only have two types of order to contend with, limit orders and market orders.Ok, I never like to misrepresent another person's argument
The point I was trying to make is that ultimately, what is recorded in the T&S is the only thing that matters but trying to figure out whether an order @bid was a stop turned market or direct market order isn't worth the effort. The effort should be spent in assessing the overall impact on the market, if any, and it should be judged within the context of the entire market action.There are data feed providers that provide a full data feed, DTN's IQFeed is the one that is commonly recommended. You might want to search for Fulcrum Traders posts on the subject. As for infrastructure I see you are in the UK, are you out in the sticks? ADSL is more than up to he task in fact I have used Zenfire with good results (though some people have issues with odd bits of data missing) it is a 'full' service though it uses UDP so if your infrastructure is poor you can loose the odd chunk. My 'main' broker is IB but there data is not good enough for this work.
I am happy with my broker and to be honest, I don't need more than I already have. It has taken me years to figure this out.
I'd be interested in any book recommendations you have on tape reading, one of the big problems is a distinct lack of them. I agree it is as much art as science but there really is not an awful lot written about it. There are classics like "Studies in Tape Reading" (Wyckoff under the nom de plume Rollo Tape) and "Tape Reading and Market Tactics" (Neil) . There are a couple of more recent modern ones Like Techniques of tape reading (Gaifer) and No BS trading (ebook). I have a few obscure titles too but nothing that really compares to those, any you would recommend?
Read Jesse Livermore's "Reminiscences of a Stock Operator". I would argue that this book and the ones you have mentioned are all you will ever need. In fact, read "Reminiscences of a Stock Operator" again and again, you will learn something new every time. A work of genius.
This includes but is not restricted to exactly how different order types work, where they are held (most important), under what circumstances they are elected etc. They need to know how the orders they are submitting are handled. There is a whole bunch of other stuff they should know too if they want to avoid being on the wrong side of a market that opens limit down 3 days in a row too.
OK, practicalities of placing a trade is something every trader should know. I would argue that a trader should only use market orders to open a position and they should always have a protective stop.
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What I find it mind boggling is that people trade without an even rudimentary understanding of order types, exchange rules and just a basic understanding of how the environment that they plan to operate in actually works. It is hardly surprising that so many fail. These things are absolutes they are unequivocal, they are the rules of the game there is no reason not to know this basic stuff (except perhaps laziness?). In just about any other endeavor you just would not expect success without knowing the rules of the game. You may think it academic I think it is fundamental and mandatory.Whether it is useful in determining market direction is academic for the reason above however it certainly can be helpful in that regard. All of these new wave of studies based on 'market delta' that attempt to detect order flow, resting inventory, buying pressure etc. rely on measuring volume@bid vs. volume@ask. I too was skeptical if there was any real value in this as some of the core premises I felt where flawed (to do with how different participants behave under different conditions). Still, traders that I respect use this information profitably so I decided to investigate properly. There have been numerous studies been conducted (by academics granted
) on the efficacy of this approach in detecting 'order flow' long story short it is (72% - 80%+ depending on the study). That gave me some confidence that conducting my own research would not be time wasted. It was not. Of course others mileage might vary.Blowfish, now you have me confused. I study tape reading, that is all I do. That is how I trade. That is all I have been studying for the last 5 years and I can tell you that tape reading IS much more of an art than an exact science. You have tried to tell me that from the Time and sales record it can be determined whether a trade was a stop or limit order. Not only do I think that’s not feasible, I also say that it is superfluous.
I have written my own proprietary trading applications and in order to do that I have to connect to my brokers API. When I wrote my first application I wanted all the information possible to determine all details of executed trades and you know what? It is impossible. When you consider the volume of data required and the bandwidth necessary to deliver it you will realise what I am saying and why.
For a start, the data provided by my broker is, to use their terms, “Throttled back”, meaning that I don’t get every trade executed on the exchange. I doubt that my broker is unique in this aspect. If you doubt me, call your broker and ask them if they limit bandwidth from the exchange.
Secondly, as far as I know the exchange does not provide information to my broker about whether a trade was filled @bid or @ask. The only information I get, along with date & timestamp, is LAST Price and LAST volume. In order to determine whether it was filled @bid or @ask it needs to be compared to the bid/ask quotes at the time it was filled to see which it was and this is prone to errors for a number of different reasons such as computer processor speed.
Lastly, perhaps you have super high bandwidth direct connections to the exchange and have access to much more information than I do, but, and I mean no disrespect, if you honestly believe that ‘knowing’ if an order was an executed STOP or Market Hit LIMIT is going to give you some sort of edge then I have to doubt your ability as a trader and whether you really understand the tricks, the games and the tactics large operators use to keep the public baffled. There isn’t one technical aspect of the market you can know and use that will give you an edge, there is much, much more to trading than that. Suffice to say that nothing but hours, days, months and years of screen time, study and practice is the only thing that will make or break you as a trader.
In my experience over the years of using trading forums it is only new traders that fuss over fine technical details like whether a trade in the time and sales window was a STOP or Market order or whether BID means selling or ASK means buying because they believe knowing this is going to make them rich. They want to be told that large orders @bid means selling so they can apply simple, rigid, mechanical rules to their trading. If it was that simple you wouldn’t have volumes of books dedicated to the art of tape reading.
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You can determine that they where not stop orders as stop orders do not trade directly. It is not 'academic', that part is wrong I would not have bothered chiming in it but it is impossible to have a complete and proper understanding of how orders are matched without understanding how stops are held and matched with limit orders. Of course for simplicity you can ignore stops (as they simply become market orders when elected) but since you mentioned them I thought it important to understand properly how they work. It is the basis of all sorts of cool stuff too.It is also important to realise (which is why I am re-iterating it) that limit orders below the market are to buy and stop orders below the market are to sell. Limits above the market are to sell and stops above the market are to buy.
The post I commented on clearly showed best bid and best ask no where limiting things to just T&S is moving the goal posts!
Anyway that information is available through any credible platform. If a trade is at the best bid it is a market order to sell. It could be one of the rare cases I mentioned but did not describe, a limit order to sell that 'crosses the market'. To all intents and purpose (including liquidity rebates, exchange fees, order matching etc.) that limit order is as a market order as the market is already at the limit or better.
Anyway hope estrader is getting something out of this.
Academic in a sense that I doubt it is going to make anyone a more profitable trader or shed anymore light on the direction the market is going to move. The reason I mention time & sales is because the OP brought up the subject. With literally 1000's of orders executing often in less than 1 second, I doubt that (by whatever means) determining which were stops and which were limits would help a great deal in trading.
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This is all true except stop orders are converted to market orders when they are elected (there trigger price is traded at). Stop orders are invisible on the book (usually) though in some markets some participants can see them (like a NYSE specialist).So, the bid you see are limit orders to buy at that price. There are also stop orders to sell at this price (they do not show on the book). When elected these will be immediately converted to market orders and so match against the current limit orders at that price. If there is not enough volume to satisfy them at that level (in the form of limit orders) they will be matched to the next level as they are now market orders. This is one of the reasons you see price spike on high volume at S/R levels or break outs it is also why you can get slippage on stop orders.
Short version - There is enough info to determine if a stop or limit order was filled as stop orders don't get filled directly, they get elected to market orders.
There are a couple of special cases but that's likely to detract from the bread and butter working of centralised electronic exchanges.
Blowfish,
The time and sales records the time, price and volume and I am led to believe that some data providers provide bid/ask information. It's true that STOP orders become market orders but that is academic. If someone wants to dissect and discuss the nuts and bolts of DOM and or the order book, that's fine.
However time & sales only records what has happened and it is impossible to determine from that record whether the orders were all limit orders or stop orders that became market orders or any other combination.
A typical T&S would look something like
date, time, volume, price and the colour for bid/ask
10/12/2010, 10:30:00, 10, 1231.50
Using GREEN to represent BID, all you can say from the above is that 10 orders were traded at the BID price of 1231.50 on 10th Dec at 10.30. They could have been 10 stops that were hit from 10 individuals or 1 stop from a larger trader or 10 limit orders from individual traders, or 10 limit orders from 1 larger trader. Were they orders to Open a position or close a position? All this is something that you have to judge yourself, the Time and sales doesn't give you this information and nobody else can either.
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Ohoh! Better be careful before you declare what's a law.Might be helpful to google for "crossed market" - which is the condition described (bid>ask).
This happens all the time.
For reference one picture and a link to a (quite recent) thread where crossed market conditions are discussed:
All the time? I doubt that. I've been watching T&S on the ES almost everyday for the last 5 years solid and I can say that I've never seen it happen when the market is open. Google can say whatever it wants, I trust my own eyes. Besides, just go with 99.999% of the time, BID is quoted below ASK.
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Let's say the bid is currently at 1100.25 and the ask is 1100. If a GREEN T&S entry is seen for 1 unit at 1100.25 would that not mean that the seller would have to have used a limit order? A market order to sell would execute at the ask of 1100, correct?Firstly, the example you have given is impossible! The current BID price is always below the current ASK price. No argument, no if's or but's, it's as good as the Law.
1) BID = The highest price a Buyer is willing to buy
2) ASK = The lowest price a Seller is willing to sell
If you think about that for a minute you will realise why there can never, ever be a situation where a seller is offering a stock below the highest bidder. It would be filled before it even got there. This is how the spread exists, it basically represents the difference in opinion between buyers and sellers.
One of the facts that was shared here as that a RED order means that it occurred at the bid and a GREEN order means that the order occurred at the ask.The colours aren't really that important because they might be set by the trading application, who knows, you could even have the T&S in a single colour like the ticker tape was many years ago in the days of Jesse Livermore. Just remember, the BID is ALWAYS quoted below the ASK. When the market isn't very active you can watch and see how orders are filled and determine whether it was filled at the BID or the ASK.
A market order to sell would execute at the ask of 1100, correct? It is probable that the buyer used a market order, but the buyer may have put a limit order at the ask.Basically my question is this: aren't all transactions a market order on one side and a limit order on the other?
There are two types of sitting orders I can think of, a STOP and LIMIT.
- Buy STOP's are placed above the current Market price.
- Sell STOP's are placed below the current Market price.
- Buy LIMIT's are placed below the current Market price.
- Sell LIMIT's are placed above the current Market price.
A trader can use a STOP to close a position but they can also use a STOP to open a position.
A trader can use a LIMIT to close a position but they can also use a LIMIT to open a position.
If the T&S printed
50 @ 1200.25 Bid.
This could mean 1 large seller who sold 50 at market to open a position to 50 individual small traders who had sell STOP's in the market to close their position. This is someone 'hitting' the BID.
It could also mean that 50 small traders sold at market to open their position to 1 large trader who had 50 buy LIMIT orders in the market to open their position. This is known as a "sitter".
There are a number of ways orders can be filled and whether they were being opened or closed and who was doing what that it really isn't worth bothering yourself about it. It's much more important to study the action of the market than it is trying to figure out whether they were STOP or LIMIT orders. It's good to understand the variables, but don't get too preoccupied about it.
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Again, thanks everyone for the collective information -- awesome people here.Let me just make sure of one thing: a red entry in the T&S at say 1000 means that a seller executed a market order at the bid price, which in turn executed a buyer's buy limit order at the bid?
No, I think you are a little confused.
The market price is made up of two figures:
1) The current ASK price
2) The current BIDprice
The Last price is the price a trade was executed.
A person who buys @ market will be filled at the current ASK.
A person who sells @ market will be filled at the current BID
Orders sitting in the market can either be LIMIT or STOP orders.
A Volume of 1 in T&S means that 1 buyer AND 1 seller have exchanged 1 contract. Do you see? There isn't enough information to determine whether the contract was a LIMIT order or STOP order that was filled.
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It is more than just uncertainty. I have invested many years (5+) into this ‘game’, sacrificing so much of my time into studying and learning to becoming proficient. Hours spent in front of the screens day after day when I could have been doing something else. A loss can often make you feel as if it has all been for nothing. I find that more distressing than anything else.
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I'm sure that there are many people in my position who get tired of reading "trade smaller positions" or "reduce your size"
I trade the ES contract and the smallest that can be traded is 1 contract...if it were possible to reduce size (currently US$50/point) I would.
Spread betting or trading a different instrument is NOT a solution to the problem.
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Dear Shy Guy: All the advice given here, reduce your lot size, recognize that losses are a part of trading, develop faith in the probabilities of your system, and ‘just do it’, are all good suggestions.But what I heard you say was that you are afraid that you might be wrong and that would mean you are stupid and you would feel like a fool.
If you had a way to deal with the internal dialogue telling you that the market might prove that you are stupid, and you would hate feeling that way, any of the above suggestions would work for you – and you never would have started this thread. But until you deal with what is generating the internal dialogue, you will probably struggle with implementing any of this good advice.
Right now, your strategy for dealing with the emotions you feel is to avoid taking a trade. That is a strategy that works – emotionally. If you don’t take a trade, you won’t feel like a fool, and the market can’t give you any evidence that you are stupid. But this strategy doesn’t work if you want to become a successful trader. You have to develop a new strategy for dealing with your internal dialogue and the emotions it generates.
First, talk out loud. Get what you are saying internally out in the open where you can examine it. Writing it down will work too. You may be surprised to find that there is quite a lot you’ve been saying to yourself. You need this information to understand what is happening in your trading. Once you know what you are saying to yourself, ask, “Have I heard those words before?” “Is it my voice I’m hearing or is it someone else’s voice?”
If this dialogue is something you haven’t heard before and it is in your own voice, then most likely it is trading specific and you can deal with it fairly easily. This is the place where we need feedback from you. Tell us what you found out about your dialogue. But in any case, be sure you ask yourself these questions: “Is there something about my strategy that I’m not fully comfortable with?” and “Do I, and the people who depend on me, have realistic expectations about how long it takes to become a successful trader?”
If the dialogue is something you have heard yourself say before, ask, “What is it about trading that triggers this dialogue?” and “Is it true?” Then give us your feedback and we’ll go from there.
If the dialogue is something you have heard before, especially if you have heard it all your life, and it isn’t in your voice, then you have a bigger issue and will need to deal with it before for you can reasonably expect to be a successful trader. If you don’t, it will continue to interfere with your trading in surprisingly negative ways. Although it is certainly possible to deal with this on your own, generally, you can make much faster progress with a little help. Look for a psychologist, someone with a PhD who specializes in brief therapy or cognitive behavioral therapy – there are a few good ones out there. Feel free to interview them before deciding whom to work with.
In the meantime, while we are waiting for your feedback, I want you to know these things:
The market makes fools of us all - we are all wrong on occasion. We were wrong a lot in the beginning; now it's better.
Though smart helps, trading the market is more about persistence than it is about being smart.
Trading is the grandest game out there – but that’s what it is, it’s a game. It isn’t who you are.
Yours,
Dr. FxGirl
FxGirl,
This is one of the best posts I've ever read in a trading forum in over 5 years.
Thanks!
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Trading is not dead and it was never easier. Read ‘Reminiscences of a Stock Operator’ by Jesse Livermore...it was written about 100 years ago and yet is as relevant today as it was when it was first published...
It can be summarised neatly and succinctly with his very wise quote:
"There is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again."Anyone here who thinks they have to learn something new because the market has changed is fooling themselves. There is nothing new, at all. Learn to trade and the skill will last a lifetime.
Buyer for Every Seller?
in E-mini Futures
Posted
I am a Tape Reader and I am a 100% purist, I don't use a chart when trading, just time and sales and nothing else. I only trade one market and that is the E-mini S&P 500 (ES).