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davewolfs

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Posts posted by davewolfs


  1. Just a couple of questions regarding this. Perhaps some of you have experience with this.

     

    1. Is watching a real time fast cash index useful - If you are not performing arb trades, is this useful at all for watching the futures?

    2. What type of calculation must be performed in order to determine the fast cash value, for example if you know what the most recent printed SPX value is and you know what each underlying components price is, how would one work out how much weight should be given to each component to determine the SPX price based on the underlying components?

     

    I appreciate any input on this.


  2. Dave,

     

    Sorry I didn't get to answer these earlier but we did some maintenance and lost some intensity data.

     

    However, over the last hours the market has posted an example of exactly what you are looking for.

     

    In the first chart you can see thee nite session BUY spikes in a down market.

     

    In the second chart of that same period you can see that the agents more heavily weighted sell information from the other inputs and gave nothing but sell signals all the way down in spite of the buys from intensity.

     

    I have said again and again that intensity by itself wont get you there. What will are the intelligent agents that value/weight intensity in each particular instance against several dozen other inputs and are the topic of this thread.

     

    Three Buy Spikes in a down market:

     

    tpt051.jpg

     

    Nothing but sell signals in spite of the buy spikes in intensity

     

    tpt052.jpg

     

     

    cheers

     

    UrmaBlume

     

    So there are 27 inputs used here to compute - non of which involve price?


  3. If you can watch realtime whether a zone of resting inventory is building or dissipating, I am not sure what you mean by failed? Also, where is the divergence and how many contracts are currently held? Middle of a recent multi-day range of price, on the upper end of an up trending multi-day range of price, on the lower end of an up trending multi-day range of price, on the upper end of a down trending multi-day range of price, on the lower end of a down trending multi-day range of price? The context of recent price/delta volume action and where the divergence is in relation to a multi-day range of price are all components that have to be accounted for.

     

    I have not seen any overall changes in the various Delta Volume Distribution patterns from 2009 to 2010 other than some volatility expansion again in 2010 (for the "ES" that is). The patterns have pretty much been the same for the last 7 years I have tracked the Cumulative Delta.....now getting into volatility changes, that is a separate subject (and how to account for the changes).

     

    The test was simple. A price double/bottom top which compared current inventory to inventory the last time the price was visited within a weekly time period - intermediate trend was ignored (perhaps it should not have been, but an optimizer was used to tweak certain values for defining how we find where the change in inventory began). Divergences then for both long and short were computed being triggered when divergence values of 0-X delta were met (this is where a GO can really save you time).

     

    Failure was defined as one of these divergences occurring and price continuing to move against the diversion more then X points. Based on the example in the thread you posted, a failure would have occurred if that double top had been exceeded more then X points while the divergence remained in place.


  4. http://www.traderslaboratory.com/forums/f208/massive-hedge-es-before-jan-22nd-7440.html

     

    40,000 contracts accumulated 10 to 15 points off recent lows in a multi-day down trend is for the most part Equities firms (through their own desks if they have futures side or through others) getting very defensive (protecting equities LONG positions/portfolios). Most Commercials trading desks are not suddenly initiating heavy new directional SHORT trade just after the market has had a multi-day downtrend (near the recent lows). As I have mentioned in this thread before, I do not care if Commercials are hedging for themselves or taking orders from Equities firms. The bottom line is, there are specific order flow signatures created by newly initiated Commercials orders that CAN BE detected and used for high probability trade entry determinations.

     

    I'm not sure to what extent you've back tested these types of divergences, it seems these setups failed miserably in 2009 and worked wonderfully in 2010 (both long and short even on smaller timeframes).


  5. Yes.......I have a new system forward testing at this time that will be at a different level than what I have ever had before. In addition, I currently use Accordion trade entry/management systems I have developed so I am trying to blend the two concepts together for future use (as a stand alone fund only using these systems).

     

    I'd be interested to know your usage of TI especially when trading longs in a bear market. There is a ton of noise under these circumstances simply because of the nature of what is happening (stops being triggered etc..)


  6. Two completely different trade ops......statistically specific TI action is for automation imo, and typical price trading back and forth between zones of resting inventory I trade discretionary. The TI events I don't want to watch for (automation can do that) and the other typical intraday action I can trade it when I feel like it.

     

    Have you ever deployed an automated trading strategy that is based purely on TI?


  7. Well a footprint chart will show the Cumulative Delta as the buyers lose control to the sellers (or sellers lose control to the buyers) but it does not at all show you, "hey everyone.....Commercials are joining the order flow for newly initiated directional trade RIGHT NOW!" if you know what I mean.

     

    Now I have tracked and worked specifically with Cumulative Delta for 7 years, and I have a very good idea what I see in the order flow at various zones of resting inventory from all my experience (for discretionary trading). With TI there is an ability to have very specific information within a sub-second basis as to be perfectly set up for fully automated intraday scalping/position trading. I would never want to be sitting intensely focused on a DOM or Footprint chart all day long looking for the few second bursts of this TI activity I mention......no thanks. This is the exact type of trade activity perfectly left to full automation.......plus, full automation can scan 30 to 40 markets throughout the day at the same time (looking for specific statistically advantageous TI events to take advantage of).

     

    When price approaches one of your zones where you choose to do business based on whatever your hypothesis may be and you are entering a position, are you not intensely focused? I know I am, which is why I plan ahead and do not allow myself to be hypnotized by watching the tape all day long. When one of these pre-determined areas are visited and everything lines up right do you require TI in order to confirm that you should proceed with your order?


  8. There are very clear patterns within rapidly increasing trade rate supply & demand events that ATTRACT Commercials participation......so yes, you can time entries as you then detect Commercials initiating new directional trade (and join them in the order flow). The whole point of the order flow signature tracking is to statistically identify the exact conditions in the order flow which attract Commercials to initiate new directional trade.....and then to track them as they initiate entries. To SEE when Commercials are initiating new directional trade in the order flow is very advantageous imo.

     

    Correct and much of this can be seen visually on a footprint chart or DOM which shows volume transacted at a specific price.


  9.  

    Actually I disagree, you SHOULD automate trade intensity derived higher probability trade entry determinations.

     

    There are three primary signatures within dynamically expanding trade rates/intensity (when observing an extremely low latency higher end data feed down to the most granular sub second level);

     

    1) CAPITULATION market order driven order flow.....this is when a mass of resting held inventory is bailing out of the market to go flat (the Losers at the moment turned into weaker hands).

     

    2) COVERING market order driven order flow......this is when Commercials are systematically covering out profitable held inventory into various price levels or related supply and demand events (the Winners at the moment covering into optimal supply and demand events).

     

    3) NEWLY INITIATING market order driven order flow......this is when Commercials initiate new directional trade into the effects of a related supply and demand event or at targeted pricing levels achieved (the Commercials jumping into the market while taking full advantage of at the moment supply and demand related activity or targeted pricing levels hit).

     

    Once you know how to track the three primary supply and demand related signatues that can cause significant trade intensity increase, then you have something robust to work with. You next have to statistically determine which combination or sequence of the three signatures within the order flow are most optimal for automated trade entry points.

     

    There is one exceptionally powerful combination of signature activity within the order flow that provides extremely powerful trade entry points. These very high probability trade entry points happen right as a significant grouping of held resting inventory get neutralized (Inventory Grab events).....these are the Losers bailing out of the market at the moment (trade rate starts to rapidly increase). At the moment of the Losers bailing, you will then also have Commercials (detecting weaker hands rapidly unwinding positions) then covering their own profitable positions into this supply and demand event.....this is Commercials taking advantage of Losers bailing, so they can cover their Winning previously held positions into a perfect sudden available supply (to optimize their exit while reducing profitable exit slippage). The next at the moment blast of signature within the order flow is Commercials now initiating new directional trade......right after they just covered their Winning positions into the Losers bailing. What a perfect time to join the market for a new directional trade, right after a bunch of Winners just covered into a bunch of Losers. Any time you have a significant group of Winners leaving the market at the same time a bunch of Losers are leaving the market, you have a brilliant supply and demand event signal to initiate a new directional trade.

     

    With all the volatility in the markets the past months, these trifecta (all three signatures at once) order flow set ups have been taking place very frequently day to day. Ultimately, the tracking of the signatures within the order flow and the trade entry operations from these developed signals is most optimal in a fully automated mode imo. I sure in the heck don't know how to trade 40 markets at the same time, do you??? LOL! With proper trade intensity based signals......go fully automated, and go often! :D

     

     

    I'm pretty sure I know pretty well what type of signals you are discussing here, short covering in particular has worked exceptionally well with this methodology, I like to believe that when one side is wrong and the bots/locals/whoever are taking advantage of that they will push the market in a specific direction until all these players are taken out, once they are gone and nobody is left to initiate is when we get rapid moves in the opposite direction. Market makers seem to love doing this first thing in the morning or during lunch :)

     

    As for trade intensity, I don't see how it applies to this in anyway with regards to timing an exact entry.

     

    Personally I'd rather see UB discuss when his methods failed and why. How the use of specific additional filters can aid with TI. We've only seen the perfect trades and I'm sure they are not always this way.


  10. For those who plan to pursue trade intensity along with UB's other 27 inputs in a weighted index. You might want to experiment with a basic consensus system such as:

     

    Formula 301 – #4 Basic Consensus System | NeoTicker Blog

     

    The key is obviously finding the inputs and the appropriate weights and combination's that apply to current market conditions.

     

    The above combined with a tool such as Neo's grid optimizer to vary the weights given to each input (or input settings) can allow for rapid testing of trade ideas. I myself have had good success being able to test ideas with Neo's GO.

     

    UB, if/when you have the time, I'd like to see some of your charts which show false positives and why the signal was ignored.


  11. Yes I know nothing. And I am not saying much :)

     

    Folks the point is, neither is Urma and those who are try to replicate his ideas.

     

    Find your niche, create your own ideas. There is no holy grail in this thread or any of the other threads that have been posted. There is no "rocket science" presented here. Price pays. The charts look great in hindsight, that is about it.

     

    Happy trading and may you all be profitable.


  12. Just a couple of points.

     

    1. You do not need trade intensity to understand where turning points occur.

    2. If you are intimately familiar with the ES, you can get a good understanding of the size of prints which occur at major reversal points.

    3. In a Bull as strong as what we had this morning, it was not difficult to understand where to pick pullbacks, all you needed to do was wait for a confirmed change in momentum and price indicators alone were sufficient for this.

    4. If you did your homework you would notice that intensity spikes likely took place at High Volume and Low Volume Nodes on a volume profile. Viewing the prints alone at these levels were indicative that heavy volume was being unloaded in these areas in a very tight congested range following up to these points of confluence. You did not need trade intensity to determine this.

     

    There is no "perfect" way to trade and many of the topics described in this thread can be replicated using market delta. If you can understand orderflow and choose areas where you think institutions are likely to participate you can do fine with just the DOM, prints at a given price, delta and a volume profile chart.

     

    Re Urmablume's charts. Whatever they are, the one showing the negative divergence can be replicated using delta momentum in market delta. Perhaps it might not be exact, but the chart that I use looks nearly identical to what UM has posted.

     

    Try watching trade intensity during a bear and it will spike to your hearts desire. These spikes do not necessarily imply that it's time to buy (or sell).

     

    Cheers!


  13. Care to elaborate how this could be done?

     

    Nothing is being done. If you watch their video, the person who is demoing the software specifically says the bars are created using PNF bars also known as a reversal chart which has been in MD for a long time.


  14. This is a great discussion. I have been trading for over 6 years part-time. I never had any REAL positive results until starting to trade with order flow, after being introduced by a friend to the basic yet effective Time & Sales information. However I really only ever made me any real decent consistent Money after learning and following some of Kam Dhadwar's (L2ST L2ST - Trading Futures Online- Learn to trade futures online) MarketDelta Footprint execution setup's over the last year or so. I am still trying to perfect the techniques and Order Flow based setup's that they teach at L2ST, however they are honest enough to say that each setup takes take time to master. Which I respect, as I have experienced that my timing improves each and every day.

     

    However the very interesting thing to me is that ONE of the exact same set-ups that I have learned from L2ST's Kam about 10 months ago, is what Order Flow Analytics is selling as a product. I personally do not feel that you need OFA, you can just use Market Delta, He explained this set-up on the footprints using the VPS (Volume Price Statistics) Indicator for tracking when the high volume buying gets trapped at the high and high volume selling at the lows, then look for them to Bail with their poor trade location out of fear, and profiting from these traders stops getting triggered. I learnt that he uses the FootPrint Price Statistics Indicator using pullback data only in MD to track what OFA call Commitment Of Traders (COT). The Risk\trade management was also explained, by using the overall Delta of the bar itself. HOWEVER the great thing is with MarketDelta you can apply this concept to any market and any time frame! i have seen it and traded the same setup on many markets, including Mini-Dow, Nasdaq and even Crude Oil and other commodities. You see it everywhere. But this was just one of the Footprint\Order Flow setup's that I learned, there are many more that L2ST still teach, some of which use a combination of the Order Book (DOM) and the resting orders, The MarketDelta Resting Bid\Ask Tool, Time & Sales alongside the MD Footprints. However you only really need 1 or 2 to be consistently profitable. So what i am trying to say is that IMO MarketDelta can do exactly what OFA can do but with more FLEXIBILITY :-) which is always good.

     

    Like BGTrader said in earlier posts its worthwhile checking out kam's videos at L2ST - Trading Futures Online - Contact Us, as he quite nicely explains how to use market profile and auction theory concepts for price based set-ups and levels to trade, however using Order Flow for execution, timing and trade management.

     

    Given the spirit of this thread, perhaps we should start to indulge in some of the setups that we all know that work. It's pretty clear that Order Flow Analytics is nothing but an attempt to profit off what MD already does.


  15. Watched the webinar, the chart they use is the same as the one I posted nothing more then a 6 tick reversal chart/pnf chart. Instead of calling the the net bid ask trades delta, her refers to them as COT. What is not shown in this video is that supply or demand will often be tested multiple times which is why it is important to plan your areas and not trade using this type of chart blindly.

     

    Matt Fahmie has posted some great setups here for those who are interested.

     

    Order Flow: 6 Tick Reversal Patterns

     

    Edit.

     

    The only difference I see here from a Market Delta PNF chart and OFA's software is that they offer the ability to hook cumulative delta since trade execution.


  16. Excellent thread...good job by all who have contributed, let's try and keep it going. Personally I believe 100% that order flow/auction theory is the only information one needs to trade profitably. That being said, there are many different ways and tools to use in order to interpret order flow. I agree with Fulcrum and electroniclocal in that to much information can be detrimental. Also, the last thing I want to do is get used to trading with someone's proprietary software and then find out one day, for whatever reason, that I can't use that software to trade with anymore. That would not be good for the psyche.

    That being said, I am always interested in learning more about order flow and how other people use it to trade successfully. I actually talked to OFA a while back because their software does look interesting. From watching their intro videos it seems to me that something very important to them is not only the actual delta from the current auction but also the location of poc/hi volume node. Seems like when volume starts to build rapidly and the poc comes close to the hi/lo of the current bar then they look for climactic type of activity to start a new auction bar in the opposite direction and trap e1 who just sold the low or bought the high but I see that on a .50 range volume candle chart. Plus, I would expect these climactic events to be occurring at levels that I am already watching myself. To be frank I think it's just taking the exact same information I look at now and just presenting it in a more organized way. But if it can continuously get me filled a tick or 2 better and help automate things a little bit.... Any comments? Anyone here actually using the software live? I have not seen the software operate in real time yet.

     

    Besides trading the ES I also use orderflow/auction theory to trade currencies without actual trade volume, only tick volume. All the same basic principles still apply.

    Way too tired to type anymore....look forward to exchanging ideas.

     

    I don't understand how someones software will help you get 1-2 tick better entry. You need to decide where you want to do business and each entry must be taken into the context of everything else that is going on i.e. risk, reward, and probability of success.

     

    What I will say is that if you look at volume at a micro level, if volume is significant, you can at times consider this a wall to lean on but you have to be disciplined about this in the sense that if that wall is breached you must accept failure.

     

    One thing to watch for is that when volume is light on a contract it can throw you off since you are used to seeing large prints when the market is active.

     

    Good example of a top. The number of contracts traded at these higher prices is pretty significant so if you are shorting below these levels, you can try to play the card that this volume will act as a wall to support your trade, since one time frame has responded here and will likely respond again at these prices given the opportunity. Additionally the decrease in cumulative delta is indicative that sellers are becoming more aggressive or buyers are trying to exit. What else is worth watching here is that any bulls purchasing between 10:06 and 10:32 might be thinking that they got a good fill shown by the limited amount of trade at the 1108.75 level, well the market will not give you a good price, if you get one either you are a very good trader, are lucky or you just got caught into a trap. Looking at the volume at 10:54 notice that 1108.75 has the most volume here, to me this looks like bulls realizing they are wrong and running for the exit.

     

    As you can see there is a TON of information here, almost too much which is why it's only worth looking at when trying to catch a reversal or attempting to find out what is happening within a trading range.

     

    6TRM107A1.png

     

    Here is a good example IMO, of using cumulative delta.

     

    If you look at 12:24 market is -62k, look at 13:48 market is almost -62k and prices are higher, opportunities like these false breakouts can work very well. But from what I have seen, delta is nowhere near as reliable to accurate volume.

     

    6TRM107A1_2.png


  17. I'd still like to know what benefits of cumulative volume delta have past the day time frame.

     

    The only use that I have found for cumulative delta is when we are making a new swing high/low it is a good indicator of knowing how hard/easy the market is capable of pushing over with respect to the state it was in that last time that level was visited (think a heavy rock on the tip of a pyramid, sometimes it's more lopsided then other times making it easier to push over). It's also helpful in determining how a trading range might be balanced even though price bars appear flat.

     

    If you look at pullback, say for example the market is in a bear trend, you will notice that even though prices pullback, cumulative delta will usually further increase in the direction of the trend, a pullback like so is usually a high probably second entry into an existing trend for that day assuming this isn't taking place at a major level of confluence.

     

    And as BlowFish has stated, for every buyer there is a seller. You have to consider too that positive delta doesn't imply real buying, think short covering.

     

    IMO, volume can be a lot more useful then delta. Looking at this chart, it's not surprising why we might have been stuck in trading range these past two trading days.

     

    Composite_2.png

     

    Notice something about each swing high/low?

     

    6TRM107A1.png

     

    While we are on the topic, have any of you explored looking at depth ratios?

     

    attachment.php?attachmentid=2579&d=1221517837


  18. Seems to me highly unlikely that a separate feed is required for that. I have a single feed and I can get all that info.

     

    Also, an arbitrage trade could include multiple futures symbols at the same time as the stock market.

     

    I think the use of second feed is a misnomer. I forget where but from what I recall, it's been discussed that all the second feed is something other then the ES future which is why Urmablume sometimes shows screenshots of all equity futures showing the spike at the exact same time.


  19. Why does it have to be especially "accurate"?

     

    S&P 500 is the futures market for a stock market. If the second data feed was something indicating the volume in the underlying stock market (whether aggregated index, premium, whatever) then couldn't it be possible that a trade intensity spike corresponding to a spike in the volume in the stock market would likely be an arbitrage and therefore something we might ignore... if there is no corresponding spike in volume in the stock market, then we can consider it commercial spike and use it.

     

    1-2 second accuracy would be enough, it takes longer than that for the spike to "take affect" anyway. See a spike, check the market internals, no spike there, ok, take the trade. Not sure... but fits the description so far anyway, I think.

     

     

    What if the second feed was just confirmation of intensity across futures representing different markets i.e. YM, NQ and Russell.


  20. By crossover... you don't mean when the plot crosses 0 do you? The trade is at the peaks of the plot.

     

    I've seen whipsaw, too, but I haven't applied any sophisticated smoothing to it, so... I haven't really evaluated it properly yet.

     

    UB's nicely goes up and down whereas looking at the raw calculation I'm using, it wiggles a lot. Hmm.... which might mean: 1) UB is using some cycle smoothing on it and 2) I already know UB uses a different underlying formula for calculating it

     

    Even if you look at the peak, there is no way to now when that peak is in. This is something nice to look at, that is about it.


  21. If your version of the harmonic is only good after the fact then maybe it is missing something. This version usually leads, as shown.

     

    V94RawHarmonic.jpg

     

    "Usually Leads".

     

    The problem is that sometimes it can whipsaw and for the style that I trade, by the time the cross over occurs can sometimes be later then where I would have already entered my trade. I've just found other methods of choosing entries to be better suited to my style.


  22. If your version of the harmonic is only good after the fact then maybe it is missing something. This version usually leads, as shown.

     

    V94RawHarmonic.jpg

     

    "Usually Leads".

     

    The problem is that sometimes it can whipsaw and for the style that I trade, by the time the cross over occurs can sometimes be later then where I would have already entered my trade. I've just found other methods of choosing entries to be superior. One thing, is that it definitely works much better for trending markets then range markets.

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