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horace

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Posts posted by horace


  1. Thanks for your article but you missed the method I use for stop placement. It is the method which traders are told NOT to use. A PRICE STOP.

     

    The reason I use this method is that I have a setup which count son momentum and after recording and analyzing well over 2000 trade setups in realtime, it is quite clear that some trades work immediately with very little MAE (adverse excursion - aka heat) and others don't. They chop around and may or MAY NOT eventually go in your favour. I have found that I want to stay in the working trades and GET OUT OF the chop em up and go nowhere trades. So as an example - even if structure would suggest say a 10 or 12 tick stop is needed in the ES, I enter and exit if 6 ticks of adverse excursion is experienced. NQ is 12 ticks (max 15), EC is 8-10 - (max 14), TY (ten year) is 4). (The range varies according to the setup being used, ie. the reason for getting into the trade).

     

    Now the BIG ADVANTAGE to this is I can increase (literally DOUBLE) my size and the winners are much larger - the losers controlled.

     

    You might say - well, you will be STOPPED OUT of trades which end up being winners by doing this. Yes, that does happen but my experience is that it happens less than 10% of the time and I am much better off by missing out on some - but staying in on the ones that work right away.

     

    Certainly, the above applies for day time frame trade entries which I expect to exit between 5 - 30 minutes. I would not do this for position trades, overnight or longer timeframe opportunities.

     

    Can you explain this method in a little more detail, as it is hard to follow your reasoning.

    Thanks


  2. I recently had an interest in trying out a new trading ladder. So I started contacting a list of retail brokers that allowed for the specific data needed for this ladder. I was talking to one of the perspective brokers and we got into a conversation. I simply asked him about his clients and what that actual percentages were. He informed me that he had short of 500 actual clients personally. I asked how many were active traders and he told me that a little more then 200 were what he considered active. Does anyone have a guess out of these 200 how many were up for the year? Take a guess. 2

     

     

    .

     

    A very interesting read from you Colonel B, but what if a good Mentor is nowhere to be found.

    What do you suggest then to a learner trader. How is he/she going to develop a tradeable system for making money.


  3. Horace,

     

    Not sure what market your trading so you will have to take my opinion with a grain of salt.

    The two pieces of information your missing is the market maker aspect, the entity that profits by collecting the spread and providing liquidity. Also the market is a continuous double auction.

    In a continuous double auction price will always move to provide greatest utility. If more and more people want to sell above the current market, price will rise, reverse for buyers below market.

    All a market maker needs to do to exploit this concept is remove some of the liquidity from either side of the market, and as price moves away from is initial position more orders will come in to cross the spread.

    Hope that helps a little.

     

    thanks add

     

    I am referring to ES

    Does your statement concerning removal of liquidity still apply


  4. dont whipsaw yourself....they are not necessarily limits either - this is a case of they may be a market order or a limit order - if the exchange classifies them as such then that may be so.

    Point is - what are you trying to get out of it....if you want to know and count everytime someone hits the bid or the offer then it maybe irrelevant how that person entered the order....plus when people really get aggressive or passive may have little to do with hitting bids and offers and more about volume. You are counting the times people cross the spread....That was all I thought (???)

     

    Here is another thought experiment .... market is 55-60. Someone ticks up and down to close the spread..... 56-59, then 57-58....what changed?.....or

    55-60.....then 55-59, 55-58, 55-57, 55-56, then someone buys at 56 and takes it bid 56-57

    What was registered the down ticks of the quotes, or the first trade as someone being aggressive and buying at the offer?

     

    Thanks guys.

    I have followed this conversation today plus a couple of other threads and I am with you BHS, my head hurts.

    On a brighter note it convinces me that price only trading suits me better since we are looking at locked in events in the sense that the price has printed and that is the end of the matter.

    How we string the prints together is our challenge.

    Over the years I have visited and revisited the DOM and each time I come away thinking that this is a job for specialists.


  5. Have you really backtested moment to moment reliability of ask/bid ratio to price movement?

    Bluntly - applied generally across a very large sample of ES tick data, it has a near random ( ie near meaningless) relationship

    … recently ran basically same tests against some 2012 data to see if anything had changed since a few months after that data stream first became widely available realtime – essentially same results...

    ..also, testing results don’t change very much at all when restricted to when price is at important SR’s either...

     

    … not to say there aren’t any setups…there are isolated, very condition specific, situations where BA ratio imbalances are good … for a few ticks

    …ie (in my experience) none of these setups are worth watching and waiting for ‘with the eyes’.

    ... this space was 'filled' with bots a while back... they've moved on now... so, imo, it may have recaptured some niche automation potential ...

     

    ZDO

     

    Can you describe the tests you ran and the results you found as they would be helpful to me.

    thanks


  6. I like this thread because it is driven by people who have an understanding of ask-bid and as a result I know more about the subject than I did yesterday and I thank you for that.

     

    I have a little understanding of ES intraday but no understanding of say stocks Fx etc so can I ask that we keep this in mind when making posts.

     

    My life at the moment is simple and I don't want to ruin this, but I am always open to ways of fine tuning and ask-bid may fall into this category.

    Here is what I do and it is simple.

    When ES is rising on the TF greater than my trading frame, I wait for a pullback and then enter on rising momentum when the price breaks out of the pullback/congestion.

    Also, I dredge up the supply /demand zones and these add weight to the pullbacks as price enters these zones.

    Given that a lot of traders are doing the same thing, I wonder if better knowledge of ask-bid on my part would give me an edge or just give me a headache.

    There is an intuitive component to this simple form of trading, in that the more you practice it, the more you can smell trouble (or lack of it)

     

    That is why I started this thread because there are a bunch of you guys out there who are miles ahead of me in your knowledge of ask-bid and the DOM and you seem happy to share it.

     

    BHS is there an algo available for what you are suggesting that reads dtn IQ data

     

    thanks


  7. The simple answer to the original question is that there are huge institutional traders who control huge volume and have lightning quick sophisticated systems. They are able to get huge orders and volume into, and out of, the order book quicker than it can be reflected in the ladder. They have the power in some cases to do this with enough volume and speed to move the price, within reason, to meet their needs.

     

    Also, as one person indicated above the ladder, or order book, reflect orders at a given price or what we'd call limit orders. They do not reflect market orders which are basically acceptance of an existing bid or offer or, if all the bids/offers are used up by a part of a market order, the next bid or offer.

     

    Thanks Cruiser,

     

    I understand the difference between market orders and limit orders, but can you expand more on the value (if any) of using the ask-bid ratio in day trading.

     

    If you believe that the ratio has value, could you explain it please.


  8. Excellent responses Colonel B and BHS.

     

    Can you enlarge on the subject please especially if I am to look at the DOM

     

    For example if price is stalling at a previous resistance line and has dropped

    a couple of ticks but the ask/bid ratio is 60/40 then what am I to gather from

    this and what should I be looking for on the DOM.

    In the above example, I normally consider that the price has run out of steam and may turn and so I am waiting for the ask/bid ratio to drop under 50 along with the softening price.

     

    But is there something more that I should be doing?


  9. In light of recent developments at Peregrine I have to suggest that people take a long look at forex and how its structured.....I never did get the attraction (I realize its cheaper to trade it but look at what you get "with the package")

     

    with regard to learning how....the same impediments exist for forex as for any market...you still have to develop an edge (as others have pointed out).....since "guarantees" of performance are not permitted, what we see is the other alternative as vendors try to make trading appear simple and easy......the most interesting development is what I call "aggregating bars"...for this technique the vendor goes and finds a programmer and they "invent" a new way of displaying data where each bar is colored (and/or shaped) differently so that trending behavior is seen (in theory) earlier (and more accurately?) ah.....well that technique has been around for quite a while and as with all things it looks good in theory but in practice...it simply doesn't provide much of an advantage.

    I think what I wil do is to provide some new info with regard to characterization of markets. With all these new vendors coming in to tell us the "top 10 reasons why traders fail" I think someone should provide some substance for a change.......

     

    much appreciated Steve


  10. I seem to remember reading an article or post that argued that the COT report for currency futures wasn't really indicative in the same way as it is for commodities etc. This had something to do with the fact that only specific types of market participant trade futures as opposed to the cash market - unfortunately I can't remember any more detail than that.

     

    Might be worth thinking about before employing currency futures COT reports though.

     

    BlueHorseshoe

     

     

    Yes this is the problem, the Futs Fx market is a small fraction of the cash market.


  11. Hi there,

     

    I would like to track the cash flow of the major currencies. I know I can do this through the Fx Futs but is there a source of this info on a weekly/ monthly basis available on the net for Forex.

     

    The interest rates are freely available from several sites that I am aware of.

     

    thanks

     

     

    Let me try this question again.

    With so many Fx Traders here, somebody must be able to pony up a source of Fx cash flow.

     

    thanks


  12. Hi there,

     

    I would like to track the cash flow of the major currencies. I know I can do this through the Fx Futs but is there a source of this info on a weekly/ monthly basis available on the net for Forex.

     

    The interest rates are freely available from several sites that I am aware of.

     

    thanks


  13. hi there,

     

    This thread is almost three years out of date and I wondered if some of you clever guys could update it with your thoughts please as correlations can change over time.

     

    I will be in Europe for a while and I have been told that the FESX is the closest index to ES

    for intraday trading and ES is what I have been following in The US.

    Do you think that this is correct?

     

    many thanks


  14. Today is a good example of using the Psy side to trade.

    I have been salivating to get short above 1300 in ES

    My thinking was that we would hack it up around 1300 and then bust above. Then we need to hold above that to convince most people that it is sustainable and will go to the next level. So last week it hung around 1305 to 1310.

    But now it needs to get people to chase it and make people panic buy decisively above 1300

    So this morning I was looking at the tape looking for exhaustion of buyers, (not big sellers pushing against)

    If I saw big volumes at the double top this morning, I would have a completely different plan of action. When you get true exhaustion moves, You can expect the market to start working the fear side of the longs until you exhaust them.

    Thats all the S&P floor traders do. They push and push until it wont go, then start pushing the other way.

    Thanks

     

    All good stuff JT, but can you explain who the panic buyers are. I thought most of the trading was done by institutions and HFT

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