[Predictor]

UB, I've been reading all your posts and find them interesting. In one example, you said something like

Point A
"the big traders go to market they don't use limit and they have a certain PRICE RANGE where they want to get filled"

And then from what I gather your approach is based mostly on trade volume and balance. There is an obvious paradox in this view.


The first initial/biggest trader must be doing something other then watching for big trader volume. He must be coming into market with a preset PRICE range or some other idea.

Point B
The next question is, are the biggest traders any good? In general, the best traders are only able to do 30% year at a 1:1 risk reward. The next question is if you copied the big trader would you get a better, no difference, or worse trades?

Argument 1: Worse
The biggest traders is in first and will get the best fill. You will lose a haircut in every case. So you will perform worse.

Argument 2: Better
It is hard to argue that you can do better given your signals are always after the big traders. You can only hope to do better if you get filled before his order is completed. He thus pays you the haircut.

Argument 3: A wash
-----------

I am very interested in learning more about volume and what others think.

I think this is a good paradox though because if all the big traders were just looking at volume then the very biggest trader must be looking at something else because he would have no volume to go by. You spoke of a price range and this makes sense that he might come in at a certain price level or based on a fundamental event. The "locals" just produce the trade between the levels. This seems to fit well with market profile theory.

The question is, how does he know the price level?

[UrmaBlume]

To work down to the answer to your question of "The question is, how does he know the price level?" we must first define the main market participants, their volume of trade and their impact on price.

In markets like ES and to some degree in most US equities most of the actural trade volume is done by traders who both enter and close their positions during the same session. This group includes retail traders, what used to be called "locals," commercial scalpers and the HFT group. While they, collectively, do up to 80% of the total volume, their impact on price in minimal. They merely run price up to and down to the waiting longer term, value trader or strong commercial operator.

While this participant usually is responsible for only 20% of total volume, he is the player responsible for the establishment of many if not most session highs and lows. He is able to form these extremes because at the moment his, mostly machine placed, orders are bigger that the market and stronger than the momentum that brought price to that level.

At the moment price runs into this immoveable force the intensity and the velocity of trade show big spikes. The measurements required to record/demonstrate these spikes must be taken in the millisecond time frame. In the ES these spikes can often reflect a rate of trade of over 300k contracts per minute. That doesn't mean that 300k contracts traded, it means that for a few seconds or parts of a second it traded at that velocity of trade.

The last four days of trade in ES have demonstrated such spikes at one extreme or the other and ther are shown below.

Of particular note is that value/longer term/value buyers are not usually present in the same session as longer term/value sellers and vice versa. During the last 4 days this traders was only present on one of the 2 session extremes and that was the sentiment that dominated the trade for the session.

The first graph shows yesterday's high and the presence of this spike and the stronger value trader on the high and not the low and it was a very strong down day. The 26th was another strong down day and again these spike appeard on the the high and not the low. On the 25 we had a day with a mostly up sentiment and he was on the low as the chart shows. The 22nd was a reversal day up with both the open and the close near the high and again these spikes were on the low. The dates are on the charts below which you can clidk to enlarge and the times are PST.

We use only volume charts and ignore price based indicators. The indicators that help us spot these extremes are a part of this package and you can download the manual for these indicators here.

The answer is that he knows the prce from models that input both fundamental and technical market data and acts accordingly.

Just click on the image to enlarge to read text and dates

cheers

UB

[Predictor]

Let's think about the market maker.. do the bank generally "scalp" a position intraday and then get loaded on one side while making market?

market is going down.. do they start to buy and load inventory.. If so then when price goes back to support (break even or profit for them) then they start to unload their inventory

Or do they keep a constant order book? and take losses throughout day

[UrmaBlume]

Originally Posted by Predictor »

Let's think about the market maker.. do the bank generally "scalp" a position intraday and then get loaded on one side while making market?market is going down.. do they start to buy and load inventory.. If so then when price goes back to support (break even or profit for them) then they start to unload their inventoryOr do they keep a constant order book? and take losses throughout day

The point is, as demonstrated above, that it doesn't matter what the market maker does, it doesn't matter what the public does, it doesn't matter what the HFT operator does. What matters is what the participant that drives price does.

Both the pulic and the market maker never lead price, never turn price they only chase price and the longer time frame/value operator is almost always ahead of price because it is his action that so often turns price.

UB

[clmacdougall]

Originally Posted by UrmaBlume »

To work down to the answer to your question of "The question is, how does he know the price level?" we must first define the main market participants, their volume of trade and their impact on price.

In markets like ES and to some degree in most US equities most of the actural trade volume is done by traders who both enter and close their positions during the same session. This group includes retail traders, what used to be called "locals," commercial scalpers and the HFT group. While they, collectively, do up to 80% of the total volume, their impact on price in minimal. They merely run price up to and down to the waiting longer term, value trader or strong commercial operator.

While this participant usually is responsible for only 20% of total volume, he is the player responsible for the establishment of many if not most session highs and lows. He is able to form these extremes because at the moment his, mostly machine placed, orders are bigger that the market and stronger than the momentum that brought price to that level.

At the moment price runs into this immoveable force the intensity and the velocity of trade show big spikes. The measurements required to record/demonstrate these spikes must be taken in the millisecond time frame. In the ES these spikes can often reflect a rate of trade of over 300k contracts per minute. That doesn't mean that 300k contracts traded, it means that for a few seconds or parts of a second it traded at that velocity of trade.

The last four days of trade in ES have demonstrated such spikes at one extreme or the other and ther are shown below.

Of particular note is that value/longer term/value buyers are not usually present in the same session as longer term/value sellers and vice versa. During the last 4 days this traders was only present on one of the 2 session extremes and that was the sentiment that dominated the trade for the session.

The first graph shows yesterday's high and the presence of this spike and the stronger value trader on the high and not the low and it was a very strong down day. The 26th was another strong down day and again these spike appeard on the the high and not the low. On the 25 we had a day with a mostly up sentiment and he was on the low as the chart shows. The 22nd was a reversal day up with both the open and the close near the high and again these spikes were on the low. The dates are on the charts below which you can clidk to enlarge and the times are PST.

We use only volume charts and ignore price based indicators. The indicators that help us spot these extremes are a part of this package and you can download the manual for these indicators here.

The answer is that he knows the prce from models that input both fundamental and technical market data and acts accordingly.

Just click on the image to enlarge to read text and dates

cheers

UB

Your judgement of "immovability," without the actual trading of numerous contracts must have required a type and speed of trade that fits a proxy description for the potential of such trade. Is it ever solely reflected in an amount of volume or is that never the case. Thanks so much for the insight, I'm a grateful student.
Cory

[UrmaBlume]

Originally Posted by clmacdougall »

Your judgement of "immovability," without the actual trading of numerous contracts must have required a type and speed of trade that fits a proxy description for the potential of such trade. Is it ever solely reflected in an amount of volume or is that never the case. Thanks so much for the insight, I'm a grateful student.
Cory

Cory,

Thanks for the very kind words.

You have made a very perceptive observation about the dynamics of the formation of session extremes.

As we described below - trade consists of a diverse brew of participants, motives and methods. Discovering the trade that forms these extremes is not just about either volume or velocity it is also about detecting certain ratios of the mix of buy/sell/limit/mkt orders that combine in the millisecond time frame to establish these session extremes and that these special indicators detect.

Thanks again Cory.

cheers

pat

Originally Posted by UrmaBlume »

To work down to the answer to your question of "The question is, how does he know the price level?" we must first define the main market participants, their volume of trade and their impact on price.

In markets like ES and to some degree in most US equities most of the actural trade volume is done by traders who both enter and close their positions during the same session. This group includes retail traders, what used to be called "locals," commercial scalpers and the HFT group. While they, collectively, do up to 80% of the total volume, their impact on price in minimal. They merely run price up to and down to the waiting longer term, value trader or strong commercial operator.

While this participant usually is responsible for only 20% of total volume, he is the player responsible for the establishment of many if not most session highs and lows. He is able to form these extremes because at the moment his, mostly machine placed, orders are bigger that the market and stronger than the momentum that brought price to that level.

At the moment price runs into this immoveable force the intensity and the velocity of trade show big spikes. The measurements required to record/demonstrate these spikes must be taken in the millisecond time frame. In the ES these spikes can often reflect a rate of trade of over 300k contracts per minute. That doesn't mean that 300k contracts traded, it means that for a few seconds or parts of a second it traded at that velocity of trade.

The last four days of trade in ES have demonstrated such spikes at one extreme or the other and ther are shown below.

Of particular note is that value/longer term/value buyers are not usually present in the same session as longer term/value sellers and vice versa. During the last 4 days this traders was only present on one of the 2 session extremes and that was the sentiment that dominated the trade for the session.

The first graph shows yesterday's high and the presence of this spike and the stronger value trader on the high and not the low and it was a very strong down day. The 26th was another strong down day and again these spike appeard on the the high and not the low. On the 25 we had a day with a mostly up sentiment and he was on the low as the chart shows. The 22nd was a reversal day up with both the open and the close near the high and again these spikes were on the low. The dates are on the charts below which you can clidk to enlarge and the times are PST.

We use only volume charts and ignore price based indicators. The indicators that help us spot these extremes are a part of this package and you can download the manual for these indicators here.

The answer is that he knows the prce from models that input both fundamental and technical market data and acts accordingly.

Just click on the image to enlarge to read text and dates

cheers

UB

[clmacdougall]

UB, in your opinion is there anything worthwhile to follow beyond trying to define the intraday extremes of price activity by identifying the "commercial trader" entering the market?
Is that your bread and butter, or do you trade if price is moving against the extreme? I guess what I'm trying to say is do you trust anything other than the extreme as having predictive ability for a profitable trade?

[UrmaBlume]

Originally Posted by clmacdougall »

UB, in your opinion is there anything worthwhile to follow beyond trying to define the intraday extremes of price activity by identifying the "commercial trader" entering the market?
Is that your bread and butter, or do you trade if price is moving against the extreme? I guess what I'm trying to say is do you trust anything other than the extreme as having predictive ability for a profitable trade?

Yes indeed. The Indicator Pack I mentioned supports both reversal and continuation trades.

But, with regard to extremes and reversals, it is noteworthy that today is the third day in a row where the commercial longer term/value trader has been active on the highs with a very strong negative effect on price.

The charts below, again, show the divergence in the higher time frame and the topping spikes w/divergence in the micro time frame.

Note the very strong activity at today's highs:

Just click to enlarge the charts to read text or dates/times PST

cheers

pat