[UrmaBlume]

Originally Posted by honvly »

UrmaBlume,

Thanks for the theory and the screenshots. I compared it to screenshots of my own for that day, and it is clearly apparent that I have much work left to do in order to achieve the numerical accuracy that you have.

Honvly,

I am delighted that you find value in this work. Keep after it - you WILL be rewarded.

If the mods would take it as news and not spam, let me say that I am saving some level of detail for my next 2 books "Practical Short Term Trading - Techniques & Technologies" and "Practical Technical Analysis of Price & Volume - a New Era." My publisher is on my ass to get these out so it wont be too long. While these will be available to the public, they are primarily designed to help develop & train our own in-house traders.

cheers

[honvly]

Originally Posted by UrmaBlume »

As to the color you will notice blue bars at the tops and red at the bottoms. This demonstrates rare instances when what is shown as selling volume is really buying by the commercial and vice versa.

These bottoms (reverse for tops) are not made by traders suddenly taking the asked they are made when downward momentum runs into commercial buying that is bigger than the market at that moment in time and price. This size is executed by automated order placement and the size is almost never shown on market depth.

I have noticed this behavior, and it is immensely confusing. Bid intensity at bottoms results in upward swings in price, and vice versa. However, it may be possible to use this behavior to filter out stop market orders, which one would expect to trade at the ask as price moves lower.

[UrmaBlume]

Originally Posted by honvly »

I have noticed this behavior, and it is immensely confusing. Bid intensity at bottoms results in upward swings in price, and vice versa. However, it may be possible to use this behavior to filter out stop market orders, which one would expect to trade at the ask as price moves lower.

Indeed, it can be very confusing. When I first started tinkering with this indicator I was expecting to find buying volume at the bottom and selling at the top - instead I found another form of volume/buy/sell/price divergence.

As you might know from other posts we use an indicator that is our calculation of session net new trade by longer term commercial traders.

Below is a screen shot of a divergence between that indicator and price that proved to be good for 20 S&P points. We think of this behavior on the extremes as just another form of divergence - i.e., lots of selling volume and price not going down.

As a fairly accomplished poker player let me say that this game we play is the one true "Big Game," the greatest treasure hunt ever, an honorable pursuit and best of all anybody can take a shot, all you have to be is more right than wrong.

When I compare it to poker I say it is a heads up match where there are no antes or blinds, the opponent can never bet, raise or re-raise and must call your every bet and can never fold. You on the other hand can always limit your risk, can bet after you see your hand, can raise and can even re-raise your own bet. Plus maybe ever more valuable is that unlike poker it doesn't get tougher as the stakes increase - if you can beat it for a 2 lot, you can beat it for a 100 lot.

good luck

cheers

[BlowFish]

Originally Posted by honvly »

I have noticed this behavior, and it is immensely confusing. Bid intensity at bottoms results in upward swings in price, and vice versa. However, it may be possible to use this behavior to filter out stop market orders, which one would expect to trade at the ask as price moves lower.

If you want to understand more you might want to get a copy of Harris (or O'Hara). He does an excelent job of describing different types of trader why and how they trade, different dimensions of liquidity hwo provides it who takes it etc. It is a tangled web. of course this wont allow you to say ah ha that spike must be x y or z but personally I found it a fascinating read. "Trading Exchanges & Market Microstructure for Practitioners" is the title. Mind expanding, and in places mind blowing.

[taotree]

Originally Posted by BlowFish »

I have a hunch smoothing and filtering are pretty important to get the best from this stuff.

Yeah, that's one of the things I'm struggling with. I'm taking on the challenge to avoid parameters as much as possible. I have some historical data I can run this stuff on (to about 2 microsecond timestamp), I've done an intensity calculation, but working out how to sum it without choosing an arbitrary window size is a fun challenge.

[taotree]

Originally Posted by UrmaBlume »

Indeed, it can be very confusing. When I first started tinkering with this indicator I was expecting to find buying volume at the bottom and selling at the top - instead I found another form of volume/buy/sell/price divergence.

Below is a screen shot of a divergence between that indicator and price that proved to be good for 20 S&P points. We think of this behavior on the extremes as just another form of divergence - i.e., lots of selling volume and price not going down.

This sounds like what I've been calling "cost per move" that I've been working on. At first I did it based on bid/ask moves, but I have a new value that "smooths" out the fluttering of last between bid/ask and am using that instead now. The idea is as you describe, as it gets more and more "expensive", to move the market in a certain direction, than we might expect it to turn because it means it's hitting heavy resistance.