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UrmaBlume

Trade Intensity

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In most markets and certainly in the equity index futures markets there is a small set of very big traders whose entries into the market often have an immediate and very tradeable impact on price.

 

These traders go to great lengths to disquise their trade - they have automated routines to send a series of small transactions to the market at intervals close to 1000th of a second.

 

Because many of these traders operate from price based models they must get their execution within a very narrow price/time range which means they must execute as much of the volume they want as fast as they can while price is in that range. This results in a huge spike in what we call the intensity of trade.

 

To calulate the indicator shown below you must have a very expensive and almost zero latency data feed and be able to measure time in 1000ths of a second. The calculation of the indicator is merely so much volume over so little time.

 

The charts shown are in TradeStation. While TradeStation by itself doesn't have the ability to get nearly as granular with time the are dll's etc that can enable that most able platform for this work. This software is NOT for sale or lease.

 

To trade this indicator at optimal levels requires automated execution.

 

These plainly visable spikes in short term trade intensity occur between 12 and 30 times per session in the S&P.

 

Notice the time axis on the bottom of this first chart - the whole chart is a look inside 1 minute of trade.

 

 

tradeintensity2.jpg

 

 

This chart shows a similar spike in the intensity of trade

 

tradeintensity1.jpg

 

 

The same spikes happen at tops - this trade was good for 5 points in only 3 minutes - a great days trade in only 3 minutes

 

tradeintensity3.jpg

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I wonder who's data feed you use? I've always found ZenFire to be good. I also wonder what sort of connection to the internet you have or do you run your trading application in a data centre? I'm pretty sure most of any latency I get under normal conditions is simply down to geographical location and the speed of light :)

 

I don't wish to quibble (but am going to anyway) but I think your 1000th of a second is probably off by an order of magnitude or two. Light would only travel about 3Km in that time for example, and the average hard disk seek time is almost 2 orders of magnitude greater than that.

 

Having said that I have no doubt that looking at volume with respect to very short time frames provides interesting data but wont a a simple 1 second chart with volume show a similar thing?

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Having said that I have no doubt that looking at volume with respect to very short time frames provides interesting data but wont a a simple 1 second chart with volume show a similar thing?

 

Price is motivated by volume, not time. The granularity of an optimal data vessel is determined by units of trade and not units of time.

 

While I do believe that a 1 second bar chart would indeed reflect much of this same information, much would be lost by having any measure of time as the structure constant rather than units of trade.

 

In the emini S&P, which until very recently has traded an average of something over 2m contracts during the session, we demonstrate this data in a 25 contract bar which generates something just short of 100,000 bars per session. A 1 second chart would only generate 24,300 during the standard 405 minute day session and their rate of presentation would be constant rather than accelerating and and slowing down consistant with the rate of trade at the moment.

 

Time as a constant with regard to this kind of processing fails to report many very pertinent facts with regard to the balance and flow of trade and money in any market. A very compelling demonstration of this fact is accomplished by our Buy/Sell Volume Harmonic which I will present in a future post.

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I still don't understand the purpose of this thread since since...

 

To calulate the indicator shown below you must have a very expensive and almost zero latency data feed and be able to measure time in 1000ths of a second. The calculation of the indicator is merely so much volume over so little time.
This software is NOT for sale or lease.
To trade this indicator at optimal levels requires automated execution.
...sounds like a tooting of ones horn.

 

However...going back to what BlowFish said and you response (just for fun), what about a small tick chart value which is NOT time dependent. Also, I would like to note that you have not specifically described how this is used for trading. Without that information no one can compare how much "special" information is being extracted versus other simple methods. So again, what is the purpose of this thread?

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Hlm,

 

Tick charts are NOT useful in the analysis of trade flow becasue they treat all transactions equally. In a tick chart, each transaction is treated as a single tick regardless of size and I assure you that a 1000 contract trade in the S&P has a bigger affect on price than a 1 lot.

 

As to zero or near zero latency data feed and automated execution, they are the standard for many technically astute commercial traders. Most of the work we do requires automated execution.

 

For the technically astute, the charts make it obvious that you trade the spikes.

 

The special information presented is completely described in the text as the intensity of trade by special size traders. I know of not other way to demonstrate this information and have never seen it demonstrated before, have you?

 

Most all retail trade uses indicators that have price as their only input - adaptive moving averages, exponential moving averages, RSI, Stochastic, Bollinger Bands, CCI etc. Regardless of time frame or combination of time frames these indicators have no chance of ever defining trade or leading it as they are based on price which responds to trade flow.

 

Price is motivated by trade not price itself.

 

The indicator I posted does not use price in any way and defines trade by the very secretive traders whose trade alone is enough to motivate/propel price and the non-retail traders I know find that very useful indeed.

 

Another purpose is to try and elevate the discussion beyond the triteness and futility of discussions about the utility of trade based on the consideration of multi-time frames of price based indicators.

 

Be assured that most successful commercial trade is not based on a few parameter changes on off the shelf indicators but is based on processes that have never been discussed or even mentioned on this forum.

 

The intensity of trade indicator I demonstrated here is such an indicator and I know of no forum, book or discussion that has ever mentioned it before.

 

I created this indicator and am proud of its basis and utility and don't mind sharing my work. You seem to have a big history of many very short, mostly content free posts that offer nothing new and contribute very little. Where is something new and useful that you have created that you are willing to share?

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Thank you for the extra information.

 

You seem to have a big history of many very short, mostly content free posts that offer nothing new and contribute very little. Where is something new and useful that you have created that you are willing to share?
:o You're kidding right? I guess people can have different defintions of "sharing". As for useful, that depends on the user and information supplied.

 

As a medium for sharing new ideas and things I am working on, I naturally prefer a more live atmosphere via the chat room or private message. My participation on the forums is mainly focused at answering specific questions one may have.

 

Enjoy your thread.

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I'll post my thoughts later on this, as it is potentially an interesting idea. Besides the motivations question (since you aren't selling), I think you have misread Hlm. He's contributed quite a lot to TL, both in the forums and especially in live chat. Let's try to keep this civil, and about your concept of trade intensity, rather than launch personal attacks. I can vouch that he knows his stuff and very frequently is helping other traders.

 

Speaking of live chat, we'd love if you could drop in during market hours (the TL chat link is on the navigation bar at the top). While we couldn't see exactly what you're talking about, as you use very expensive and fast data feeds, you could show examples of your premise and discuss with other traders (we usually have 15-16 in the morning US session).

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Pretty cool, I've also noticed something like this but haven't figured out a way to play with it yet.

One thing I would be interested to know is how much does your datafeed cost?

One interesting way to see this if you have ninjatrader is to pull up a time and sales window and set Timer refresh to false. Setting it to true means it updates ever 250 ms...when you set it to false though you see how many trades during those "blasts" that 250 ms is actually far to slow and actually misses tons of trades.

The fact that ninja defaults to not seeing this to me is an interesting statement on our retail tools. It just strikes me that our tools all default as if we are trading against a very very large pit and not against algorithms.

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Hi UrmaBlume,

Thanks for the post. You are correct. I have not seen this concept before.

 

You mention that this type of signal can occur between 12 and 30 times on the ES. Have you had the chance to calculate the win/failure ratio when taking the correct side of this signal ? in other words have you proven an edge to this concept.

 

I agree any new way to represent data visually always provides a mindset change and hopefully a new set of rules to "see" the market more profitably.

 

By the way sounds like your group is one (of the many) well organised companies that are into fully automated strategies.

 

All the best

John

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I wonder if you would get similar results by using a constant volume chart and having the histogram value defined by the amount of time needed to create a new bar. So a spike would be created when a volume comes in quicker in relation to other times.

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All this reminds me of MarketDelta when it first came out about four years ago, It had this whole new way of looking at volume at the bid ,volume at the ask ,and their cumulative values arranged a new way known as the footprint. It really appealed to the logical minds of many. But in reality. how many of you today are using this amazing tool to trade?

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I wonder if you would get similar results by using a constant volume chart and having the histogram value defined by the amount of time needed to create a new bar. So a spike would be created when a volume comes in quicker in relation to other times.

 

Wouldn't volume coming in quicker result in NOT a spike, since the bar will be created quicker? So you would look at the troughs instead of the peaks in the histogram.

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Wouldn't volume coming in quicker result in NOT a spike, since the bar will be created quicker? So you would look at the troughs instead of the peaks in the histogram.

I think that's what he meant. Very low time bars (seen through a small "time" indication) would indicate very fast orders coming in. Something else to look in would be the derivative of that, as you'd get the change as it develops.

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Wouldn't volume coming in quicker result in NOT a spike, since the bar will be created quicker? So you would look at the troughs instead of the peaks in the histogram.
I guess you are right (not top of my game early Sunday morning)...you would just have to display the inverse. Same difference. :)

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All this reminds me of MarketDelta when it first came out about four years ago, It had this whole new way of looking at volume at the bid ,volume at the ask ,and their cumulative values arranged a new way known as the footprint. It really appealed to the logical minds of many. But in reality. how many of you today are using this amazing tool to trade?

 

I think Market Delta is to blame for this though. For one they don't have a forum, something that just completely blows my mind. There is no place to bounce ideas off other people and no place for people not using the software to get really interested like what a forum would provide.

Considering the price of the software your basically on your own to come up with how to use it and I think this is why most people try it, like it, but don't use it.

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Interesting stuff and quite similar to some research ideas I have been playing with.

 

One interesting visualisation I showed a while back is a 1 tick constant range chart with a volume histogram below, that shows quite clear spikes.

 

Good stuff keep it coming :)

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Interesting stuff and quite similar to some research ideas I have been playing with.

 

One interesting visualisation I showed a while back is a 1 tick constant range chart with a volume histogram below, that shows quite clear spikes.

 

Good stuff keep it coming :)

 

Hi BlowFish

 

I am sorry if this sound like I am nitpicking on the posts here, but this is really not my intend. What is a 1 tick constant range chart? 1 tick chart I understand, but the "constant range" part confuses me a bit.

 

Constant range charts to me means that the bars are all the same range, but I don't understand how that will work on a 1 tick chart. Did you maybe mean just a 1 tick chart with volume histogram?

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Hi BlowFish

 

I am sorry if this sound like I am nitpicking on the posts here, but this is really not my intend. What is a 1 tick constant range chart? 1 tick chart I understand, but the "constant range" part confuses me a bit.

 

Constant range charts to me means that the bars are all the same range, but I don't understand how that will work on a 1 tick chart. Did you maybe mean just a 1 tick chart with volume histogram?

It means price has moved from 859.25 to 859.50. With a one tick chart you could have several bars created while just sitting at 859.50. With a constant range chart of one tick, volume will keep increasing until price actually moves up or down a tick hence the ability for a "spike" to be formed at the previous price/bar.

 

Added: There are two different ways to draw constant range charts. A new bar could be created at the time of the one tick move up, or it could wait until trading has continued within the range (moves beyond your specified range). I personally prefer to wait until price moves beyond my specified range which creates less bars.

Edited by Hlm
Added information

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The concept of 'trade intensity' is not new. There is no truth in saying that it is not discussed/used anywhere.

 

MarketDelta has implemented IOAMT's Trade speed ideas ( I am not affiliated with any of them) in TradeSpeed Indicator.

 

http://www.marketdelta.com/kb/article.aspx?id=10585

 

http.http://www.marketvolume.com has products/pending patents based on this idea of spikes in volume. Their SBV Indicator uses the idea of trade intensity/spikes in volume.

 

I request the thread starter to elaborate and comment if his ideas are different from the above.

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Funnily quite similar to some research ideas I have been playing with, though it seems that you work has come to fruition :)

 

One interesting visualisation I showed a while back is a 1 tick wide constant range chart with a volume histogram below, that shows quite clear spikes.

 

Good stuff keep it coming :)

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Hi BlowFish

 

I am sorry if this sound like I am nitpicking on the posts here, but this is really not my intend. What is a 1 tick constant range chart? 1 tick chart I understand, but the "constant range" part confuses me a bit.

 

Constant range charts to me means that the bars are all the same range, but I don't understand how that will work on a 1 tick chart. Did you maybe mean just a 1 tick chart with volume histogram?

 

Hi a constant range chart that is 1 tick of the instrument in width. So for ES it would be a .25 point range for each bar. Hope that makes it clear.

 

Oh btw HLM's suggestion (constant volume bars with time as a histogram) gives an interesting take on things. Something else that I have played with in the past. Kind of weird though as things are back to front, for example a tiny time histogram bar shows fast activity.

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I would dare to say that the concept or idea is old at least hundred years. It is simply a high volume reversal, or a climax. A lot of volume in small amount of time in a small price range. I would also say that how chopped or not chopped are the orders of big guys are is not that relevant. No indicator is needed for detection of such an event. But if somebody wishes to react fast enough to participate at this very top or bottom, then some sort of computation and automization can be useful. Yet since the thread starter states that the way he does it is secret, this thread serves only as an example that something like that is maybe possible, at least with super-hyper-datafeed and processing capacity :)

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I would also say that how chopped or not chopped are the orders of big guys are is not that relevant.

 

I don't know...In the abstract it is an interesting question if a 500 lot trade moves the bid/ask as 500 1 lot trades does.

I can't totally put my finger on it but it seems a bit asburd to believe that 500 trades will act the same as 1 trade, no matter what the size.

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I don't know...In the abstract it is an interesting question if a 500 lot trade moves the bid/ask as 500 1 lot trades does.

I can't totally put my finger on it but it seems a bit asburd to believe that 500 trades will act the same as 1 trade, no matter what the size.

Market would most likely react diffenently, at least on micro-scale, but the most significant fact is that there were 500 lots traded. How the trades were splitted is IMHO not that important. But maybe if somebody wants to pick the very bottom or top it actually may be important, because picking the extreme is in fact a micro-scale work.

And last but not least, I am a beginner so what do I know?

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Other advantages of STOs include: 1- It is adequately regulated: Entities issuing security tokens must operate under the guidance of designated regulatory agencies in the region like SECs and FTCs. 2- You can rest assured that STOs won’t falter in the future: Unlike ICOs that cannot be guaranteed, STOs are sure to always deliver because it is properly regulated. 3- STOs offer great convenience: Procuring security tokens is easy, straightforward, and stress-free. All you need to do is to adhere to the STO requirement in your jurisdiction and you’re good to go. 4- It can be programmed: Security tokens are programmable and can be facilitated by smart contracts. 5- Automated dividend disbursement and voting: Some security tokens are structured to send dividends automatically through smart contracts. Also, some security tokens provide the bearer with exclusive voting rights in the affairs of the entity offering the tokens. 6- It is a globally accessible investment vehicle: Investors across the globe can procure security tokens regardless of their location. 7- It is not susceptible to manipulation: Considering the mode of operation STOs are run by, big players cannot manipulate its movements. 8- STOs are very liquid: It is a very promising investment option as it has an impressive liquidity quality and can be traded easily. With benefits like these, STOs are for sure transforming the fundamentals of the financial sphere. Disadvantages of STOs As with every other form of investment, security tokens has its limitations and shortcomings. Some of these limits are: 1- It is considerably more costly than utility tokens: STOs, unlike ICOs, hosts many organizations in their fundraising campaigns. Also, regulatory fees are not cheap which makes it more capital-intensive to host STOs. 2- Investor Qualifications: Countries like the US have certain qualifications an investor has to scale before becoming eligible to engage STOs. According to the SEC to be an “Accredited investor”, you must have an annual income rate of $200k and above or a minimum of $1 million in the bank. 3- Specific trading conditions: STOs can only be traded on certain designated exchanges. Also, these tokens are time-bound meaning that you are allowed to trade these tokens between investors for a set period after the STO. The Howey Test Usually, tokens are said to be securities, by law, when they pass certain thresholds. One such way to identify a security instrument is by applying the “Howey Test”. But first, let’s look at a piece of quick background information on how the Howey test came to be. In 1944, a citrus plantation called the Howey company of Florida leased out a large portion of its land to several investors in a bid to raise funds for much-needed developments. The buyers of the land were not skilled or versed in citrus farming in any way and decided instead to just be “speculators” and let the experts do their jobs. The lease was made on the premise that profits would be generated for the investors by the lessor. Not long after the business transaction the Howey company was sanctioned and accused by the United States SEC of failing to register the sale with the authority. The SEC maintained that the company was dealing with unregistered security. Howey denied the claims however, assuring that what it offered wasn’t a security. After much debate, the case ended up in the Supreme Court, which later ruled in favor of the SEC that Howey’s land leasing were undoubtedly securities. It remarked that investors were purchasing land mainly because they saw an opportunity to make a profit off the deal. Howey was then ordered to register the sale. This was the story of the enactment of the Howey test. Today, per the Howey test, anything is deemed to be a security if it satisfies the following criteria: 1- The investment included money. 2- The investment was made on an enterprise. 3- Profit will be made from the efforts of the providers of the investment. The Howey test has become a stronghold name in the crypto space. In 2017 and 2018 (during the “Heydey boom”), many ICO providers were completely consumed with scaling the Howey test as it was a major determinant used in ascertaining the legality of an ICO by the SEC. Failure to pass the test meant the offering was illegal and was sanctioned by the authorities. Some ICOs even advertised their tokens as investment instruments that had no value, describing their tokens as “utilities” used only for interactions on the platform. The Inception of STOs The very first STO was released by Blockchain Capital on the 10th of April 2017. The release pooled about $10 million in one day. Several STOs have been released following the first event including tZero, Sharespost, Aspen Coin, Quadrant Biosciences, and many more. STOs have since gained widespread acceptance and relevance in today’s market. Understanding the Distinction Between Security Tokens and Tokenized Security Confusing security token for tokenized securities is a common trap that people fall into. The main distinction between the two is that the former is usually a recently issued token that functions on a distributed ledger system while the latter is just a digital manifestation of pre-existing financial instruments. Apart from similarities in appearance and nomenclature, security tokens have absolutely nothing in common with tokenized securities. What Entities are Involved in an STO Issuance? Assuming a business entity plans on issuing security tokens as an embodiment of equity in its establishment, the next necessary step for that business would be to involve certain players and follow certain directives. It has to formally contact an issuance platform to serve as a medium for issuing the tokens. Popular issuance platforms include Polymath and Harbor, which consist of service providers like custodians, broker-dealers, and legal entities to carry out secure processes. Who Can Invest in STOs? STOs are available to the general public for the taking, regardless of location. However, as mentioned previously, the US has certain rules guiding STO investments. In the US, it is mandatory to be an “accredited investor” before you can invest in this instrument. An accredited investor is an individual with an annual cash flow of $200k and above for at least 2 years or a net worth of $1 million and above. More nations are starting to adopt the United States’ classification method and have begun restricting certain classes from investing in STOs. It is advisable to always research on the STO rules and regulations of the jurisdiction you’re planning on investing with. Final Word STOs provide businesses with the prospect of raising funds in an easy and regulated setting. It gives both investors and issuers a good deal of benefits, while also ensuring insurances against fraudulent or malicious practices, unlike ICOs. Issuers are not limited to any industry, they can vary from several sectors including real estate, VC firms, and small and medium enterprises. Moving forward, we will likely witness prominent firms venture into the STOs.   Source: https://learn2.trade 
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