Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

TheNegotiator

Delta Volume in Intraday Trading

Recommended Posts

looking at delta is like looking at a candle chart when price goes up so does delta so i dont see a point there, as far as delta divergence or anything like that their is no point because when price goes up in an aggressive fashion the orders are pulled out of the que so the delta will be magnified not showing the real intent or the actual quantity or strength...

 

The fact that orders are pulled from the book tells you something, doesn't it?

 

Like I said before, delta only tells you something in context. If there is a high delta with high movement, that means market makers and reversion traders have pulled their limit orders for the time being. If you see a high delta with low movement, especially in the context of a level, you can take that to mean that aggressive buyers or sellers have run into a large amount of limit orders.

 

There is no tool that will give you a complete and total view of the order flow. It changes much too quickly, and it is responsive and dynamic.

Share this post


Link to post
Share on other sites
The fact that orders are pulled from the book tells you something, doesn't it?

 

Like I said before, delta only tells you something in context. If there is a high delta with high movement, that means market makers and reversion traders have pulled their limit orders for the time being. If you see a high delta with low movement, especially in the context of a level, you can take that to mean that aggressive buyers or sellers have run into a large amount of limit orders.

 

There is no tool that will give you a complete and total view of the order flow. It changes much too quickly, and it is responsive and dynamic.

 

you just went back to my point that better off analyzing limit orders

Share this post


Link to post
Share on other sites
you just went back to my point that better off analyzing limit orders

 

Well, not quite. I think that both are important, and I don't understand how someone could claim to understand order flow without considering all types of orders.

Share this post


Link to post
Share on other sites

Here is the part that is difficult to explain: they didn't necessarily want those first orders, they were just placeholders. They would then cancel order and see if other algos followed suit thus allowing the orders further back to move forward. They would cancel orders/add new ones until they felt they were in just the right place in the book and then let them rest to execute or get pulled if the market moved the wrong direction.

Scott

 

Scott,

If I understood you correctly, a lot of the logic you describe above depends on knowing the location in the bid/ask queue. Currently, when I send my limit order I do not know my location in the queue, how do they?

 

Many Thanks

Share this post


Link to post
Share on other sites

I do think an important point to consider is whether you are using this or any other method in discretionary or automated trading. I also would point out that as system designers/testers should know, a system is only as good as the research and testing done on it. Just because one person doesn't find something particularly useful or as having quantifiable edge, doesn't mean another won't. It also depends very much on your money management, style, account size, timeframe ...............

Share this post


Link to post
Share on other sites

Karish, first, they have completely unfiltered/uncoaleseced data so they see literally every tick, every book change.

 

I recently spoke with one of the major players in the data feed market and when I asked just the right questions, it turns out their ads about how their data is the best, you get every tick, etc. weren't true.

 

Their answer basically was - oh, you mean all the data like actually every tick, every book change? When I said yes that was exactly what I meant, the response was - oh, well, (a few umms in there too), that wouldn't be practical to deliver over the internet.

 

So right there is the primary difference. High end platforms like X_Trader Pro give you a column on their DOM screen called EPIQ - estimated position in the queue.

 

There are algorithms that estimate your position. Start with how many were on the bid when you joined the bid (you want to be long). Then subtract every trade you see at that price and then with the right amount of historical data, you can build algorithms that estimate how many orders that are cancelled were in front of you, which leaves you with a decent idea of where you are.

 

If you are a big enough player, you sprinkle 1 lots in all this and when one of them executes, you know exactly where the rest of your orders are relative to that 1 lot which also helps pinpoint where your orders are.

 

I can tell you from personal experience, knowing with a fair amount of accuracy, where you are in the queue is a huge advantage. Think of all the times you were trying to decide whether to bag a trade at the bid (you were long) or hold out for your limit order at the ask to be hit. If you know you are 3rd in line, you hang in there, if you know you are 200 back, you hit the bid.

 

I hate to say it but there is a world out there the average trader never even sees.

Share this post


Link to post
Share on other sites
Think of all the times you were trying to decide whether to bag a trade at the bid (you were long) or hold out for your limit order at the ask to be hit. If you know you are 3rd in line, you hang in there, if you know you are 200 back, you hit the bid.

 

Most traders don't realize just how small their edge is, don't you agree? Even a lot of the big players have an edge that is very small, a tick a trade, but they make trades with big size. So, even if this only improved your execution by a tick 20% of the time it's a huge advantage.

 

To those of you wondering about data feeds, as yourself, "Is this data really expensive?" If not, it's not unfiltered. I hate to say that, but it's true. Paying 100 - 200 a month for data is not going to buy the highest quality stuff.

Share this post


Link to post
Share on other sites

sdoma, that is an excellent way of putting it; I hadn't thought of it exactly like that. Institutional data feeds often are in the 1,000s not 100s.

 

The prop shop I worked at had trades that made $20.00 per million traded (notional) but traded over a billion per day (notional). That one trade made between 20-50k per day but it took almost 1,000 trades per day to do it.

 

We completely agree on the edge thing. I sometimes think about writing a book titled "What trading has taught me about life". If I do, I now have a new chapter - "Do you know how small the line is between being ok and not"

Share this post


Link to post
Share on other sites

Scott, Thanks

As these shop doing most of their business in the limit side of the book they play Market Maker role, is the money they are sucking out of the market is it coming out of the overall MM business ,or in addition their practice cause for unfavored execution to liquidity takers?

Share this post


Link to post
Share on other sites
We completely agree on the edge thing. I sometimes think about writing a book titled "What trading has taught me about life". If I do, I now have a new chapter - "Do you know how small the line is between being ok and not"

 

A great analogy to edge is The Old Man and the Sea. You have this big tuna, your edge, and you have a bunch of sharks taking a bite here, a bite there, and all you have left is a pile of bones. Human mistakes, psychological problems, computer and data-feed failure, sick days, all of these and many more can erode your edge until there's nothing left.

 

You can thank me for this brilliant analogy in the forward.

Share this post


Link to post
Share on other sites

sdoma, thanks here and I will thank you again in the foreword.

 

Karish, MM come in two flavors, the true market makers (think NYSE specialists of the olden days) and prop firms that are just trying to take what they can out of the market.

 

I don't have an issue with either type, we are all trying to make money, why should they be any different?

 

I think both types provide liquidity by acting as the facilitator for anyone wanting to take liquidity. If you want to take liquidity, do you really care who you get it from?

Share this post


Link to post
Share on other sites

Scott, thank you very much for the very valuable information. I had my guesses about how these prop shop work and you confirm many of them.

My belief is that even if I cannot play this game myself, understanding these players behavior and intention can assist me in building my own strategies / indicators to present their activity.

 

The other group I'm trying to understand/analyze their behavior are the so called "smart money" who execute part of their strategies at limit and not for MM, HST business. We cannot see them directly looking at Volume Delta, but their footprint is there.

Share this post


Link to post
Share on other sites
Scott, Thanks

As these shop doing most of their business in the limit side of the book they play Market Maker role, is the money they are sucking out of the market is it coming out of the overall MM business ,or in addition their practice cause for unfavored execution to liquidity takers?

 

You know, I wouldn't even worry about this as a trader. I used to get upset with whoever I thought was taking money out of my pocket, but I eventually learned not to take anything personally. Also, it's impossible to know why some large trade was done that spiked you out of your position. It might have been a stop run, but, especially in the indexes, it could also be that someone legged into or out of a spread, or an options player had to hedge a position in the futures, or a basis trade, or any number of complex strategies that many traders have no inkling of.

 

Worry about two things - your edge and how well you execute. Take care of those and you won't worry about market makers.

 

My belief is that even if I cannot play this game myself, understanding these players behavior and intention can assist me in building my own strategies / indicators to present their activity.

 

Just saw this. Go back to what I said above. A lot of trade, in the indexes especially, is complex, non-directional, and done for a lot of different reasons. It's good that you will try and model for it, but remember, concentrating on the WHY in trading will eventually drive you nuts. Find something that works and get as good at using it as you possibly can. The first part is easy. The second part is hard.

Edited by sdoma

Share this post


Link to post
Share on other sites

ok noob here, but after studying delta volume for a while along with cumulative Delta, wouldn’t the delta volume divided by total volume be more telling after all 500 delta means 1 thing when there are 600 traded and another when 5000 are traded or did I miss something?

Share this post


Link to post
Share on other sites
ok noob here, but after studying delta volume for a while along with cumulative Delta, wouldn’t the delta volume divided by total volume be more telling after all 500 delta means 1 thing when there are 600 traded and another when 5000 are traded or did I miss something?

 

Every trader is a Noob from their first trade to their last trade. And you are right. a delta of 500 could very well mean 2 completely different things if they have very different trade volumes. Sounds like you are on the right track.

Share this post


Link to post
Share on other sites

Negotiator, I have and still do work on both sides of the institutional/retail fence and I can say from my experience is no you cannot do that type of analysis without the feeds, etc. The most insidious part is you can easily get the illusion you can.

 

The differences are subtle in nature and virtually impossible to reconcile if you aren't aware of what to look for. For example, how would you be 100% certain a trade went off at the bid or ask or how would you ever spot algos running deeper in the book without getting every book change, not just "most or enough" of them? These are terms data providers will use if pushed to explain EXACTLY what their data streams consist of.

Share this post


Link to post
Share on other sites

This is definitely what I was getting at. I guess if you do the analysis on a long enough scale and look at the queues proportionally to one another, the specific orders that may have been 'missed' or even 'skipped' will become less and less relevant. So if you are a highly skilled analysis technician, perhaps it may still be possible to do this kind of thing with retail tools available today. What do you think?

Share this post


Link to post
Share on other sites

You have actually pinpointed virtually the only way you can do it at the retail level.

 

There are good proxies for most of these things if you truly understand what you are looking at/for. If someone is doing the equivalent of throwing paint at the wall hoping to create a Rembrandt that likely won't work (you might get a Picasso though).

 

However, if you are looking for market structure to give you a probability based edge then that is much different (imo). Start with something very simple.

 

One thing I do is show a histogram of the number of consecutive bars in the same direction. That is mildly interesting but I also know (not that anything can really be known relative to the market) the approximate probability of another up bar given we have had 4 up bars in a row and we are not within N minutes of a market moving report.

 

That kind of analysis take a lot of time. One of the worst feelings in trading for me isn't losing on a trade. It is spending a week researching something like that only to find it has zero predictive value.

Share this post


Link to post
Share on other sites
One of the worst feelings in trading for me isn't losing on a trade. It is spending a week researching something like that only to find it has zero predictive value.

 

I can imagine! talking of counting bars etc, do you look at stuff like demark?

Share this post


Link to post
Share on other sites

I don't want this to sound wrong but I almost never look at other people's stuff.

 

One of the reasons I am always happy to share what knowledge I have is my guess is that almoste everyone has their own ideas and likely not enough time to research them.

 

If I can point someone in the right direction or at least warn them of the potholes I have fallen in along the way then maybe some of those late nights weren't wasted after all.

 

Of course, having just said I don't look at other people's stuff much, I must now go do a little research on DeMark, lol

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • Date: 29th March 2024. GBPUSD Analysis: The Pound Trades Higher But For How Long? The global Stocks Markets are closed due to Easter Friday (Good Friday). The NASDAQ continued to follow the sideways trend while other indices again rose. The SNP500 reaches an all-time high, but the NASDAQ remains under pressure from Tesla, Meta and Apple. The Euro continues to trade lower against all major currencies including the US Dollar, Euro and Japanese Yen. The British Pound is the best performing currency during this morning’s Asian session. However, investors are largely fixing their attention on this afternoon’s Core PCE Price Index. GBPUSD – The Pound Trades Higher but For How Long? The GBPUSD is slightly higher than the day’s open and is primary due to the Pound’s strong performance. At the moment, the British Pound is increasing in value against all major currencies. However, the US Dollar Index is also trading 0.10% higher and for this reason there is a slight conflict here. If investors wish to avoid this conflict, the EURUSD is a better option. This is because, the Euro depreciating against the whole currency market avoiding the “tug-of-war” scenario. The GBPUSD is trading slightly lower than the 2-month’s average price and is trading at 49.10 on the RSI. For this reason, the price of the exchange is at a “neutral” level and is signalling neither a buy nor a sell. The day’s price action and future signals are possibly likely to be triggered by this afternoon’s Core PCE Price Index. Analysts expect the Core PCE Price Index to read 0.3% which is slightly lower than the previous month but will result in the annual figure remaining at 2.85%. The PCE rate is different to the inflation rate and the Fed aims for a rate between 1.5% to 2.00%. Therefore, even if the annual rate remains at 2.85%, as analysts expect, it would be too high for the Fed. If the rate increases, even if only slightly, the US Dollar can again renew bullish momentum and the stock market can come under pressure. This includes the SNP500. Investors are focused on the publication of data on the UK’s gross domestic product (GDP) for the last quarter of 2023: the quarterly figures decreased by 0.3%, and 0.2% over the past 12-months. This confirms the state of a shallow recession and the need for stimulation. The data, combined with a cooling labor market and a steady decline in inflation, increase the likelihood that the Bank of England will soon begin interest rate cuts. In the latest meeting the Bank of England representatives did not see any members vote for a hike. USA500 – The SNP500 Rises to New Highs, But Cannot Hold Onto Gains! The price of the SNP500 rises to an all-time high, before correcting 0.33% and ending the day slightly lower than the open price. Nonetheless, the index performs better than the NASDAQ which came under pressure from Tesla, Meta and Apple which hold a higher weight compared to the SNP500. For the SNP500, these 3 stocks hold a weight of 9.25%, whereas the 3 stocks make up 14.63% of the NASDAQ. The SNP500 is also supported by ExxonMobil’s gains due to higher energy prices. The market will remain closed on Friday due to Easter. However, the market will reopen on Monday for the US and investors can expect high volatility. Investors will also need to take into consideration how the PCE Price Index and the changed value of the US Dollar is likely to affect the stock market next week. Always trade with strict risk management. Your capital is the single most important aspect of your trading business. Please note that times displayed based on local time zone and are from time of writing this report. Click HERE to access the full HFM Economic calendar. Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! Click HERE to READ more Market news. Michalis Efthymiou Market Analyst HFMarkets Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • MT4 is good and will be good until their parent company keep updating the software, later mt4 users will have to switch to mt5.
    • $SOUN SoundHound AI stock at 5.91 support area , see https://stockconsultant.com/?SOUN
    • $ELEV Elevation Oncology stock bull flag breakout watch , see https://stockconsultant.com/?ELEV
    • $AVDX AvidXchange stock narrow range breakout watch above 13.32 , see https://stockconsultant.com/?AVDX
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.