A Jack of Small Trades

Grexit - Classic Order Flow Example | Futures vs. Equities

The global markets are down and experiencing increased volatility due to the Greece EU issue.

The U.S. is about to open.

The equity tape, ala WIND, is selling (Note the red).

The futures tape, ala MacDaddy is buying (Note the green).

One of these two monster forces will have to capitulate.

ES Futures Order Flow Buying Equity Selling

This is evidence of the markets being manipulated...

Order Flow Workshop | An Arsenal of Order Flow Insights That Repeatedly Expose Forward Price Movements | 25-JUN-2015

Over the years we have observed some neat patterns in order flow.  

Some of these patterns have enough staying power that they have been incorporated into some of the basic workhorses that we regularly use in our own prop trading.


These order flow patterns fall into 3 basic categories:

Category 1 | Conclusionary Buying or Selling - Order Flow Behavioral Traits That Arise at the End of Price Move

Conclusionary (Subcategories)

  • Decrementing Rate of Change of Order Flow

  • Discrete Surges in Either Buying or Selling

  • Late Demand or Supply

  • Panicked Trading


When analysis of these 'Conclusionary' order flow patterns is integrated with classic technical analysis the results are astounding.  

For instance, when a market is oversold, would it be interesting for you to know, in real-time, that when a market is deemed oversold, whether information can be gleaned from the markets concomittant order flow that 1 or more of the Conclusionary Selling's subcategories (Decrementing rate of change of order flow, surges in HFT selling, or 'Late' supply) has entered the market?
 

Category 2 Tipping Point  - Order Flow Behavioral States That Arise That Are Fertile For A New Trend To Begin 

Tipping Point (Subcategories)

      •  

      • Buy Programs Waning \ Sell Programs Waning

      • Order Book Having Been Swept


When analysis of these 'Tipping Point' patterns is integrated with time-tested price action techniques (Engulfing Bars, Dojis, Known Support & Resistance Levels) the results are astoundingly eye-popping.
 

Category 3 New Fuel  - Order Flow Behavioral Traits That Are the Stimulus and the Sustenance That Fuel A Trend

New Fuel (Subcategories)

      • Increase in the Rate of Change of Order Flow

      • Discrete Surges in Either Buying or Selling

      • New Informed Supply or Demand

      • Resumptive Supply or Demand


When analysis of these 'New Fuel' patterns arise after a typical sequence of Price & Order Flow evolving from 'Conclusionary' through a 'Tipping Point', a trader can infer that a new trend is ensuing and that there trader posture should adapt to fit that new trend.

 

In Thursday's workshop we will be digging into a few of the more obvious Order Flow 'tells' that we have learned from the above categories.

Hope to see you there.

Register for this free Order Flow Workshop on Thursday, June 25th @ 4:00 P.M. ET here. 


Looking forward to seeing you there.
 
Carl
 
Carl 
 
Carl Weiss
Algorithmic Architect @ ...sceeto
 

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CME Market Data Platform (MDP) 3.0 | What it means for traders, tape readers, and tick charts

There is some confusion, and some hullabaloo, about the CME's Market Data Platform (MDP) 3.0.

Folks have been enquiring on what the impact of MDP 3.0 will have on order flow, tape reading, tick charts, and ...sceeto.

In a nutshell, we think that MDP 3.0 is a good thing for tape readers and day traders.

Below is our understanding of MDP 3.0.

CME Market Data Platform (MDP) 3.0 | Event Based Format Example

Event Example | Buy 50 @ market àMatches 4 orders in size of 10, 20, 10, 10.  

Old | 4 transactions of sizes 10, 20, 10, 10 | Disseminated as 4 "ticks".

New | 1 Event | Aggressor quantity of 50 | Disseminated as 1 "tick“ | Event includes detailed component trade information - 4 trades of sizes 10, 20, 10, 10

MDP 3.0 Impact

  • The ready access to aggressor quantity is important in tape reading.
  • Detailed component information can, and will be, parsed out.
  • Traders who are concerned about the ‘bundling’ of ticks as it affects the bar formation their tick based charts can consider using range bars or simply adjust your tick chart settings to accomodate new behavioral patterns imposed by MDP 3.0.

Subcategories