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EOT Automated System

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Paris, France
Trading Experience: Advanced
Platform: Market Delta & Ninjatrader
Favorite Futures: ES
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Posts: 2,565 since Jun 2009
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Silvester17 View Post
interesting. now it makes sense to me to use vol spitters. since everything is unbundled.

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Silvester17 View Post
I don't think we're talking about the same thing. example. 10 orders to buy 50 shs at $ 10. before october it would show up as 500 shs at $ 10. and that's simply not correct. but now it is. that's why it makes more sense to use vol spitters.

I do not believe that is correct.

Your example would increase the trade size from 50 to 500. What I have shown is that the avg order size has decreased by roughly 50% (maybe 2.5x).

So what it'd show now, using your original example, 5 orders to buy 25 shares at $10 and 5 orders to buy 25 shares at $10. In this case you do not know the two orders came from the same trader, and both orders do not meet the volume split minimum of say 50 shares. So your splitter will show two "dumb" transactions and zero "smart" transactions.

I think the correct way to use volume is to compare the volume at the bid & ask. 50 shares is 50 shares, doesn't matter if they come from the same trader or 50 traders. In the market it's the order flow that moves price, not the trade size.

To place more importance on some transactions than others is to assume way too much about those transactions. As I mentioned in a previous post. the S&P is widely used for hedging. Someone could take off a spread or a hedge and you'd see a big transaction. That doesn't mean that the trader had a directional bias on the S&P.

Also the large trader categories are separated into commercial hedgers & speculators. They do not trade together inside each category. The early (smart) speculators are now selling to the late-comer (dumb) speculators. So even in a large trader group there is "smart" and "dumb".

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