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Sweeping the book, ECN style....
Sweeping the book, ECN style
this concept by its very discussion and definition is supposed to be impossible, given the structure and nature of the ECN and how it claims to do order matching and allocation,
we as experienced traders, having seen T&S run the handles like a finely tuned piano being played, know better.
So, how is it done?
we can only post theories, and hopefully by shedding light to the subject reveal an exploited weakness that has been the bane of the industry and sophisticated retail traders. That's what category we futures.io (formerly BMT)'ers fall into.
ok, here's the script, in simple scenario terms:
A) a position trader, hedge, fund, etc wants in big on an Emini that it expects to move, and also react to its pending order being placed.
B) that trader intends to go long into an anticipated upturn that's beginning to form
C) that trader, using ES as an objective sampling, wants to enter 1,200 cars at 1,200.00 and sweep the book hoping for partial fills lower than his maximum price of 1,200.00
D) trader hopes to fill and sweep the entire Bid from 1,200.00 through 1,198.50 and each handle in between, until a total position of 1,200 cars is reached.
how would he do that?, in detail?
how or which handle would he put the order in at?
how does he attain price improvement (stock trading term used by Specialists, if possible)
how does he enter that quantity, without breaking it up or using some software routing algorythm?
What if you are long, but know that say 20 ticks down there likely resides a large number of long stops, say at a major price level or recent swing low, etc etc.
I could see a sweep action to push price down rapidly to take the level out, followed by a lot of buying to move it back in your favor and build your position (at a possibly slightly improved price).
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ever hit the Ask (right side of the dome) and think you were going long?
the understanding that the 2 respondents have, are the essence of the confusion over the term "sweeping the book", iow, it defies description,
hence, my description:
A) I want to purchase roughly 16times the average daily volume (during the 9:30am - 10:30am range) that trades in one order, without resorting to some order splitting mechanism
B) I want price improvements by buying at the current and all lower levels until my quantity is filled, thus removing inventory (hence the term, sweeping the book) or removing supply and eventually driving up the price or putting in a floor
it has long been suspected and talked about, that this capability is reserved possibly, under non-disclosure contract, to massively large traders in league with the exchanges (Globex / CME, etc.)
whether or not this being true, its been suspected,
the question on this forum, is whether or not someone with knowledge (possibly no longer under restriction) or others who have seen the book being swept and suspect it too,
would like to weigh in on this subject
frankly, we're hoping this becomes a hot thread and a most educational one too
The following user says Thank You to kronie for this post:
kronie from a trader (you) talking to a developer (me) standpoint I still don't understand your question. My understanding of the phrase "sweeping the book" is taking out n levels. Looking at the 6E right now if I put in a buy limit order for 500 lots five ticks better than the last traded price I would have "swept the book" and the 6E would print 5 ticks higher until the usual price discovery mechanisms kicked in.
You can't buy the "current and all lower levels" unless there is a seller. I presume you know about VWAP, TWAP, Iceberg, etc orders that big players use to minimize the market impact of their trades.
Help me out in understanding what you want to do and I'll try to help.
Just a guess, but perhaps in the situation you're describing there were both large buy and large sell orders for those lower prices waiting off the published book which only matched each other once price traded to that level?