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Gold GC Futures - Extreme Price Movements
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Gold GC Futures - Extreme Price Movements

  #1 (permalink)
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Gold GC Futures - Extreme Price Movements

Hi all,

I'm sure many of you that trade gold GC futures will know that there were some extreme price movements during yesterday's trading (I'm new here so can't post a picture to the chart but it's very obvious what i'm talking about if you see it)

EDIT: To caveat the above, when I say extreme - i'm still looking at lower timeframe charts for day trading e.g. 30 min, 1 hour.

What i'm hoping to understand is why this movement happened. Now obviously it was due to some big players/algos clearing out the order book in a 'whipsaw' fashion, however why did they do it at this time?

From what I saw, there was no major news at that time.

The only things I can think of were these:

1. New contract rollover (in terms of volume shifting from August to December contract) - potentially more likely for big players to want to clear the order book for whatever reason

2. End of the month?


Why do I want to understand these things? To hopefully avoid getting caught out by this in the future. If anyone can spot any patterns of when this type of thing has happened in the past and what to look out for, that could be really helpful.

Thanks,
any comments welcome.


Last edited by goldalgotrader; August 1st, 2018 at 11:48 AM.
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  #3 (permalink)
Market Wizard
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goldalgotrader View Post
Hi all,

I'm sure many of you that trade gold GC futures will know that there were some extreme price movements during yesterday's trading (I'm new here so can't post a picture to the chart, but it's very obvious what i'm talking about if you see it)

What i'm hoping to understand is why this movement happened. Now obviously it was due to some big players/algos clearing out the order book in a 'whipsaw' fashion, however why did they do it at this time?

From what I saw, there was no major news at that time.

The only things I can think of were these:

1. New contract rollover (in terms of volume shifting from August to December contract) - potentially more likely for big players to want to clear the order book for whatever reason

2. End of the month?


Why do I want to understand these things? To hopefully avoid getting caught out by this in the future. If anyone can spot any patterns of when this type of thing has happened in the past and what to look out for, that could be really helpful.

Thanks,
any comments welcome.

2.

This is not necessarily algos, but you are right it could relate to exiting a month that is close to delivery. It could also be a manual "at market" exit.
Not sure there is a way to avoid it, but I always advise to transfer to liquid months as soon as you see open interest and liquidity shifting to the next month. Some people sadly keep it to the last minute, and I never understood the reason for that. Trade where the liquidity is at.

Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

PM with any questions about optimusfutures (800) 771-6748 (561) 367 8686. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING.
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  #4 (permalink)
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mattz View Post
This is not necessarily algos, but you are right it could relate to exiting a month that is close to delivery. It could also be a manual "at market" exit.
Not sure there is a way to avoid it, but I always advise to transfer to liquid months as soon as you see open interest and liquidity shifting to the next month.

Hi Matt,

Sorry I should have been more clear, the extreme moves I saw were on the GC December 2018 contract which has significantly more volume that August. With this in mind, I don't see how it could be orders exiting for that reason.

I don't suppose there is any data source that gives access to long vs short exposure? It would be interesting to see how much liquidity was exposed at this time and maybe look out for such events in the future.

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  #5 (permalink)
Market Wizard
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goldalgotrader View Post
Hi Matt,

Sorry I should have been more clear, the extreme moves I saw were on the GC December 2018 contract which has significantly more volume that August. With this in mind, I don't see how it could be orders exiting for that reason.

I don't suppose there is any data source that gives access to long vs short exposure? It would be interesting to see how much liquidity was exposed at this time and maybe look out for such events in the future.

Hi @goldalgotrader
The Dec moves could have been triggered due to liquidation in Aug. Sometimes you see volatility across the liquid month as a result of other expirations. Maybe this was not the case this time, but I have seen it before. As far as long versus shorts, are you referring to the COT data? This is the only one I am familiar with or can think of now.

MattZ
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future result.

PM with any questions about optimusfutures (800) 771-6748 (561) 367 8686. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING.
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  #6 (permalink)
Market Wizard
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I've seen Gold move a lot, for seemingly no reason at all. So, even if you figure out the reasons behind yesterday, it might not help you with the next time.

I include a lot of slippage in my calculations when I trade Gold. Sometimes, all Gold orders disappear, and then market move quickly and violently, many times back and forth.

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  #7 (permalink)
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Net positions GC

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And interesting correlation Yuan to Gold

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