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6E Euro Volume?!


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6E Euro Volume?!

  #21 (permalink)
 Wartrace 
Wartrace,TN usa
 
Experience: Intermediate
Platform: NinjaTrader
Trading: 6E
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choke35 View Post
Guess, your understanding of "fragmentation" is somewhat limited.

Let's make it clearer:
The ES isn't a only a fraction of the S&P market, it makes the market since you can't trade the S&P index in cash.
The only cash alternative is constant rebalancing of the included stocks (classical arbitrage).

In contrast, 6E represents only a small fraction of the EURUSD market. You can safely bet that millions of cash/spot money
already have changed hands on a (half)pip before you even record the first blip of the 6E. Nevertheless many traders
(me included) also rely on 6E because of regulation and standardization. In addition, even with a small forex pool of
e.g. 10 banks, you normally get 50-200 times the number of bids, asks, and ticks (and noise with it) that you have
in the 6E - which is relatively impractical if you don't operate a HFT colocation centre of your own.

Not only is my understanding of it "somewhat limited"; my concern with it is as well. Not concerned at all. I am trading the order flow in the 6E futures market.

I am watching the market bids/market offers and how the limit bids/limit offers react to them. Very simple stuff. If I see the market sellers hitting the bid and the limit bids pulling there is a good chance the price will move down.

Now tell me why I should be concerned with the bids/offers in the forex market while taking short term trades in the 6E futures?

How is this influenced by the forex market in the very short term?

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  #22 (permalink)
 choke35 
Germany
 
Experience: Intermediate
Platform: Other
Trading: ES, YM, 6E
Posts: 2,668 since Feb 2013
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Wartrace View Post
Not only is my understanding of it "somewhat limited"; my concern with it is as well. Not concerned at all. I am trading the order flow in the 6E futures market.

I am watching the market bids/market offers and how the limit bids/limit offers react to them. Very simple stuff. If I see the market sellers hitting the bid and the limit bids pulling there is a good chance the price will move down.

Now tell me why I should be concerned with the bids/offers in the forex market while taking short term trades in the 6E futures?

How is this influenced by the forex market in the very short term?

Very simple: Just as the ES makes the market for the S&P500, inter- and central bank forex trades make
the market for the EURUSD. The 6E is only one among several results. So particularly in the short term
focusing on the 6E as one of the last links in the currency chain is very myopic. Esp in the case of currencies
you'd better try to look at futures as a kind of final receipt, not as an indication of what's going on/going to be.

Just to give an impression of the magnitude of myopia, the latest aggregated BIS numbers for avg daily currency
turnover by category (as of Q2/2016):

$1.654 trillion in spot transactions
$700 billion in outright forwards
$2.383 trillion in foreign exchange swaps
$96 billion currency swaps
$254 billion in options and other derivative products

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  #23 (permalink)
 Wartrace 
Wartrace,TN usa
 
Experience: Intermediate
Platform: NinjaTrader
Trading: 6E
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choke35 View Post
Very simple: Just as the ES makes the market for the S&P500, inter- and central bank forex trades make
the market for the EURUSD. The 6E is only one among several results. So particularly in the short term
focusing on the 6E as one of the last links in the currency chain is very myopic. Esp in the case of currencies
you'd better try to look at futures as a kind of final receipt, not as an indication of what's going on/going to be.

Just to give an impression of the magnitude of myopia, the latest aggregated BIS numbers for avg daily currency
turnover by category (as of Q2/2016):

$1.654 trillion in spot transactions
$700 billion in outright forwards
$2.383 trillion in foreign exchange swaps
$96 billion currency swaps
$254 billion in options and other derivative products

So you are saying that the order flow on the 6E futures contract is useless for traders?

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  #24 (permalink)
 
jperkins22's Avatar
 jperkins22 
Idaho Falls, ID/USA
 
Experience: Advanced
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Broker: NinjaTrader
Trading: GC, CL, ES
Posts: 2 since Mar 2013
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I don't trade 6E anymore, but having traded it for many years... Order flow is not useless for the 6E


Sent from my iPad using futures.io

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  #25 (permalink)
 choke35 
Germany
 
Experience: Intermediate
Platform: Other
Trading: ES, YM, 6E
Posts: 2,668 since Feb 2013
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Wartrace View Post
So you are saying that the order flow on the 6E futures contract is useless for traders?

Basically yes, but I'd put it a little softer: Compared with e.g. the ES, the use of the order flow of the
currency futures is negligible. With the ES you are "only" competing with tons of HFT systems and/or
market makers around the bid/ask. But at least you have a quantifiable chance of being first in line.
With the preconditions of the currencies markets this chance is already evanescent ex ante. Many
segments are simply closed for retail trades or have a warped retail pricing (e.g. because of small
quoting pools). So if a move finally arrives in the currency futures, you can bet that most of the meat
is already consumed by your forerunners.

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  #26 (permalink)
 Wartrace 
Wartrace,TN usa
 
Experience: Intermediate
Platform: NinjaTrader
Trading: 6E
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choke35 View Post
Basically yes, but I'd put it a little softer: Compared with e.g. the ES, the use of the order flow of the
currency futures is negligible. With the ES you are "only" competing with tons of HFT systems and/or
market makers around the bid/ask. But at least you have a quantifiable chance of being first in line.
With the preconditions of the currencies markets this chance is already evanescent ex ante. Many
segments are simply closed for retail trades or have a warped retail pricing (e.g. because of small
quoting pools). So if a move finally arrives in the currency futures, you can bet that most of the meat
is already consumed by your forerunners.

That's an "interesting" take on it. I guess we will have to agree to disagree.

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  #27 (permalink)
 choke35 
Germany
 
Experience: Intermediate
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Just like always: Longevity in trading doesn't come from following the retail sheep

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  #28 (permalink)
 
lasecondababele's Avatar
 lasecondababele 
London, UK
 
Experience: Beginner
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choke35 View Post
$1.654 trillion in spot transactions
$700 billion in outright forwards
$2.383 trillion in foreign exchange swaps
$96 billion currency swaps
$254 billion in options and other derivative products

Volume rules where price goes, so a pull back in an up trend does not stop because 200 contracts have been absorbed in the 6E, but because of the 100x more has been absorbed in the spot market. It's impossible not to agree with that.

At the same time, we have folks who swear by reading order flow on the 6E.

Fascinating. Probably there is truth in both. Maybe 6E is just a small scale mirror of the spot markets, and while it does not have any predictive power on where the price itself will go, it's reliable enough to trade.
Sure I could get more accurate fills on the ES, but I have yet to become able to read its order flow correctly after watching it for months, whereas 6E clicked on the first day.

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  #29 (permalink)
 
lasecondababele's Avatar
 lasecondababele 
London, UK
 
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As I've got the attention of several people who know much more than I do:

Ninjatrader quotes the 6E in thousands of a cent, whereas I can see the DOM on R Trader splits the thousandth in two... what am I missing?


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  #30 (permalink)
 Wartrace 
Wartrace,TN usa
 
Experience: Intermediate
Platform: NinjaTrader
Trading: 6E
Posts: 81 since Nov 2013
Thanks Given: 50
Thanks Received: 55



lasecondababele View Post
As I've got the attention of several people who know much more than I do:

Ninjatrader quotes the 6E in thousands of a cent, whereas I can see the DOM on R Trader splits the thousandth in two... what am I missing?

Just go into instrument manager and click on the 6E. Hit "edit" and you will be able to change the tick size display to .00005 and that should do the trick.

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