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Market Microstructures - The Red Pill
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Created: by iantg Attachments:6

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Market Microstructures - The Red Pill

 
south africa
 
 
Posts: 170 since Dec 2018

MORE!

I would really love to read the next installment.

Personally, I love the data science and intellectual challenge of high frequency data but the older I get the more I hold common stock and do a lot of sitting on my ass doing nothing as Charlie Munger would say.

I am sure some people make great money trading order flow but I am even more sure many are delusional and/or just making things up.

I mean the idea there are all these misprisings and alpha waiting for you at home on the order book is just not rational.

 
 
charlotte nc
 
Trading Experience: Master
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As a follow up to Post 9 on fill rates

Following up on my last post: Here is the actual analysis and raw data.

I won't provide a long winded explanation of the technical aspects of the analysis. Everything is in excel and you can easily trace all of the formulas to see how I did everything. I think I used a fairly reasonable approach, and even though I didn't do a ton of QC on this casual analysis I think it is directionally fairly accurate.

Thanks for reading and taking an interest!

Ian

In the analytical world there is no such thing as art, there is only the science you know and the science you don't know. Characterizing the science you don't know as "art" is a fools game.
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Register to download File Type: rar ES 2-25-19 Limit Order Fill Rate Analysis.rar (13.26 MB, 50 views)
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Murrays Bay
 
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Thank you Ian for your great insight mate. I really appreciate it and the way you have given it ie , open , honest and insightful.

Many thanks Ian

best
John


iantg View Post
Following up on my last post: Here is the actual analysis and raw data.

I won't provide a long winded explanation of the technical aspects of the analysis. Everything is in excel and you can easily trace all of the formulas to see how I did everything. I think I used a fairly reasonable approach, and even though I didn't do a ton of QC on this casual analysis I think it is directionally fairly accurate.

Thanks for reading and taking an interest!

Ian


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Palm Beach
 
 
Posts: 6 since Sep 2019
Thanks: 0 given, 5 received

Very impressive info.
Did you happen to try take advantage of this yourself?
If I did not misunderstand something, you mentioned this type of things are not accessible for retail traders?
Do you think having Rithmic or CQG access and your own code would not be able to take advantage of some of the patterning that perhaps exist there?
Thanks

The following user says Thank You to quants00 for this post:
 
 
Palm Beach
 
 
Posts: 6 since Sep 2019
Thanks: 0 given, 5 received

One of the reasons I am also asking this is because I am working on one trading system of mine that involves support/resistance price levels and wondering if it's possible to predict a break through with a higher probability of success by using some method of analyzing the DOM activity at that level?
I am assuming that I would write a code for this of course.
Thanks

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charlotte nc
 
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You might have a shot with rithmic's diamond API, but that is about the only one on the market (in terms of retail-ish).

The edge is solid, you can test it over any day, any time of day, etc, and it will generally produce around 55% / 45% in favor of accurately predicting the next major price level break.

If you had an seat license, exchange / broker discounts and were getting 100- 200 trades a day, you would still need around 60% / 40% to make money. This edge alone is not enough. But with around 5% more cowbell you can mathematically break even.

I've been too swamped with work, and other pet projects to spend much time testing things like this. I did have a go with Ninjatrader a little while back with spectacularly shitty results. Their platform crashed during live trading, they later did a major revision to the edition to fix the bug, but ultimately they weren't fast enough to be able to capture this edge. Even with a VPS with a decent co-lo, the issue was that their data feed event sequence has a built in lag.
I am sure this is the case with a lot of retail tools, but prioritize a thread that most traders will use, and the more granular data feed gets a lower priority.

When I pick this back eventually, I might give rithmic a go, and possibly look at something like treasuries. I think there might be a higher edge with books that are thinker, and mathematically the gap to break even may be far less vs. the ES.

Best of luck out there.

Ian



quants00 View Post
Very impressive info.
Did you happen to try take advantage of this yourself?
If I did not misunderstand something, you mentioned this type of things are not accessible for retail traders?
Do you think having Rithmic or CQG access and your own code would not be able to take advantage of some of the patterning that perhaps exist there?
Thanks


In the analytical world there is no such thing as art, there is only the science you know and the science you don't know. Characterizing the science you don't know as "art" is a fools game.
Visit my futures io Trade Journal
The following 3 users say Thank You to iantg for this post:
 
 
Palm Beach
 
 
Posts: 6 since Sep 2019
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iantg View Post
You might have a shot with rithmic's diamond API, but that is about the only one on the market (in terms of retail-ish).

The edge is solid, you can test it over any day, any time of day, etc, and it will generally produce around 55% / 45% in favor of accurately predicting the next major price level break.

If you had an seat license, exchange / broker discounts and were getting 100- 200 trades a day, you would still need around 60% / 40% to make money. This edge alone is not enough. But with around 5% more cowbell you can mathematically break even.

I've been too swamped with work, and other pet projects to spend much time testing things like this. I did have a go with Ninjatrader a little while back with spectacularly shitty results. Their platform crashed during live trading, they later did a major revision to the edition to fix the bug, but ultimately they weren't fast enough to be able to capture this edge. Even with a VPS with a decent co-lo, the issue was that their data feed event sequence has a built in lag.
I am sure this is the case with a lot of retail tools, but prioritize a thread that most traders will use, and the more granular data feed gets a lower priority.

When I pick this back eventually, I might give rithmic a go, and possibly look at something like treasuries. I think there might be a higher edge with books that are thinker, and mathematically the gap to break even may be far less vs. the ES.

Best of luck out there.

Ian

Thank you for the response. Do you mind sending me a pm. I can't as the forum says that I am too new.
I could share some working things I got done so far, plus I am working on this stuff full time and could potentially help out with some testing.

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New York, NY
 
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quants00 View Post
Thank you for the response. Do you mind sending me a pm. I can't as the forum says that I am too new.
I could share some working things I got done so far, plus I am working on this stuff full time and could potentially help out with some testing.

I might be able to help you out. PM me.

The following user says Thank You to artemiso for this post:
 
 
Palm Beach
 
 
Posts: 6 since Sep 2019
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artemiso View Post
I might be able to help you out. PM me.

Sent you a PM, I am finally on my 5th post.

The following user says Thank You to quants00 for this post:
 
 
charlotte nc
 
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Hi quants00, I am always happy to share and help if possible. If you have any specific questions, let me know and I will be glad to give you some feedback.

But i will always defer to @artemiso on this topic. He is a legit pro whereas I am a hobbyist. Because I don't do this very seriously at this point, I have been willing to share what little secret sauce I have found. I am a data scientist by trade, and this world definitely fascinates me, but I haven't had much time to put into it lately unfortunately.


If anyone has any interesting thoughts on this thread, this topic, or would like to add to the discussion I think there are some cool things here, but most retail tools will have no chance of working at this granular of a level.

I''ll definitely PM you though to follow up.

Ian



quants00 View Post
Thank you for the response. Do you mind sending me a pm. I can't as the forum says that I am too new.
I could share some working things I got done so far, plus I am working on this stuff full time and could potentially help out with some testing.


In the analytical world there is no such thing as art, there is only the science you know and the science you don't know. Characterizing the science you don't know as "art" is a fools game.
Visit my futures io Trade Journal
The following 3 users say Thank You to iantg for this post:

 



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