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VWAP for stock index futures trading?


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VWAP for stock index futures trading?

 
 
trendisyourfriend's Avatar
 trendisyourfriend 
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As someone wrote in another thread, i'd say this...

I can see the VWAP useful in the overall scheme of things, but I generally look for a confluence of factors and would not take a trade strictly based on VWAP as i would not take a trade strickly based on a moving average or a Fibonacci level.

Not to take away from the topic of discussion @ centaurer, but since you're obviously an opponent of VWAP, I am legitimately interested in what you, personally, think works or outweighs the effectiveness of VWAP in the market

P.S. BTW, still waiting for a proper answer in the other Fib thread as well.

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 JonnyBoy 
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brakkar View Post
It seems the human role in today's market vs algos is way, way underestimated.
If algos were so dominant, trading volume on 24H instruments would be evenly distributed over 24 hours range, with algo relentlessly trading in and out. They don't need to sleep after all.

Quite on the contrary: volume is at its top on the regular trading session starting at 9:30 EST. Even more, most of the volume is consumed in the first hour of trading: traders get at their desk, attain their objective in the first hour of the day and are done.
This is universal. Even on Forex markets on European timeframe, we can notice the same pattern of the first hour.

Market rhythm seems very biological, human. And as long as it is the case, the human factor, even if built in algos is still very predominant and humand are heavily supervising those algos as proven by the circadian rhythms of the markets.

Algo's are dominant, but there are humans left too! That I agree. Volume is higher during the RTH because the markets are not accessible to all during the overnight session. So I don't agree that volume would be evenly distributed because it can't be. The ES (for example) overnight data trades based on correlated spreads and does not have the 500 stocks trading for the ES during the time. But even during the overnight session, the algo's are still there. In fact, Nanex had a brilliant article (I can't lay my hands on it now) where they hypothesized a large player/algo was driving the ES up during the overnight session in the fragile 2008/2009 period. You could set your watch by it. Thinner market = easy manipulation.

In hindsight though, it doesn't matter if it is algo or human doing the executions, you can take a chart from the 1920s and a chart from today and they would look similar (assuming you remove reference points like price etc.!)

Algo's haven't changed things all that much, but sure as hell give us liquidity. And we love liquidity!

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 bobwest 
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JonnyBoy View Post
Algo's are dominant, but there are humans left too! That I agree. Volume is higher during the RTH because the markets are not accessible to all during the overnight session. So I don't agree that volume would be evenly distributed because it can't be. The ES (for example) overnight data trades based on correlated spreads and does not have the 500 stocks trading for the ES during the time. But even during the overnight session, the algo's are still there. In fact, Nanex had a brilliant article (I can't lay my hands on it now) where they hypothesized a large player/algo was driving the ES up during the overnight session in the fragile 2008/2009 period. You could set your watch by it. Thinner market = easy manipulation.

In hindsight though, it doesn't matter if it is algo or human doing the executions, you can take a chart from the 1920s and a chart from today and they would look similar (assuming you remove reference points like price etc.!)

Algo's haven't changed things all that much, but sure as hell give us liquidity. And we love liquidity!

Yeah. I second this.

Bob.

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 centaurer 
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Algorithmic volume is estimated at 75% world wide volume and 80% of US market volume.

https://seekingalpha.com/article/4230982-algo-trading-dominates-80-percent-stock-market

I would think it is like 90% for equities and more human trading in futures.

 
 
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 bobwest 
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JonnyBoy View Post

Algo's haven't changed things all that much, but sure as hell give us liquidity. And we love liquidity!


centaurer View Post
Algorithmic volume is estimated at 75% world wide volume and 80% of US market volume.

https://seekingalpha.com/article/4230982-algo-trading-dominates-80-percent-stock-market

I would think it is like 90% for equities and more human trading in futures.

A great deal of the algorithmic volume would be from high frequency trading, which involves taking advantage of tiny opportunities, essentially hyper-fast scalping, which adds to liquidity as well as reduces the opportunities for slower human trading to do the same. People do argue that it has other good or bad effects in the market, which is another question entirely.

It's an interesting topic, as is the rest of the discussion about algos, but does it say anything about the topic at hand? (Reminder: it was VWAP. )

There are profitable traders on futures.io who are using VWAP, in various ways, in their trade journals, and who would not care much if they were told it is impossible for them to be profitable because of algo trading. Most traders, of course, are not profitable (which was the case long before computers existed), but some traders using VWAP are, and sometimes substantially and consistently. (So, of course, are many who do do not use it. VWAP is not essential, but it may be useful.)

I think it's a matter of personal decision to use this or that tool. Your success or lack of it is the ultimate arbiter of whether it works for you or not. I also think it is perfectly fine to question traditional methods and the rationales for them, for any reason, including the impact of algo trading.

When there are traders who are using a particular tool profitably, the question of whether it is possible to do so has been settled by the facts. ( @JonnyBoy comes to mind . There are others.... @michaelleemoore, @Inletcap, @GruttePier, and more.) Whether it is a good tool for a particular trader to use is always another question, since most trading is not profitable, and most strategies do not work out well for most people who try them. But this is also just a fact about trading.

I think if the question were raised in its own thread, the contribution and/or effect of algo trading would be vastly interesting. (There will be many pros and cons, and some will even be well-informed, from within the industry.) Even the question of what is the predominant role and the predominate type of algo trading would be interesting. I think the subject is very large and very intriguing. It deserves an actual discussion, if anyone is willing to start one. (Yes, this is a hint.)

As to VWAP, there are traders who make good use of it, and traders who don't, and not all trading is or needs to be automated.

Bob.

 
 centaurer 
south africa
 
Posts: 169 since Dec 2018

Sorry, I actually like understanding the tools I use that I bet my capital with.

Most people here seem to be content with slapping each other on the ass and saying "it is all order flow" and quoting things how the markets were 30 years ago. If you think the markets haven't changed much you are an idiot, plain and simple.

I have traded for 15 years and seen so much change. You just aren't paying attention or are basically full of shit.

Good luck. Place is a waste of my time.

 
 
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 wldman 
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the more experience you have, the more you have actually done, the easier it is to see the difference in who is a pundit (likes to talk) who is a player (actually does something) and who is so confused or deluded that they cant do either. This person centaurer's communication is so firmly entrenched in group three that I actually log in and search those threads just for a laugh.

The guy KNOWS EVERYTHING and has DONE NOTHING except make himself feel better about his own insecurity by CRITICIZING EVERYONE.

@Big Mike do the right thing here and excise the cancer.

Dan

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 wldman 
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still logged in as a guest, no less, "totally wasting his time" on Saturday morning like most brilliant prolific traders. Probably fixing up a weak attempt to flame me as that is what insecure fools do.

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He has been banned. Please make sure you report posts to get the attention of mods on these cases, mentioning me isn't enough. Thank you to the member that reported the post.

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I've also banned his duplicate accounts, each were overly negative, not Elite, and violation of our rules. Rude behavior is not tolerated. Dupe accounts are not tolerated.

Users like this that spend their time and energy just to be rude and troll, have no vested interest in the community (not Elite, which is not normal) should be reported to the mods so they can be removed from our community. Don't feed the trolls by engaging them or lowering yourself to their level with name calling or otherwise.

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