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I'm looking for a kind of indicator for measuring icebergs/limit orders and refreshing limit orders. I use volume a lot for my trading decisions and. And I think many other people would have good use of it.
The use of Jigsaw's DepthSales is also helpful but sometimes hard to keep up with and I don't want to exclusively stare at the DOM.
Appreciate any tips
The closest I've found is the mzVolumeDelta indicator mzpack. But they don't sell it separately.
Interesting idea... I am not 100% sure what exactly you are looking for, but I have a few thoughts that may help.
Iceberg orders by their very nature are large orders broken up into small pieces to hide their total size. I don't think you will ever be able to quantify that a group of orders recently added to a price level over K amount of time such as: (+5, + 6, + 10, +20 +,7, +11, + 13, +18) is really one large iceberg order of 100 total. There wouldn't be any way to deconstruct this. Any assumptions about a random group of orders being part of a larger whole order would be a wild guess at best. That being said, here is what you could do: You can set a predefined threshold of any amount, for example volume of (10,25,50,100) and then flag any change to the level 2 book where New value - Old value meets your threshold. Then you can find all the large orders that are naked in the book. This may give you a part of a much larger iceberg, or it may give you just a large enough order in and of itself that you can use this to inform your next action.
I am not sure what you mean regarding "refreshing limit orders", but this would be tricky to do as well for a similar reason. If someone adds 10 contracts, then removes 10 contracts then add 10 contracts back, this would be an example of refreshing. But how would one ever know if this is a single party doing this, or 3 different events by 3 different parties. Any assumptions here would be wild guesses. The only real shot you would have at something like this, is if you find a fairly specific, fairly large number. Let's say 57. Then if you see 57 added, then removed, then added back, you could make a reasonable assumption it is the same party. But small units, 1,2,3,4,5,67,8,1,10.... I would never make any assumptions about these. What exactly would be the value in capturing something like this? I could build something to capture distinct high values being added and removed, but what would one do with this sort of information?
I think in practice the best application for collecting this type of information is counter intuitive to most peoples expectation of what it would be good for. Most people assume, if you can spot a large contract then you should get on that side and ride the proverbial wave. But from my experience analyzing micro-structures I can tell you that equally as often if not more often, these large volumes cancel when they hit the transaction price level, and this leaves everyone on that side of the bid ask screwed. You are staring at your DOM and you think, theres 100 on the bid, but 50 on the Ask, I should get on the Bid side because it is more stable. But what you don't realize is that the composition of that 100 is made up of a large order of 80, and when this cancels there will only be 20 real orders left, and these will collapse immediately after the cancel as the remaining group try to cancel. So if anything I recommend never picking sides that have the large order for this reason.
Interesting topic and I would like to hear your insights of how you would like to use this type of information, and or what you are hoping such an indicator would do. I could potentially throw out some code to get you started depending on what you are trying to do and how you are approaching this.
Best of Luck!
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.
Thank you for your insight iantg. I will keep on developing based on the approach that iceberg orders are often broken up in multiple order, some with algorithmic orders to make up one big or multiple big orders. The fact that there are multiple institutions with different agendas should also be taken into consideration, and so there is not just one big player putting on a large trade. The goal is to target areas where this is happening and try to debunker why.
I do not trade solely based on these high volume areas or to pick tops or bottoms, but it can give me a good clue about what the overall market is trying to do and helps with predictions.
I have now kind of found a setup that gives me a good overview on what the market is doing and how I should approach the reasoning behind high volume areas/"icebergs". I'll post some observations I make in hindsight from Fridays super volatile movement.
Comparing EquiVolume Bars and Cumulative Delta for high volume areas: Unfortunately, my Volume Profile isn't working. Gonna switch soon...
Area 1:
I didn't take a look at the context for this days trade, but it's easier to see that there is something is happening at this area on Image 02 thanks to the volume bars. Some sort of accumulation. It was a very frantic day and this could had been a some stop run, or it was drawn to resting limit orders, a false breakout or just some big intra day traders taking advantage. I really don't know. But what I do know is that the market slowly and steady moved down to area 2 and tried to do something similar there.
Area 2: Double bottom
Pretty good setups on the way to this bottom. It hit the bids pretty hard but didn't manage to break through and followed up with a reversal. Then it just did some whacky stuff untill it reached Area 3.
Area 3: Managed to breakout out from the consolidation to the upside
Same story as in Area 1, but on a much larger volume. Continued down untill it reached the daily POC and with low interest at staying at that price it ran upwards.
Attached images: Image 02: Discretionary trading with Volume Based Bars and Volume.
Image 01: Discretionary trading with Cumulative Delta and Volume.
The reason I am keen to learn more about limit orders is that I can't relate to them from an auction market theory perspective. I don't know much about them more than they kinda act like a magnet, can be used as traps, sometimes the market just blasts through them, and when a big limit order gets pulled when price is close I usually get the hell out of there or take a trade in the opposite direction.
So what would be interesting to have would be a filter that only plots a volume bar/candle or such when market orders are hitting into limit orders. Like a limit order filter. This could maybe be indicated by the divergence between the Cumulative Delta and the Price Action at such areas.
You said you could potentially throw out some code to get me started. I'm not really sure what I am looking for, but if I managed to explain what I think I am looking for maybe you have some ideas for what could make these tools more useful. I do have some experience in basic programming, so I will eventually learn to do some NinjaScripting (would be so great to be able to customize some indicators). Maybe even find a solution on how to build in all the functionality I want into one simple chart.
Hi @crille123,
in order to dive more into Order Book and Order Flow I recommend Peter Davies Jigsaw trader and his videos about learning order flow.
If you want to visualize IceBerg orders, market depth, Order flow and market volume I highly recommend MZPack for NT8.
To understand what's happening in the market basic understanding of order flow is a must. It takes some time to learn and understand. Once you are firm in order flow you can use visualization tools like MZPack for NT8, Gomis VolumeProfile solution. Standalone solutions are Jigsaw TRader with their visualization tool Vista and BookMap from VeloxPro.
Price descends to level xyz.....price stalls and goes sideways 10 bars on a 1000 volume chart....cumulative delta keeps going down. The context here is that price was going down and ran into a limit buy order, an iceberg of roughly 10k volume give or take.
