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Does the market know your positions?


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Does the market know your positions?

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  #51 (permalink)
lightsun47
Toronto, Canada
 
 
Posts: 293 since May 2018
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I believe Bookmap has a tool called stop sweeps - which shows you where the liquidity rests - and advanced users can see how the market makers actually trap all these retailers with sweeps by going against their direction, taking them out and then continue in the original direction.

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  #52 (permalink)
trend train
Riyadh, Saudi Arabia
 
 
Posts: 23 since Dec 2021
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SMCJB View Post
A simple Google search will reveal CFDs are illegal for US residents. I believe this is the CFTC trying to protect people from a) shitty brokers and b) using to much leverage.

As you correctly state Oanda is one of the largest FX trading platform in the world and is available to US residents. How can that be? It's actual currency pairs and not CFDs on currency pairs. US residents trading on Oanda are not allowed to trade Oanda CFDs.

Maybe they have overseas bank accounts since they live abroad or under their foreign wives names they are working and living out of USA but it's funny how oanda is based in usa and offering cfds to foreigners not americans. The rest of the world trading cfds no one thinks it's scam, you don't have to use 1:2000 if it's risky for you. But for me I will not pay $40,000 to trade bitcoin while I can pay $40 (1:1000) 😍.

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  #53 (permalink)
 SMCJB 
Legendary Market Wizard
Houston, TX
 
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With regards to CFD's being illegal in the US I suspect there are many things at play here, leverage being the primary one. We know that because the CFTC heavily regulates the maximum leverage Forex and Crypto brokers are allowed to offer at 50:1. I'm also sure that the futures exchanges are very happy with this and lobby for it to stay that way. Finally it is also a way to regulate/reduce the number of 'bucket shops' that make money by taking advantage of, rather than supplying a service to, people.

Personally I would never trade anything that didn't have a central order book. With CFD's and many crypto's you are directly trading against the company. They make money when you lose it. With central order books, the exchange makes money by you trading, not by you losing money.

With regards to Forex, I've mentioned it here several times over the years, but for me the big 'gotcha' that nobody seems to be take notice of, is the interest rate (or rollover) bid/ask the FX brokers charge. For example...

SMCJB View Post
For a large account size and a Pro not a Lite account, Interactive Brokers lends AUD at 1.058% and lends USD at 1.09% but they pay no interest on deposits on either currency. Hence no matter which you have this trade on, IB is charging you over 1% in carry costs. (For smaller accounts or Lite accounts the cost is even higher)

Looking at 6A settlements on the CME last night (18-Sep-20) 6AZ0 settled 0.7301 and 6AZ1 settled 0.7302 so the annualized cost of carry using futures is basically 0.

Yes. In this case it saves you over 1%/year in carry charges. Even if you roll 4 times at a cost of $20 each, that's only a .08% cost.

This gets even more pronounced when you start going into some of the more exotic currencies where the carry bid ask can be over 10%.

With regards to leverage there are several things at play here. First on regulated US futures exchanges any margin call officially has to be covered by the next day. (Your broker may be stricter than that, for example Interactive Brokers are notorious for auto-liquidating accounts at the first sign of margin deficiency) while online FX and crypto brokers/exchanges will liquidate you immediately. (To me that extra day is extremely valuable). Secondly for regulated exchanges margin requirement (or leverage) is a function volatility. The more volatile the product the higher the margin/the less leverage you get. Treating Bitcoin and say interest rates the same way is suicidal. You mention 1:1000 leverage on Bitcoin. Bitcoin moved 10% yesterday so if you were short and had leverage of greater than 10:1 you were wiped out. There's an expression here in the US that the lottery is the tax on the poor. I think that's a good analogy to a lot of peoples trading.

And to finish, this is the current leverage you can get trading certain CME contracts...
ZN / 10yr Treasury 50.5 : 1 ($100000 / ($1800 *1.1) )
6E / USD:EUR 43.1 : 1 (125000 * $1.005 / ($2650 *1.1) )
GC / Gold 24.2 : 1 (100 oz * $1727 / ($6500 *1.1) )
ES / S&P500 18.5 : 1 (4066 * $50 / ($10000 *1.1) )
ZS / Soybean 14.6 : 1 (5000 Bushels * $14.1 / ($4400 *1.1) )
CL / Crude 9.1 : 1 (1000 bbl * $86 / ($8600 *1.1) )
NG / Natural Gas 5.9 : 1 (10000 MMBtu * $8.04 / ($12400 *1.1) )
BTC / Bitcoin 3.5 : 1 (5 coins * $21305 / ($27749 *1.1) )
MBT / Bitcoin (Micro) 3.5 : 1 (0.1 coins * $21305 / ($554.98 *1.1) )
Note the leverage on 10 yr Treasuries is 14x higher than that of Bitcoin

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  #54 (permalink)
map367
Chicago Illinois
 
 
Posts: 8 since Jul 2022
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The whole point of electronic trading was to get rid of the problem of floor traders paying the market makers to tell them where the stops are and then the floor traders gunning the stops. Paul Tudor Jones never entered his stops in the market precisely because of this problem.

The big hedge funds got around this in electronic trading by setting up order execution desks. This gave them access to all of the STOP/MKT/LMT/OCO orders that clients put in their systems. If they see massive numbers of stops with huge numbers of shares behind them they could then move the market toward the stops. This is the secret sauce in hedge fund profits.

All of this talk about bots, AI, HFT, synthetic shorts, and the carry trade, is all distraction from what is really happening. In fact, I think the whole purpose of the quant departments is just to burn excess profits and hide these illicit transactions in a sea of orders. Notice how most hedge funds don't beat the market, but their clients never simply get their money back and put it in a SPY ETF.

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  #55 (permalink)
trend train
Riyadh, Saudi Arabia
 
 
Posts: 23 since Dec 2021
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to sum up my opinion with what's going on behind the scenes here it is as following:

chart traders place their orders.
then
order flow traders will see the volume and flow with it.
then
whales will see total traders levels and orders sizes and decide where to hunt the big chunks thus the price moves as they desired!




check how easy and cheap to get the data




so if these products and data offered to retailers imagine what is offered to whales, hint: (all order data of all futures brokers!)

this reminds me of realistic scene in casino film



valuable explanation video about this topic





I hope my posts help on this thread, thanks for the invitation to this discussion BIG MIKE.


happy week and good luck on your trades (hide your stop loss)

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  #56 (permalink)
 SMCJB 
Legendary Market Wizard
Houston, TX
 
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Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, SI, Bitcoin & Ether
 
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trend train View Post
so if these products and data offered to retailers imagine what is offered to whales, hint: (all order data of all futures brokers!)

Yes its called Market by Order or MBO as opposed to Market by Price which is MBP.
MBO is more calculation intensive because you have to build your own order book, which is why many software go the easy route and use MBP.
But MBO isn't a secret and I believe it actually costs the same as MBP

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  #57 (permalink)
 forgiven 
Market Wizard
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our positions are not big enough during normal market hours and conditions to influence any thing even if its seen . it is important to see other positions in the limit order book chasing your trade or closing in on it from the other direction .

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  #58 (permalink)
 Hulk 
Texas, USA
 
Experience: Advanced
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Trading: Futures, Spreads
 
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SMCJB View Post
Yes its called Market by Order or MBO as opposed to Market by Price which is MBP.
MBO is more calculation intensive because you have to build your own order book, which is why many software go the easy route and use MBP.
But MBO isn't a secret and I believe it actually costs the same as MBP

Some vendors will sell MBP separately and it will be cheaper. Terms like FOB (full order book), Level 3 (or L3) etc are also used to separately offer MBO from MBP, which is also referred to as level 2 or L2. But if you are looking to write algos that utilize order book changes then you are better off going for the full data feed without any filters.

Vendors like Onix, Maystreet, Exegy, Pico/Redline etc. offer APIs that will construct the order book on live (or historical data, generally captured live as network PCAPs). These APIs are capable of reconstructing implied and even consolidated order books (for instance, if you wanted to combine CL and its ICE twin WBS or NYMEX and ICE brent etc. order books)

It gets dramatically expensive to go this route though because you can't consume this data over the internet because of bandwidth and computing resources limitations. Generally, the solution is to co-locate your server in the exchange datacenter, which these vendors will help setup and manage for you. The cost of the data license, vendor fees, infrastructure and its management (if you are not managing it yourself) makes it all quite expensive but if you can afford it, its available to anyone as you said.

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  #59 (permalink)
 Hulk 
Texas, USA
 
Experience: Advanced
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Trading: Futures, Spreads
 
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Hulk View Post
It gets dramatically expensive to go this route though because you can't consume this data over the internet because of bandwidth and computing resources limitations. Generally, the solution is to co-locate your server in the exchange datacenter, which these vendors will help setup and manage for you. The cost of the data license, vendor fees, infrastructure and its management (if you are not managing it yourself) makes it all quite expensive but if you can afford it, its available to anyone as you said.

On this, I should note that there is one option that is a lot cheaper than going the colocation route but it is not production ready IMO. CME has developed CME SmartStream and offered it via Google Cloud pub/sub (https://www.cmegroup.com/confluence/display/EPICSANDBOX/CME+Smart+Stream+on+GCP+SBE). There is a 10-minute delayed feed also which is free I believe.

This is the full (MDP 3) data feed. For each channel that CME disseminates data on the colo version, there is a pub/sub topic. For instance, PROD.SSCL.GCP.MD.RT.CMEG.FIXBIN.v01000.INCR.382 would be the topic that disseminates channel 382 data. This is the channel for Crude and products futures. This incremental refresh channel will contain both MBP and MBO data. If you want to start mid-week, you would also subscribe to PROD.SSCL.GCP.MD.RT.CMEG.FIXBIN.v01000.MBORPLY.382 topic. This topic disseminates MBO state in a loop. The coolest thing is that you can subscribe to all channels and pay less than $1000/month plus exchange fees (approx $800/exchange/month). I know this is still a lot more expensive that what we pay for a "retail" feed but it is a lot cheaper than what you would pay for the colo option.

The problem with Smartstream is that CME did not build an API to consume it. I attempted to write my own API and succeeded for the most part but during peak times, the number of messages spike and get so out of order, that it takes several seconds to reach my consumer (messages have to be processed in order), which delays the entire consumption process and therefore the live feed itself. But, considering Google's 1B investment in CME (https://www.cmegroup.com/media-room/press-releases/2021/11/04/cme_group_signs_10-yearpartnershipwithgooglecloudtotransformglob.html), it wont be long before this is the option with the lowest entry barrier to consume CME data that is 100% unfiltered.

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