trendisyourfriend 

Thanks for the detailed explanation. The idea of seeing an application of your concepts using your tool is to better understand how it can be used. It is like trying to play music, we can talk about the circle of fifths and how to use it in songwriting for hours but unless i see an application of it which i can HEAR then i am afraid it might make the situation more confusing. You could take any day and point where you think MM are moderately at risk here but here they are in a severe situation where considering a trade might offer a low risk for me with a good potential reward. You don't need to show your trades but just pointing where your tool is shinning so to speak.

Well, good words. I posted a video showing Micro Scalping for
100Bucks in 10 minutes. Now, I wouldn't recommend that
without hi-tech support. My technology was developed at
S4 underground, within Area 51, so... JUST KIDDIN' AROUND
[correction] S4 is south of Area 51; I rang up Bob Lazzzzzzzar to check

But I'd just re-suggest that peeps just use the TradeFlowRisk
Analyzer to see how it strongly suggests Support and Resistance
areas, based NOT on Price alone, but on Market Dynamics and
Trade Flow (what most people think of as Order Flow).

Taken together with what you Traders already know; it's
just another confirmation factor on deciding Entries and Exits
from positions, maybe ??

BUT, remember the famous advice "RTFM" so do read this
thread from the beginning; "Read the Frickin' Manual"
and, if you really want to use it, it would be worth while,
mainly if you are a DayTrading Scalper.

Params for the Screenshot were:
NQ
# comment line
RISK_THRESHOLD=8
RETENTION_SECONDS=600
MULTIPLIER=3.5
BIGLOT_MINIMUM=2
TAPER_SIZE=True
SUPER_SPIKE_THRESHOLD_RATIO=5


and MNQ
# comment line
RISK_THRESHOLD=8
RETENTION_SECONDS=600
MULTIPLIER=3.5
BIGLOT_MINIMUM=2
TAPER_SIZE=True
SUPER_SPIKE_THRESHOLD_RATIO=6

Both are using 10 minute Retention Interval windows...
MUST USE SEPARATE PARAMETER FILENAMES.

[edit] To state the not so obvious; you have to have Long
Inventory imbalance, to have Long Risk; and Short Inventory
in order to show Short Risk; just in case you were wondering...

Apologies the numbers charted are a little mangled, but
that's not so bad really... ?

[edit] I've been bumping my RISK_THRESHOLDS up to 12
or more; so FEWER Risk Dots are generated, and only at the
higher tops and lower bottoms of price... Hey, fiddle with it
and notice how the settings interact.
ONE FINAL THING since we're talking Windows for NinjaTrader
anyway; get the very good Notepad++ editor so you can put
each parameter file nicely in its own Tab, for editing the
parameters "on the fly".

hyperscalper

So, I've found your explanations of the key figures in the market (retail, commercial and Market Maker) to be,
probably, the best characterizations I've heard since my mentor's back in the early 2000's. (out of respect for
him that's a huge compliment - he's since passed on).

Having used this for a week there's no doubt (to me) that this works for automated scalping and I totally
understand that's why you started the thread. To go just a bit deeper my question is - whether you have
ever considered sharing your views on why the market maker changes from net buying to net selling? A million reasons, right? Yes, for sure, but the elephant in the room is interest rates... (I think)

Are you factoring in the "market turns" on anything else or are you a strictly scalping (based on price) trader.. I'd be just as interested in your views on extraneous influences or why you aren't concerned - perhaps in another thread?

Chuck (chof)

Chof 

So, I've found your explanations of the key figures in the market (retail, commercial and Market Maker) to be, probably, the best characterizations I've heard since my mentor's back in the early 2000's. (out of respect for him that's a huge compliment - he's since passed on). Having used this for a week there's no doubt (to me) that this works for automated scalping and I totally understand that's why you started the thread. To go just a bit deeper my question is - whether you have ever considered sharing your views on why the market maker changes from net buying to net selling? A million reasons, right? Yes, for sure, but the elephant in the room is interest rates... (I think) Are you factoring in the "market turns" on anything else or are you a strictly scalping (based on price) trader.. I'd be just as interested in your views on extraneous influences or why you aren't concerned - perhaps in another thread? Chuck (chof)

Good questions.

1) I have said before that no single indicator should be relied upon;
and, depending upon the precision of entry required; TradeFlowRisk
gives a good "situational view" by showing Market Maker's relative
"position" or "situation".

2) Retail players tend to "chase price"; so when MM pushes price
upwards, the Retail players Buy to follow it; and when MM pushes
down, the Retail players, again, Sell to follow it. Please understand
I've said before it's far more complicated than that; but that's the
primary effect. So MM "knows" that when She drops price, She'll
see more Retail Sellers; and when lifting price She'll see more
Retail Buyers. Consequently, that effect, in the short term
is "why" Retail sentiment changes in short term scalping.

3) I don't scalp on Price alone; but always require a couple of
other "non Price" indications of predicted Trend. I always say
that "Price is a great Liar" and everyone is watching it; so
of course it will "lie" and tempt Retail players in when they
should not bite.

4) "External factors" are a problem for Technical Analysis; since
my technical analysis examines patterns of Trading, and uses
them to help with prediction of future Price moves. Technicals
can be "swamped" by external factors such as fundamentals,
News Events or other such external events or influences.

But the important thing is that Market Maker has a "daily plan"
as to how Prices will be moved; and most of the time, that plan
in futures at least can be executed. What I want to know is
"what is Market Maker thinking" and in which direction is the
market price being "pushed" ?? Not easy to discover...

hyperscalper

@hyperscalper

I can answer your question to a certain point, as my trading college in the past, active time as traders was at some points and moments and market levels a market maker.

There are different kind of market makers out there and each one has his own ideas about what the market is going to do next. Even the way they became market makers at certain points and times and levels is in many times and ways very unique in their ways of getting there

So there is no general answer to your question, as you by your self even mentioned in point 4 a little fraction of what such market markers use to do what they do. And here some of the market makers, who have time and money, do implement pure strategies for background trading in the market you not even and will not even recognize on any chart and give a cup of tea of front trading going on. But this is just one way I mentioned here in a nutshell.

Hope it expands your knowledge a bit how market makers can and do work in very different ways. Take care.

Symple

hyperscalper 

But the important thing is that Market Maker has a "daily plan" as to how Prices will be moved; and most of the time, that plan in futures at least can be executed. What I want to know is "what is Market Maker thinking" and in which direction is the market price being "pushed" ?? Not easy to discover...

I can't really comment on your system, but I hope that it is making some money, which is the point, after all. I hope it is working for you.

I have noticed how you mention from time to time the near-complete control you believe the market makers have over the markets, being able to move them according to their master plan. From what I gather, actual market makers have many strategies, mostly hedging-related, and do make money over time pretty reliably. I don't think that they have god-like power and that all the retail traders lose money because of them and their total command of markets.

I have read a lot of retail traders' journals over the years. I am a retail trader too, obviously. The most common thing I read from others (or myself) is more like, "Why did I do that?"

Of course, one also sometimes reads something like "they took it from me again," proving that lack of self-knowledge and blaming others is still popular, as it always will be.

Again, I'm not criticizing your methods, and if you make money that's the main thing. For that matter, if you want to attribute retail lack of success to the powerful money makers, that's fine too. You may even be right. It doesn't really matter, if the system works. And if it is what guided you to design the system as you did, then that's fine too.

But do you really think that there are some vastly powerful manipulators who can move the markets any way they want? Really? Why aren't they all the multi-billionaires, rather than pikers like Jeff Bezos and Elon Musk?

Just my comments from the sidelines.

Bob.

bobwest 

But do you really think that there are some vastly powerful manipulators who can move the markets any way they want? Really? Why aren't they all the multi-billionaires, rather than pikers like Jeff Bezos and Elon Musk? Just my comments from the sidelines. Bob.

Hi Bob. Very perceptive comments, as usual...

For Analysis purposes, and for short term Day Trading or Scalping,
I use the "simplifying assumption" that there is ONE UNITARY
MARKET MAKER.

Now, this is clearly something of a "statistical concept"; but it
is very powerful in predicting.

It's shocking how useful this assumption is; and it is even
tempting to go "down a Rabbit Hole" about issues like
"collusion", etc.....

But I try to, and recommend others do the same, just focus
on "what is happening", rather than to try and delve "behind
the curtain" if it is not necessary.

And, for short term scalping, it is NOT NECESSARY to think
of Market Maker as anything other than a "single entity"
whose purpose is best described like this:

Quoting an imaginary Market Maker here:
"Welcome, All Traders; but I will Defeat Nearly ALL of You
in the Short Term". "However, for those of you who Guess
correctly in the Longer Term, You will Win; but I will defeat
the other 50% of You" !!

And so, for the type of Trading or Scalping I'm doing; I am
"calling Market Maker's Bluff" and attempting to be that
small percentage of Traders who are able to survive in the
Short Term, as difficult as that is...

But my Main Point here is that those who talk about the
"diversity" of Market Maker; I'd just suggest that's idle
speculation. For my specific purposes of Short Term
Scalping; there is no need to think of Market Maker as
anything other than a "single entity". She is "taking positions"
in the Short Term, against the ENTIRE RETAIL POPULATION;
and She succeeds in destroying the Hopes and Dreams of
those who Tangle with Her.

Don't bring a Club or Knife to a Gun Fight; or something like
that. But the simplifying assumption of a Single Unitary
Adversary, for Short Term Scalping; is all you really need...
...that's according to me; of course... Your mileage and
your viewpoint may vary, depending upon your domain
of experience, and trading timeframes, etc...

[EDIT] Today, after a great Jobs Report; the Nasdaq is in the "irrational
exuberance" phase. I've said many times, that Technical Analysis is
"swamped" often by these External events, like News, etc... This makes
it very difficult to avoid making mistakes; so these ridiculous levels of
volatility might put me on the sidelines; however, most of the time, I'm
in the game fairly constantly... I attach a screenshot to show how the
Indicator we wrote in this Thread, does yield "situational awareness"
but fails to predict exactly where Price trending will turn... More is
needed. However, in more "normal" action; it works much better

hyperscalper

hyperscalper 

Hi Bob. Very perceptive comments, as usual... For Analysis purposes, and for short term Day Trading or Scalping, I use the "simplifying assumption" that there is ONE UNITARY MARKET MAKER. Now, this is clearly something of a "statistical concept"; but it is very powerful in predicting. It's shocking how useful this assumption is; and it is even tempting to go "down a Rabbit Hole" about issues like "collusion", etc..... But I try to, and recommend others do the same, just focus on "what is happening", rather than to try and delve "behind the curtain" if it is not necessary. And, for short term scalping, it is NOT NECESSARY to think of Market Maker as anything other than a "single entity" whose purpose is best described like this: Quoting an imaginary Market Maker here: "Welcome, All Traders; but I will Defeat Nearly ALL of You in the Short Term". "However, for those of you who Guess correctly in the Longer Term, You will Win; but I will defeat the other 50% of You" !!

This is a pretty good answer. So the "unitary market maker" is a statistical construct standing in the place of all traders on the other side of the "retail money." So it's the hypothetical "smart money" that is contrary to the "retail money."

Heh, this includes other retail money that is not making the foolish trades of the dumber money. So the definition of "retail" is a little fluid too. But I get your point.

Nothing wrong with this, other than that you're not really talking about actual market makers any more, who are specific traders who do specific things. But it's a good answer.

I'm not sure your point is clear to everyone reading your posts, but that's up to you.

If it were me, I wouldn't call this group market makers any more, but that's up to you, too.

Thanks for the clarification.

Bob.

bobwest 

This is a pretty good answer. So the "unitary market maker" is a statistical construct standing in the place of all traders on the other side of the "retail money." So it's the hypothetical "smart money" that is contrary to the "retail money." Heh, this includes other retail money that is not making the foolish trades of the dumber money. So the definition of "retail" is a little fluid too. But I get your point. Nothing wrong with this, other than that you're not really talking about actual market makers any more, who are specific traders who do specific things. But it's a good answer. I'm not sure your point is clear to everyone reading your posts, but that's up to you. If it were me, I wouldn't call this group market makers any more, but that's up to you, too. Thanks for the clarification. Bob.

Thanks for the benefit of the doubt

As a way of thinking about this, consider that Short Term trading
attracts a very specific High Technology Market Maker whose
sole focus is to profit from the 1) Spread advantage, and
2) the Short Term swings....

So that's likely to be a special subset of all possible Market Makers,
who specialize on specific trading timeframes...

Indeed, the Indicator we developed relies on the concept that
there is a "unitary market maker" who is interacting with
the Retail Trader population in order to "take positions"
against them, considered in the aggregate...

THERE IS MORE to my approach than just looking at Inventory
Analysis. Often, the presence of "Big Lot" trades, which are
shown on the Indicator reflect a Top or a Bottom in the
short term Price Trend. The reason for that is that Market
Maker actually brings Depth of Market (aka DOM) Bids and/or
Offers CLOSER to the Inside Market, which is a "proxy" for
a greater desire to interact with the Retail population at
these Tops and Bottoms. That's not difficult to show from
simple data analysis...

Often, there are "momentary events" which occur very near
the Market which "show Market Maker's hand"; however,
this requires some "Hi Tech" to capture and analyze these
events, and a High Quality data feed, so that the Events are
there in order to be analyzed !!! (I use Rithmic)

Further, the Indicator we wrote (together-ish?) uses only
"Level 1" data; and when I analyze Market Direction, I'm
using DOM Bid and Offer patterns a bit further out from the
Inside Market, so there's a lot to it, and it is a nearly
impossible task to extract useful prediction, and Triggers,
from those "real time" analyses.......

The concept of Triggers is really essential, since those Events
are "invisible" to the naked eye; and as soon as you've
seen them, and tried to react to them; they're history....
As in Astronomy, where you're always seeing "the past",
so in trading, regardless of the speed of your charting;
many things are too fast for manual approaches.

So reduction of Latency is important, and elimination of
unnecessary Manual actions by the Trader; in favor of a
direct link to the Order Entry component of the system.

This is why it's best to avoid even attempting to Scalp in
the Short Term without specialized equipment.....

hyperscalper

Hey Hyperscalper, love your journal and thoughts on scalping, thanks for that...
always good to see another perspective and a creative one at that..

was wondering what your blue squiggley line is going thru your last chart posted ? sorry i dont have a better term for it...
well keep up the good work Hyperscalper

best
John

JBWTrader 

Hey Hyperscalper, love your journal and thoughts on scalping, thanks for that... always good to see another perspective and a creative one at that.. was wondering what your blue squiggley line is going thru your last chart posted ? sorry i dont have a better term for it... well keep up the good work Hyperscalper best John

Hey, thanx.

Yes, the Blue squiggly line is none other than a Secondary
copy of the Indicator; running on a very short retention
interval. However, it would benefit from having the vertical
multiplier changed for more deflection.

Each Indicator instance has a parameters file, which must
be unique; and a vertical multiplier is one item which can
be changed. I think also the "tapering" of the data in the
Integrator retention window can also be switched off for
these very short retention intervals which should show
very large "big lot" trades come and go...

Both of these "net inventory" lines are pegged to a single scale on
the left side; so one of them, the blue one, would benefit from a
larger multiplier, given the deflection of the purple instance, which
uses a much longer retention interval.

The Indicator has just 2 "color schemes"; and I realize there's
a lot of customization work which y'all are welcome to do...

hyperscalper