Why does the market move towards the heavier side of the order book? - futures io
futures io futures trading



Why does the market move towards the heavier side of the order book?


Discussion in Traders Hideout

Updated by tpredictor
      Top Posters
    1. looks_one josh with 6 posts (8 thanks)
    2. looks_two Jigsaw Trading with 4 posts (29 thanks)
    3. looks_3 paps with 3 posts (1 thanks)
    4. looks_4 Blash with 3 posts (2 thanks)
      Best Posters
    1. looks_one Jigsaw Trading with 7.3 thanks per post
    2. looks_two uexkuell with 6.0 thanks per post
    3. looks_3 cory with 5.0 thanks per post
    4. looks_4 josh with 1.3 thanks per post
    1. trending_up 16,535 views
    2. thumb_up 57 thanks given
    3. group 39 followers
    1. forum 31 replies
    2. attach_file 4 attachments




Welcome to futures io: the largest futures trading community on the planet, with well over 100,000 members
  • Genuine reviews from real traders, not fake reviews from stealth vendors
  • Quality education from leading professional traders
  • We are a friendly, helpful, and positive community
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts
  • We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

(If you already have an account, login at the top of the page)

 
Search this Thread
 

Why does the market move towards the heavier side of the order book?

(login for full post details)
  #21 (permalink)
NY
 
 
Posts: 4 since Jun 2010
Thanks: 0 given, 1 received

Late to the discussion... Here are some stuff I heard and learned from people or place quoted:

a) There is a tape pattern which is (large) size bid/size ask being "revisited" again and again are meant to be taken (trade thru). Personally I think there is some truth to this watching the tape. (bano)

b) There is also a totally opposite school of thought is to step in front of size but get out when decrement quickly. (stophunter)

c) Another school of thought thinks that (b) is a newbie play because institutions would never show their hands however they might if they are at the last piece of their order. (tape reading thread at ET... might be good to post this question to Maverick74)

d) The idea of liquidity vacuum explained by Peter at jigsawtrading (DT).

These are my wild guess but I thought about this problem sometimes:

Say it is showing a huge limit order at some underlying bid.

1) if it is indeed the last piece of an institutional buy order (done their job), wouldn't it be advantageous to take the last major piece of the demand out... last man standing? And if it turns out to be a fake bid, even better.

2) if (1) is true or just in general people thinks that price trades toward size, wouldn't that make people more likely to pull their underlying bids out in front of the large bid (who wants to buy at worse price?) Kind of a self-fulfilling prophesy.

3) It might be partly due to psychological comfort. If prudent buyers or cheap bastards trying to lean on the large bid, it creates a kind of air pocket because more bids will be moved just in front of the large bid which makes the top light and bottom heavy on the ladder. This makes the price move down faster and that sheer momentum might make the buyers have second thoughts (pull limit order or new buyers not entering) and seller more confident.

4) This one is a bit of a stretch... Also some buyers AND sellers might want to wait out to see how price react to the large limit order, this also thin out the liquidity on the buy side a bit meanwhile the sell side liquidity are only above the best bid... this too helps create some kind of air pocket?

Reply With Quote
The following 2 users say Thank You to cook for this post:

Can you help answer these questions
from other members on futures io?
Metastock Xenith Adapter
NinjaTrader
IB Bracker Order
Platforms and Indicators
Where is the link to download GomiRecorder?
NinjaTrader
DLL with webrequest function for MC
MultiCharts
GBP/ARS Pair
Traders Hideout
 
 
(login for full post details)
  #22 (permalink)
Brisbane, Queensland, Australia
 
Experience: Advanced
Platform: JIGSAW/SIERRA CHART
Broker: MacQuarie Futures/AMP Clearing/CQG
Trading: HHI, HSI, FDAX
 
xiaosi's Avatar
 
Posts: 502 since Feb 2012
Thanks: 444 given, 531 received

The Dax and CL are notorious for size sitting on the bid or offer...perhaps because it's easier to see. I use it as a confluence to support a trade 'idea'....

Guy Bower posted some interesting videos on YT about trading around size on the SPI contract...sorry, can't link it. Search for him.

Btw, great stuff DT!

XS

Follow me on Twitter Reply With Quote
 
(login for full post details)
  #23 (permalink)
Site Sponsor

Web: Jigsaw Trading
AMA: Ask Me Anything
Webinars: Jigsaw Trading Webinars
Elite offer: Click here
 
 
Jigsaw Trading's Avatar
 
Posts: 2,977 since Nov 2010
Thanks: 823 given, 10,285 received



xiaosi View Post
The Dax and CL are notorious for size sitting on the bid or offer...perhaps because it's easier to see. I use it as a confluence to support a trade 'idea'....

Guy Bower posted some interesting videos on YT about trading around size on the SPI contract...sorry, can't link it. Search for him.

Btw, great stuff DT!

XS

Thing is - on a thin market, spoofing is more dangerous.

You spoof the ES when there's 3000 contracts in front of you, then you know you have time to move out of the way.

You spoof the DAX when there's 30 contracts in front of you, then you have more balls than brains IMO.

Visit my futures io Trade Journal Reply With Quote
The following 3 users say Thank You to Jigsaw Trading for this post:
 
(login for full post details)
  #24 (permalink)
Brisbane, Queensland, Australia
 
Experience: Advanced
Platform: JIGSAW/SIERRA CHART
Broker: MacQuarie Futures/AMP Clearing/CQG
Trading: HHI, HSI, FDAX
 
xiaosi's Avatar
 
Posts: 502 since Feb 2012
Thanks: 444 given, 531 received


DionysusToast View Post
Thing is - on a thin market, spoofing is more dangerous.

You spoof the ES when there's 3000 contracts in front of you, then you know you have time to move out of the way.

You spoof the DAX when there's 30 contracts in front of you, then you have more balls than brains IMO.

Yeah and I've seen the spoofer get smashed too, then the price blasts through that level...

You were very right when you told me that the DAX and CL are similar, especially the way several levels will be taken out very quickly in one swoop. The bergs are much smaller too. You've got to be nimble trading these markets...very similar thin markets...

XS

Follow me on Twitter Reply With Quote
 
(login for full post details)
  #25 (permalink)
Legendary Market Chamois
Chicago, IL
 
Experience: None
Platform: NT8,NT7,TWS
Broker: InteractiveBrokers, S5T, IQFeed
Trading: The one I'm creating in the present....Index Futures mini/micro, ZF
 
Blash's Avatar
 
Posts: 2,232 since Nov 2011
Thanks: 7,059 given, 4,277 received


josh View Post
Someone said to me recently:


Quoting 
Remember, the market moves TOWARD size in the order book. Contrary to popular belief and common sense. For example, if there are more offers in the book than bids, it is most likely going to probe higher to test that size. The market is create to do business in the most efficient way possible (getting off large size). This is why the market moves towards size.

I have observed that this tends to be the case as well, though I don't pretend to know how to use the DOM effectively to trade. Do you agree? And if so, why is it the case the the side with more orders tends to draw price to it? While spoofing occurs all the time, I'm assuming a relatively spoof-free environment for the sake of this discussion, although if spoofing is simply part of the equation of why this works, then please I'd love to hear your thoughts on it too.

At night, outside RTH, on contracts like ES (and similar), it's the opposite...market(s) moves away from the heavy order book side in general (not a hard fast rule...no such thing in this business), I have observed.

Ron

...My calamity is My providence, outwardly it is fire and vengeance, but inwardly it is light and mercy...
The steed of this Valley is pain; and if there be no pain this journey will never end.
Buy Low And Sell High (read left to right or right to left....lol)
Follow me on Twitter Visit my futures io Trade Journal Reply With Quote
 
(login for full post details)
  #26 (permalink)
Legendary Market Wizard
Georgia, US
 
Experience: None
Platform: SC
Broker: AMP+CQG
Trading: ES, HSI, Nikkei
 
josh's Avatar
 
Posts: 5,466 since Jan 2011
Thanks: 6,054 given, 14,436 received

I just logged on and saw this thread in my control panel as having new messages. I thought to myself, "what a stupid question... who would ask 'why does the mark move towards the heavier side of the order book'?" Then, of course, I discovered that it was I who had asked that question 7 years ago. Puts things in perspective, always a good opportunity to be humble

Reply With Quote
The following 4 users say Thank You to josh for this post:
 
(login for full post details)
  #27 (permalink)
Legendary Market Chamois
Chicago, IL
 
Experience: None
Platform: NT8,NT7,TWS
Broker: InteractiveBrokers, S5T, IQFeed
Trading: The one I'm creating in the present....Index Futures mini/micro, ZF
 
Blash's Avatar
 
Posts: 2,232 since Nov 2011
Thanks: 7,059 given, 4,277 received


josh View Post
I just logged on and saw this thread in my control panel as having new messages. I thought to myself, "what a stupid question... who would ask 'why does the mark move towards the heavier side of the order book'?" Then, of course, I discovered that it was I who had asked that question 7 years ago. Puts things in perspective, always a good opportunity to be humble



Yeah I saw your “come back post” so to speak so I started to dive in and learn about you bro. Wow you started some great threads.

I just had to be part of at least one....lol

Ron


Sent from my iPhone using futures.io

...My calamity is My providence, outwardly it is fire and vengeance, but inwardly it is light and mercy...
The steed of this Valley is pain; and if there be no pain this journey will never end.
Buy Low And Sell High (read left to right or right to left....lol)
Follow me on Twitter Visit my futures io Trade Journal Reply With Quote
The following user says Thank You to Blash for this post:
 
(login for full post details)
  #28 (permalink)
SF Bay Area + CA/US
 
Experience: None
Platform: TS, TOS, Ninja(Analytics)
Trading: NQ CL, ES when volatile mrkts
 
paps's Avatar
 
Posts: 1,713 since Oct 2011
Thanks: 2,170 given, 1,698 received

reply to the OP.....the observation made & what was told to you is simply not true. It may at times look like that....but it is an incorrect statement. If watching Market Depth & observing which side of the book was heavy and which was not....would be a joke to see it trade towards the lighter book. Its a blatant incorrect statement & whoever said if prob does not know what is the LOB

also illustrating.....but u can take it for what it is....



also i did not mean to ruffle any feathers...however the LOB is a very complex subject...and most hardly ever scratch the surface...which maybe just good enough....so i did not mean to negate anything .... i myself am very deep into the subject of Order Flow...& i use it not for scalps....its for very very major turns in mrkt.....but again i can be entirely wrong...hence pls do what u have found been good for yr trades

an example of a LOB analysis is shown below....but am almost 100% that the heavy/light side of book is irrelevant w/o some key considerations

Reply With Quote
 
(login for full post details)
  #29 (permalink)
Legendary Market Chamois
Chicago, IL
 
Experience: None
Platform: NT8,NT7,TWS
Broker: InteractiveBrokers, S5T, IQFeed
Trading: The one I'm creating in the present....Index Futures mini/micro, ZF
 
Blash's Avatar
 
Posts: 2,232 since Nov 2011
Thanks: 7,059 given, 4,277 received


paps View Post
reply to the OP.....the observation made & what was told to you is simply not true. It may at times look like that....but it is an incorrect statement. If watching Market Depth & observing which side of the book was heavy and which was not....would be a joke to see it trade towards the lighter book. Its a blatant incorrect statement & whoever said if prob does not know what is the LOB

also illustrating.....but u can take it for what it is....


Nothing works 100% of the time..... but there is an edge here.... ES 10 sec chart this morning following the heavy side of the book.....



Ron

...My calamity is My providence, outwardly it is fire and vengeance, but inwardly it is light and mercy...
The steed of this Valley is pain; and if there be no pain this journey will never end.
Buy Low And Sell High (read left to right or right to left....lol)
Follow me on Twitter Visit my futures io Trade Journal Reply With Quote
The following user says Thank You to Blash for this post:
 
(login for full post details)
  #30 (permalink)
SF Bay Area + CA/US
 
Experience: None
Platform: TS, TOS, Ninja(Analytics)
Trading: NQ CL, ES when volatile mrkts
 
paps's Avatar
 
Posts: 1,713 since Oct 2011
Thanks: 2,170 given, 1,698 received


As I said Ron...edge is what the game is. If there is an edge which probably is the case...then one is golden and one should not change it.

For me I may look at depth size but it has 0 statistical edge unless I can clean and clearly see what the aggressive limits have done. let me take this a step fwd...a poor high or poor lows are typically made in mrkts due to a certain sequence of limits in the market and has no forbearance to market depth. just by looking at depth one cannot at any specific period know that it is a poor high or poor low instantaneously. but then again this is my experience with order flow...& it may not coincide with others thinking.....thats what makes trading so wonderfully unique. else all would be L or S ...wink.

Reply With Quote


futures io Trading Community Traders Hideout > Why does the market move towards the heavier side of the order book?


July 29, 2018


Upcoming Webinars and Events
 

Dealing with burnout w/Linda Bradford Raschke

Elite only
     



Copyright © 2020 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts