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Block Trade Observations
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Block Trade Observations

  #1 (permalink)
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Block Trade Observations

My first time to post, so please be gentle with me.

I am not a good trader, I am too technical and analytical so I fall into the trap of exiting too quickly when price moves against me.

Regarding indicators, I truly feel that it is like driving down an interstate highway by looking in your rear view mirror. You can see where you have been, but you do not see what is ahead of you. When you do see what has happened, it is too late. You are heading for a wreck.

Having said that, I must now contradict myself- I do believe there might be some predictability in using divergences. Also, I like to use ATR to avoid markets that are whipsawing. My favorite indicator is the SMA4median.

I have recently been trying to analyze footprints and I have come up with these conclusions:
(1) Indicators are good at telling me what market orders have done recently, but they do not tell me much about limit orders. If anyone has any suggestions on an indicator that identifies limit order activity, I would love to hear about it.
(2) The Market Manipulator is more obvious when things are not behaving as they should, but the Market Manipulator's activity seems to be invisible when the Herd of traders are doing what he wants them to do. An example of things not behaving as they should is when you have a large amount of market orders buying, but price fails to rise, or perhaps price even goes down.
(3) Regarding supply and demand - The Market Manipulator can create “demand” by buying on the ask using market orders, or he can create “demand” on the bid side by using limit orders. This is why footprints are tricky. The same theory can also be applied to the “supply” manipulation.
(4) The teachers I have heard tell us that the Market Manipulators work on limit orders. My theory is that the Market Manipulator uses limit orders when he wants to trade secretly and he uses market orders when he wants to stampede the herd.
(5) I have recently been looking at the POC of the candle, on high volume candles, and observing which direction price moves as it leaves the POC area.
(6) It seems to me that the Market Maker is always on the opposite side of Herds activity. He is selling when the herd wants to buy, and is buying when the herd wants to sell. The problem is - I am part of the herd. The Market Maker must eventually move the market against the herd and this is when I find that his hand is the most visible. These are the locations of higher volume, delta is one direction but price starts moving in the other direction (delta divergence). Also, the highest volume in the POC switches to the side so the herd can see his intent (he is now ready to stampede). So in the case of a rise in price, the higher volume in the POC will move to ask side of the footprint; while it was previously larger on the bid side of previous candles.
(7) It appears to me that when a block trade occurs the Market Maker will move price in the opposite direction so the Market Maker can cover his position. If a large buyer buys 10,000 shares long, then the Market Maker is effectively short 10,000 shares. The Market Maker needs to drive the price downward so he can be profitable in his short position. This does not always ring true but it is an interesting observation.
(8) I have been using the idea of using the block trade price as a pivot line, or as support/resistance. If the block order was a long position at $10.00 I draw a line at the $10.00 level. If price immediately moves below the pivot line then I have a short bias, if the price moves above the pivot line, I have a long bias. This price change is only relative for the amount of time it takes for the Market Maker to cover his position.

The best advice I can give new traders is:
(1) Paper trade before you actually put real money on the line. Using real money only increases the emotional pressure exponentially. If you cannot trade profitable, using a practice account, then you most certainly will NOT be successful trading with real money.
(2) Trade price action and volume as much as possible and avoid using indicators. Remember they are looking backwards.
(3) Buy into support and sell into resistance areas.
(4) Enter in the direction of a longer time frame and exit on a shorter time frame.
(5) Quit buying indicators. Some of the best indicators I have found are available for free from the download area of futures.io.

Please help me with the following question.
I am trying to find block trade data for NASDAQ stocks. I have a Schwab real account and they provide block trade data but it does not have a time stamp for each trade. I purchased data today from nasdaq.com but I cannot correlate it to the volume and prices I see on one minute charts. I think their data may be related to options and not equities. I am considering buying a trade-ideas.com membership but I am not sure how fast their block data is provided. Any recommendations would be appreciated.

The information I have given is provided to help stimulate thought and conversation. I hope it will help someone. Feel free to treat me roughly, if you like. Teach me what you know. Where am I right? Where am I wrong? I confess, I am not a good trader so take everything I have said with a measure of caution. I am still learning.

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  #3 (permalink)
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For what it's worth...


Hi goodknight,

Traditionally people think about limit order activity in two ways.

1. Resting on the DOM in real time
2. What has transacted

But there is quite a bit more to it than this. For every price level we have

1. Starting limit order volume
2. Added limit order volume
3. Canceled limit order volume
4. Ending limit order volume

I built some algorithms that cut the data into these buckets for every price level. But outside of writing my own code, I am unaware of anything else out there that attempts to do anything similar. I am not saying it's not out there... I just have never seen anyone get to this level of detail... and get it measured the way I was looking for it.

I use this information mainly for modeling research, not live trading. But it has helped me to build a very accurate testing platform and to better understand microstructures.

One of the observations that I came to here was that the canceled volume was 2x to 3x the transacted volume which was a big eye opener..... So when you speak of the market makers playing games and doing things... You can see it very clearly with this type of data.


Best of luck!

Ian








goodknight View Post
(1) Indicators are good at telling me what market orders have done recently, but they do not tell me much about limit orders. If anyone has any suggestions on an indicator that identifies limit order activity, I would love to hear about it.


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.
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  #4 (permalink)
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creating fake trades / spoofing and let HFT algos chase that is legal when you are a market maker. Not so when you are a retail player .

Spoofing tactics
It goes on to allege that Mr Sarao used a computer-based algorithm to essentially pretend to create - or 'spoof' - sell orders, making it appear that there were multiple traders wanting to take a downward bet on the market, when in fact there were none.

The prosecuters accused Mr Sarao of using an automated trading programme to execute the scheme, which they described as "dynamic layering," involving placing a significant number of large volume sell orders at different price points at the same time to make it appear as if substantial supply existed.

Mr Sarao is then alleged to have modified the orders again and again to ensure they were close to the actual market price, only to then cancel them before they were executed.

He then profited from the turmoil which ensued through a series of well-placed bets on the futures market, it is alleged, selling futures contracts and buying them back at a lower price. Some of his actions happened within a millisecond of each other, the FBI says.

The charges have only came to light now, however, following his arrest by the Metropolitan Police on April 21, working in conjunction with the British regulator, the Financial Conduct Authority.

Mr Sarao, who worked alone from his west London home, remains in custody, awaiting extradition to the US on the charges. A US judge has issued an order freezing the assets of both Mr Sarao, and his trading company.

https://www.telegraph.co.uk/finance/financial-crime/11553433/British-trader-Nav-...flash-crash-in-2010.html

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  #5 (permalink)
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I do monitor block trades and more so dark pools. Dark Pools are not visible in the orderbook but are released to the consolidated tape usually after cash close. One could filter TimeAndSales for large orders (above 100000++) and see what big players are upto. I usually have this running for sector ETFs, Gold, FANG, Financials etc to get a feel after the close.

https://www.investopedia.com/articles/markets/050614/introduction-dark-pools.asp

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this is one of the most interesting posts i have read...advice sought...n given same time....nice....makes things interesting

this is good by @iantg...its the only way u can know of executed Buy/Sell lims in the mrkt

From a DP perspective....it is very important to know what Form Ts are doing.......https://www.investopedia.com/terms/f/formt.asp


iantg View Post
Hi goodknight,

Traditionally people think about limit order activity in two ways.

1. Resting on the DOM in real time
2. What has transacted

But there is quite a bit more to it than this. For every price level we have

1. Starting limit order volume
2. Added limit order volume
3. Canceled limit order volume
4. Ending limit order volume

I built some algorithms that cut the data into these buckets for every price level. But outside of writing my own code, I am unaware of anything else out there that attempts to do anything similar. I am not saying it's not out there... I just have never seen anyone get to this level of detail... and get it measured the way I was looking for it.

I use this information mainly for modeling research, not live trading. But it has helped me to build a very accurate testing platform and to better understand microstructures.

One of the observations that I came to here was that the canceled volume was 2x to 3x the transacted volume which was a big eye opener..... So when you speak of the market makers playing games and doing things... You can see it very clearly with this type of data.


Best of luck!

Ian



Last edited by paps; August 7th, 2018 at 06:03 AM.
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  #7 (permalink)
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rahulgopi View Post
The charges have only came to light now, however, following his arrest by the Metropolitan Police on April 21, working in conjunction with the British regulator, the Financial Conduct Authority.

Mr Sarao, who worked alone from his west London home, remains in custody, awaiting extradition to the US on the charges. A US judge has issued an order freezing the assets of both Mr Sarao, and his trading company.

https://www.telegraph.co.uk/finance/financial-crime/11553433/British-trader-Nav-...flash-crash-in-2010.html

That was from 3 years ago. He was extradited and eventually he pleaded guilty as part of a plea agreement.

I believe Sarao is now back in the UK.


Last edited by xplorer; August 7th, 2018 at 04:35 AM. Reason: added more context
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  #8 (permalink)
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rahulgopi View Post
creating fake trades / spoofing and let HFT algos chase that is legal when you are a market maker. Not so when you are a retail player .

Mr Sarao is then alleged to have modified the orders again and again to ensure they were close to the actual market price, only to then cancel them before they were executed.

Sounds like Mr Sarao's biggest mistake was not being high enough up the ladder. He should change his last name to Soros and his problems will go away.

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  #9 (permalink)
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iantg View Post
One of the observations that I came to here was that the canceled volume was 2x to 3x the transacted volume which was a big eye opener..... So when you speak of the market makers playing games and doing things...

Sometimes a market maker is also a broker. This goes back to the old question, "Is your broker on your side?"

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