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Hi Hyper.
Thank you so much for your work on the TradeFlow Risk Indicator.
I carefully have read all the posts here and was amazed and learned.
I see you're also in LeeLoo program.
Can you also share your PnL for this Strategy, to see what can be expected from this
type of Triggering via Big Lots and Inventory Analysis?
Thank you so much for sharing.
Believe me when I say I'm not trying to diminish the value of Trade Flow
Analysis; as it is a valuable "situational awareness" tool during non-trending
market conditions.
When I call it a "situational variable" I mean simply that it should tell you
"well, the price has generally risen, and lots of Retail Buyers have chased
the price upwards by Buying in Trend Direction; so we know that Market
Maker has been Selling to them and is now 'Short' against the Retail
population; and additionally, may be in 'Short Risk' (losing money on
paper) against the Retail population of Buyers".........
Other things being equal, meaning no strong trending in one direction or
the other; this is a predictor that a Top in price may be near; and it would
be time for you to begin the process of selling; anticipating that the up
trend is ending, and MM will initiate a down trend.
It is the case that, in the absence of other external factors, MM initiates
an up trend, which spurs Retail Buyers against which MM Sells; and then
initiates a down trend; where Retail Sellers may predominate, against
which MM then Buys... that is the natural "sawtooth" nature of Market
Micro Trending.
However, in my work, we use indicators well beyond Trade Flow to be
more precise as to exactly when the Trend Change will happen. Of
course, we anticipate the underling Trade Flow patterns to be consistent
with this; BUT..... for high precision discovery of the Tops and Bottoms,
additional info is required...
Let me just say that Trade Flow analysis is helpful; and you should not
be trading against it. That is, during 'Short Risk' by Market Maker, you
should begin to develop your Short entries; and during 'Long Risk' you
should begin to develop your Long entries. However, high precision as
to exact prices at the Tops and Bottoms may not be given by Trade
Flow analysis only... That said, it is a very useful "situational awareness"
to have while day trading.
Disclaimer: I trade only the Nasdaq futures contracts NQ/MNQ where
moves are fast and brutal; although the same processes should be
happening in most all markets. There are many more high precision
and proprietary techniques required, which involve analyzing the Depth of Market patterns, which are beyond discussion here.
Thanks.
So can you Show us "The way to the Promised Land.."?
What and where?
What proprietary techniques we need more and where
to get/purchase/learn them?
No discussion is needed....
I could be flippant and say "What part of 'proprietary' did
you not understand?" but, in truth, that's not my attitude.
I'm not in the business of selling DOM analysis algorithms,
but I can give you some general principles if you wanted to
get into the 'game of the DOM'..... I am aware that this
all sounds like some 'teaser' with 'more to come' but that is
not what I am intending here...
1) the first Disqualifying Requirement for the typical trader,
is that they DO NOT have access to a DOM feed of sufficiently
high quality. By this, I mean the Rithmic Depth of Market, as
made available by outfits like LeeLoo and Apex.
2) the second Disqualifier for the typical trader is that this
is eXtremely Performance Intensive. Somewhere in the range of 1000 - 1500 DOM updates per second will arrive from the
NQ contract alone; so you typically have less than a millisecond
to deal with the data; that is, to properly feed into an Analysis
framework.....
3) the third issue is that you need to Co-Locate your server
near enough to the Auorora exchanges, to have less than a
millisecond or so latencies to the exchange. Most traders
think that Beefing up their Home Office Desktop computer,
when they are maybe at least 100 milliseconds away from
the Chicago area in networking terms; is going to allow them
to succeed. Particularly if you are manually entering orders,
you are seeing the market as it was perhaps as much as 1
second in the past; given typical networking and processing
latencies, as network tuning is not done well; and, in any case,
the speed of Light is a limiting factor.....
4) the fourth issue is simply FOCUS. You can't have anything
but the bare bones market feeds you need; clogging up the
network, etc.... Most traders are following a number of
tradable instruments, and only specialized focus is going to
enable a higher level of predictive processing...
...I could go on; but you can see that on a couple of these points, the normal trader is simply not in the game, which is
the game I play anyway...
And then there's Software to not only analyze, using 'proprietary'
algorithms; but to tie the analysis into 'triggering' trade executions
at the server side.....
Hopefully I am not sounding like some 'holier than thou' kind of
guy; but am just emphasizing that Traders would need to think
differently about How they trade, and how much they are willing to
specialize, in order to approach something like analysis of the
Depth of Market; and use that information in their Trading
decisions.......
Brokers don't cater for a 'higher end' population of traders, because
there aren't that many of them; and the 'masses of traders' who
are using very 'low technology' approaches, provide them with
a steady revenue. These traders, like casino gamblers, will never
have a very satisfying life, as they are unlikely to be able to
beat the markets, but they think they're doing everything right,
since they are doing what everyone else is doing, and nobody
is being completely honest about their real live trading outcomes...
I would urge traders to 'be different', and 'think differently' about
how they can approach something like day trading with a solid
positive outcome each and every day. That can only be through
specialization, hard work, money spent for development; and
doing things differently from the way most traders operate....
So let this be an 'Inspirational' message that doing what everyone
else does is not likely to be very effective. FOR EXAMPLE, let me
say that 'Price does not predict future Price'. You may say, 'But
what about a Head and Shoulders pattern?' that is a Price pattern
which often predicts a top and the start of a downtrend. That
may be true to some extent.
But just think clearly. 'Price is what everyone is watching, so isn't
it reasonable to suspect Market Maker uses Price movements to
Deceive traders?' Of course that's possible, and it's happening
ALL the time in markets. But maybe you have something OTHER
THAN PRICE, such as a Trade Flow analysis, which can help to
predict where Price may go in the near future, or maybe you can
find Patterns of Quote placement on the Depth of Market (aka
Order Book) which you could analyze to help in your predictions?
At least now you're starting to think 'out of the box' and searching
for something OTHER THAN PRICE, which you can use to help
predict where Price is moving......? But once again, we are into
waters too deep for most traders who are doing what most other
traders are doing, and expecting to get a good outcome...
Thanks for sharing but what's an ex-open outcry Chicago guy to do in the new era of electronic HFT colocation scalping....LOL (re: film short "Floored")
I've been using DELTA with the concept that trades talk / quotes walk. But what you say here is beyond my resources to track:
This is also the reason, fortunately, that proper evaluation of Volume
on the Quote DOM is a "Leading indicator". Quoted size must be placed
Early, and Held; in order to be most effective. So size will be placed,
and held, then later, the Inside Market will be moved to that size. If
MM did not want to transact with the Retail market; then size would
be minimal; but when it becomes significant; this is a signal that a Trend
change is imminent, etc.... That's the idea anyway.
I did find someone to be able to suss out trades > quoted size from time&sales to expose hidden orders which don't get DOM quoted but are algos in the weeds. SOOOO in the above example of my painful 01/25/2023 half hour of fading trades in high DELTA supply (shorting in this case)........how does a retailer like me know that the final Stop@33860(YM) was THE ONE to finally reinitiate the position for the gold ring? I use very tight entry stops but they add up fading the trend for the seesaw scalp.
Is there any hope for a retailer trading Delta to identify distribution/accumulation and the final opposing sides' exhaustion for a retracement scalp?
Thanks for all your efforts and code sharing
Bruce
Like many, I don't have a lot of time to discuss these issues; and, as a hyper-specialist, my approach to the market is highly proprietary, highly cpu-intensive, and data analytic intensive, and specific to a single "niche" which is the Nasdaq 100 Futures market in its NQ eMini and MNQ Micro contracts.
That brings me to one of my most important points; and that is that hyper-specialization is required, in my view; in order to "scalp" or "short term scalp" in day trading...
I never look at any other symbol but NQ/MNQ; so I pretend the other opportunities don't even exist !!
Many traders are desperately switching symbols all the time; seeking a symbol/instrument that might be "more tradable" or "less risky".
If you are NOT a highly technical trader with extensive technical analytics skills, and coding skills, working with a platform which allows that..... then you are a more Typical Trader.
I am living in a completely different "universe" than the Typical Trader. Relying upon highly specialized, very specific, proprietary means of Analysis, and linking Analytics with Triggers on a colocated Server; in a very specific market.
I'm not recommending this "game" for the Typical Trader. The Analytic technics which Traders use involve completely different principles; and work on completely different Time Scales to the "game" which I'm playing...
DO I HAVE ANY ADVICE FOR ANY OF YOU? PROBABLY NOT. AND I'M NOT SAYING MY APPROACH IS SUPERIOR TO THAT OF MORE TYPICAL TRADERS.
But I do have some suggestions for Traders.
1) Specialize in a single tradable Instrument, or a very few of them; and don't stray from them.
2) Decide whether you are going to take Short Term Trades, or be a Scalper; meaning your typical trade hold duration is less than 1 minute so that you'll be making dozens or hundreds of potential round-trip Scalps in a typical day trading session.
3) If you are going to attempt Short Term Trades, and become a Scalper, then you will be going down a Rabbit Hole which will require a very High degree of Precision. You can't afford to be wrong, and your Win rates will need to be very High, at least 80-90% in order to survive.
4) I use NinjaTrader as the platform which is programmable in native C# and is capable of extremely high performance, for a retail platform. You will need to be a coder, or hire a good coder to develop Indicators which will help you to identify the Buy/Sell Entry/Exit points for your trades; and these will need to be both Fast and predictive of Price Trend reversal.
5) NinjaTrader allows code to use UnManaged Order Entry, which removes the "guard rails" and "training wheels" and puts the entire responsibility for Order Entry on the coder..... You won't get any support once you are in this territory.
6) Your goal will be that your Indicators will be able to trigger Trades, or Scalps which will make you money consistently....
7) For reliable fast operation, you will want to run your system on a colocated server in the Chicago area for U.S. futures....
...and then.....
BUT YOU CAN SEE HOW I really can't go any further, since what I'll say is not of general interest, and can't apply to any but other traders who might be in my own "niche".... and that Proprietary coding gets so Extreme that, one again, it isn't generally applicable or helpful to the majority of Traders who are not doing down the same Rabbit Hole.
So, when I want to help, I find myself unable to help; and that's frustrating to me, since I'd like to help other traders to be more profitable. But, again, my "journey" just doesn't apply to yours, most likely
Anyway, Trading successfully is a nearly impossible thing to do; and those who may "brag" about their astounding successes, I think bring False Hope to the majority of Traders who feel it's something you can "Learn" using existing platforms and generic indicators.
But, Fortunately, with "blood and sweat" real and metaphorical, successful Trading is something you may be able to "Earn" through many Years of intensive goal-directed struggling; and specializing in a "niche" in which you can become "expert".
Sorry the above may not be helpful; we all would like to be helpful to our fellow Traders
OR 2 ) get a large account, widen out the stops, set the triggers & their stops far apart on trailing ATM
settings then just let profits run as far as you allow your HOPE to keep you in losers j/k
I knew those kind of guys from the futures floors.......I'm an CBOE guy trying to adjust and being "legged" all the time is an adventure.........LOL
I appreciate your thoughtful time consuming reply thanks. I wish I spent more time in code school and mathematics/statistics courses after leaving the floor when electronics went mainstream. Having just retired from 20+ years on a support desk of an FCM whose customers were the very MMs and Hedge funds you speak about, I know its possible (cant trade that kind of size year after without going broke if you dont have your skills); just not sure about making it happen on a shoe string without wrestling for my spot next to the floor broker on the top step <g>......the game really hasnt changed that much but no such thing as latency/colocation when you're shouting and spitting on the order flow and your ears are ringing from the noise of the trend<g>
I admire your skills someday we will meet on the same side of a winner I hope
