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Shredding
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Created: by JohnBly Attachments:0

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Shredding

  #11 (permalink)
Elite Member
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Private Banker View Post
John,

Going in at small lots will potentially keep the price around their goal entry/value area without attracting to much attention or creating a rally/crash.
PB

Yes I wonder why this tactic seems preferable to simply "sweeping the book".
On the ES for example it's not hard to get a 1000-lot mkt order filled within the 2first two price levels.
Boom it's done. Zero chance of anyone frontrunning.

Where as "machinegunning" huindreds of 1-2 lot mkt orders, even quickly, is detactable.
Why bother?

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  #12 (permalink)
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sysot1t View Post
most algo's are proprietary that I know off... so they dont really share... but since I see you are with IB, just take a look at their algo offerings and that will give you an idea... keep in mind that many of the orders will go to dark pools first before being displayed, it all comes down to the routing sequence based on the algo being used... also keep in mind that many orders might be internalized by the matching engines, though DMA means Direct Access, that is not always the case... specially depending on the instrument being traded... so not sure what you are trying to "see" ...

best way to spot order size/flow IMO is via the tape... and MD/IRT T&S provides for the ability to aggreagate ticks on the same side within the same second.. something that I believe I have seen someone else try to do with NT7.. but I have to look at my links to recall who it might be.

CVD will help, but IMO it does not communicate how aggressive order flow is... which is what I think you are trying to decipher..

lastly, keep in mind that true large blocks will more than likely be traded on the floor when done by hedgers..

Thanks sysot1t.
Great suggestion to checkout IB algo offerings.
You mentioned "MD/IRT". Is MD Market Delta? Not sure what the "IRT" refers to.

My main objective is tracking retail-held inventory. It most cases it is pretty obvious without getting too fancy, but I wanted to see if I could backup my assessment by tracking small lot mkt activity. One thing I was trying to get a feel for is how large mkt orders are typically fed into the book when camo was the goal. For example if a 5000-lot order is shredded into 1000-5 lot orders, how quickly would those 1000 orders be typically be fed into the mkt? 5 seconds, 2 minutes? I realize there is no single answer, just trying to get a general sense of what is going on under our noses in this regard that we never even see.

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  #13 (permalink)
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Linds View Post
Hi
Cunparis's Pace of Tape indicator would identify high frequency of orders hitting the tape. Its in the download section on the following page but note that this version is for NT 6.5. There doesnt appear to be a NT7 version.

Downloads - NinjaTrader 6.5 Indicators - Big Mike's Trading Forum

Thanks Linds,
That sounds helpful.
I will check it out.

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  #14 (permalink)
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Thanks Traderwerks,

I was thinking Mkt orders in particular.
I
know limit orders are shredded and sprinkled through a price level too, but I was interesting in tracking mkt orders as a way of gauging "who" is panicking or getting excited.

Yes block trades being GTFO makes sense.

I get the impression that big mkt orders broken up will often hit the book very quickly. If so, the total volume traded in that 1 second will be extremely high, even though executed in small lots. Doesn't seem like much is really being hidden this way?

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  #15 (permalink)
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Private Banker View Post
John,

Big market orders can be used to try to push the market around to either scale out of a losing position (pump and dump) or simply get out no matter what the situation.
PB

PB,
Yes that's a great example of a case where a big trader would want to be as visible as possible.
Someone beating their chest as it were.
Under certain conditions this could be a signal to look to potentially fade those big block mkt orders eh?

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  #16 (permalink)
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Private Banker View Post
John,

Big market orders can be used to simply get out no matter what the situation.
PB

Yes and under the right conditions this could be the footprint of a wounded elephant, ei mkt moving out of a long-held inventory zone etc.

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  #17 (permalink)
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JohnBly View Post
PB,
Yes that's a great example of a case where a big trader would want to be as visible as possible.
Someone beating their chest as it were.
Under certain conditions this could be a signal to look to potentially fade those big block mkt orders eh?

It's definitely possible. The idea would be to show the big order and then shred out of your position as retail traders begin to get excited allowing you to take profit and save your loser at BE or small gain. Once there's no more big market orders and it's just the little guys trying to maintain the momentum, a divergence occurs and that's when you can see reversals. Doesn't always happen that way of course but that's the general idea.

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  #18 (permalink)
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JohnBly View Post
You mentioned "MD/IRT". Is MD Market Delta? Not sure what the "IRT" refers to.

Yes MD is MarketDelta, and IRT is Investor/RT. They are sister products. There is an upcoming webinar on these, check it out if you want more info.

Mike

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  #19 (permalink)
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One thing I recently learned from one of my last books is that not all futures orders are displayed on the book. Apparently there are people that are allowed to trade without having to put their orders on the book.

I'm not talking about OTC.

Next to it, you have blackbox systems putting fake orders on the book to make sure you are thinking something so they can take it off the book and trap you.

I quote a big bank : "We used to develop trading programs to search for patterns, now we develop trading programs who search for programs who search for patterns'

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  #20 (permalink)
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You should consider that even the COT has changed to break things down by dealer intermediary, asset manager/Institutional, leveraged funds, other reportable and other non reportable. It is foolish to believe you can tease out who is behind the order, there are just too many motivations, players and fragmentation is available at this point to even the least sophisticated. You can't even say who is behind a random 1 lot YM print with any accuracy.
I think the tape makes so much more sense when you view it as mostly(95%+) professionals. "Retail" just doesn't have that much money to put up all that many prints and professionals have more than enough money to use fragmentation algorithms for their orders. Even forgetting about masking of some sorts it just makes sense from a market impact standpoint.

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