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Jigsaw Trading's Peter Davies - Ask Me Anything (AMA)


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Jigsaw Trading's Peter Davies - Ask Me Anything (AMA)

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  #581 (permalink)
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What can i do to get Jigsaw D&S to print the Between bid/ask in the 'Current at Bid/Ask' and 'Total at Bid/Ask' columns?
Same behavior is observed with the JT D&S plugin on NT.

NT8 8.0.21.1 64-bit
Jigsawtradr Version 2.1.0.4
Feed: IQFeed/IB
Instruments: Equities with bid/ask spreads <--- Yes, these are the culprits.

See sample below. The 'Between' prints in the T&S are yellow. Would be nice to see them reflected on the JT D&S.


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  #582 (permalink)
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Jigsaw Trading View Post
MBO does give you a way of detecting native icebergs. By native, I mean icebergs that are sitting at the exchange using the CME "Display Qty" order parameters. These iceberg order types at CME are quite unsophisticated. On the other hand, the leading Instutional trading platform (TT) has far superior iceberg order capabilities that are co-located at the exchange and not visible via MBO (and the 'other' platform you mention).

So first thing you have to ask - which ones are most widely used? The unsophisticated ones that are now visible via MBO or the highly tunable ones that MBO can't show you?

Second thing you have to ask - which icebergs do you want so see? All of them or some of them?

The platform used by the majority of the traders you want to track are using a platform that has had amazing iceberg functionality for years & that just happens to be invisible to MBO. See for yourself here: https://library.tradingtechnologies.com/trade/tto-order-types-overview.html

By the way, I explained here: why these claims aren't true.

1. MBO does not disclose tag 1138, so it doesn't give you an explicit mechanism to detect "icebergs" over MBP. However the same techniques you use to detect "icebergs" (both exchange-specified ones using tag 1138 or simulated ones using an automated execution algorithm) on MBP can be performed with higher accuracy on MBO.

2. Leading prediction and lagging confirmation are different. There's a large number of edge cases where iceberg detection is not useful, on both MBO and MBP. Let's say a user places an order with peek 1 size and hide 1 size. Now you see a trade-through of size 1, add 1, depth stays the same. This is the minimum case required to confirm an "iceberg". But once you see it, what's the point? His order is now fully displayed. Compare this to a scenario from US equities: let's say you see a displayed NBBO of 10.95/10.96 but the local book on NASDAQ is 10.95/10.97. You place a NASDAQ post-only bid at 10.96 which is expected to slide to 10.95 since it locks the NBBO. But instead your order goes through without being repriced to 10.95 and is posted and displayed at 10.96 - this implies that there is a sell iceberg at 10.96 before the hidden portion is displayed.

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  #583 (permalink)
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matzero View Post
Actually I can notice icebergs with no additional visual aids, using either DOM or footprint

I'm more interested in the "stop" part of the stop&iceberg detector

They now visualize the number of stop limit orders being executed at any given time. I know that experienced traders can recognize this without additional help, but for the rest of us without such skill it's very helpful

Do you plan to add some kind of stop run detector to Jigsaw?

We can do that but again, I wonder what the point is. Like icebergs, it'll be 'some stops' - although in the case of stops, I do believe most will be on the exchange and not synthetic stops on TTs co-located server.

That is - until the point TT traders feel they are giving away an edge to other traders by having stops visible.

We all know that rapid acceleration on a break of (for example) a range is caused by stops (co-located or exchange based. There is definitely a benefit in knowing that one side stopped out when you return to an area in the short term. Whether that is best achieved analyzing exchange stops only is an interesting story and I am in the process of trying to quantify the percentages of exchange vs co-located stops.

Normally though -when retailers ask me about "can I see stops" - they are looking for some way to know PRIOR to them being fired. I regularly get asked if thet can see other traders' stops or if other traders can see theirs. That's something that would be of much more benefit than knowing that they just did fire. Both are things we tackle on the education side.

So my take is - as long as the percentages in exchange triggered/detectable stops is high enough - we could use MBO to do this. If not, we'd have to create an algo to do it. I'm fine with either but first - you (and any others need to answer this)...

- If we can detect stops on firing - what would you do with that information?

I ask this because I've seen some cherry-picked charts from you-know-who that imply a stop run causes a reversal. Just like a few years ago they were implying that an area of excess depth/liquidity causes a reversal. We all know the latter is not true, that excess depth is part of a story playing out and that also in some cases it can be ignored completely.

I don't want to be sending people down a path of one-rule trading systems that have no hope of working. I see a slight edge on returning to an area that has people stop out one side but I'm not seeing much more than that in it.

Your thoughts?

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  #584 (permalink)
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tradingwarrior View Post
What can i do to get Jigsaw D&S to print the Between bid/ask in the 'Current at Bid/Ask' and 'Total at Bid/Ask' columns?
Same behavior is observed with the JT D&S plugin on NT.

NT8 8.0.21.1 64-bit
Jigsawtradr Version 2.1.0.4
Feed: IQFeed/IB
Instruments: Equities with bid/ask spreads <--- Yes, these are the culprits.

See sample below. The 'Between' prints in the T&S are yellow. Would be nice to see them reflected on the JT D&S.


Yellow trades are between & as such can't be placed either side. There is no aggressor. Our feeling is that putting them on one side (for instance based on last tick up/down) would give a false impression of the aggressor.

So question back - if we had an option to put these on - where would you want to see them & why?

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  #585 (permalink)
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artemiso View Post
By the way, I explained here: why these claims aren't true.

1. MBO does not disclose tag 1138, so it doesn't give you an explicit mechanism to detect "icebergs" over MBP. However the same techniques you use to detect "icebergs" (both exchange-specified ones using tag 1138 or simulated ones using an automated execution algorithm) on MBP can be performed with higher accuracy on MBO.

CME Say this:


Quoting 
Exchange-assigned OrderIDs are unique per order and are consistent for the life of the order. When CME Group-held iceberg orders (referred to as native icebergs) have displayed quantity refreshed, the refreshed order will have the same OrderID as the original order.

and then this


Quoting 
For those concerned this function gives other participants greater ability to detect presence of iceberg, we recommend evaluating third party offerings that include ISV-held iceberg orders (synthetic iceberg where total quantity is managed off-exchange by ISV server).

And we detect those 3rd party offerings Icebergs. It is this that we have always done.

But according to CME - you CAN detect their icebergs by order id. It's not tag 1138 (display qty) - it's the orders that come on with the same order id that allows you to associate it. Although that means a dictionary of all orders and a search of that dictionary each time an change comes in. Crunch crunch.



artemiso View Post
2. Leading prediction and lagging confirmation are different. There's a large number of edge cases where iceberg detection is not useful, on both MBO and MBP. Let's say a user places an order with peek 1 size and hide 1 size. Now you see a trade-through of size 1, add 1, depth stays the same. This is the minimum case required to confirm an "iceberg". But once you see it, what's the point? His order is now fully displayed. Compare this to a scenario from US equities: let's say you see a displayed NBBO of 10.95/10.96 but the local book on NASDAQ is 10.95/10.97. You place a NASDAQ post-only bid at 10.96 which is expected to slide to 10.95 since it locks the NBBO. But instead your order goes through without being repriced to 10.95 and is posted and displayed at 10.96 - this implies that there is a sell iceberg at 10.96 before the hidden portion is displayed.

I agree, in fact - there is ZERO edge in detecting a single iceberg in isolation. That is the problem with it - people jump on it as if it's a method in it's own right. An iceberg could be someone legging into a spread with direction of that single market being unimportant in terms of profitability of the position.

I do beleive in the concept of "stopping volume" - where we hit a price (especially when a market is weakly pulling back), where we just start accumulating and where orders no longer have price moving. I believe it is more significant when it takes more time. Simply because (for example) in a market that's been tearing up, that then moves weakly down, it gives traders time to think "maybe path of least resistance is upside". It gives pause to countertrend sellers who are fading the overall move and gives them chance to bail at a profit.

With Jigsaw, iceberg detection would not show a refresh of 1 with 1. It's smart enough to know that even a 100% increase in size is irrelevant at that size. In fact, it self tunes to the market based on recent behaviour.

It's all trainer wheels though - traders need to get used to reading the flow and not relying on a bunch of indicators to do it for them. I would also argue it's more nuanced than any iceberg detector of any type can detect. I pulled an old screen shot for this. Circles show area of excessive volume.



a - not icebergs - high liquidity area that we hit and traded. Size was there & stayed as we traded it.
b - iceberg - excess trades into the bid, no liquidity showing leading up to the price. We'd just traded through it and we are in a range, so of course we'll chop and spin within the range. Call it what you want - but I wouldn't get too excited.
c - definite iceberg - massive imbalanced to trading at offer (hence mostly blue), no excess volume leading up to us trading there. Bigger cirlce/volume than in recent past.

Now more cirlces between C&D but what's the context? We are in areas we've traded over before - and that tends to see is trading more as we go back and forth over those areas.

d - this is where it gets interesting and where a nuanced interpretation is going to get you a lot further than some indicator. We do have excess depth but the size traded a couple of ticks below it. Size was added as we got there. It's heavy blue which means more buy market orders/sellers absorbing. Or sellers POTENTIALLY absorbing because in theory it could be one half of a spread. Realistically though - just popping the top of the range, high liquidity above and aborption just below it. It appears to be like front running the big order. Either way - it's a potential headfake and a good R:R trade. You could be wrong 70% of the time and still come out on top with these. BUT - it only makes sense in light of what's been happening earlier.

Trouble is - everyone wants to dumb it down to an indicator. To clean it all up so it gives clear and concise signals. I say "embrace the ugly".

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  #586 (permalink)
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Jigsaw Trading View Post
Yellow trades are between & as such can't be placed either side. There is no aggressor. Our feeling is that putting them on one side (for instance based on last tick up/down) would give a false impression of the aggressor.

So question back - if we had an option to put these on - where would you want to see them & why?



Having the option to select a new column 'Trades Between' so it can be placed anywhere on the
DOM would ensure we have visibility but do not add noise to the bid/ask prints, to your point.

While i agree they are not aggressors, the significant volume of these prints contributes
to the sum of all the parts by rending a more complete picture across the VPs (see approximate intraday sample snapshot below).

Since i consider them to be 'fillers' they help to identify areas leading up to the aggressors and having a
distinct view of their price action is something that warrants visibility with such instruments, IMO.

Sorry if this thread is detracting from the iceberg discussion, happy to start a new one if preferred.

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  #587 (permalink)
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Jigsaw Trading View Post
But according to CME - you CAN detect their icebergs by order id. It's not tag 1138 (display qty) - it's the orders that come on with the same order id that allows you to associate it. Although that means a dictionary of all orders and a search of that dictionary each time an change comes in. Crunch crunch.

Exactly, you've explained the contradiction in your own argument. You earlier claimed that MBP is superior for detecting "icebergs". But as you've pointed out, MBO provides the crucial order ID needed to infer an iceberg (both server-side and exchanges-side), while MBP does not.

And even the order ID can only be used for an ex post confirmation of a refresh, it still doesn't tell if you if there's any additional size behind a given order ID. Both methods are imperfect, but MBO is strictly superior.

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  #588 (permalink)
SpeculatorSeth
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Jigsaw Trading View Post
- If we can detect stops on firing - what would you do with that information?

I ask this because I've seen some cherry-picked charts from you-know-who that imply a stop run causes a reversal. Just like a few years ago they were implying that an area of excess depth/liquidity causes a reversal. We all know the latter is not true, that excess depth is part of a story playing out and that also in some cases it can be ignored completely.

I don't want to be sending people down a path of one-rule trading systems that have no hope of working. I see a slight edge on returning to an area that has people stop out one side but I'm not seeing much more than that in it.

Your thoughts?

I want to count them. So for instance in the same way that we use cumulative delta. When cumulative delta diverges with price it can be an indication of trapped traders. It doesn't tell you which way the imbalance will resolve, but such imbalance can mean a good move is coming. A stop order is useful because it's very likely to be an exit. So percentage of stops detected on discovery of new prices could tell you things about how much imbalance still exists, and how much new interest is being attracted.

I'd actually be more interested if I found an area where I expected there to be a lot of stops, and they didn't show up. But since I have no way of detecting them currently it's hard to say what edges can be found until we start digging. What I'd really like is to be able to track individual positions. You knew who you were trading with on the floor, and that was a key edge. Stop orders don't do that, but you could at least piece together some of where people got in and out.

And of course there's always going to be that tendency to fall into one rule trading system traps. Most of the peculiarities I've found are very dependent on what kind of market it is, and that's often something you don't realize is happening until after the trade is done. I'm starting to conclude that it is better to know ahead of time what sort of trades to expect, and then try to find them on the DOM. Which is why I am relying more and more on trades based on fundamentals and who I expect to be in the market that day. But isn't that really the problem with everything we can see from market data?

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  #589 (permalink)
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tradingwarrior View Post
Having the option to select a new column 'Trades Between' so it can be placed anywhere on the
DOM would ensure we have visibility but do not add noise to the bid/ask prints, to your point.

While i agree they are not aggressors, the significant volume of these prints contributes
to the sum of all the parts by rending a more complete picture across the VPs (see approximate intraday sample snapshot below).

Since i consider them to be 'fillers' they help to identify areas leading up to the aggressors and having a
distinct view of their price action is something that warrants visibility with such instruments, IMO.

Sorry if this thread is detracting from the iceberg discussion, happy to start a new one if preferred.

***Just checking in to see if this is a viable option.***

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  #590 (permalink)
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TWDsje View Post
I want to count them. So for instance in the same way that we use cumulative delta. When cumulative delta diverges with price it can be an indication of trapped traders. It doesn't tell you which way the imbalance will resolve, but such imbalance can mean a good move is coming. A stop order is useful because it's very likely to be an exit. So percentage of stops detected on discovery of new prices could tell you things about how much imbalance still exists, and how much new interest is being attracted.

I'd actually be more interested if I found an area where I expected there to be a lot of stops, and they didn't show up. But since I have no way of detecting them currently it's hard to say what edges can be found until we start digging. What I'd really like is to be able to track individual positions. You knew who you were trading with on the floor, and that was a key edge. Stop orders don't do that, but you could at least piece together some of where people got in and out.

And of course there's always going to be that tendency to fall into one rule trading system traps. Most of the peculiarities I've found are very dependent on what kind of market it is, and that's often something you don't realize is happening until after the trade is done. I'm starting to conclude that it is better to know ahead of time what sort of trades to expect, and then try to find them on the DOM. Which is why I am relying more and more on trades based on fundamentals and who I expect to be in the market that day. But isn't that really the problem with everything we can see from market data?


Yeah - I don'[t think that's going to yield the results you are looking for.

If you look at Order Flow in general - you have to always consider that some people are arb/spreading & some are longer term (and don't react to short term fluctuations)

Not all flow is reactionary - BUT you can often consider everything to be short term because that's who reacts in the short term. Short term players cause short term moves, so you can exclude the ones you don't.

For this reason - counting the orders is problematic because the counting doesn't exclude the arb/spread/long term.

Stops are an order type but you can have stops without them being stops at the exchange legging out of a bad spread would be done on an autospreader, not with stop orders placed at fixed levels because it's the RELATIVE move that stops you out, not absolute moves on 1 leg.

So let's say you have a range where 100k contracts trade and for example:

- 40k are arb/spread/non-directional - any stops they have will be automated based on the entire position - most likely not actual stop orders but not directional anyway
- 30k are long term
- 30k are short term

Now, of course every buy is a sell but put that to one side for now.

When you see stops - you can't really compare the volume of stops to traded qty. Some stops aren't stop orders, so won't be visible in MBO. The Qty you are comparing against has too much non-directional, non-reactionary trades to make comparing the values.

This issue is coming up a lot and we are going to do a session on it at the end of the month: https://us02web.zoom.us/s/89660447494

This will be an interactive session, so you can come along and we can discuss different positions on it.

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