I'm find it hard to differentiate between absorption or market exit .
For example there are 1000 sell market order hitting the bid, but instead of ticking down it ticks back up.
Some times it just sits and absorps and absorbs , and at that time I think oo there are buys there and it's going back up, it continous ticking down.
So My question is ...
What is the differentiating characteristics of absorption in one direction vs market exit orders?
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Hi i think it may not be simple and apparent to judge based only on number of cnts executed. Anyways will add my 2cs which make sense for me. It will be different for others.
My OF experience comes from someone who said Fill them up and they shut up. In other words...for markets to go down....there might be buys...but there is always a Sell Limit. So they buy and then sell. And price will trickle down. Likewise for an up move opposite. But its also not that simple.....this may happen only at key turn points else it is noise and the way market moves. This however goes against rational of traditional price moves....but markets work a certain way. It moves due to big players who will trade in/out without their footsteps being easy to follow.
The trick to my understanding of OF is watching at only key turn points which may or may not come due to OF.
I do not get into 1000 Sells etc otherwise. Also you want to watch the difference in Buy/Sell side LOB which should show/might show otherwise or delta's in LOB. However watching all this play out in split ms or less is definitely tough but not impossible. But if one thinks that the move is directional for ex:- when price moving down...with the 1000 sells....maybe the 1000 sells have already cleared 3-4 Buy LOB levels and one should see continuous Buy LOBs being pulled and Buy Lobs being swept by the Sell Markets which is due to the Sell LOB side being refreshed & stacked or hidden orders executed. When the Down move is stopping likewise the Buy side would be stacked and Sell LOB pulled.
cheers n goodluck
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Sometimes you will see a market go down 4-5 ticks, then massive absorption on the bid, then down another 4-5 ticks and same thing, then down 4-5 ticks and same again.
Which makes you think "is that guy with the hundred million dollar account out of his mind?".
But there's not directional entry orders and exit orders - there is also non-directional trading to consider. There's a lot of spread/arb trading. One side of the position would be ES trades, and on the other side on a basket of stocks. But the trader taking that spread will not care which way the ES goes after entry.
My rule of thumb with absorption is that it won't, on it's own, stop a one-way market. But it will on it's own stop a pullback.
Watch the way traders hit into that absorption. Are they easing off at all or are they just gunning it? Is this at a key level - that sort of thing.
In your first video - you are in a trading range and at the POC - the price with the most contracts traded. So it's natural for it to thicken up there as the market likes trading those prices. It's not the best place to enter though - it tends to be the choppiest.
In the second video - a double bottom as noted by your "ssssss" - you have a couple of things going on...
1 - You are in an aggressive move down with few pullbacks
2 - It's a double bottom
So you can certainly expect a pause/some sort of reaction because of the double bottom but fading the market, trying to pick the bottom is the hardest way to trade. Even more so when the move down is so one-sided. Also - it's an area with the most potential profit for market manipulators. Think about it - how many traders are going to be entering at that point (reversal and breakout traders), how much opportunity is that for someone to nudge them out of position and run their stops?
As it was, you got absorption at the bottom but it could only tick up a few ticks - there was no follow through. Personally, I would not have gone long there BUT if it had moved up from there, I would have then stalked a long entry because your potential is all the way to the top of the range and heck - letting the market show it's hand will just cost you 5 or 6 ticks.
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Last edited by DionysusToast; October 19th, 2015 at 03:37 AM.
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Thank you all for the reply ... do professionals read the price ladder on jigsaw all the time or at certain locations, and do they understand what's happening at any give time by looking at the price ladder?
because I have this expectation if i spend hours just in front of the jigsaw i can eventually understand the madness or see certain patterns that will allow me to scalp the market at any give time IS this realistic goal?
My way of thinking/trading is to have areas you want to conduct business in ahead of time you conceive of during your daily trade assumption/thesis creation usually done in the morning taking into account the over night action as well as everything else you have observed over the past months and years. Looking at the DOM/price ladder and trying to figure out what is happening at any moment in time, as if there is constantly a way to discern what is going on, and make tradable sense out of it, is a sure fire way IMO to over trading and a very poor substitute for a clear plan.
IMO focusing on your risk is the only way to go. How much of your account are you going to risk to find out if your idea for a trade is going to work out? How much are you going to risk during streaks of trades both winning and losing? Streaks happen. Take advantage of them. And also protect from them on trades that don't work out. Most think focusing on the entry is the most important. I think focusing on trade management, market context and taking advantage of market extremes and exits is most important.
Don't be in a hurry to trade. Seek to understand what is going on in the Depth and Sales Jigsaw tool at your key locations never mind the rest of the noise.
I often relate to other businesses I am a patron of. For example restaurants. Home Depot. Amazon etc. Not every "trade" they make works out. Warranty work. Cold soup. Item broken in shipment. A poorly seasoned dish. A hair in a taco....lol..... This is the same thing we do just a diff industry. I look to buy peanut butter at the grocery store when its on sale for example. Not when its at the vpoc. Meaning the price most traded or just the regular price peanut butter is normally sold for. I want a good deal. So I wait for a sale. Sales are for short time periods. Then the price goes back to the "vpoc". I then stand in the grocery store aisle and sell all those jars back I bought on sale to the people that like to buy at the "vpoc"....lol.... So this means in trading have areas you will wait for and them watch the DOM to see if you are correct in your thesis about this area. You might end up waiting 2 or 3 days. So what. You are smart about it. There will still be uncertainty but you can stack the probabilities in your favor this way.
I like to think our business is a more pure form of all this peanut butter talk...lol...without all the complications of employees, massive over head etc etc..... our orders are our employees. But for this simplicity there is a price to pay. Namely retraining your brain to think in probabilities.
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Last edited by Blash; November 8th, 2015 at 01:43 PM.
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I'm working through the training materials, including Joel Parker's materials, and have a suggestion for a new feature for Jigsaw.
Emphasis is made in the various materials that I'm reviewing, that before taking an entry, whatever that entry signal might be, there should be sufficient T&S orders, for this instrument, on this day, that demonstrate others are joining in on this entry point.
My suggestion is the addition of a "Note Wand" (or other name of your liking, maybe "Sniffer Stick"?), that when the user activates by pressing, say Ctrl-F12, and swipes over a section of the T&S Tape that is of interest, the critical info of where the user swiped is transferred to a "Note Tape" that stores throughout the day, summaries of every section the user swiped with the Note Wand". Attached is a very rough mockup of the concept.
The idea, is that summary of order flo at user identified critical pivot points can be stored in the "Note Tape" for reference throughout the day so the user may establish baselines of what was sufficient orders on that day to move the market in the desired direction.
The Notes tape can assist in doing the quick math on the fly as to total orders on a particular pivot that occurred. It should help lesson fatigue.
The Notes Tape should be user definable as to what fields are shown from the T&S tape and should allow for multiple days of summaries being saved at the user's option.
The Notes Tape itself could have a "Merge" and "UnMerge" feature that would allow the user to swipe the cursor over 2 sections of the Notes Tape, that may have been added to the notes tape over say 10 minutes, because things are moving a little slower this time through, resulting in all the summary info that was swiped, being itself merged into a single summary at each price level. This would help see buildup occurring in the current or past pivot that may have gone unnoticed as to reaching the critical threshold level due to some added consolidation this time around as compared to the last pivot. This feature could be activated with another Ctrl Key.
Thanks for your consideration of this idea.
Additionally, I really appreciate all the work you've done in putting Jigsaw together, and the HUGE amount of information you've made available.
All The Best,
Last edited by CurtisC; November 19th, 2015 at 05:37 PM.
Reason: Minor Edit
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