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Any Volume spread analysis / Wyckoff traders?

Nov 22, 2013 at 17:40
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99 Replies
Member Since Nov 02, 2009   85 posts
Nov 26, 2013 at 13:25
felotus posted:

-Most institutional are going to split their order over a certain period of time, say buy 10M per 150ms until you have 1B. (I frequently have 500m - 1b intraday)

What you have to look at for market manipulation is the WM/Reuters rate that happens between 3pm and 4pm, where most banks are being sued by the SEC. They gather on a bloomberg chat and talk about their clients stop loss (hence the lawsuit). Oh... just read your message, yeah so we're talking about the same thing, it's a well-known thing. Just look at the moves between 3 and 4pm eurusd and do the opposite to fade it, it'll work 80% of the time.




Now this is very interesting. I want to check out the manipulation between 3 and 4pm , do you mind to tell me if this is US time or UK time? Thanks.
Preservation of capital and home runs.
Member Since Nov 02, 2009   85 posts
Nov 26, 2013 at 13:29
felotus posted:

Although the patterns you showed me are interesting and deserve more research, I disagree regarding the volumes. The volumes you see are, as you said earlier, only the number of ticks in a bar. If you want to stay discreet, you have access to level 2 market depth (anyone has, open a dukascopy account for retail) and you split your order to not consume the first layer.
So say there's 30m of liquidity at 1.30301 which is the bid, you'll only take 20m of position. Thus the official bid doesn't change. Thus you won't see it in your volume analysis.

If you like market manipulation, look what they do in high frequency on the FX market ;)

Yes, I have access to level 2 Market depth data with my retail broker, I don't trust this data very much, you would need a very big broker to catch some useful thing (IMO) because now we are talking about traded volume.

About the patterns, here are another ones, this one is what a fake break would look like most of the time.

Let me know what you think.

Attachments:

Preservation of capital and home runs.
Member Since Nov 02, 2009   85 posts
Nov 26, 2013 at 13:37 (edited Nov 26, 2013 at 13:38)
felotus posted:
-Regarding bloomberg and reuters: they're overrated, I have a bloomberg terminal, had a reuters eikon.

I would love to know more about how you work, I know that if you run a hedge fund you can't talk business with very freely, so I will not ask you about the fund, Im talking about what prime brokerage you use, what platforms, all the context that surounds you. If you want, of course.

Regards.
Preservation of capital and home runs.
Member Since Nov 02, 2009   85 posts
Nov 26, 2013 at 13:47
felotus posted:

So say there's 30m of liquidity at 1.30301 which is the bid, you'll only take 20m of position. Thus the official bid doesn't change. Thus you won't see it in your volume analysis.

If you like market manipulation, look what they do in high frequency on the FX market ;)

I will check this out. I've read some years ago about Paul Rotter a.k.a. 'the flipper' but his (amazing) work was in the german bunds. He was basically putting 'ghost' orders, big money orders that never got executed because he cancelled just before price move towards the order's price, he manipulated really good that markets in my opinion, I don't know if he is still working. Some say he is now in Singapore.
Preservation of capital and home runs.
Member Since Nov 02, 2009   85 posts
Nov 26, 2013 at 14:16
Here is another example of supply/demand, volume spread analysis in forex.

Attachments:

Preservation of capital and home runs.
Member Since Nov 02, 2009   85 posts
Nov 26, 2013 at 15:15
More logic behind the above example.

Regards.

Attachments:

Preservation of capital and home runs.
Member Since Nov 02, 2009   85 posts
Nov 26, 2013 at 15:18
And now I moved the Stop Loss to break even, no risk, trying to enjoy the ride. Business as usual. :-)
Preservation of capital and home runs.
Member Since Nov 21, 2011   1718 posts
Nov 26, 2013 at 15:23
Rubn posted:
More logic behind the above example.

Regards.

Green sentence: That's where you had to add to your existing position.
Member Since Nov 02, 2009   85 posts
Nov 26, 2013 at 15:31 (edited Nov 26, 2013 at 15:33)
CrazyTrader posted:

Green sentence: That's where you had to add to your existing position.

In theory yes, but my money management method is a little more conservative, before I add a second position to complete my entire line (my line is 10% of the entire account) I need to 1.- have no risk at the first position (check) and 2.- Have no supply coming in above the price (non check). Also, the price didn't gave me any entry. I like to enter the market on no supply/demand bars.

I will add to my position when/if we break the top showed in those charts.


Regards.
Preservation of capital and home runs.
Member Since Sep 11, 2012   53 posts
Nov 26, 2013 at 16:33
1. Manipulation: UK time

2. Example: that's the problem, how do you know if the pattern fundamentally works? you'd need to define some rules and look at the past 1000 or 100,000 time it occurred.

3. Paul Rotter: exactly, that's how all the HFT is being done. Basically, you put extremely large amount of money, say 10B of offers at 1.3000

....Say current price is 1.3005, if it goes down 5 pips, you're pretty sure that it will go back up as you have a 10b offer down there.

... Now put 20M of offers at 1.3005, 1.3004, 1.3003, 1.3002 and 1.3001; wait a few moments, say 5-10 seconds.

.... All at once, pull out all your offers and do a market short of 150m, the guys who remain in the order book will get exploded, there probably will be only a few millions here and there. you'll move the price down to 1.3000 with an average sell of 1.3003 and here you go, you just made 3 pips.

4. what I do: we're a systematic fund, that is, we develop algorithms ('EA' they're called in the retail world) based on patterns, statistics, artificial intelligence etc. For 2 years now, we've been focusing on the FX market, with a short-term overview (50 to 150 positions a day).

Most of the tools we use are developed in house, both the research and the production software. (Research = charting / indicators / backtesting, production = bridge with the broker)

Most quant funds either own their own software or use specific commercial software (Deltix costs 10k/month/computer and specializes in HFT).

For the brokers, we can say an 'institutional broker' is amazingly different from a retail broker. We have intermarket spreads (0.0 to 0.3 pips eurusd) and pay between 0.1 and 0.25 pips of commission (10 to 25$ RT per million).
I work in a hedge fund.
Member Since Mar 29, 2012   192 posts
Nov 26, 2013 at 17:18
@Rubn This is a really cool documentary about HFT and Haim Bodek if you want: https://leaksource.wordpress.com/2013/11/17/the-wall-street-code-documentary-2013/
A smooth sea never made a skillful sailor.
Member Since Nov 02, 2009   85 posts
Nov 26, 2013 at 17:37
felotus posted:

2. Example: that's the problem, how do you know if the pattern fundamentally works? you'd need to define some rules and look at the past 1000 or 100,000 time it occurred.

It works, its been working since Livermore and Wyckoff eras and even before of that. They talked about this 100 years ago in their books. Personally I've been using this method for 3 years (6 months or so in forex, the other 2 and a half years in futures where you can get actual traded volume and not just tick volume) im still learning this method and I think I will always be trying to improve it. I've been trading for 5 years in general, and like ALL traders I've used all kinds of indicators, fibo's extensions, etc etc etc... Im not a newbie but I am not a pro neither, I consider myself to be in the middle, in all hohestlly.

About the rules, yes! I have very defined rules. Actually I have some pre-set sequences of patterns that I look for, here are some of them:

Notes: This setups need to be within 30 bar

Short setups:

 Sequence 1.-
• Buying climax
• Supply coming in
• No demand
Sequence 2:
• Supply coming in
• Supply coming in
• No demand
Sequence 3:
• Climatic action
• Supply coming in
• Test on low volume
Sequence 4:
• No demand
• Upthrust
• No demand

Those are just some examples of the sequences Im looking for to enter short the market, to enter long I have some more sequences.

As for why I know a 'no supply bar' it really shows no supply (like in the above charts) the logic is this:

No supply bar/candle: Is a tiny/narrow spread down-bar closing off the lows with volume lower than the previous two or more bars, the low volume suggests that theres no interest to the downside. You need to wait for a confirmation of this by looking at the next bar, the next bar should be up and with momentum (volume can be average or a little low), this action confirms the imbalance of supply and demand at that price. This indicator is more powerful when theres strenght on the background (i.e. look for signs of strenght like: demand swamping supply, selling climax, fake break to the downside, etc).

About testing this sequences, I honestly am not a math guy, I don't occupy my time backtesting this method so I cannot tell you 'it works 98.2 of the time', of course nothing works 100% of the time, but I can tell you that when a true 'no supply bar' appears in the right place with strenght in the background it will for a minimum put the price up some pips, if after that the price shows you that supply is getting stronger at higher prices (higher prices always come with more supply) is another thing and you should be carefuly looking at the price action, but at least the price respected the imbalance of supply and demand when it should. I hope this doesnt get too confusing as I am enjoying this conversation so much.


felotus posted:
4. what I do: we're a systematic fund, that is, we develop algorithms ('EA' they're called in the retail world) based on patterns, statistics, artificial intelligence etc. For 2 years now, we've been focusing on the FX market, with a short-term overview (50 to 150 positions a day).

Most of the tools we use are developed in house, both the research and the production software. (Research = charting / indicators / backtesting, production = bridge with the broker)

Most quant funds either own their own software or use specific commercial software (Deltix costs 10k/month/computer and specializes in HFT).

For the brokers, we can say an 'institutional broker' is amazingly different from a retail broker. We have intermarket spreads (0.0 to 0.3 pips eurusd) and pay between 0.1 and 0.25 pips of commission (10 to 25$ RT per million).

Really? That's really nice man, does your hedge fund uses Paul Rotter-like strategies? Can you say aprox how much money do you need to move the price 3 or 5 pips? (I've been wanting to know this for YEARS)

What institutional broker do you find better?
I think you have one of the most exciting and interesting jobs in the world. Im very interested.



Sorry for the long post. Regards.

  

Preservation of capital and home runs.
Member Since Sep 11, 2012   53 posts
Nov 26, 2013 at 17:39
Keep in mind that Bodek was doing the 'extreme' of HFT. There are plenty of HFT models that do not require order book manipulation.

For example, try to analyse the face of bernanke while he speaks to determine in advance if he's going to say 'may' or 'can'. The movements of his lips would be fundamentally different, thus you could place an order on the market.

Similarly with text analysis on the FOMC minutes, through machine learning you can analyse the comments as quickly as possible and be the first on the market.
I work in a hedge fund.
Member Since Nov 02, 2009   85 posts
Nov 26, 2013 at 17:41
Thalantas posted:
@Rubn This is a really cool documentary about HFT and Haim Bodek if you want: https://leaksource.wordpress.com/2013/11/17/the-wall-street-code-documentary-2013/

I've heard of this documentary, Sang Lucci (some option trader) talks about it all the time. Thanks for share it man, I will get to it ASAP :-)

Cheers.
Preservation of capital and home runs.
Member Since Nov 02, 2009   85 posts
Nov 26, 2013 at 17:42
felotus posted:
Keep in mind that Bodek was doing the 'extreme' of HFT. There are plenty of HFT models that do not require order book manipulation.

For example, try to analyse the face of bernanke while he speaks to determine in advance if he's going to say 'may' or 'can'. The movements of his lips would be fundamentally different, thus you could place an order on the market.

Similarly with text analysis on the FOMC minutes, through machine learning you can analyse the comments as quickly as possible and be the first on the market.

Oh man, that's some other level thing, never heard of it, do you think it truly can be used?
Preservation of capital and home runs.
Member Since Sep 11, 2012   53 posts
Nov 26, 2013 at 17:43
We don't do high frequency much, so we don't play around with market depth that much, it's too much a 'cow-boy' thing for most investors.

In order to move the market: it depends what time of the day. Open a 100M$ position at night, say 2am on the EURUSD and you can be sure you move 2-3 pips. During the european session, I would assume a simple 400-500M order would create a gap of liquidity for 5 pips.
I work in a hedge fund.
Member Since Sep 11, 2012   53 posts
Nov 26, 2013 at 17:46
Rubn posted:
felotus posted:
Keep in mind that Bodek was doing the 'extreme' of HFT. There are plenty of HFT models that do not require order book manipulation.

For example, try to analyse the face of bernanke while he speaks to determine in advance if he's going to say 'may' or 'can'. The movements of his lips would be fundamentally different, thus you could place an order on the market.

Similarly with text analysis on the FOMC minutes, through machine learning you can analyse the comments as quickly as possible and be the first on the market.

Oh man, that's some other level thing, never heard of it, do you think it truly can be used?

Yeah sure, I know a good quant fund where they have a team of 10 guys just for facial recognition. The real hardcore stuff in HFT is when you want to avoid using computer. Plenty of HFT funds these days do more hardware development rather than software. They create algorithms on integrated circuits or network cards directly. By the time they receive the packet of the quote, 1 nanosecond later they send an order; much quicker than through a CPU etc.
I work in a hedge fund.
Member Since Nov 02, 2009   85 posts
Nov 26, 2013 at 17:46
felotus posted:
We don't do high frequency much, so we don't play around with market depth that much, it's too much a 'cow-boy' thing for most investors.

In order to move the market: it depends what time of the day. Open a 100M$ position at night, say 2am on the EURUSD and you can be sure you move 2-3 pips. During the european session, I would assume a simple 400-500M order would create a gap of liquidity for 5 pips.

Amazing, I truly belive that guys (companies) doing that are true geniuses, would you agree?
Preservation of capital and home runs.
Member Since Sep 11, 2012   53 posts
Nov 26, 2013 at 17:48
Yeah I guess. Sometimes makes me wonder why we waste our time on fighting for a price that moves up or down, rather than curing cancer.
I work in a hedge fund.
Member Since Nov 02, 2009   85 posts
Nov 26, 2013 at 17:50
felotus posted:
Yeah I guess. Sometimes makes me wonder why we waste our time on fighting for a price that moves up or down, rather than curing cancer.

Hmmmmm, I guess that as sad as it sounds, theres no money in curing cancer, its like the flu, how many companies are gaining money making medicines for a little flu, if there was no more flu, there would not be more medicine. Its sad but true.
Preservation of capital and home runs.
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