Yes- all trades today are with machines as counterparty. If you try to get on the NBBO they will swarm you to crowd you out. All arriving orders are filled by market-making machines.
Spoofing becoming illegal
- Thread starter TraDaToR
- Start date
Simple Volume is fine- these are sharp moves in one direction. My software colors them green and red to make it easy to go back and study.
Let me add I am on one-second resolution for all real-time charts.
Thanks None Business for some thought provoking posts.
I noticed the thread "is this place dead?" and it occurred to me there are still a small handful of interesting posters popping up from time to time that keep me reading.
I noticed the thread "is this place dead?" and it occurred to me there are still a small handful of interesting posters popping up from time to time that keep me reading.
In prompt CME Natural Gas today, you will see a predatory machine attack right after 10:20AM. The rhythm and time-of-hour were for Sell, as were the fundamentals. You will see 300 contracts of HFT attack, pushing price up 1.5 cents (a large amount). The attack continued until all of the robotic shorts were stopped out, then the price fell right back to where it was. No human was involved, at all. Nobody bought gas as the top as an investment. Nobody said "I will pay 1.5 cents more for each contract to get them all at once."
Even more dramatic, Natural Gas overnight November 20th starting after 11PM ET. Massive Sell rhythm, ended up down 20 cents, but an 8-cent attack stopped out every robot that was short. Market was headed down but you had to be awake and trading without a stop to profit. It's very hard to be short Natural gas in the Winter without a stop.
Even more dramatic, Natural Gas overnight November 20th starting after 11PM ET. Massive Sell rhythm, ended up down 20 cents, but an 8-cent attack stopped out every robot that was short. Market was headed down but you had to be awake and trading without a stop to profit. It's very hard to be short Natural gas in the Winter without a stop.
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Although in this particular example (NGF5 contract), in HINDSIGHT, it would have been a good buy-at least as we speak now. How can you be so sure it's 'the machine'? I understand that informed traders looking to buy will likely try to accumulate more stealthily than with a bunch of market orders, but if the move is imminent they would have a reason to do it.
none business, your handle should have been John Connor
jelite, you are free to interpret the action as you see it.
I hope that if you go to buy, say, 100 contracts of Natural Gas, in a market with fewer than 10 contracts at the NBBO, you break your order into 10 orders of 10 each, spaced 10 seconds apart, paying the NBBO, rather than put it thru as a single market order paying 1.5 cents more per contract ($15K). Especially since the price always falls back the 1.5 cents right after your order (darn!) and you always seem to lose money (figuratively speaking, of course).
PS If you look 3 minutes later (remember 180 seconds?) you'll see 300 contracts of selling to bring the price right back to where it was before the 300 contracts of buying. The two strats at the single firm are both flat 3 minutes later, excepting for the cash from the stops. They had bought before the move at the bottom from the robots who were going short, and they sold back at the top of the move to the same robots who they had just stopped out. Along the way to the stops, they bought from themselves. After collecting all of the stops, they sold back to themselves all the way back down. "Themselves" being different strats at their firm. Wash, rinse, repeat.
This is the only game that matters right now, and the cash adds up to billions of dollars.
This goes on all day and night in every CME Energy market. The CME is a sewer and you basically have to trade without stops, unsettling when trading with personal funds.
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Let's assume then that all liquidity in CL/NG etc. can be decomposed into machine's liquidity and everyone elses.
Would you say these machines do their 'runs' mostly in a direction where their estimate of 'everyone elses liquidity' shows that it's small(er) than its own? Based on your Nov 20th NG example (80 tick run), it seems there is no telling where the machine stops (as we don't have the information telling us which liquidity is machine's vs everyone elses).
Would you say these machines do their 'runs' mostly in a direction where their estimate of 'everyone elses liquidity' shows that it's small(er) than its own? Based on your Nov 20th NG example (80 tick run), it seems there is no telling where the machine stops (as we don't have the information telling us which liquidity is machine's vs everyone elses).
This is a great question.
The moves don't stop until the machine recovers the same number of lots it sold (bought). The Nov 20 took 8.5 cents to wake up enough traders to stop themselves out. Your question alludes to a key point. That is, can the move really go as far was necessary? The answer is, basically "yes." The firms who make these markets are exempted from margin constraints by the CME, a dunn for "providing liquidity." So, they can trade with almost infinite size. The constraint is, they don't want to run into too many outside orders to fill, hence they look for deep lulls in the trading when they can overrun the stack and be assured to high precision they are trading with "themselves."
I should add all of this is also discussed in the "wash trade" lawsuit against CME, although the wording is slightly different since it's from the perspective of a smaller HFT.
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Thanks None Business a very thought provoking explanation which will probably cost me another nights sleep thinking through it
