Spydertrader's Jack Hershey Futures Trading Journal

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Quote from bigmoose:

Nkhoi, I too strugle with what the intended meaning of Jack's statement above is. I think he has said that most folks interpret the DOM wrong. So since most folks think a preponderance of bid's on the DOM infer going long, I assume he means the opposite. Although I think I have seen it described both ways. :confused:
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I posted recently about this here and previously on interpreting the DOM:

http://elitetrader.com/vb/showthread.php?s=&postid=1574403#post1574403

You have to undertsand the context of the Grob threads from a few years ago - he was attempting to gauge the level of understanding and I think he stopped short of drawing a diagram in coloured crayons for them although he did plant the concept of tables with queues forming and prices on flags etc. We are meant to be the A-team in contrast. Get a grip guys!

Observe the way price ticks away from an FTT at a wall. It does so on lower volume usually. This is the minority taking control with market orders just as the DOM is at its most imbalanced.
 
Quote from PointOne:

I posted recently about this here and previously on interpreting the DOM:

http://elitetrader.com/vb/showthread.php?s=&postid=1574403#post1574403
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I've been thinking a bit about the DOM recently and offer the following comments for discussion.

My view of the DOM is that it is composed of 6 independent variables:

Bid Side:
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1) Market orders hit the Bid (demand)
2) Limit orders enter the Bid queue (supply)
3) Limit orders are pulled from the Bid queue (supply)

Ask Side:
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4) Market orders hit the Ask (demand)
5) Limit orders enter the Ask queue (supply)
6) Limit orders are pulled from the Ask queue (supply)

A lot has been written about the inside Bid (or Ask) being "eaten" by market orders and price ticks down (or up).

But what about the inside Bid (or Ask) being "eaten" from buyers (or sellers) pulling orders? In real-time, if no more limit orders come in (supply) at this NOW as orders are being pulled, price ticks down (or up), right? I may be incorrect, but I don't assume that price translating is always due to the the Bid or Ask being "eaten" by market orders. If the supply dries up, independent of the demand, price should also translate. Any comments?

Semi-related, check out Mak's "leaky boat" post:

http://www.elitetrader.com/vb/showthread.php?s=&postid=904731#post904731

As usual, FWIW and food for thought and discussion.

spooz
 
Quote from spooz_trader1:

But what about the inside Bid (or Ask) being "eaten" from buyers (or sellers) pulling orders? In real-time, if no more limit orders come in (supply) at this NOW as orders are being pulled, price ticks down (or up), right? I may be incorrect, but I don't assume that price translating is always due to the the Bid or Ask being "eaten" by market orders. If the supply dries up, independent of the demand, price should also translate. Any comments?

...

spooz
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I think Jack's most recent post on this thread explains the situation where large positions are showing outside of market (e.g. at level 3) in the DOM.

Say a short trend is coming to an end. At the wall (major DOM imbalance) he watches to see the spoof orders on the ASK side being pulled off the DOM (nothing to see on T&S, this is supply - willing shorts, apparently - being removed) AND market orders showing on the T&S hitting the ASK side. Market orders in the opposite direction to the spoof limit orders.

He noted that the spoof capital deployed is an order of magnitude larger than the actual positions placed with market orders. Did no one else interpret Jack's post this way??

Imagine if you had the economic clout to keep a lid on price until you had filled at the level you wanted, then you take the lid off and watch price fill the void. No one player has this clout, I suspect, but in aggregate you see this game being played out.

What do you think?
 
Quote from spooz_trader1:

I've been thinking a bit about the DOM recently and offer the following comments for discussion.

My view of the DOM is that it is composed of 6 independent variables:

Bid Side:
-----------
1) Market orders hit the Bid (demand)
2) Limit orders enter the Bid queue (supply)
3) Limit orders are pulled from the Bid queue (supply)

Ask Side:
------------
4) Market orders hit the Ask (demand)
5) Limit orders enter the Ask queue (supply)
6) Limit orders are pulled from the Ask queue (supply)

As usual, FWIW and food for thought and discussion.

spooz
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Bid Side:

Maybe I have completely misunderstood you, on the Bid side?
Please correct me if I have.

Market is supply , and hit the bid (demand)?
 
Quote from PointOne:

He noted that the spoof capital deployed is an order of magnitude larger than the actual positions placed with market orders. Did no one else interpret Jack's post this way??

Imagine if you had the economic clout to keep a lid on price until you had filled at the level you wanted, then you take the lid off and watch price fill the void. No one player has this clout, I suspect, but in aggregate you see this game being played out.

What do you think?
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PointOne,

Yes, I would assume that entities spoofing large quantities have the economic clout to withstand being filled.

I guess my "food for thought" is the scenario when in aggregate, supply is pulled, which in turn causes price to translate, followed by lagging market orders. For example, can this explain a several tick or more BO out of a lateral, only to have price retrace back minutes later. Or maybe orders are pulled and the BO holds. Dunno. I don't record all of the DOM levels in my app so I can't offer more than opinions/guesses. I just wanted to point out that pulling orders in theory can cause price to translate.

Also from my limited visual DOM observations, it seems that DOM rate of change is much higher frequency than market orders. It seems like it would be cool to have history that plotted DOM rate of change along with price change. Maybe like Mak's cool DOM chart.

spooz
 
Quote from TIKITRADER:

Bid Side:

If I were to sell market, on the Bid, would I not be the supply?
I am holding ( contract, stock...) and looking to sell market at bid.

I would have supply, to sell, to a limit placed on bid ( demand).
The limit on bid would be in demand ( empty handed ), looking to buy.
Maybe I have completely misunderstood you, on the Bid side?
Please correct me if I have.
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Hey TIKITRADER,

I apologize for the confusion and I hope I haven't taken this stuff OT.

But no, asumming I'm interpreting this post by PointOne correctly:

http://elitetrader.com/vb/showthread.php?s=&postid=1574403#post1574403

I view Limit Orders as Supply and Market Orders as Demand. It doesn't matter which side (Bid/Ask).

spooz
 
Quote from spooz_trader1:

Hey TIKITRADER,

I apologize for the confusion and I hope I haven't taken this stuff OT.

But no, asumming I'm interpreting this post by PointOne correctly:

http://elitetrader.com/vb/showthread.php?s=&postid=1574403#post1574403

I view Limit Orders as Supply and Market Orders as Demand. It doesn't matter which side (Bid/Ask).

spooz
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Hi Spooz,

I was not sure how to view, your Bid side.

I always look at the Limit orders on Bid as demand. As they are empty handed, looking to make a purchase.

Market order sell ( on bid ) as supply. Looking to sell a contract.
Holding a contract in hand ( supply), looking for a willing buyer.

Maybe there is more than one view to this?
 
Quote from PointOne:


Imagine if you had the economic clout to keep a lid on price until you had filled at the level you wanted, then you take the lid off and watch price fill the void. No one player has this clout, I suspect, but in aggregate you see this game being played out.

What do you think?
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How does this fit in with our interpretation of DOM walls in regard to using them as a fine tool to catch turning points? I am thinking of two scenarios, which in my experience happen an equal number of times and have quite different results

You have a 3/4000 lot order sitting at a certain price on level 3 in a trend, and price slows/volume wavers as we reach this level. This is either going to repel price, which most likely forms an ftt. Or eventually an enormous amount of size will come in and a minute later you'll find that price level 2 points in your rear view mirror.

I suppose this could either be a large player trying to get a fill like you say, but it seems more reasonable that for whatever reason a large number of folks have chose this as a good point to place their stops (S/R, fibs, etc.). Not sure what the answer is to that one, but is there a 'finer' tool to help gauge a change in sentiment in this situation?
 
Quote from Jander:

I was wondering if you cared to comment on how you begin the day (your first entry).
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Before 9:30 AM Eastern Time, I monitor the YM pre-market in an effort to note market direction. Even right up until seconds before the open, this could change, so I keep an eye on the YM right up until the New York Opening Bell. If the market appears to be following the same coarse as the day before, I usually enter right away. If a significant change has taken place, I'll usually wait on sync in order to have the assistance of STR / SQU.

Quote from Jander:

I have noticed several days recently that start out like today, price going up/down on decreasing volume.
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Combine this 'notice' of yours with a comment I made with respect to 'type' of days, and one might have some really cool information.

Quote from Jander:

At what point do you decide to enter?
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While this differs every day, knowing 'the right side' of the market is my first requirement. Once known, in I go. For a beginner (who may only trade dominant traverses), I see nothing wrong with waiting.

Quote from Jander:

Normally I would be thinking retrace, but this was obviously not the case today.
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I suspect a down channel (carry over) existed someplace that I simply didn't bother adding based on the decreasing volume, but as long as price continues as anticipated, no problem exists.

Quote from Jander:

I was not able to trade today, but I would have been hesitant to enter long anytime before 9:45, and would have missed out on a good bit of that move.
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Why have concern over 'missing' any move. Many more moves exist right around the next corner. Who cares if you missed one. Another train will be along shortly. Catch that one.

Quote from Jander:

For the record, I would not have had your blue channel drawn in the same way.
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It is important to have one's carryover channels drawn in. I used to not worry about them too much, but often felt lost and unable to gauge the 'right side' of the market as well. I encourage you to draw in plenty of carryover channels. You can always delete what you do not use.

Quote from Jander:

Hypothetically, if you ended the previous day in an up channel, would you enter long at 9:30 if nothing significant happened overnight?
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If Price opened within the carryover channel near the right trend line, I'd have no problem with a long. Understand, it isn't as if I say to myself, "Oh yesterday ended long, and no major news out over night caused a change, so the market must go higher on bar one." I still need to see increasing volume coming in, and improving price in order to make the trade.

Quote from Jander:

Or do you still recommend waiting for sync to begin the day?
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I recommend all beginners (or anyone else who uses STR / SQU) wait on 'sync' to enter.

Quote from Jander:

This turned into a few more questions that I had anticipated, apologies...
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Hopefully, you find the answers useful.

- Spydertrader
 
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