Tape Reading Large Orders CL

[traderchi128]

Quote from jsmooth:

interesting...I do have a trading system I use but I base my executions on the DOM...I still do think there is value in watching the tape and how it moves. If you ever trade a market overnight or when volume is very light/mid day, basically you just need to be sitting on your hands and waiting for a big order to come into the market, other wise your just trading the algos...while your waiting for that the charts/technicals can become pretty deceiving IMO.

I'll get some examples of what I was talking about next week with some print screens. we can continue this discussion next week.

Curious to how you trade the DOM. Yrs ago I knew guys who would look for those big bids in the market. They would put bids in a few ticks below the big bids and wait. If the big bid started to get hit they would wait until 70% or so was gone, hit the rest of it, and cover with their bids below as the big bid got taken out and then stops below were hit which would run the market into their bids below. Worked well in the thicker markets, especially Bunds and EuroStoxx. But again...now a days a lot of the big size you see come in is fake. Although in Corn futures you do see these 300-500 lot bids come in and stay.

 

[austinp]

Quote from jsmooth:

interesting...I do have a trading system I use but I base my executions on the DOM...I still do think there is value in watching the tape and how it moves. If you ever trade a market overnight or when volume is very light/mid day, basically you just need to be sitting on your hands and waiting for a big order to come into the market, other wise your just trading the algos...while your waiting for that the charts/technicals can become pretty deceiving IMO.

When currency markets open at 8:20am eastern and all day while price action is moving, the DOM action is illegible and untradable.

Since CL is a quasi-currency symbol, it adheres well to measured pullbacks and contraction breakout sequences. Trading price action is where the easiest $$ is at... anything else is a waste of time, money and lost capital.

Everything needed to know about printing money in CL resides within its own price action. Daily $$ ranges of $1,500 to $3,000+ per contract from lows to highs (not counting oscillations in between) makes it pretty simple for skilled traders to pick off +$500 per contract somewhere or other in between.

No need to overthink the process. Like someome else already said, keep it simple. Get good at trading structured pullbacks and/or breakouts. Keep losses smaller than profit objectives. Let unrivaled price movement on a daily basis take care of the rest.

 

[jsmooth]

Quote from traderchi128:

Curious to how you trade the DOM. Yrs ago I knew guys who would look for those big bids in the market. They would put bids in a few ticks below the big bids and wait. If the big bid started to get hit they would wait until 70% or so was gone, hit the rest of it, and cover with their bids below as the big bid got taken out and then stops below were hit which would run the market into their bids below. Worked well in the thicker markets, especially Bunds and EuroStoxx. But again...now a days a lot of the big size you see come in is fake. Although in Corn futures you do see these 300-500 lot bids come in and stay.

Years ago I traded at a prop and this was exactly what we did (in stocks)....this does not work anymore IMO. When your trading futures (or any zero sum market) I think it still works to a certain point, but not to just front run these orders, but more or less to get some information on pivot levels to trade against. The overall structure of the market is still the same...its not going to move unless a bigger order comes in, and they have to either post it or execute it. What I have found is that they will post it, trade will move up/down around it, then depending on what the market does it gets filled in a iceberg type of order. But that initial post level will still hold some significance as a pivot....when a large order was filled, the market either will absorbed all of it and find support or it wont and move lower.

 

[Maverick74]

Quote from jsmooth:

Years ago I traded at a prop and this was exactly what we did (in stocks)....this does not work anymore IMO. When your trading futures (or any zero sum market) I think it still works to a certain point, but not to just front run these orders, but more or less to get some information on pivot levels to trade against. The overall structure of the market is still the same...its not going to move unless a bigger order comes in, and they have to either post it or execute it. What I have found is that they will post it, trade will move up/down around it, then depending on what the market does it gets filled in a iceberg type of order. But that initial post level will still hold some significance as a pivot....when a large order was filled, the market either will absorbed all of it and find support or it wont and move lower.

Jason, a couple of things here to note. Crude oil futures, WTI to be exact, represents only 2% of the actual trading of oil in the world. So by definition, there can be no significant trades. Next, the crack spreads and calendars in oil are probably more heavily traded then crude itself. Now most of those spreads are traded as exchanged traded spreads. However, most prop firms also trade the "implied" spreads via their algos to pick off ticks. Those implied spreads trade on your order book and skew all the flow activity. And lastly, you have the crude options which bring in the crude hedging.

The really big prop firms that trade crude oil have brokers in the cash space and get deal info on what's trading in cash so they can trade the futures better. That is where you want to get order flow info. Not from your DOM on TT which is nothing but algos putting in and pulling orders.

 

[RenkoTrades]

Quote from Maverick74:

The really big prop firms that trade crude oil have brokers in the cash space and get deal info on what's trading in cash so they can trade the futures better. That is where you want to get order flow info. Not from your DOM on TT which is nothing but algos putting in and pulling orders.

Exactly, and DOM trance trading is a dead end road for long term profitability.

 

[optionbull]

Quote from Chicago_CTA:

The order book is worthless.

500-lot spoofs appear nowadays in both crude and natural gas.

Hourly and Daily charts are the best source of information, in my view.

+1

 

[RenkoTrades]

CL trend following today. Eurodollar bounce and CL goes into rally mode. Work the price action trends not the tape, much easier method.

 

[2rosy]

Quote from traderchi128:

How does one frontrun an iceberg order?

you used to be able to see last trade size and compare it to what was shown in the dom. so if the bid was 89.29 for 5 and you saw 14@89.29 trade and still 89.29 for 5 theres probably an order there. Of course, this is all automated now

 

[TraDaToR]

Quote from 2rosy:

you used to be able to see last trade size and compare it to what was shown in the dom. so if the bid was 89.29 for 5 and you saw 14@89.29 trade and still 89.29 for 5 theres probably an order there. Of course, this is all automated now

And when you are placing an iceberg order, you only get FIFO priority for the size shown, so if you show 10 and want 500, anybody can place an order at the same level and "frontrun" yourself in between your 10 lots.

 

[traderchi128]

Quote from 2rosy:

you used to be able to see last trade size and compare it to what was shown in the dom. so if the bid was 89.29 for 5 and you saw 14@89.29 trade and still 89.29 for 5 theres probably an order there. Of course, this is all automated now

I hear ya. But to me seems kinda of dangerous to get in front of that as you have no idea how many are still waiting to join the bid.

Not sure how anyone could really have front ran a bid like that.