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Using ES Time and Sales
- Thread starter traderkay
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Interesting question. Just had a discussion on this in a chat room yesterday. Using T&S along with the bid\ask and price movement, I equate to "tape reading" which goes all the way back to stock speculators in bucket shops. To get good at it, you really need to watch it for months and months, day in and day out, and try to catch almost every tick. Obviously, the goal is to trade with the strong hands which equates to large lot size on the t&s.
Where the T&S for es helps the most is at the market turns at support and resistance. Yesterday morning is a good example. The weak hands were panicking, selling 1027 down to 1025, while the strong hand (read large lots) were buying.
In my discussion yesterday, the question was raised, "since you only see one side, (the buying the ask and selling the bid) you don't know about the large order on the other side.
My answer to this is the large orders are less concerned about the extra tick and are more likely to buy the ask or sell the bid. In addition, if you don't think that is true, you have to at least assume that the balance is the same on the bid and ask orders as it is on market order, i.e. large lot traders have an approximately equal amount of limit orders at various prices as compared to their market orders, so the indicator is still valid.
The next question was, "All trades are balanced, and require a buyer and seller, using t&s is like getting in the middle of a cat fight."
My answer is yes, all trades are balanced, but you want to see the t&s as an indicator of buying and selling pressure. It is just an indicator like any other, that must be confirmed by movement in prices. I am not interested in those times when the large orders are fairly balanced between buy and sell, like the proverbial cat fight. I am interested in the unbalanced situation where almost all the large orders are on one side. This isn't a cat fight, this is lions feeding - don't be their lunch.
Related to this, you used to see some tricks in the es bid\ask A year ago, you could fade the big bid\ask, because it was almost always a false order by a big trader, trying to get the little traders to front run it. When they had accumulated enough contracts, they would pull the offer and start buying, with the result that if you were trying to front run that big order, you just sold near the low of the day. This isn't happening so much now with volume and b\a size increasing in es, but you should be on the alert for it if you are a "tape reader." A year ago a b\a size of 1000 contracts would scare other traders. Now it take more like 4k or more, and with other large traders (firms) using es, they could get filled.
You may notice also after a while, that some large orders for "fake" support\resistance (a few ticks away from the present b\a) are entered and pulled by a computer program, because it occurs so quickly.
Good luck on your tape reading.
Where the T&S for es helps the most is at the market turns at support and resistance. Yesterday morning is a good example. The weak hands were panicking, selling 1027 down to 1025, while the strong hand (read large lots) were buying.
In my discussion yesterday, the question was raised, "since you only see one side, (the buying the ask and selling the bid) you don't know about the large order on the other side.
My answer to this is the large orders are less concerned about the extra tick and are more likely to buy the ask or sell the bid. In addition, if you don't think that is true, you have to at least assume that the balance is the same on the bid and ask orders as it is on market order, i.e. large lot traders have an approximately equal amount of limit orders at various prices as compared to their market orders, so the indicator is still valid.
The next question was, "All trades are balanced, and require a buyer and seller, using t&s is like getting in the middle of a cat fight."
My answer is yes, all trades are balanced, but you want to see the t&s as an indicator of buying and selling pressure. It is just an indicator like any other, that must be confirmed by movement in prices. I am not interested in those times when the large orders are fairly balanced between buy and sell, like the proverbial cat fight. I am interested in the unbalanced situation where almost all the large orders are on one side. This isn't a cat fight, this is lions feeding - don't be their lunch.
Related to this, you used to see some tricks in the es bid\ask A year ago, you could fade the big bid\ask, because it was almost always a false order by a big trader, trying to get the little traders to front run it. When they had accumulated enough contracts, they would pull the offer and start buying, with the result that if you were trying to front run that big order, you just sold near the low of the day. This isn't happening so much now with volume and b\a size increasing in es, but you should be on the alert for it if you are a "tape reader." A year ago a b\a size of 1000 contracts would scare other traders. Now it take more like 4k or more, and with other large traders (firms) using es, they could get filled.
You may notice also after a while, that some large orders for "fake" support\resistance (a few ticks away from the present b\a) are entered and pulled by a computer program, because it occurs so quickly.
Good luck on your tape reading.
Quote from mBear:
My answer is yes, all trades are balanced, but you want to see the t&s as an indicator of buying and selling pressure. It is just an indicator like any other, that must be confirmed by movement in prices. I am not interested in those times when the large orders are fairly balanced between buy and sell, like the proverbial cat fight. I am interested in the unbalanced situation where almost all the large orders are on one side. This isn't a cat fight, this is lions feeding - don't be their lunch.
Probably I don't get it and I'm still fighting the tape trying to get it out from the prints
Sometimes I thing that buying/ selling pressure is a bit subjective because any large block from one side is moved in the other side as well and how can one discover the trader's intentions ??. From my point of view Ask/ bid sizes are worthless .
So what else can give us a lead ? Certainly I don't wanna feed the big cat.
A big reason why the t/s for the ES is not that helpful is because its a fragmented market. Besides the futures, you've got the spy, the big pit contract, all the underlying stocks, plus all the other indicies that closely track the ES.
With stocks the t/s shows every trade, but that doesn't work with futures.
With stocks the t/s shows every trade, but that doesn't work with futures.
Its all about the strong hands, where large lot size is indicative of strong hands. Trade with them!
Another reason I believe this works, is the strong hand are more committed and have more "ammo" to expend. Again, yesterday morning is a good example, in that when prices dropped below 1027, even though the large lot sizes were unbalanced to the buy side, they just bought more and more as prices dropped to 1025. No panic, no reversing to short, just buying more. Then they were keeping the sellers on their heels as prices turned back up.
Note that reading the t&s in the zb and zn generally is working better than in es right now. The large lot trades "at the market" are moving the market.
Another reason I believe this works, is the strong hand are more committed and have more "ammo" to expend. Again, yesterday morning is a good example, in that when prices dropped below 1027, even though the large lot sizes were unbalanced to the buy side, they just bought more and more as prices dropped to 1025. No panic, no reversing to short, just buying more. Then they were keeping the sellers on their heels as prices turned back up.
Note that reading the t&s in the zb and zn generally is working better than in es right now. The large lot trades "at the market" are moving the market.
I'm actually kind of surprised how many traders out there are resistant\skeptical regarding this.
Isn't this tape reading 101? I've read chapters in trading books where tape readers used to be interested in large orders in particular. They were looking for the footprints of accumulation\distribution by the large traders, so that they could trade with them before prices took off.
Are there any traders out there besides me who agree with me and\or use T&S like I've described?
Isn't this tape reading 101? I've read chapters in trading books where tape readers used to be interested in large orders in particular. They were looking for the footprints of accumulation\distribution by the large traders, so that they could trade with them before prices took off.
Are there any traders out there besides me who agree with me and\or use T&S like I've described?
Quote from mBear:
When the herd of elephants are moving one way, and the mice are moving the other, go with the elephants, or you'll end up flattened by the stampede.
Thanks for the sage advice, but my point was that it is 100 times harder to spot a true elaphant in a market that is flooded with them, then say on a medium cap tech stock where an elaphant can be spotted roaming a mile away...
An elaphant stepping into a bath-tub or an elaphant stepping into a river...
PEACE and good-speculating
Quote from Htrader:
A big reason why the t/s for the ES is not that helpful is because its a fragmented market. Besides the futures, you've got the spy, the big pit contract, all the underlying stocks, plus all the other indicies that closely track the ES.
With stocks the t/s shows every trade, but that doesn't work with futures.
My argument regarding the fragmentation due to these other instruments would be the same as with seeing just the buys at the ask vs. orders to buy at the bid - I assume the ratio will be relatively constant, even between instruments
In the case of the S&P, the large traders are the funds, especially index and mutual funds. When buying, they are buying across the board, including all of the above named instruments. That being said, though, I agree that t&s does not work with es all the time, nor is it as predictive as it is in other markets.
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