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What kind of techniques do heavy scalpers use?
- Thread starter CFerret
- Start date
Here's the TRUTH.
1. NO ONE paying more than member rates can make money NET by "scalping". I don't even think at the lease rate 50 trades a day has a positive expectancy.
2. Anyone who says you can has their own self interest at heart.
3. If there were in reality bona fide DOM strats (don't make me laugh) then a BOT that's faster, better or with a higher risk appetite will arb out the opportunity.
4. If any of this shit worked, an arbitraged financial futures contract (i.e. ES, ZB, EUR ect) would be the LAST venue to use it.
Half the freakin' size in the ES or ZB "book" is dependant on a spread relationship. Hence if the 10year trades on the offer the ZB size offered cancels. If a few large caps trade on the offer the program seller on the ES offer cancels, if someone buys a 1000 put spreads in SPX the ES bid trades out by the CBOE MM who's hedging delta's.
1. NO ONE paying more than member rates can make money NET by "scalping". I don't even think at the lease rate 50 trades a day has a positive expectancy.
2. Anyone who says you can has their own self interest at heart.
3. If there were in reality bona fide DOM strats (don't make me laugh) then a BOT that's faster, better or with a higher risk appetite will arb out the opportunity.
4. If any of this shit worked, an arbitraged financial futures contract (i.e. ES, ZB, EUR ect) would be the LAST venue to use it.
Half the freakin' size in the ES or ZB "book" is dependant on a spread relationship. Hence if the 10year trades on the offer the ZB size offered cancels. If a few large caps trade on the offer the program seller on the ES offer cancels, if someone buys a 1000 put spreads in SPX the ES bid trades out by the CBOE MM who's hedging delta's.
Quote from Pa(b)st Prime:
Here's the TRUTH.
1. NO ONE paying more than member rates can make money NET by "scalping". I don't even think at the lease rate 50 trades a day has a positive expectancy.
2. Anyone who says you can has their own self interest at heart.
3. If there were in reality bona fide DOM strats (don't make me laugh) then a BOT that's faster, better or with a higher risk appetite will arb out the opportunity.
4. If any of this shit worked, an arbitraged financial futures contract (i.e. ES, ZB, EUR ect) would be the LAST venue to use it.
Half the freakin' size in the ES or ZB "book" is dependant on a spread relationship. Hence if the 10year trades on the offer the ZB size offered cancels. If a few large caps trade on the offer the program seller on the ES offer cancels, if someone buys a 1000 put spreads in SPX the ES bid trades out by the CBOE MM who's hedging delta's.
Agree that spreads and arbs influence futures T&S very much. I also noticed that T&S activity in futures is much different than in stocks. For example ES may trend up and at the same time delta is strongly negative (bid vol. is much higher than ask). Guess this is all due to games mentioned above.
And this happens again and again.
In stocks tape shows mostly "real" buying and selling what makes reading tape much easier.
But regarding retail scalpers - at least VST seems to make it. Guess not he alone. He trades ER2 though.
Quote from Pa(b)st Prime:
And perhaps not coincidentally ER2 is the least arbed index....
Agree. Plus due to small liquidity it must be less efficient and there are most likely much less black boxes and "big boys" playing it.
So the way for retail scalper is thin contracts. Interesting is anybody successfully scalps HSI?
Quote from dcraig:
Here's my take FWIW. I'm not sure I like the term "fake" a lot. I'm sure there are fakes and flipping, but there are almost certainly cancelled orders that are left resting in the book to get a good position in the queue that may or may not be pulled or executed. They might be pulled according to some plan by the trader (human or computer) triggered by order execution activity. Is it useful to call such a situation a "fake" or is it normal market behavior ?
Anyway, to get to the point. One might be interested in cancellations, but it's not going to be easy to see them in a DOM price ladder. Much better to use computerised analysis and possibly chart them to get a feel for things. I tried this using IB feed, but didn't get anything useful, possibly because IB doesn't explicitly report cancellations in the Level 2 feed and trying to match up executions with changes in DOM is a bit tricky. I'm working on a different feed at the moment that supplies explicit cancellation events in the L2 stream. If I get anything useful, I'll consider posting something.
T&S doesn't necessarily have to lag. Two things to look out for:
* If price is moving up volume executing at ask dropping off. Converse for price falling.
* Volume dropping off.
You can see these on very short timeframe charts. No doubt a good scalper can see these on DOM display.
Here is chart of DAX, each bar just 10 IB "ticks" wide. Second plot from top is "market delta". Order book plots as before. Notice some rapid changes in book marked by crosses.
Great post.
I feel it adds another specific look at what is going on.
By recording what goes on that is in view of the trader on his display, anyone can get into an effectiver analysis of all the games that are played and just who is playing them.
What is the vocabulary for describing all these things. You can get that down by using the terminology of Larry Harris. There are about four good chapters there and you can start around chapter 8 more or less. Print page 199 and use crayolas to color in the boxes according to the jersey colors.
Janis, nicely, put on the table the walls as an exterior and she mentions that it is important to see what is going on within the walls (the playing field). You bring out the fact that some things are difficult to keep track of for various reasons. This tells us some people can keep track of things and others cannot. the exchange supplies data in a stream and from that there is a record made directly and indirectly by doing data processing in real time.
By being a trader for 50 years you get to see how the financial industry advances and it isn't by leaps and bounds. Its by cocktail parties and yatch racing and recruiting some employees who are not from the families who run the industry. The computer (PC) is as important to the taming of the industry are the six shooter was to taming the west.
What is it like to process the data that we can't see in the display?
The computer solutions to the game on the playing field are necessities to be able to play well or you can play with sports memory.
You can see how rapidly the posts generate and comeup with "sayings" on the market action. Some of them are the "standard Orthodoxy" that Lo addressed to get to his AMH. and we see jem typifiing a person who another person with skills bent jem into shape; jem adapted as an alternative to using his native skills derived from his brief sports experience.
A lot of people have SO beliefs some of which which, in fact, are myths. You can see that the EMH and the AMH point this out and that one is an outgrowth of the other. The market action involves people with either of he belief systems and even other belif systems.
You post adds several significant considerations to the topis of heavy scalping. These include:
fakes and flipping,
cancelled orders that are left resting in the book to get a good position in the queue,
these may or may not be pulled or executed.
They might be pulled according to some plan by the trader (human or computer) triggered by order execution activity.
Is it a "fake" or is it normal market behavior ?
color=blue]pa(b)st Prime suggests: Half the freakin' size in the ES or ZB "book" is dependant on a spread relationship. Hence if the 10year trades on the offer the ZB size offered cancels. If a few large caps trade on the offer the program seller on the ES offer cancels, if someone buys a 1000 put spreads in SPX the ES bid trades out by the CBOE MM who's hedging delta's.[/color]
I previously suggested that the "ball" represents all of the contracts being held at any given time by any kind of player.
The strategies are beginning to emerge and it is a good idea to look at how all of the concurrent strategies (games) work to provide their NET EFFECT.
We have this dialogue going too:
1. Price DOES indeed move to size, and this is the only logical explanation I've found for this phenomenon.
2. One other way of thinking about "price moves to size" is to consider the aggressiveness of buyers and sellers.
3. Price doesn't move to size.
4. Is that your opinion?
If you have evidence to support the assertion, please provide it.
Hmmm ...
5. Today's SPI, each bar 25 contracts wide.
Middle plot is the ratio of total contracts at ask ( 5 book levels) to total contracts visible in book (all 10 levels) plotted as OHLC series.
Lower plot is a smoothed version of the middle plot.
6. Lest anybody think that the SPI charts I posted are not representative of "price moves towards size" because the SPI is relatively illiquid compared to some of the major SIFs, here is today's Kospi morning session. The Kospi is very liquid.
Notice how the ACV which I call order book delta averages above the 0.5 level for the uptrend.
Each bar 1500 contracts wide.
7. Size doesn't move price.
FEAR MOVES PRICE.
bids can be dropped and offers can be raised.
8. Show me a chart of FEAR.
9. vix, maybe?
There are many different ways to look at what goes on at the heavy scalping level. All the other kinds of scalping are going on too. And there is a contribution of all the non- scalping strategies (80 edges). And the ever present BOTS which implement strategies of the knids of money that can afford the programming for their operation). All of these are part of the SO. And there are the other paradigms operating as well that are "out of the SO box".
The story of all of this is only told in the dynamic of how time unfolds.
The strategies of the games reveal that the capital involved falls into several domains:
1. Capital that is used to allow people to be in trades. (Ball money).
2. Capital that is there that allows a person to back a strategy that may NEVER take that capital into the market. The "fake" (my bad choice of words long ago) play money so to speak. (Fake money)
3. Capital that is on the sidelines all the time to "protect" capital that is used in 1. ("protection" money)
4. Capital that is on the sidelines at any point is time where an EDGE cannot be played because no setup has occurred. (Edge money).
So we have Ball, Fake, Protection, and Edge money being used to play the game.
We have the jerseys who play. red, orange, yellow and GREEN
Who uses what and when to they use it and how does it show on the display?
When I look at the display, my mind is canted. That is I know there is the past, present (NOW) and the future.
In SPM the creator tried to cant the market too. He did it to get an edge during active markets only. The plus 2 and plus 3 stuff.
We only see NOW and as I "see" it the T&S is in the past. Onlt the very last print could be in now and it usually isn't. what is usually in NOW on the T&S is a gap in time that is passing between prints.
Just like amimals use their eyes, I only sweep to see change and movement. It is often a punctuation on the platform like the yellows on the Qcharts or other similar platforms.
NOW is only the yellows and the vectors of the market. I look at the data, relatively speaking. I only "see" direction (valence) and magnitude. As I read posts I read that most people are scalor oriented instead of vector oriented.
The money velocity charts are done as rate of change of capital movement. The pace (volume)-volatility charts are also vector in the nature of their notation.
What would have happened if the clinical study had been done based upon the vector orientation of the cases regarding learning and trading? We did find that 80 starters became 33 finishers. I feel the data that stopped coming to the clinical study said big things and it, if included, would have spoken very loudly to correlate with the ANS measured other case study (Boston banking pros).
So the games and heavy scalping come down to what happened (T&S), whats happening (the DOM) and what is anticipated (leading indicators). There is a streaming comparison of the T&S and the DOM as a NOW facet.
We can keep the sports analogy rolling by seeing what happened, what is going on , and what the players anticipate in any team sport.
Quote from dcraig:
Hmmm ...
Today's SPI, each bar 25 contracts wide.
Middle plot is the ratio of total contracts at ask ( 5 book levels) to total contracts visible in book (all 10 levels) plotted as OHLC series.
Lower plot is a smoothed version of the middle plot.
dcraig,
Which charting package are you using for the above?
Thanks!
John
It is my own software written in Java and running on Linux, though it should also run on Windows (and Solaris, MAC etc). Feed is IB. I'm also looking at OpenTick as an alternative feed for US markets.Quote from johnpinochet:
dcraig,
Which charting package are you using for the above?
Thanks!
John
Quote from dcraig:
It is my own software written in Java and running on Linux, though it should also run on Windows (and Solaris, MAC etc). Feed is IB. I'm also looking at OpenTick as an alternative feed for US markets.
Ah, good! I'll re-read your posts and see if I can piece together what you have done. Not saying it is easy, just a matter of not wanting to ask silly questions that have been answered.