What kind of techniques do heavy scalpers use?

trader225 · Apr 16, 2007

Quote from PointOne:

ES lags YM and INDU. There are a few posts knocking around on this topic. It's controversial.

No doubt someone may find a chart where ES appears to lag YM.
But couldn't they also find a chart where that wasn't true? Of course, the proponents of this theory use a 2 min. YM chart and a 5 min. ES chart, which is something that should be considered. I suppose that someone could find a 2 min. GS chart that leads the 5 min. GS chart, as well as one that supported a different hypothesis.

dcraig · Apr 16, 2007

Quote from trader225:

No doubt someone may find a chart where ES appears to lag YM.
But couldn't they also find a chart where that wasn't true? Of course, the proponents of this theory use a 2 min. YM chart and a 5 min. ES chart, which is something that should be considered. I suppose that someone could find a 2 min. GS chart that leads the 5 min. GS chart, as well as one that supported a different hypothesis.

I would put it more strongly than that. It is a proposition that could be tested statistically. As you say it is possible to show charts in support of any assertion.

frank_london · Apr 16, 2007

Quote from dcraig:

It seems to me that this is a proposition that could be tested by analyzing the data. Such being the case, there is no need for it to be "controversial" at all. If nobody can be bothered doing this, then I suggest that this thread not be polluted by a Pythonesque exchange of "this is not argument, this is contradiction".

Index are always leading and lagging each other based on where the money is flowing into, or out of faster. They key is to figure out which is which on any given day and use that to your advantage.

It is not a constant that the ym leads the sp or the sp leads the ym. So looking for empirical data is useless. If it were proven that one was a leader and one was a lager this wouldn't last for long as the quants would figure it out. The fact is the quants have already figured out most of the markets inefficiencies, and that is why there is no constant leader/lager. When a lead/lag relationship does start to develop between to assets it doesn't last long for this reason.

dcraig · Apr 17, 2007

Quote from frank_london:

Index are always leading and lagging each other based on where the money is flowing into, or out of faster. They key is to figure out which is which on any given day and use that to your advantage.

It is not a constant that the ym leads the sp or the sp leads the ym. So looking for empirical data is useless. If it were proven that one was a leader and one was a lager this wouldn't last for long as the quants would figure it out. The fact is the quants have already figured out most of the markets inefficiencies, and that is why there is no constant leader/lager. When a lead/lag relationship does start to develop between to assets it doesn't last long for this reason.

I quite agree. My point was that bland assertions that X leads y in general are of little value, but that is what the ES/YM argument is about.

frank_london · Apr 17, 2007

Quote from dcraig:

I would put it more strongly than that. It is a proposition that could be tested statistically. As you say it is possible to show charts in support of any assertion.

I know for a fact that there are no constant relationships in the market. There are things that last for a short time then disappear though. If you are still trying to figure this out you are way behind in the game.

frank_london · Apr 17, 2007

Quote from dcraig:

I quite agree. My point was that bland assertions that X leads y in general are of little value, but that is what the ES/YM argument is about.

I didn't mean to attack you. You and I are in agreement.

dcraig · Apr 17, 2007

Quote from frank_london:

I didn't mean to attack you. You and I are in agreement.

Sorry, I was a bit abrupt.

john99 · Apr 17, 2007

When there is economic news I see ZN being leading index (most the time trading inversly to stock indices), then ES, YM, ER2, NQ. Overall NQ lags. Track the time and sales tommorow on the CPI number and lets see who makes the first move.

CFerret · Apr 17, 2007

Quote from trader225:

No doubt someone may find a chart where ES appears to lag YM.
But couldn't they also find a chart where that wasn't true? Of course, the proponents of this theory use a 2 min. YM chart and a 5 min. ES chart, which is something that should be considered. I suppose that someone could find a 2 min. GS chart that leads the 5 min. GS chart, as well as one that supported a different hypothesis.

IMO it doesn't matter much if ES lags YM or wise versa. What is important when looking at both is their interaction (if they move in tandem or diverge etc.).

frank_london · Apr 17, 2007

Quote from john99:

When there is economic news I see ZN being leading index (most the time trading inversely to stock indices), then ES, YM, ER2, NQ. Overall NQ lags. Track the time and sales tomorrow on the CPI number and lets see who makes the first move.

That is not true. On the release of an ECO # everything moves at the same time(or within milliseconds) unless someone gets wind of actual release or its released early by one of the wires early, like Reuters has done on the Employment Report in the past. Even if it where true that the ZN sometimes led it is not actionable. Are you going to put on an es trade if the bonds jump a few ticks at 7:29:57? before the CPI release.

The reason its not true is that now there are "quant. bots." that trade the release of ECO #'s within milliseconds of the release, much faster then any human could react and across all markets that release is relevant to. So bonds/notes will not go first. I've been trading along time and know people/ firms that do this. I used to game the release of ECO #'s but it is no longer viable, now you must wait to play the reaction.

P.S. I was using Bloomberg and Reuters to game the #'s