Prawnsandwich
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We're getting into Jedi territory here now....who knows.....you'd have to ask the man himself
B
Black Swan
I agree with the majority of your post but diasgree with the highlighted bit...you could be working with them...(could be accidentally rather than by design) but they aren't out to get you and you're not nec. "competing" with them, they won't *take* what you're nec. after..
DionysusToast
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sigh....
Nope - this doesn't include me and doesn't need to.
Let's say price comes up to a level and there's 3000 contracts on the offer. As price moves to that level, the 3000 stays there, 30 or 40 contracts print and price starts to move down. 10 minutes later, price comes back to that level. At that point how would you react to each of the following scenarios?
A - There's still over 3000 contracts at that level but it gets pulled after just a few trades print.
B - There's still over 3000 contracts at that level, a thousand contracts go through at the offer and there's 2000 remaining
C - There's still over 3000 contracts at that level, Price reaches that level but there's no buying, just 30 or 40 contracts hit that offer and then a bunch of market sell orders come in.
D - The 3000 is no longer there, there's just 500 which start to disappear when orders print.
Now - you could add in a bunch of other scenarios but the above all tell you things that candles cannot tell you.
It's not about being faster than an HFT - they are playing a different game. It's all about how much buying/how much selling & what the reaction is to that buying and selling.
Prawnsandwich
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I agree with the majority of your post but diasgree with the highlighted bit...you could be working with them...(could be accidentally rather than by design) but they aren't out to get you and you're not nec. "competing" with them, they won't *take* what you're nec. after..
Well it might be possible to trade with HFT entities but I doubt it due to the speed and timescales they operate in...I never mentioned that I thought they that they were out to get me....but said that we compete with them in the sense that we all compete in the market, to make money, to take the right side of a trade etc
DionysusToast
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Quite right too - just as they would have trouble driving with a clutch, accelerator & brake...
... but no steering wheel...
:whistling 
Shakone
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Well even though I seem to disagree with DT on many things, I have to say he has got me more interested in using L2. It makes sense that there is value in using it.
One thing I have observed though, looking at some of the trades DT posted recently on his trading, was that the entries were excellent, but the exits were not. DT, is this a symptom of L2/DOM? You can tell where there is big selling or buying, and if you go with that, that will give you a good entry. But once it moves your way and maybe you take half off, price can turn around and come back and take your stop out on the second half without showing a reversal on L2/DOM at all. Sure someone sold a lot there, but you don't know when/where they are covering. Big traders act differently depending on whether entering or exiting? They may be covering in small quantities all the way down, or they may be holding for months, showing very little that you can use on LII? These are questions, because I don't know and would appreciate your insight. I am wondering if perhaps Price although it may not show you the level of selling and give as good an entry, it may well tell you when price is reversing after entry and coming back towards your stop. Just an observation, not a criticism.
P.S. Is there any Level II/DOM archive service? e.g. much as you can play past bars and watch them in present, is there an archived recording of the data somewhere?
One thing I have observed though, looking at some of the trades DT posted recently on his trading, was that the entries were excellent, but the exits were not. DT, is this a symptom of L2/DOM? You can tell where there is big selling or buying, and if you go with that, that will give you a good entry. But once it moves your way and maybe you take half off, price can turn around and come back and take your stop out on the second half without showing a reversal on L2/DOM at all. Sure someone sold a lot there, but you don't know when/where they are covering. Big traders act differently depending on whether entering or exiting? They may be covering in small quantities all the way down, or they may be holding for months, showing very little that you can use on LII? These are questions, because I don't know and would appreciate your insight. I am wondering if perhaps Price although it may not show you the level of selling and give as good an entry, it may well tell you when price is reversing after entry and coming back towards your stop. Just an observation, not a criticism.
P.S. Is there any Level II/DOM archive service? e.g. much as you can play past bars and watch them in present, is there an archived recording of the data somewhere?
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Prawnsandwich
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This article suggest HFT is changing the market, making it more volatile...does this mean more whipsaw-like , particularly in the short term..? I recall other posters on here suggesting that markets have become more difficult to trade recently....
http://www.economist.com/node/14133802?story_id=14133802
that depends on what markets you talking about. fx has been normal
Prawnsandwich
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I was thinking of forex, thought some posters had mentioned that conditions appeared to have changed....
In terms of US stocks, apart from the obvious example of the flash crash, in my trading experience / method and I haven't noticed significant changes in how stocks behave, on an intraday timeframe..
perhaps its their inexperience? one only needs to look at T2W where during trending markets where the birth of the outrageous "i am god" type threads are born. When the cyclical nature of markets permute, those threads disappear as though they never existed.
when markets change as they always do; strategies\expectations\risk\trade management\regularity of trades\emphasis on economic data\ etcetera.... all need to change too. adapt or die is the only way forward.
employing a flat strategy within a cyclical market is never going to make consistent money unless trades are only placed in conditions that work well with the strategy. between early September and early October the dollars depreciation created a generous rally. since that time the market has ranged. This is where the inexperienced get their asses handed to them because they repetitively try to either resume or reverse the trend.
There is plenty of opportunities within this type of market but you have to have the right expectations and trade with the market not against it to enjoy those opportunities. when i see posts like the market has recently become tough to trade i can only recommend those traders take a step back and re-evaluate their objectives and thought process. in time they can learn to recognise the cyclical changes and how to best approach them. it all comes with experience.
Prawnsandwich
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Lol at the "I am god " threads reference....
Thats all fair enough regarding cyclical markets...you would expect any relatively experienced trader to be aware of this, and any comment regarding markets changing to be outside of these parameters..
wackypete2
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Hello Forker,
I agree with much of your post regarding trends and the cyclical nature of the markets. I trade very short t/f forex and am far from inexperienced. This niche area I have found to be much more difficult than just a few years ago. Whippier zig zags so to speak. Most likely those trading higher t/f would not feel the effects as you would be less prone to them while looking at at a longer horizon. I have also preached the adapt or die philosophy to friends and fellow traders for years, but one would not have to adapt unless your current methods no longer produce sufficient results, ie: trading becomes more difficult, therefore try it a different way. A good look at 1m or 5m charts from 2-3 years ago shows fewer of the whippier zig zags. I can conjure up guesses and theories based on observations...which may have some merit or be completely wrong. I am certainly no expert in macro economics or any type of HFT trading.
Good trading to you!
Peter
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I think you misunderstood me. My view is neutral when trading - I just use the price action as a guide. Anyway it's a good advice (in agreement with my view on trading)
I don't use Level 2- I tried it and it didn't work for me. So far I've heard of only one trader who is successfully using Level 2 data - but again he is an exceptional trader.
I can see you are quite knowledgeable about order flow and if you can transfer that knowledge to profitable trading, why not. Good luck.
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DionysusToast
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Absolutely fair points about the trades I posted this week.
For my current trading, I only use the DOM/T&S to get a good entry. After that point, I am not using it. At the price points I use the DOM to enter, I already have an opinion that this is the area in which I will see a reversal/continuation and the DOM/T&S tells me whether I can get in or not. I also have an opinion on where the market will go.
I trade 2 contracts on the ES. The worst number of contracts you can trade in my opinion is 1. The more the better. Let's say you have 3 contracts. Then you could do the following.
Exit 1 - fixed, this effectively averages down your buying price on a long. Giving you more breathing room.
Exit 2 - next natural place for the price to reverse
Exit 3 - one for a runner
The 2 trades I posted this week both came back on me. Mostly because I am waiting for a runner, whilst ensuring I don't lose money on the trade after a significant move. So - those second exits are not symptomatic of using DOM/T&S - more symptomatic of me staying in trades to capitalize on those larger moves and of course getting stopped when they don't occur. Thus far, my trading journal indicates this is still the correct thing to do.
In terms of replay - Ninja trader does have a replay function and allow you to record the chart, DOM and Time & Sales to allow you to replay it. You can record days & then move to key reversal areas (or any areas you use in your current method) and replay the market action to see what DOM/T&S told you at that point. It's easy to set up but if you need help - I can give pointers.
DionysusToast
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LOL @ this sentence. I wonder what a non-trader would make of it?
Has to be said, US indices and US Stocks are both more choppy right now. I am not sure of the reasons but we all have our personal theories. The S&P has been dead on the open a number of times, only to them pick up speed later on - even on non-news days. Very odd behaviour.
Changes such as these don't occur overnight, so if you are trading every day, you tend to adapt to them naturally anyway. I think a trading journal helps in this. Even if you never read it, just writing stuff down makes a difference to how you learn from your trades.
Prawnsandwich
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Not sure about US stocks being very choppy right now, again theres a huge variety of stocks and they don't all behave the same...in my experience strongly trending / momentum stocks are generally behaving the same as they have done for the last couple of years..
wackypete2
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I moved away from trading stocks. The US markets (for us unlucky US citizens) are overregulated to "protect the small trader" yet the big corporations get away with murder..and if they get caught the NFA/CFTC/SEC just pounces the small trader even more...what a mess here.
Agree with the trading journal. Valuable tool even for experienced traders.
Peter
Agree with the trading journal. Valuable tool even for experienced traders.
Peter
wackypete2
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