E-Mini S&P Tape Reading : Hidden Limit Order absorption!

Eurex

Active member
105 5
E-Mini S&P Tape Reading.

I see a lot of time the price at a particular level does a lot of volume Plenty of market orders hitting to break a offer and offer is showing 100-200 lots but kept refreshing and absorbing the market orders.

Similar case some one is absorbing the market orders hitting the bids but bid only shows 100-200 lots like some hidden orders resting and refreshing before our orders go to the Exchange.

Looks like a passive absorption or like some hidden limit orders resting on offers.

Passive absorption skews the tape reading. One it suggests that a strong Initiative buyer and a Responsive seller at the offer. Who will win and market participants wait. Then price fell 1-2 ticks and then rallies.

Any Tape Readers here having seen any particular good set-up please share or PM :)

Good Luck Trading!
 

OrderFlowDashPro

Member
76 9
Yes, during range markets often large supply above and below the market will reverse the order flow. These limit order traders often but not always exhaust the market driven trade and these zones become the pivot highs and lows in the market. Often, the market ping pongs between a large limit buy order and sell order (or trader). The market tends to run into and away from the large trader (aggregate trader) as part of dynamic driven by bots which detect changing liquidity and very possibly due to structural margin dynamics. My "sense" is that the buying is driven by equities HFT bots while the exhaustion is driven by large firms trading in the futures market -- though of course it is just one narrative/simplification.
 

DionysusToast

Legendary member
5,963 1,499
E-Mini S&P Tape Reading.

I see a lot of time the price at a particular level does a lot of volume Plenty of market orders hitting to break a offer and offer is showing 100-200 lots but kept refreshing and absorbing the market orders.

Similar case some one is absorbing the market orders hitting the bids but bid only shows 100-200 lots like some hidden orders resting and refreshing before our orders go to the Exchange.

Looks like a passive absorption or like some hidden limit orders resting on offers.

Passive absorption skews the tape reading. One it suggests that a strong Initiative buyer and a Responsive seller at the offer. Who will win and market participants wait. Then price fell 1-2 ticks and then rallies.

Any Tape Readers here having seen any particular good set-up please share or PM :)

Good Luck Trading!

A few things to keep in mind....

Passive absorption does not skew tape reading - it is what tape reading is all about. Tape reading requires you to look at the flow of trades as well as the resulting price move. If buying does not result in a move up, then buyers may be getting trapped.

There is a lot of stat arb trading and so when you see an iceberg being executed like this, it is often just one half of a stat arb trade and has no directional impact. It is important WHERE the absorption occurs.
 
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Eurex

Active member
105 5
Thanks OrderFlowDashPro!

You got me thinking in a different perspective of what is happening!

Further to this How does a bot determines the changing liquidity do they have access to Limit Orders resting or Do they have any other advantage than being a bot and living near to the exchange than us apart from inside knowledge of impending large trades.

or is it like they have knowledge of Dark Pool Trades and they contact Market Makers for particular market and MM will then do lot of volume keep filling orders at Limit which hides their activity and take the Average Fill price above VWAP or some other benchmark pre decided with the Client and close the Market on High.

MM - Gets paid by CME for commission cut and any profit they generate
Client - Get best price for their Large Orders.

Anyone can share additional light on above or other comments.

Good Luck Trading!
 

Eurex

Active member
105 5
A few things to keep in mind....

Passive absorption does not skew tape reading - it is what tape reading is all about. Tape reading requires you to look at the flow of trades as well as the resulting price move. If buying does not result in a move up, then buyers may be getting trapped.

There is a lot of stat arb trading and so when you see an iceberg being executed like this, it is often just one half of a stat arb trade and has no directional impact. It is important WHERE the absorption occurs.

Your point about where absorption is happening i noticed the location is imp.

Why its skewing is because 1st Delta of BuySell was showing buying but in fact its a big seller at offer.

2nd if someone is absorbing at Limit Order then they are hiding Information and once the big players realize that they are trapped their should be covering but if absorption is happening at Offer then after its finished price fell a couple of ticks no new selling and then it rallies in opposite direction with Offers pulled. Gives an impression that lot of buying but tape shows only few trades. Looks like only few guys who are Market Makers are controlling the E-mini S&P order book.

I thought the passive absorber at Offer was big seller but in fact it was opposite he just held the market long enough to let big traders wait and then covered as soon as he flipped his orders from Bid and and then pulled Offers and it rallied 2 Handles after that.

I use CTS T4 and i think im getting filtered Data because the trades happening on DOM are sometimes not visible on T&S in fast market. Ill check with broker anyone having the same issue.


Good Luck Trading!
 
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OrderFlowDashPro

Member
76 9
Eurex.. my feeling is the bots can only drive the trade to the big trader. They don't per se dictate direction. The large limit order trader does that but they make the market go to wherever it would go faster. But, say the market is rallying the aggressive buyer can be shooting in market orders while at same time holding out sell limit orders above the market.
 
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Eurex

Active member
105 5
Eurex.. my feeling is the bots can only drive the trade to the big trader. They don't per se dictate direction. The large limit order trader does that but they make the market go to wherever it would go faster. But, say the market is rallying the aggressive buyer can be shooting in market orders while at same time holding out sell limit orders above the market.

Earlier i thought the trades to be of one big block going through with occasional icebergs but the breakdown Tape contain lots of small trades.

I've compared CTS T4 T&S to IQFeed T&S via IRT charting Software.

T&S from CTS T4 and IQFeed are the same aggregate from CME with IQfeed having one additional choice of breakdown of individual trades.

Having seen both the tapes it occurred to me that lots of small trades are flashed as a big buy or sell on DOM which may not be a big buyer or seller unless they have broken these trades so fast and submitted to the exchange. Cant figure out that.

Now which feed to use
The Breakdown Tape- Cant analyse in real time . flashes very fast with lots of small 1 lots.

The Aggregate tape - Maybe lots of retail traders or a big chunk of trades broken by bots.

Good Luck trading!
 

Eurex

Active member
105 5
New Insight Hidden Limit Order absorption!

The hidden Limit Order absorption orders are order types using order qualifiers "Display Quantity" aka iceberg.


Read Here - http://www.cmegroup.com/confluence/display/EPICSANDBOX/Order+Qualifiers

Display Quantity: The display quantity allows you to control the manner in which orders are shown to the market. The display quantity specifies the given quantity of an order shown the market, replenishes the specified quantity when filled, and exposes the entire order to the market gradually until the entire order quantity is depleted.

For example, a user may place a Buy order for 100 and a display quantity of 10. Therefore, no more than Buy 10 is exposed to the market at any time; the remainder are hidden. Each time the quantity of 10 instruments is filled, the next 10 enter the market as a new order at the bottom of the book.


Good Luck Trading!
 
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OrderFlowDashPro

Member
76 9
Eurex, in regards to tape displays you may want to look at our QuantTape which has many breakdowns and displays of the order flow information that traders find valuable

Right as far as algorithms there are 2 types: execution algorithms which may have manual trader operating behind them and then there are quantitative driven strategies. I'm not sure if it is possible to pick out an individual algorithm in the futures but what you can do is look for how the aggregate activity is taking shape and look for repeating patterns.
 
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numbertea

Well-known member
257 9
Your point about where absorption is happening i noticed the location is imp.

Why its skewing is because 1st Delta of BuySell was showing buying but in fact its a big seller at offer.

2nd if someone is absorbing at Limit Order then they are hiding Information and once the big players realize that they are trapped their should be covering but if absorption is happening at Offer then after its finished price fell a couple of ticks no new selling and then it rallies in opposite direction with Offers pulled. Gives an impression that lot of buying but tape shows only few trades. Looks like only few guys who are Market Makers are controlling the E-mini S&P order book.

I thought the passive absorber at Offer was big seller but in fact it was opposite he just held the market long enough to let big traders wait and then covered as soon as he flipped his orders from Bid and and then pulled Offers and it rallied 2 Handles after that.

I use CTS T4 and i think im getting filtered Data because the trades happening on DOM are sometimes not visible on T&S in fast market. Ill check with broker anyone having the same issue.


Good Luck Trading!

I'm using a 10 MB up/down fiber and I analyze per trade on ES. If I was to use less than a 5 MB up/down connection I would lose some trades in a fast market. Connection is important when using DOM. Also important is method of compensation your data provider uses for lost data at your end.

Cheers
 

numbertea

Well-known member
257 9
Eurex, in regards to tape displays you may want to look at our QuantTape which has many breakdowns and displays of the order flow information that traders find valuable

Right as far as algorithms there are 2 types: execution algorithms which may have manual trader operating behind them and then there are quantitative driven strategies. I'm not sure if it is possible to pick out an individual algorithm in the futures but what you can do is look for how the aggregate activity is taking shape and look for repeating patterns.

My system uses repeating patterns for entry and exit setups. I base them on order flow indicators I have devised. Sometimes I use matching closes and opens with direction change as markers for support or resistance but mostly I've found that considering price action along with order flow in combination is the most profitable way. I have consistently seen candlestick patterns confirm price moves in the ES but order flow with price move gives actual leading indications for myself.

Cheers
 
 
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