Tape reading, Time and Sales, Order flow

[DionysusToast]

That would be the Time and Sales, although the originating trader could have split it up (you can't see the T+S in that video)

On any CME based exchange, the trades have been split up anyway now.

Let's say you have bids of 100,200,4,5,24 on the inside to make a total of 333 contracts there & someone puts in a market order to sell for 333 contracts. What you would have seen previously would be a single print of 333 contracts. After the CME made changes (almost a year ago?), you know see 5 prints 100, 200, 4,5,24.

So - small prints don't mean small market orders. They could be a large market order being filled against small limit orders.

Nowadays, a large print at the bid signifies a large limit order on the bid side as well as a potentially larger market order.

I was working on a new Time & Sales which effectively reconstructed these split up market orders but I heard the CME were considering backing out the recent changes after complaints from various traders who rather liked to see the larger prints coming through and what it implied about intent of the bigger traders.

 

[vinicius]

I got a Demo from CQG platform to watch DOM and try to pick something up. It looks completely different. I don’t have a clue what is going on also I don’t have a chart and the time sales to make my mind... Is it something that I have to buy separate?

What you I be looking for? The only thing I see is some pressure at some levels... Which I suppose is S/R is bulls x bears.

Also, what do you guys look for, I mean, what is the average target? Ticks or points?

Tks

 

[SanMiguel]

I got a Demo from CQG platform to watch DOM and try to pick something up. It looks completely different. I don’t have a clue what is going on also I don’t have a chart and the time sales to make my mind... Is it something that I have to buy separate?

What you I be looking for? The only thing I see is some pressure at some levels... Which I suppose is S/R is bulls x bears.

Also, what do you guys look for, I mean, what is the average target? Ticks or points?

Tks

If you are used to having charts up then open the chart and familiarise yourself with the platform before you even bother with the rest.
I don't know about you but I usually take trades at SR zones so I'm going to video the DOM when it gets to a point where I might take a trade and then look it over later if I have to. My normal targets for scalp trades are around 8 ticks on the ES (2pts) - perhaps this will change if I understand the DOM more in future but I'm going to focus on reversals at the moment and how to read when to stay in for the 8ticks plus or when to get out if they are going to jam it through the SR zone - not gonna bother with anything else until I can at least understand reversals in the DOM.

 

[vinicius]

Did you get any good info resource? I used to trade from S/R too, mainly fading big levels and Id like to get deeper into this..

Dionysus, what is a good target for you.. How many ticks or points?

tks

 

[DionysusToast]

Did you get any good info resource? I used to trade from S/R too, mainly fading big levels and Id like to get deeper into this..

Dionysus, what is a good target for you.. How many ticks or points?

tks

Normally, I won't take a trade if I don't think there's at least 3 points in it. It just depends on the type of day the S&P is having. Some says it swings nicely from high to low with a big range and you can grab a considerable amount of it. It's a faders market most of the time.

I'm not trying to scalp though, I'm just using DOM/T&S to confirm an entry.

 

[SanMiguel]

Here's a trade today showing how not to do it
Easier to view on youtube directly after clicking the full screen icon. Change the settings to 720 on YT for higher resolution.
The video is about 6mins long so don't get too bored will you!

Firstly, this is the application I am demoing so I took a similar trade on my live account but what you see on the screen is the demo. I will very often split my trade entry into 2 and usually only add the second half when I see the trade moving my way (I don't always do this, the risk is the same around about 20 ticks on the YM (8 on the ES) though I often tighten this very quickly). In the attached video, I actually average into the trade for the second half - don't do this at home

You will see the YM chart along with the DOM on the side.
The red line on the chart is a support line from 3 days ago.
There was a move down on heavy volume and then the volume was lightening up - there had been about 1091 contracts traded at 11,013 and we hadn't moved down any ticks for the last few seconds or so and I decided that was time to enter a long (1 contract).
Price pauses for a bit and then all of a sudden, bam, the price just drops 4 ticks - I'm pretty sure that was a variation of the smackdown move talked about in his video and that should have been a signal to get out of the long immediately and reassess.

...but I don't as I'm only half in and awaiting a 20 tick stop loss...

Price continues downward with the current momentum (again maybe that was a signal to be scalp short but I don't generally like doing that at support areas), before I start to see a load of contracts waiting at the 11,000 round number mark. We eventually hit 11,000, 99, 98 and between those 3 prices about 550+ contracts trade and we start to move up a little bit so I take that as an opportunity to get into the second half of the trade for a scalp. The rest of the vid shows the move up and exit for around 16 ticks or so (averaged 8 ticks).

Feel free to ridicule me - more interested in the analysis of the numbers in the DOM
It was actually a heavy morning for volume TBH, non POMO day sell off and mutual fund trade settlement possible profit taking.

 

[SanMiguel]

also, what is the basic difference between to "go offer" and to "go bid"?
Is it simply move down a tick and move up a tick?

 

[DionysusToast]

SM - video was OK - but to get a grasp of why you entered - it'd be nice to see a the market action prior to the point you got in - a couple of mins would be fine.

This my only trade today, still not doing much after 40 mins so I'll quit here.

And the excerpt from my trading log - this is abbreviated notes but should make some sense.

T1 - 9:42
Was looking weak at 1185.50 - trouble getting through it & not many buy orders going off. It came back & did the same again. Shorted it, 1185.75. Went 3 ticks against before hitting first target. Second target 1181.75 but got my eye on 1180. Moved stop to 1186.75. Bounced off 1183. Next run through - couldn't break 1183.25 so pulled stop to B/E. Eventually pulled target up to 1183.25 as market started a sideways move & I was tired. Exit 1 + $75, Exit 2 + $125. Total +$200.

 

[DionysusToast]

also, what is the basic difference between to "go offer" and to "go bid"?
Is it simply move down a tick and move up a tick?

Lets say Inside Bid is 1150 and offer is 1150.25.

You might see a lot of buying and as such, you'd expect price to move up and for 1150.25 to be the new inside bid. When people say 'go bid' this is what they are talking about, the ability for that price to become the inside bid and to actually hold it. So - if it can't 'go bid' it basically means the buying is not having any impact, it can't move to a level and hold it, which would be a sign of weakness.

 

[SanMiguel]

Lets say Inside Bid is 1150 and offer is 1150.25.

You might see a lot of buying and as such, you'd expect price to move up and for 1150.25 to be the new inside bid. When people say 'go bid' this is what they are talking about, the ability for that price to become the inside bid and to actually hold it. So - if it can't 'go bid' it basically means the buying is not having any impact, it can't move to a level and hold it, which would be a sign of weakness.

That's fair enough but when the bid/ask is 1150/1150.25, you sometimes see the contracts all being traded at 1150.25, then it might flip to flashing 300 contracts at 1150, then back to 50 contracts at 1150.25 without the bid/ask ever moving. I suppose that for the bid to move up then all the bids must consume all the offers at 1150.25...
anything flashing at 1150 is a sell order going through and anything flashing at 1150.25 is a buy order being traded FROM a seller...

I would expect that if a 300 flashed up at 1150 then it would very likely move up a tick for a moment...seems to be what I have been seeing in the ES.

 

[DionysusToast]

The market will tick up and down constantly depending on wether the last order was a market sell or buy. Last price is just switching between bid & ask which are not moving. There's nothing at all to read into those movements in my opinion.

 

[petewood]

I have noticed that on equity time and sales you see more and more ADF.

Are these dark pool sales?

 

[Chartsy]

started tape reading today :O on YM but it's really boring and atm not even trending

 

[nepenthean]

If someone experienced would not mind answering my question...

I understand how the offer price is lifted: Contracts are bought up and the price moves up. I understand how the bid price drops: Contracts are sold to satisfy demand the the price moves down.

How does the offer price move down? Is it a consequence of the bid dropping?

Thanks!

 

[barjon]

bid and (offer) prices are exactly what it says on the tin. They are the highest (lowest) orders on the book. Thus, if no-one will buy what is offered at the price then people who want to sell will offer at a lower price

 

[nepenthean]

bid and (offer) prices are exactly what it says on the tin. They are the highest (lowest) orders on the book. Thus, if no-one will buy what is offered at the price then people who want to sell will offer at a lower price

Thanks.

Would you mind describing what determines the spread? Is it liquidity? It seems it remains in flux.

 

[SanMiguel]

If someone experienced would not mind answering my question...

I understand how the offer price is lifted: Contracts are bought up and the price moves up. I understand how the bid price drops: Contracts are sold to satisfy demand the the price moves down.

How does the offer price move down? Is it a consequence of the bid dropping?

Thanks!

You are going to sell (offer) me 10 oranges for $10 but I only want to buy (bid) them at $5 so I either have to increase my bid or you have to lower your offer.
A 2nd buyer comes in and bids $7 also reducing the spread. You accept $8 for them and the deal is done.

It's the same process in the market except with many buyers and sellers.

Actually, the spread is a bit more complex as it has things like brokers and market makers playing with it. I'm surprised we never get a zero spread on the ES even for a few seconds, it always seems to be 1 tick. Some stocks will move to zero spread on occasion.

 

[Lodian1019]

Are there any good books available on how to read the DOM, time and sales and order flow?

I have found limited information on this topic.

Any info would be appreciated.

Thanks

I would strongly recommending looking at the Market Delta platform I have attached some screen shots. My trading is based around order flow and profile. If however you use Ninja Trader perhaps getting hold of the GOM ladder which is free, would be worth your time.
Also take a look at the Commitment of Traders. Which the GOM ladder shows its good for catching institutional washouts.

Lodian

 

[dominationFX]

Excellent conversation with much food for thought. Reading the tape and all the rest of it, is where I am now at, with my Price Action Trading exploits. Anybody in London who is a PA trader, blah blah...

 

[nepenthean]

How do transactions go off below bid or over offer?

Thanks in advance.