George,
Briefly,
Look at the speed at which orders are going through - fast or slow?
Which predominates - buys or sells?
What sizes of trades are going through - large or small, and on which side are they?
If buys dominate, are the sizes larger than the sells (there may be more buys, for example, but the sizes may be small compared to the sells - this suggests a more bearish bias).
Also watch the DOM to see the interplay.
It's late so that will do as a starter. Ask more questions and I'll try to expand.
Grant.
Briefly,
Look at the speed at which orders are going through - fast or slow?
Which predominates - buys or sells?
What sizes of trades are going through - large or small, and on which side are they?
If buys dominate, are the sizes larger than the sells (there may be more buys, for example, but the sizes may be small compared to the sells - this suggests a more bearish bias).
Also watch the DOM to see the interplay.
It's late so that will do as a starter. Ask more questions and I'll try to expand.
Grant.
timsk
Legendary member
- Messages
- 8,727
- Likes
- 3,424
Hi George,
Just to add to Grant's comments . . .
Be aware of - and beware of - fluctuations in the spread. In a slow moving market these are likely to be minimal, but will become more noticeable in a fast moving one. You will observe that one half of the spread often remains static while the other half moves away. For example, suppose price has tested a key level of support and the indications are that there's likely to be a breakdown. The bid drops, but the ask remains where it is and the spread widens dramatically. One of two things are likely to happen next: either the bid will rise back up and the ask remains firm and / or it starts to rise itself (i.e. the breakdown fails) - or, the ask 'pops' down as sellers realise that the can't get the higher price that they wanted. Taking advantage of all of this is difficult without direct access and Level II skills. The bottom line is to be very wary when you see the spread widening as it can snap shut very quickly and, when it does, the resulting move can be equally fast. Very nasty if you're on the wrong side of it! I tend to watch from the sidelines until things settle down a bit.
Tim.
Thank you, Grant, for taking the time to write down the very helpful information regarding Time & Sales. I will begin looking at GG's Time & Sales today keeping the information you have provided me in mind. I now feel that I have a focus: speed, size, do buys or sells dominate.
Please explain what DOM is. I don't know. thanks again, -- george
Thank you, Tim, for adding to Grant's comments regarding the fluctuations in the spread. You have made the Time & Sales issue a lot more subtle than I ever imagined.
I will watch GG's Time & Sales today keeping in mind what you have written. I would like very much to see all of what you and Grant have told me in action on GG's Time & Sales - I mean be on top of what is going on - before your responses I had no clue. I will tread carefully at first and try to make some paper trade predictions to gain confidence.
thanks, -- george
George,
Here’s something to consider when you are about to open a position.
Assume sizes all levels on both sides (bid and ask) on the DOM are showing 100. A few trades go through on the offer (someone is buying). Now the offer is showing only 5 lots . You have a sell signal and sellers are adding pressure. Given only the information above, would you sell now?
I would wait until that 5-lot on the offer is lifted (bought) and the price ticks up. This may be a temporary blimp and your analysis re selling is still sound. But regardless of the direction of price, and large sizes at every level, 9 times out of 10, that small lot will be taken even if all the pressure is on the opposite size with large sizes traded. So you save a tick – big deal. But if you’re scalping, it’s significant.
Another example. Let’s assume the current price is 100 offered. You’ve identified a good entry point/price to buy at 105. Again, all levels including the inside market (current bid and offer) price are showing size of 100. Do you enter a buy at 105 with 100 lots offered? No. Similar to above, wait until the size starts reducing to say, 10 lots. The smaller the size, the more likely it will be lifted (bought).
By using the two approaches above, your closing side is already at breakeven as opposed to the usual 1-point loss (or whatever the difference is in the spread).
Further, this avoids a premature entry especially where sizes are large – by the time half the contracts have been bought/sold, the market could be heading in the opposite direction and your on the wrong side.
The reverse of above also applies to sells and exiting positions
You could lose out if the market suddenly starts trading in large sizes and a number of levels are taken out faster than you can respond– you miss your entry. So keep an eye on Time and Sales for changing sizes, bias or speed.
Grant.
Here’s something to consider when you are about to open a position.
Assume sizes all levels on both sides (bid and ask) on the DOM are showing 100. A few trades go through on the offer (someone is buying). Now the offer is showing only 5 lots . You have a sell signal and sellers are adding pressure. Given only the information above, would you sell now?
I would wait until that 5-lot on the offer is lifted (bought) and the price ticks up. This may be a temporary blimp and your analysis re selling is still sound. But regardless of the direction of price, and large sizes at every level, 9 times out of 10, that small lot will be taken even if all the pressure is on the opposite size with large sizes traded. So you save a tick – big deal. But if you’re scalping, it’s significant.
Another example. Let’s assume the current price is 100 offered. You’ve identified a good entry point/price to buy at 105. Again, all levels including the inside market (current bid and offer) price are showing size of 100. Do you enter a buy at 105 with 100 lots offered? No. Similar to above, wait until the size starts reducing to say, 10 lots. The smaller the size, the more likely it will be lifted (bought).
By using the two approaches above, your closing side is already at breakeven as opposed to the usual 1-point loss (or whatever the difference is in the spread).
Further, this avoids a premature entry especially where sizes are large – by the time half the contracts have been bought/sold, the market could be heading in the opposite direction and your on the wrong side.
The reverse of above also applies to sells and exiting positions
You could lose out if the market suddenly starts trading in large sizes and a number of levels are taken out faster than you can respond– you miss your entry. So keep an eye on Time and Sales for changing sizes, bias or speed.
Grant.
George,
Re DOM. This is the “Depth of Market”. Please refer to the attachment.
This is a typical DOM. There are slight variations between programmes but they all have common features.
The figures at left are the size of trades taken from Time and Sales. This is usually separate from the DOM. Ignore these figures.
The numbers in the central column - 113.71, 113.70, 113.69, 113.68, etc – are price levels (in this example for the German bund contract traded on Eurex).
The figure in the middle column (113.69) corresponding to the top blue figure in the left column (115) represents the best bid price, ie if you sell, this is the price you will receive. For example, you would sell 10 lots at 11.69.
The figure in the middle column (113.70) corresponding to the bottom red figure in the right column right left column (2) represents the best offer or ask bid price, ie if you buy, this is the price you will pay. For example, buy 1 lot at 113.70.
The figures in blue represent the bid side/short side/demand side of the market. They are the buyers – they buy from you/you sell to them, hence you sell at the bid (or hit the bid). The figures themselves are the quantities they are looking to buy, eg there is a buyer of 155 (lots or contracts) at the price of 113.69 (middle column). So, if you were looking to sell 155 contracts or less, you would receive 113.69 (assuming there were no trades before yours). If you wished to sell more than 155 lots, eg 200, you would sell 155 at 113.69 (leaving zero lots available to sell at 113.69), so the remaining 45 lots would be sold at 113.68. As each level of supply is sold out, the price falls to the next price where there is demand (the blue figures).
For buying all this is reversed (I couldn’t be bothered writing it out) including ‘buying’ or ‘selling’.
The figure highlighted in yellow represents the last trade and size of the trade – in this example, we can see 15 lots were bought at 113.70. We know it was a buy because there is no quantity of lots available below the 2 in the right column. However, it could also have been a sale of a remaining 15 lots at 113.70 and the price has consequently fallen. When demand (on the bid) has run out it will either be replaced by new demand or if not, the price will fall and the gap will be filled by supply (right figures in red). The top figure in the Time and Sales at extreme right confirms it was a buy (blue); red would be a sale. This is where also watching Time and Sales is a great help.
The figure in green shows I sold/I’m short (indicated by the minus sign) 1 contract.
Grant.
Re DOM. This is the “Depth of Market”. Please refer to the attachment.
This is a typical DOM. There are slight variations between programmes but they all have common features.
The figures at left are the size of trades taken from Time and Sales. This is usually separate from the DOM. Ignore these figures.
The numbers in the central column - 113.71, 113.70, 113.69, 113.68, etc – are price levels (in this example for the German bund contract traded on Eurex).
The figure in the middle column (113.69) corresponding to the top blue figure in the left column (115) represents the best bid price, ie if you sell, this is the price you will receive. For example, you would sell 10 lots at 11.69.
The figure in the middle column (113.70) corresponding to the bottom red figure in the right column right left column (2) represents the best offer or ask bid price, ie if you buy, this is the price you will pay. For example, buy 1 lot at 113.70.
The figures in blue represent the bid side/short side/demand side of the market. They are the buyers – they buy from you/you sell to them, hence you sell at the bid (or hit the bid). The figures themselves are the quantities they are looking to buy, eg there is a buyer of 155 (lots or contracts) at the price of 113.69 (middle column). So, if you were looking to sell 155 contracts or less, you would receive 113.69 (assuming there were no trades before yours). If you wished to sell more than 155 lots, eg 200, you would sell 155 at 113.69 (leaving zero lots available to sell at 113.69), so the remaining 45 lots would be sold at 113.68. As each level of supply is sold out, the price falls to the next price where there is demand (the blue figures).
For buying all this is reversed (I couldn’t be bothered writing it out) including ‘buying’ or ‘selling’.
The figure highlighted in yellow represents the last trade and size of the trade – in this example, we can see 15 lots were bought at 113.70. We know it was a buy because there is no quantity of lots available below the 2 in the right column. However, it could also have been a sale of a remaining 15 lots at 113.70 and the price has consequently fallen. When demand (on the bid) has run out it will either be replaced by new demand or if not, the price will fall and the gap will be filled by supply (right figures in red). The top figure in the Time and Sales at extreme right confirms it was a buy (blue); red would be a sale. This is where also watching Time and Sales is a great help.
The figure in green shows I sold/I’m short (indicated by the minus sign) 1 contract.
Grant.
Good post!
Buy side, sell side. It's the only way, get on the wrong side and it's all t!ts up, forget it.
But...
This needs perspective, yeh...!
You start selling into buying at the wrong time and you will get your fingers burned. Ok, what are the pro's up to?
Are they accumulating?
Are they distributing?
Are they throwing contracts about to lead you into a false sense of security, about obvious prices?
All this is known in volume and T&S and the book.
As a retailer, you have the easiest job in the world. All you have to do is read the intent, then you are on your way.
Forget sh!t about classical SnR, they are your danger areas, you'll be seen off!
Understand intent!
There is no free money on this planet, buddy boy, good luck.
Thank you, Mr Gecko.
Paul,
Are the pro's accumulating or distributing? I've asked this elsewhere but didn't receive a satisfactory reply. How can we tell? We can assume large trades are pro's but are they opening or closing? And how do treat block trades?
Grant.
Paul,
Are the pro's accumulating or distributing? I've asked this elsewhere but didn't receive a satisfactory reply. How can we tell? We can assume large trades are pro's but are they opening or closing? And how do treat block trades?
Grant.
timsk
Legendary member
- Messages
- 8,727
- Likes
- 3,424
Hi Paul,
Easy if you know how to 'read the intent', which isn't easy at all and therein lies the rub. Of course Paul, if you know something the rest of us don't, I'm all ears . . .
Tim.
Time and Sales and DOM
George, Once again, Grant, you given me an incredible amount of valuable information. There is a lot to study in your latest response. Thank you for taking the time to teach Time and Sales. -- george
George, Once again, Grant, you given me an incredible amount of valuable information. There is a lot to study in your latest response. Thank you for taking the time to teach Time and Sales. -- george
George,
Glad to help. These are my observations. I'm sure there are other tips that would help or maybe no one has anything to add (or point out flaws in what I say).
It may seem a lot to take in but in time it becomes almost automatic; it's just a question of practise.
One common perception I don't agree with is the idea that a 2:1 ratio of bids to offers is indicative of strength of support, ie the shorts (on the bid) are looking to cover (buy from you) in the belief the market will rise. The reverse applies where the ratio is 1:2, ie offers are greater, indicative of weakness.
Ten levels are shown around the current bid/ask. We don't know what lies at the eleventh level. When the price ticks up/down revealing the eleventh level (now the new tenth level), the quantity may be considerably larger and thus reverse the side on which the 2:1 ratio lies. If you’re scalping, it is the first two, possibly three levels which need to be noted.
Grant.
Glad to help. These are my observations. I'm sure there are other tips that would help or maybe no one has anything to add (or point out flaws in what I say).
It may seem a lot to take in but in time it becomes almost automatic; it's just a question of practise.
One common perception I don't agree with is the idea that a 2:1 ratio of bids to offers is indicative of strength of support, ie the shorts (on the bid) are looking to cover (buy from you) in the belief the market will rise. The reverse applies where the ratio is 1:2, ie offers are greater, indicative of weakness.
Ten levels are shown around the current bid/ask. We don't know what lies at the eleventh level. When the price ticks up/down revealing the eleventh level (now the new tenth level), the quantity may be considerably larger and thus reverse the side on which the 2:1 ratio lies. If you’re scalping, it is the first two, possibly three levels which need to be noted.
Grant.
Hi, fides88. I found the following definitions at Investopedia:
What Does Block Mean?
A large amount of the same security bought or sold by institutional or other large investors. There is no official size designation constituting a block of securities, but a commonly used threshold is more than 10,000 equity shares or more than $200,000 of debt securities. What Does Block Trade Mean?
An order/trade submitted for sale or purchase of a large quantity of securities. Also known as "Block Order". Investopedia explains Block Trade
In general, 10,000 shares of stock (not including penny stocks) or $200,000 worth of bonds would be considered a block trade
--george
I am also now getting a bit confused with the level two and T&S screen. I see the orders coming in and printing but often, they are at prices that are way off the current Bid/Ask.
Eg a share could be at $35.00 Bid and $35.02 Ask. Many trades go through at these prices but then suddenly a trade will go through for $35.60 or $34.55 or even further from the current price.
Can anyone explain why this is? It makes it confusing to apply the previous advice with such strange prices printing off.
thanks
Coop
Eg a share could be at $35.00 Bid and $35.02 Ask. Many trades go through at these prices but then suddenly a trade will go through for $35.60 or $34.55 or even further from the current price.
Can anyone explain why this is? It makes it confusing to apply the previous advice with such strange prices printing off.
thanks
Coop
DionysusToast
Legendary member
- Messages
- 5,965
- Likes
- 1,501
coopster - you may have bandwidth issues - I have this happen to me sometimes when I have too much data coming in.
Set your software to bring in only the last 300 sales upon opening T&S and that will help cut down the initial load. If it persists, try upgrading your network or cut down on the amount of symbols you have on your screens.
Note though - at the start of the day - the above is quite normal. Also - sales do go through above the ask & below the bid but they should be marked as such and are not the majority of transactions.
Set your software to bring in only the last 300 sales upon opening T&S and that will help cut down the initial load. If it persists, try upgrading your network or cut down on the amount of symbols you have on your screens.
Note though - at the start of the day - the above is quite normal. Also - sales do go through above the ask & below the bid but they should be marked as such and are not the majority of transactions.
