Market Depth based Scalper

[A Dashing Blade]

. . .

. . . if "bump" doesn't budge, but it is steadily "eaten" by the market, than most likely market is going to break out through that level, and it is going to be a big brake out.

If "bump" disappears as soon as it is touched, in other words it was just "bluff"

. . .

Absolutely agree.

 

[RichieE]

Absolutely agree.

That's very interesting... I'm going to have a look at that. I tend to watch out for the icebergers. They are annoying since they tend to stop 'drip feeding' the market right at the time I decide to join the queue.

 

[insight2]

I hope that I am not stilling this thread. Just want to put my thoughts together on this subject.

"Flipper" or "spoofer", like Paul Rotter of EUREX fame, would present a big limit order on bid. This game would particularly screw the spreaders who are scalping single ticks, since their orders would get filled automatically, on the back of the liquidity provided by "spoofer". This would explain ‘size as a magnet’ adage, as well, this would provide fuel for small market rise. Market can now only go up, while spreaders have their buy stops hit.

Please, check attached "paul-rotter-trader-monthly.pdf" file on:
http://www.trade2win.com/boards/general-trading-chat/26622-flipping-2.html#post381395

There he would make small profit by covering stops of the shorts that are panicking. Once this action lifted the price, he would possibly go short, but through market orders, so he is less visible. Than he would reverse, through his less visible market orders and slam market downwards, breaking through the level of the large bid limit order he started with.

Once under the original large bid limit order level, he is short and he needs to cover (buy). Well, there would be lots of guys bracketing narrow price ranges with stop orders. He would cover (buy) as their sell stop orders are automatically hit and come out flat, with double profit.

So, it is two leg approach: small profit leg is cleaning smaller participants and than bigger profit leg on the way down, possibly cleaning stop orders, under the price range. It is critical for "flipper" ("spoofer") to have larger size than all the small guys in a given moment, so he can push them around. I bet he is very shy during the opening or during non farm reports. As well, he is profiting from unattended automatic orders, both on his entry and exit.

This is the game I taped on video few times, on emini Dow Jones, around 7-10am London time. At that time US futures are really slow, so it is easier to understand them. Its only now, through cross referencing ideas in this and other threads, that I am starting to understand what I've seen. In DJ, it happens just few times a week, not once every hour of every day, because "flipper" needs to count on surprise and doesn't want you to develop counter strategy. He possibly has a way of seeing stop orders, under the price range, as well.

Anyway, market formation to look for, looks like a very tight, orderly, low volume price range, usually preceded by momentous move 2-3 times longer than range's depth.

This game must be as old as markets themselves.

cheers, dejan

Question:
Level II, aka DOM, aka book, is showing limit buys & sells. How can one see the stop orders?

 

[grantx]

Dejan,

“How can one see the stop orders?”

I should think they can be assumed to be at various levels – high/low support/resistance, pivots, fibonnaci, etc.

Grant.

 

[scalp]

Can anyone tell me what is the average number of lots/per price on the Eurostoxx50 future contract nowadays?

 

[SFL Trader]

Example, let's say scenario where "normal" market size at any one price is of the order of several hundred.

Lets say someone comes in with an order to buy 2500 lots 5 points below the current bid.

Hmmmmm, scalpers are now going to be thinking "I can put an order in to buy a 5 lot 4 points below the current bid knowing that I should be able to lean on that 2500 lot to support the market ie probable max loss of only 1 point"

So, in this scenario, suddenly the scalpers are looking to buy 4 points below the current bid, liquidity falls off a bit and, hey presto, the price falls away 4 points as if magnetically drawn to that 2500 lot.

BUT . . . lets say the 2500 lot guy was a really nasty bit of work, he'll wait till the scalpers had been filled ie were now long, pull his 2500 lot order, sell, say, 1000 to push the market a couple of points lower, all the scalpers, expecting a max 1 point loss are now looking at 4 or 5 point losses, they panic, liquidate their longs into a falling market, market falls even more, scalper closes off his short 1000 lot and goes down the champagne bar.

So, point is, you simply don't know what are "real" orders.

Great post. This happens all the time. Especially in the treasury markets.

This is the danger in leaning on prices. It's unlikely that the guy bidding will actually sit there and buy everything for which he's bid unless:
a) he's a spreader and is already short in a related market or
b) he's looking to cover a large short position he already has in this market

and in scenario b, he's not going to let that order sit there. He's going to pull it and when the longs who are leaning on that price try to sell that price, he's going to buy...a few hundred at a time. If you really want to buy and you know no one is going to hit into 2500, why leave the bid there?

 

[SFL Trader]

I hope that I am not stilling this thread. Just want to put my thoughts together on this subject.

"Flipper" or "spoofer", like Paul Rotter of EUREX fame, would present a big limit order on bid. This game would particularly screw the spreaders who are scalping single ticks, since their orders would get filled automatically, on the back of the liquidity provided by "spoofer". This would explain ‘size as a magnet’ adage, as well, this would provide fuel for small market rise. Market can now only go up, while spreaders have their buy stops hit.

Please, check attached "paul-rotter-trader-monthly.pdf" file on:
http://www.trade2win.com/boards/general-trading-chat/26622-flipping-2.html#post381395

There he would make small profit by covering stops of the shorts that are panicking. Once this action lifted the price, he would possibly go short, but through market orders, so he is less visible. Than he would reverse, through his less visible market orders and slam market downwards, breaking through the level of the large bid limit order he started with.

Once under the original large bid limit order level, he is short and he needs to cover (buy). Well, there would be lots of guys bracketing narrow price ranges with stop orders. He would cover (buy) as their sell stop orders are automatically hit and come out flat, with double profit.

So, it is two leg approach: small profit leg is cleaning smaller participants and than bigger profit leg on the way down, possibly cleaning stop orders, under the price range. It is critical for "flipper" ("spoofer") to have larger size than all the small guys in a given moment, so he can push them around. I bet he is very shy during the opening or during non farm reports. As well, he is profiting from unattended automatic orders, both on his entry and exit.

This is the game I taped on video few times, on emini Dow Jones, around 7-10am London time. At that time US futures are really slow, so it is easier to understand them. Its only now, through cross referencing ideas in this and other threads, that I am starting to understand what I've seen. In DJ, it happens just few times a week, not once every hour of every day, because "flipper" needs to count on surprise and doesn't want you to develop counter strategy. He possibly has a way of seeing stop orders, under the price range, as well.

Anyway, market formation to look for, looks like a very tight, orderly, low volume price range, usually preceded by momentous move 2-3 times longer than range's depth.

This game must be as old as markets themselves.

cheers, dejan

Question:
Level II, aka DOM, aka book, is showing limit buys & sells. How can one see the stop orders?

"As old as the markets themselves."

Indeed. While there's nothing unethical about flipping, it reminds of the stories I've read about "bucket shop drives" which took place nearly 100 years ago. Things don't change much.