Tape reading, Time and Sales, Order flow

[DionysusToast]

To be honest - the book "Techniques of Tape Reading" is about analyzing charts, it's not about tape reading at all.

Hope you sell it - it's all over the web as a PDF file...

 

[SanMiguel]

To be honest - the book "Techniques of Tape Reading" is about analyzing charts, it's not about tape reading at all.

Know of any decent books that do cover some of it aside from No BS?
Day trader's bible looks ok but don;t think it has the same kind of video explanation...

 

[SanMiguel]

If I had had the time, I would have made a video of this but just thought I would post a trade from today's 1st hour in the YM showing some DOM data.

The New Home Sales news came out 30mins after the open and it was interesting to see the volume in the DOM die down substantially about 1min before release.
The volume of the bid and ask contracts is shown by the orange bar within the red cell or the orange bar within the green cell.
It seems that although the market blasted up through this news report, the volume stayed heavy on the sell side so I was not really sure why the market was moving up -
perhaps there is some data in the volume / touotal contracts traded on the right at each level that I missed?
10mins after the report, we see a long tailed candle on high volume, which was enough reason for me to get short, coupled with
all the contracts still on the sell side but the market had a lot of trouble moving down - again, shouldn't the volume on the ask side have resulted in a move down?
The market just seemed to stall for about 20mins before falling down and I managed to grab about 20 points on half the order and a further 47 points on the remainder (33.5 total).
The images should be in order and the tag on them should say the time...

 

[robster970]

I shorted this scenario too on ES. I just put it down to there not being enough buying pressure to take it materially past the pre-market high especially with those who entered on the bell profit taking around this level. I exited when it looked like there was some strength coming in at the RTH low that was established from the first couple of minutes of the session.

 

[SanMiguel]

I shorted this scenario too on ES. I just put it down to there not being enough buying pressure to take it materially past the pre-market high especially with those who entered on the bell profit taking around this level. I exited when it looked like there was some strength coming in at the RTH low that was established from the first couple of minutes of the session.

Sure but looking through the photos, it looks like the market was moving up even though the volume of sell orders was higher (looked higher). Only thing I could think of was that the sell orders were perhaps luring in the longs somehow but I'm not experienced enough to see that on the DOM. Really I just took a short from the pre market high given the high volume candle.

 

[robster970]

I'm in the same boat as you SM - I couldn't categorically tell you why but I have a suspicion that there was buying going on with offers from these same buyers being lifted all the time. The 'good news' came in at 3pm at which point the buyer(s) sold into the longs who bought the news. Eventually they realise that there is nobody else buying, cover and probably reverse. In the meantime, the likes of you and I play follow the leader.

 

[jules190]

Sure but looking through the photos, it looks like the market was moving up even though the volume of sell orders was higher (looked higher). Only thing I could think of was that the sell orders were perhaps luring in the longs somehow but I'm not experienced enough to see that on the DOM. Really I just took a short from the pre market high given the high volume candle.

This is a common misconception when people initially attempt to read the DOM. Looking at the size of the bids/offers on the ladder alone is not going to help you and is not even the most important thing to look at. The most important thing to look at is the the volume that is actually trading at each price and the effect that this has on the bids/offers. To be fair, a lot of the size on the ladder isn't real and will be pulled before anyone has the chance to trade with it.

For example if the market sells off 5 prices on 200 contracts and then 1000 trade at one price, you can see that someone is stepping up to buy at that price. Then say people start to front run the big buyer but the offer at the price above stays offered, now you know that the people front running the big buyer are going to puke if he runs out of contracts to buy and can't hold the market.

So do you want to front run with everyone else or are you going to sell into theirs bids because you don't think the buyer is going to hold the market!

If you are looking to scalp the DOM, this is how you should be attempting to read it, the size of the bids/offers are really only a fraction of what you are looking for.

As for the No BS, the video is probably the best part and would recommend it to anyone who is looking to do this.

 

[SanMiguel]

This is a common misconception when people initially attempt to read the DOM. Looking at the size of the bids/offers on the ladder alone is not going to help you and is not even the most important thing to look at. The most important thing to look at is the the volume that is actually trading at each price and the effect that this has on the bids/offers. To be fair, a lot of the size on the ladder isn't real and will be pulled before anyone has the chance to trade with it.

For example if the market sells off 5 prices on 200 contracts and then 1000 trade at one price, you can see that someone is stepping up to buy at that price. Then say people start to front run the big buyer but the offer at the price above stays offered, now you know that the people front running the big buyer are going to puke if he runs out of contracts to buy and can't hold the market.

So do you want to front run with everyone else or are you going to sell into theirs bids because you don't think the buyer is going to hold the market!

If you are looking to scalp the DOM, this is how you should be attempting to read it, the size of the bids/offers are really only a fraction of what you are looking for.

As for the No BS, the video is probably the best part and would recommend it to anyone who is looking to do this.

Although I can see the number of contracts traded at a price, it's the number from the whole day and therefore includes the bids and the offers at that price, when price moves back to that level, you first have to remember what the total was and then figure out how many extra were traded at that level.
For example, in the attached picture:
we have more offers in total than bids
328 contracts traded at 11178
For the market to move, the 28 offers at 11179 would either have to be pulled and someone bids 11179 or more than 28 contracts bid 11179?
I can't really see how the volume traded at that level helps as it's historic - ideally I'd need a number traded at that level for the last movement in price.
Gonna need to post a video when I take a subsequent SR trade as it's difficult to explain...

 

[jules190]

Although I can see the number of contracts traded at a price, it's the number from the whole day and therefore includes the bids and the offers at that price, when price moves back to that level, you first have to remember what the total was and then figure out how many extra were traded at that level.
For example, in the attached picture:
we have more offers in total than bids
328 contracts traded at 11178
For the market to move, the 28 offers at 11179 would either have to be pulled and someone bids 11179 or more than 28 contracts bid 11179?
I can't really see how the volume traded at that level helps as it's historic - ideally I'd need a number traded at that level for the last movement in price.
Gonna need to post a video when I take a subsequent SR trade as it's difficult to explain...

You're looking for a change in supply and demand. So in your example, lets say someone buys 100contracts at market. So they lift the 79's, 80's and trade 15 into the 1's...which leaves the 1's offered for 60 contracts.

If someone lifts these 60 contracts and the 1's reload and you see another 100 contracts trade at this price, you have just seen 28 trade at 9's, 57 at 80's and then 160 trade at the 1's. So you can see more people are willing to sell at the 1's. You may be thinking yes, but people are also buying more at the 1's and that's right...but it is the increased trade at this price that you need to be noticing. If you watch the DOM for long enough you get a feel for how many contracts cause a bounce/reversal.

Hope this makes sense!

There really is not any replacement for sitting in front of the thing for hours on end, but this is the kind of thing you need to notice if you are to trade from the DOM.

 

[jules190]

Just read the last part of your post:

"I can't really see how the volume traded at that level helps as it's historic - ideally I'd need a number traded at that level for the last movement in price."

I use TT and this shows the number traded for the last price movement, this is the important information not the total contracts traded at that price for the day. I don't know what software you are using so don't know whether it shows this on yours. Maybe you should pull up a time and sales as well.

 

[DionysusToast]

Good stuff from Jules here in my opinion.

San Miguel - good stuff too.

In terms of tracking actual contracts you have a choice. 1) You can pull up Time & Sales, ensuring you see "At Bid" and "At Ask". At Bid = market sell order (colour it red), As Ask = market buy order (colour it green). Keep 1 time and sales window showing all trades and for the YM, keep a second showing all trades over 10 contracts.
2) You can track the 'total volume' in your head - make a mental note of total contracts today the few levels above & below. Let's say ask is 50 and total contracts is 20, if no offers are pulled, the total contracts should be 70 when it passes through that level. If it's more than 70 - someone added contracts, if it's less that 70, someone pulled them.

Infinity have a DOM with total contracts that you can clear out whenever you want - that might help too. I actually have my own DOM I programmed up to track the actuals but I know people that get on well with Time & Sales.

Remember - bids and offers are not real, they are stated intention and if somoene wants to buy, they may appear to be a seller on purpose to trick you into thinking it's going down.

 

[wackypete2]

Remember - bids and offers are not real, they are stated intention and if somoene wants to buy, they may appear to be a seller on purpose to trick you into thinking it's going down.

I'm too gullible and get tricked easily
Seriously, I never could get the hang of the game playing that goes on with DOM trading. Good job those of you that can make it work for you.

Peter

 

[MrGecko]

San Miguel,

try and arrange a go on TT with another FCM - i notice you are with Open E Cry (from the charts you posted) which means you are already trading futures... some of the features Jules has mentioned (which TT has) are really worth the hassle of switching brokers if you want to give yourself the best chance of success... not to mention the things he doesn't mention about the platform, such as the spread matrix etc...

anyhow - try TT, infinity / tradestation / ninjatrader / openEcry aren't even playing the same game.

 

[dribs]

Yeah I agree with Gecko, I'm using TT, they have a few very handy options for traders like us. I've heard another one called Stellar is also pretty decent but not sure how you can get it and I've never used it myself, just seen a few guys who have and they seem to like it. One of the main things with TT(and Stellar I guess) is the cumulative trades, so it solves the problem you're having with trying to add up how many trades went through after the initial lot, TT does that for you, so if it ticks up, the initial lot at the higher price will be green, then it changes to white and adds the rest of the trades on to it as they come through at that same price, so you can see when a 1000+ prints into one price or area for example.

I find the Eurex pretty good for this stuff, I usually trade the Bund, I don't use charts, just watch the order book and its a reasonable market for it. Main thing is to just stick with one market, don't keep swapping and changing, for sure change if you want when you know what to look for, most of the games they play are the same or pretty similar, its just the way they are executed etc. (thin or thick market)

If you stare and trade flat out, record everything you see, jot down ideas you come up with and keep thinking, think contrarily, look for patterns between markets, this does that when that does this etc. If some size in the book is real or not, whether bids or offers are being pulled or taken out, refreshing bids and offers etc. If you really want to learn to do it, you need to put in the hours and you will start to see things.

...oh, and keep track of when POMO days are hehe :whistling

 

[SanMiguel]

1) You can pull up Time & Sales, ensuring you see "At Bid" and "At Ask". At Bid = market sell order (colour it red), As Ask = market buy order (colour it green). Keep 1 time and sales window showing all trades and for the YM, keep a second showing all trades over 10 contracts.

By at bid, do you mean that the market has moved down a tick, ie the sell orders gobbled the bids? I can program the DOM I have but I'll get onto that at a later time, it does show the orders traded at each level but it's a flash so as you say, the T&S will show it a bit more easily.

I'll try and post a vid today as this seems an interesting discussion but I'm only going to focus on reversals in the DOM /chart at present.

YM seems to have many less contracts than the ES. YM regularly only has 100 or less in the book at each price whereas ES is in the couple of hundreds +.

 

[DionysusToast]

"At bid" just means a trade went off at the bid price - doesn't mean the price necessarily ticked up or down. "at bid" also means that the trade was initiated by a seller.

In terms of TT vs other tools, it depends on what you are using it for. For scalping, it'd have to be Infinity or TT. For longer term trades, I think that is less important. As stupid as this sounds, I have my own DOM tailored for the way I like the data presented. If you have a programmable DOM, this might be something worth considering. Bottom line is that TT is the best amongst a bunch of poorly designed products that are flawed in the way they force you to read the data.

 

[MrGecko]

Bottom line is that TT is the best amongst a bunch of poorly designed products that are flawed in the way they force you to read the data.

Disagree here. The front ends that most people here are familiar with are suited to a particular style of trading; there are other styles of trading with front ends to suit - TT is one, amongst others (Eccoware, easyscreen) that have features that most traders here wouldn't know how to use because they don't trade that way - things such as spread matrices, the treatment of implieds, autospreaders, autotraders - not to mention the API.

 

[DionysusToast]

Disagree here. The front ends that most people here are familiar with are suited to a particular style of trading; there are other styles of trading with front ends to suit - TT is one, amongst others (Eccoware, easyscreen) that have features that most traders here wouldn't know how to use because they don't trade that way - things such as spread matrices, the treatment of implieds, autospreaders, autotraders - not to mention the API.

Actually - given the way that people trade, the UI with TT is not well designed. None of the platforms are.

It may be the best available but it certainly is not a good design, given the information that needs to be absorbed.

As an Edit let me add one thing here.... Imaging giving a games designer the parameters of a DOM without ever letting him see one. It would be pretty neat to see what they came up with for a UI. I have no doubt it would b way different from what existing DOMS look like....

 

[vinicius]

Actually - given the way that people trade, the UI with TT is not well designed. None of the platforms are.

It may be the best available but it certainly is not a good design, given the information that needs to be absorbed.

As an Edit let me add one thing here.... Imaging giving a games designer the parameters of a DOM without ever letting him see one. It would be pretty neat to see what they came up with for a UI. I have no doubt it would b way different from what existing DOMS look like....

Which broker would you recomend for e-mini trading with access to TT or Ninja?

tks

 

[DionysusToast]

Which broker would you recomend for e-mini trading with access to TT or Ninja?

tks

It depends on the type of trading. If you are scalping, Ninja won't give you the information you need.

If you are using DOM/T&S to refine entries on longer term directional trades, then Ninja is fine in my opinion.