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Price Volume Analysis Trading with the Essentials

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Old 27-11-2013, 10:44 PM
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Originally Posted by NT View Post
We retailers are at best primitive.
HFT are sharks for liquidity, they are pseudo front runners, even then also their edge off late hv eroded to non viable level.

may be what the retailer attempts is to aline himself with the sharks, not to become a shark
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Old 26-01-2014, 12:39 AM
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A couple of games you might see: tape shows huge line of contracts trade at a specific price level (lets call this level X for now). On level 2, price appears to have enough momentum and volume to take out level X. However, someone is standing firm there not showing his hand entirely and even when price breaks that level X by one tick, you can see contracts getting dumped taking price back below X. What is this indicating?

First, lets say you are an institution with 10,000 contracts you need to sell. Are you going to dump this at the market and cause an artificial sell off? No. You can get a much better entry by distributing throughout the day whether it be the entire morning session or in the afternoon. If you're sitting on an order from several hedge funds to short 10,000 contracts in total... you want to short into the rallies. So what you are going to do is to hold the ask at a desired level. You might even by a few contracts to support any decline... but you are going to be distributing alot more contracts than the fake support you are creating. So some games you can play is:

Hold the ask and then withdraw the ask causing an impression that the selling is over. Instead of posting a monster 5,000 lot size at the ask, post 50. When buyers start buying at the ask, start dumping without exposing your hand on level 2. (obviously this is visible on tape)

Withdraw the ask and then buy 500-1000 lot just to bring price up by a few ticks. This fuels momentum as traders think resistance is over. Then dump another 2000-3000 to take price back to the breakout point.


Understanding order flow offers the ability to enter trades early. Do you see strong order flow coming in that has the potential to take out the high? Does it show that the pullback is likely to hold? Are you sensing a breakout from a consolidation with the sudden buying/selling interest you see on tape? Did the level 2 bid/ask just get thicker? Thinner? What do all these information mean?

The answer to these questions will be my crux of research for the next few months. I intend to come up with a method of not just detecting where the big orders started, but also know why the big order chose that price level. My approach is mixing conventional order flow logic's into a quantitative framework, adding more logic to the existing principles & decode the game of orders with a higher probability.
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