FiftyEight Fluffs Around In Futures

[fiftyeight]

I just seen this one pop in the DOM on rising volume and around some resistance from yesterday and overnight.

The order at 95 didnt seem to budging and then a couple of orders stacked in front of it which also did not seem to budging. Price seem to respect these orders and got a little pop. I bought at 104. Once the price moved up there was no support behind so I closed both trades out for 17 points profit. It then dropped back down.

No idea if they were real bids but the story seem to be strong enough to buy, but with a lack of volume coming in and in a falling market I was looking for the exit door pretty quick.

With a sample size of 1 who knows if it will work again

 

[Wysiwyg]

With a sample size of 1 who knows if it will work again

With 1440 minutes in a day, this observation could be very random.

 

[fiftyeight]

With 1440 minutes in a day, this observation could be very random.

That was my point????

 

[fiftyeight]

How my day finished

Much quieter afternoon

Many things to look at over the weekend if I get time

I should probably make a rule that I will post if I am trading in the morning so I dont cherry pick winning days

 

[Wysiwyg]

That was my point????

That was my affirmation!

 

[fiftyeight]

I am not too sure of the logic here at all and need to further investigate just having a play around with stuff...

I was playing around with Excel this afternoon and graphed Volume vs Range

If you had a day with huge volume in the morning session but with a tiny range (not even sure these days exist) then the afternoon is likely to trend so to increase the range.

And if there was a large range on tiny volume and no volume is coming in the afternoon session then it is likely to revert back towards the open.

 

[DeepState]

I am not too sure of the logic here at all...

Here is analysis for S&P which shows the same relation. It is for daily data on the front month futures contract for the last 10 years. Please note that spread is divided by closing price to standardize for proportional movement. A 100 point spread when the market is at 1,000 is different to a 100 point spread when the market is at 10,000.

The scatter shows there is a positive relationship as per your chart. The table provided basically says 'this relationship is probably not by luck'. I won't adjust for all the formal stuff, because the point will still stand. You will find this relationship to be near universal for market aggregates.

The implications are not what you are espousing.

What is happening is that, when people trade, they do so partly because they need to change exposure due to portfolio level movements, but mostly because they disagree with each other. Volume is a proxy for disagreement.

Spread tends to be wide when there is uncertainty. In high uncertainty, people have all sorts of opinions and, when they conflict, they trade.

The reason why the relationship is not even stronger is that there are times when volume is low and yet spread is large. This occurs when something hit the market and it re-assessed the valuation. Yet, largely, the market participants agreed about the impact. You can form the obverse argument for low spread and high volume.

The relationship between spread and volume is not likely to lead you in a direction that is money making from the perspective of directionally sourced position taking.

 

[fiftyeight]

Awesome post DS greatly appreciated

A few gems to keep my mind busy this weekend, I am sure ill have a few more questions later.

I love the detailed and well thought out content you often find on ASF, then I realise that I am competing with the same people

 

[fiftyeight]

On sim this morning, lets how I go after a rather large weekend

 

[fiftyeight]

Could not get focused this morning, too early on some too late on others. Barely watching the DOM. After commish I am about flat. Time to call it quits for the morning

 

[fiftyeight]

I will have another crack this afternoon and hopefully spot a few setups to post

 

[fiftyeight]

Pretty much a repeat of this morning efforts. Missed a few and then chased it resulting in less than ideal entries

 

[fiftyeight]

What is happening is that, when people trade, they do so partly because they need to change exposure due to portfolio level movements, but mostly because they disagree with each other. Volume is a proxy for disagreement.

Spread tends to be wide when there is uncertainty. In high uncertainty, people have all sorts of opinions and, when they conflict, they trade.

I have thought about this post over the last few days and the section I have quoted. As I am at the very early stages of understanding the markets, this will make a great starting point when I am attempting to make sense of a situation.

 

[tech/a]

Volume is a proxy for disagreement.

So who wins who loses and what tells you this?

 

[tech/a]

And this


.

 

[Nortorious]

And this


.View attachment 61924

The first three I would say the sellers are winning based on the fact volume has come in and is making lower highs. The fact the bar closed on the lower half is a bit of a clue as well.

Probabilities favour those prices on the respective charts heading downwards (at least in the short term, hard to say how long for without any background context).

The fourth chart, is heading upwards. Based on how I would trade this, each time it made a step up, volume expanded which indicates to me demand is pushing it higher. Not much volume whilst it is going sideways or on down bars. Again play the probabilities and the fourth chart would be heading higher.

Things can change on a dime though, so always have a stop loss in place and trail it....

 

[DeepState]

So who wins who loses and what tells you this?

Some win, some lose. I don't have their names - for the most part. Disagreement simply states they have differing views. It says nothing about who is more correct. If they trade amongst themselves for reasons outside portfolio rebalancing activity (which is small relative to total volume), but don't disagree, they must really like feeding their broker for some reason, including for reasons like getting some thrill/dopamine-hit just for placing a trade (which is a real world phenomenon...as should be amply apparent). The relationship isn't 1-to-1. There is a relationship nonetheless.

There are research pieces into this if you need a door stopper for the weight-test. One of your contacts should be able to get hold of it easily enough.

Here's another example. Much simpler. When ASF threads are full of agreement, volume drops. When there is disagreement, like, say, on religion/politics....you get volume. Pretty straight-forward.

 

[fiftyeight]

Lets see how this goes haha

Looking at the area I highlighted, to me it looks like no real supply came in near the days highs but also a lack of demand from the bull to push it any higher. Sold back down to the lows, where the bull have stepped back in. I would be going long


Second picture the bar you have highlighted finishes on its lows, not convinced either way on this one and would let it play out a few more bars

The pull backs were all supported. The high seen no excessive supply come in and then we have a ultra high volume bar closing in the middle of the bar. I would have a crack at going long but cautious of so much supply suddenly entering

 

[fiftyeight]

The relationship isn't 1-to-1. There is a relationship nonetheless.

Which relationship are you referring to here sorry?

 

[DeepState]

Which relationship are you referring to here sorry?

Between measures of uncertainty/disagreement and volume. For example, your chart showed volume correlated meaningfully with intra-day spread (a proxy for uncertainty).

There is much else that goes on, but the relationship is super-clear from a statistical viewpoint and also evident to people who trade against each other for a living. Without disagreement, there is no market or price discovery in uncertainty.