Half baked trading scheme (Market Depth)

[LifeChoices]

I've got a half baked trading scheme that I thought I'd put out there for flammatory comments by experts - who know stacks more than me.

The past few weeks I've been scraping live data to identify some buying opportunities.

What I've been looking for are stocks with a daily turnover of over $1M with very high buying to selling ratios and following them.

MSB is an example of that - for the past few days at least it's consistantly had roughly 300% more buys than sells, and its steadily rising in price.

The other sort of stocks I look at are those that are bottoming out and at their lowest ever point for some time - CVN, HST and ERA are examples I've identified. As they bottom out the buy/sell ratio is strongly negative. When they bottom out that's when the the ratio turns around. I bought CNV a few days ago at 0.21 - the point that buyers came in - a few days later the ratio is still at about (150%) and the stock has gone up almost 20% - I'll sell it when the ratio goes below zero.

HST bottomed out 29 April and now has very strong ratio (250%) and has gone up roughly 40% and ERA looks to me as if it's still got some time to go before it bottoms out (-30%) - I'll keep watching.

Is this trading scheme totally half baked and idiotic?

 

[Knobby22]

Re: Half baked trading scheme

I've got a half baked trading scheme that I thought I'd put out there for flammatory comments by experts - who know stacks more than me.

The past few weeks I've been scraping live data to identify some buying opportunities.

What I've been looking for are stocks with a daily turnover of over $1M with very high buying to selling ratios and following them.

MSB is an example of that - for the past few days at least it's consistantly had roughly 300% more buys than sells, and its steadily rising in price.

The other sort of stocks I look at are those that are bottoming out and at their lowest ever point for some time - CVN, HST and ERA are examples I've identified. As they bottom out the buy/sell ratio is strongly negative. When they bottom out that's when the the ratio turns around. I bought CNV a few days ago at 0.21 - the point that buyers came in - a few days later the ratio is still at about (150%) and the stock has gone up almost 20% - I'll sell it when the ratio goes below zero.

HST bottomed out 29 April and now has very strong ratio (250%) and has gone up roughly 40% and ERA looks to me as if it's still got some time to go before it bottoms out (-30%) - I'll keep watching.

Is this trading scheme totally half baked and idiotic?

Sorry, don't get it. What do you mean by more buys than sells?

 

[tech/a]

Re: Half baked trading scheme

Are you talking depth of market?
On the buy and sell sides?
Or do you have someway of determining if a sale is buying or selling??

 

[LifeChoices]

Re: Half baked trading scheme

Sorry, don't get it. What do you mean by more buys than sells?

Yeah, not explained real well - here we go:



ratio = ((254483 - 80300)/80300)*100) + %
buy sell ratio of MSB = 217%

 

[prawn_86]

Re: Half baked trading scheme

LifeChoices,

half (or at least a lot) of order in the queue are spoof orders that will be pulled beforehand. Both sides tend to put large orders in to try and give the impression there is more of one than the other.

There is no guarantee that any of those sales will even go through.

 

[Gringotts Bank]

Re: Half baked trading scheme

The Neilsen Smart Money Indicator works this same way. Identify total buyers vs total sellers and show those that are heavy on buyers. I'm sure that the balance of MD is a reliable edge, and if you can make it work, good on you! Where are you screen scraping from? Does your broker allow this? Show us ya spreadsheet!

 

[tech/a]

Re: Half baked trading scheme

Been tried before by many.
The problem is that when selling becomes Fear then you wont see it in depth
when buying becomes greed you wont see it in depth.
Business will be conducted "At Market".---so you wont have a leading indicator.

 

[skc]

Re: Half baked trading scheme

I think the buyer vs seller ratio is useful but not 100% reliable. I think coupling that observation with other chart pattern (e.g. share has fallen a long way) may increase your edge.

But what you can't rely on is the buy/sell ratio to remain the same in the next week, day or hour. So the bigger challenge is how long you hold / when you sell.

BTW how do you scan for that with commsec? Or do you just keep trying different quotes and refresh?

 

[LifeChoices]

Re: Half baked trading scheme

Been tried before by many.
The problem is that when selling becomes Fear then you wont see it in depth
when buying becomes greed you wont see it in depth.
Business will be conducted "At Market".---so you wont have a leading indicator.

I've really been watching HST and CVN closely - I put my money where my mouth was with CVN.

As they were both bottoming out there was no support - the ratio was strongly negative, same goes for ERA right now. Then I could see this negative getting less and less as more buyers came in the ratio reversed. Now the price is going up and the ratio is quite strong - over 100% If I set up some alerts to notify me when the CVN ratio hit's zero, I'll sell regardless of the price and I'll buy ERA, when that ratio goes above zero.

Surely fear shows up in the ratio - I think I was seeing it in HST and CVN as they were going down.

 

[tech/a]

Re: Half baked trading scheme

Its only my opinion.
You can discard it from your own experience.

 

[Boggo]

Re: Half baked trading scheme

Yeah, not explained real well - here we go:

ratio = ((254483 - 80300)/80300)*100) + %
buy sell ratio of MSB = 217%

If you applied that theory then DMA should be rocketing upwards should it not ?
.

 

[LifeChoices]

Re: Half baked trading scheme

If you applied that theory then DMA should be rocketing upwards should it not ?
.

Stocks with under $1M daily turnover don't come into my radar.

 

[sammy84]

Re: Half baked trading scheme

Agree with majority of the posts here. Whilst the ratio does give some indication of the buyers and sellers on sidelines, the larger order parcels are typically brokers playing silly buggers. There is a large chance the order will be adjusted, withdrawn or reversed depending on the underlying price action. The ratio in isolation is about as useful as a vendor bid is at a real estate auction. Watch long enough and you will see what we mean.

 

[pixel]

Re: Half baked trading scheme

Stocks with under $1M daily turnover don't come into my radar.

I reckon you've got a very good pre-filter, which ought to define -

• long-term Low
• sufficient market interest

When you then find significantly more bids than offers, I guess you can ignore the "fake" ones because there's got to be enough genuine buy interest left to get you a winner.
Keep us posted how your method performs over a longer time and larger number of trades.

 

[LifeChoices]

Re: Half baked trading scheme

BTW how do you scan for that with commsec? Or do you just keep trying different quotes and refresh?

I wrote a script that auto logs on to my account and scrapes data for any stock I choose - usually my watchlists, I then just worked on different algorithms and watched them, I thought the buy/sell volume ratio thing was particularly interesting to watch.

The next step I want to do is to hook it up to a timer so say every couple of minutes it will fetch data from chosen stocks and send me an alert if some matched criterea is reached. ie CVN < 0, ERA > 0

I have another script that mines the ASX site every day for all data. From that and my own research I develop my watchlist, I like stocks with turnover above 1M with big falls gains in past week/month/year. This is limited to about 10 - 20 stocks.

 

[Boggo]

Re: Half baked trading scheme

Stocks with under $1M daily turnover don't come into my radar.

Ok, this one then
.

 

[Gringotts Bank]

Re: Half baked trading scheme

life, Turbo Trader already does this and more. It gives me a little *star* next to the stock when the volume switches from seller-heavy to buyer-heavy. It's pretty expensive but a nice layout and does a lot more than MD, all in real time!

 

[tech/a]

Re: Half baked trading scheme

http://au.finance.yahoo.com/gainers?e=AX

refresh this every 30 mins and youll see the same.

 

[Boggo]

Re: Half baked trading scheme

life, Turbo Trader already does this and more. It gives me a little *star* next to the stock when the volume switches from seller-heavy to buyer-heavy. It's pretty expensive but a nice layout and does a lot more than MD, all live.

One that I do hold in my SMSF is ILU, it has actually done a reversal since midday from being seller majority volume to now being buyer majority volume.

Does that type of scenario show up during the day or is it at EOD ?

 

[Gringotts Bank]

Re: Half baked trading scheme

Live. Also does some nice comparisons with yesterday's volume.