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Order Flow - Achieving the mindset

  • #2,441
  • Jul 12, 2011 6:04pm Jul 12, 2011 6:04pm
Quote
it's dog eat dog out there. I think he is referring to the "pro's" having retail accounts as well as institutional to hit it with as much as they can. You would be able to get more liquidity this way instead of just running with one straight institutional account which may not provide you with enough liquidity, especially during illiquid times which is the favored time to strike.

I guess what makes them pro's is that they are ex-interbank traders with contacts, as well as enough cash to move the market.
Yeah it's just cool that we can ride their liquidity. It is pretty neat how they actually do it. I wonder how organized they get.
Cautiously optimistic. . .
  • #2,442
  • Edited 6:19pm Jul 12, 2011 6:09pm | Edited 6:19pm
Quoting Tact1cal
Yeah it's just cool that we can ride their liquidity. It is pretty neat how they actually do it. I wonder how organized they get.
If I were able to swing up to 1 yard for 30-40 pips profit.... I would get pretty organized.
  • #2,443
  • Jul 12, 2011 7:46pm Jul 12, 2011 7:46pm
Hmm, I don't buy it. 1 yard in a few seconds would move EUR/USD 200-300, pips, not 30-40.
  • #2,444
  • Jul 12, 2011 7:52pm Jul 12, 2011 7:52pm
Quoting Adal
Hmm, I don't buy it. 1 yard in a few seconds would move EUR/USD 200-300, pips, not 30-40.
that depends, but 1 yard on EU in a few seconds... 200-300pips? no, that I doubt. Anyway, he stated "anything up to 1bln"
  • #2,445
  • Jul 12, 2011 7:52pm Jul 12, 2011 7:52pm
Quoting Adal
Hmm, I don't buy it. 1 yard in a few seconds would move EUR/USD 200-300, pips, not 30-40.
Heya Adal,

Depends on if you're still going by the 5mio/pip quoted in the OANDA paper..but from what I've seen of late I wouldn't be surprised if that figure has jumped to 20mio/pip. I don't have any official sources though, just viewing market impact from orders of known size which happens once a blue moon. Add in having to maul through the offers/bids that would be ahead of those stops and I think it's quite credible.

Regards,
xXTrizzleXx
  • #2,446
  • Jul 12, 2011 8:13pm Jul 12, 2011 8:13pm
Average interbank trade size decreased, not increased. So I find it hard to believe that there is 20 mio per level when the market is fast. Because:

The books are now run by HFT algos. They have orders on all the levels. When you hit the top of the book, they give you the liquidity and they watch closely. If immediately you hit them on the 2nd and the 3rd level, they cancel the orders on all the other levels. We're talking microseconds here. This is how they detect huge market orders. They only return when the market stabilizes.

So you would get good fills for the first 10-20 mil of that bln order, but then watch out.

Then, after the drop, the mean reversion algos will kick in and start fading the move, competing with you when you'll try to close the position. And you'll have a huge position to close. More slippage.

EDIT: What I'm trying to say is that you may have let's say 20 mio per pip (through I believe the Oanda version more) when the market is moving slowly, but when shit gets serious, that liquidity quickly disappears. If you are trying to make the spread, you don't want to take part in directional moves, because that leaves you with inventory. And a lot of the liquidity is provided by the market making algos.
  • #2,447
  • Jul 12, 2011 8:27pm Jul 12, 2011 8:27pm
Quoting Adal
Average interbank trade size decreased, not increased. So I find it hard to believe that there is 20 mio per level when the market is fast. Because:

The books are now run by HFT algos. They have orders on all the levels. When you hit the top of the book, they give you the liquidity and they watch closely. If immediately you hit them on the 2nd and the 3rd level, they cancel the orders on all the other levels. We're talking microseconds here. This is how they detect huge market orders. They only return when the market stabilizes.

So you would...
true, they would probably use what they needed to get to the stops where they would liquidate. I'm sure the position isn't built entirely within seconds when within reach of the stops. They might use "anything up to 1bln" to get the job done perhaps.

I also think with that kind of money to throw around, it's welled planned with good info on the stops and their size.
  • #2,448
  • Jul 12, 2011 8:31pm Jul 12, 2011 8:31pm
Quoting Adal
Average interbank trade size decreased, not increased. So I find it hard to believe that there is 20 mio per level when the market is fast. Because:

The books are now run by HFT algos. They have orders on all the levels. When you hit the top of the book, they give you the liquidity and they watch closely. If immediately you hit them on the 2nd and the 3rd level, they cancel the orders on all the other levels. We're talking microseconds here. This is how they detect huge market orders. They only return when the market stabilizes.

So you would get...
Sure I agree with you that the algos would act to reduce the probability of building an inventory at the market makers, but I don't think it's as simple as them just going to execute 1 yard into the market all at once, especially as the article said they spread it out over several brokers. Do algos exist to build up size as well? (Ignorant about them)

Watching the PA of a stop-hunt would lead one to believe that the gunners slowly build up size over the course of an hour or two...then the lull..then the overexaggerated move, part of which would be assisted by positive feedback from the market making algos you highlighted.

Regards,
xXTrizzleXx
  • #2,449
  • Jul 12, 2011 8:44pm Jul 12, 2011 8:44pm
Quoting xXTrizzleXx
Do algos exist to build up size as well? (Ignorant about them)
Yes, they are called "buy-side algorithms" or "execution algorithms". In general they are used by big players like pension funds or commercials.

VWAP for example was the original execution "algorithm". Through these days you would have to be quite stupid to use it, because there are gaming algorithms out there who sniff out VWAP algorithms (or humans) and front-run them.
  • #2,450
  • Jul 12, 2011 9:11pm Jul 12, 2011 9:11pm
Quoting Adal
Average interbank trade size decreased, not increased. So I find it hard to believe that there is 20 mio per level when the market is fast. Because:

The books are now run by HFT algos. They have orders on all the levels. When you hit the top of the book, they give you the liquidity and they watch closely. If immediately you hit them on the 2nd and the 3rd level, they cancel the orders on all the other levels. We're talking microseconds here. This is how they detect huge market orders. They only return when the market stabilizes.

So you would get...
Yep exactly, and that's why it still takes a good while getting a yard done. Normally well over a day's work at least, regardless of technological advancements.
rgds.
  • #2,451
  • Edited 11:46pm Jul 12, 2011 11:35pm | Edited 11:46pm
1bln should not be a full days work on EU, I would doubt it when there has been times where there were orders for over 4bln to be done at the tokyo or london fixing, but I guess it would depend on the conditions.

"When they see that stops are about to be triggered, they will hit their brokers with everything they’ve got so they might be selling anything up to $1 billion across about 5 or 7 brokers in a matter of seconds. They like to operate in less-liquid markets as then their chances of triggering the stops and also of getting bigger gaps, are greatly enhanced."

they are not talking about going for piker stops, I'm sure they can liquidate well over a yard into what they are aiming for.
  • #2,452
  • Jul 13, 2011 2:09pm Jul 13, 2011 2:09pm
Do you guys see the current scenario (QE3 hints) as a temporary event that turned market opposite to its current driving theme(Euro zone)?

Also do you think what are the thoughts on US debt limit debate? I see it as a risk aversion event. Which does prove to be positive for safe heaven items but does this event also means that USD too will benefit from it against high yeilders?
.
  • #2,453
  • Jul 13, 2011 5:10pm Jul 13, 2011 5:10pm
Quoting nasir.khan
Do you guys see the current scenario (QE3 hints) as a temporary event that turned market opposite to its current driving theme(Euro zone)?
Today, definitely. I suspect a lot of people pared down their shorts in the hours leading up to the Bernank's testimony. Then when the Bernank left the door open on the possibility of QE3, it was buy buy buy for the e/u and I bet you a good number of people got squeezed on their shorts.

Quoting nasir.khan
Also do you think what are the thoughts on US debt limit debate? I see it as a risk aversion event. Which does prove to be positive for safe heaven items but does this event also means that USD too will benefit from it against high yeilders?
.
I think that the debt limit debate is something that'll be looked at closer as the deadline comes near. If there aren't any new developments on the euro front, the market may very well start to lock in on it. Moody's just put the US on review for a downgrade, this is getting interesting....
  • #2,454
  • Jul 13, 2011 7:30pm Jul 13, 2011 7:30pm
Quoting nasir.khan
Do you guys see the current scenario (QE3 hints) as a temporary event that turned market opposite to its current driving theme(Euro zone)?

Also do you think what are the thoughts on US debt limit debate? I see it as a risk aversion event. Which does prove to be positive for safe heaven items but does this event also means that USD too will benefit from it against high yeilders?
.
Heya nasir.khan,

Definitely. When you really look at it, you can use the debt ceiling to get a nice price if you're playing sovereign debt, or use sovereign debt to get a nice price if you're playing the US debt ceiling...but you have to be very flexible and identify the shifts in sentiment quickly, since the markets are so volatile lately.

I'm seeing the event as a bid for CHF and JPY across the board...high-yielders I'd imagine would fall based on safe-haven bids for those on the crosses rather than USD directly perhaps?

Anyone have any thoughts about USD/JPY and BoJ? It's like look out below...

Regards,
xXTrizzleXx
  • #2,455
  • Jul 13, 2011 7:57pm Jul 13, 2011 7:57pm
Quoting xXTrizzleXx
Anyone have any thoughts about USD/JPY and BoJ? It's like look out below...

Regards,
xXTrizzleXx
I can see BoJ intervention before SNB. My to do list tonight: Prep for JPY intervention.

Until then.. down down down
  • #2,456
  • Jul 13, 2011 8:25pm Jul 13, 2011 8:25pm
Quoting xXTrizzleXx
I'm seeing the event as a bid for CHF and JPY across the board...high-yielders I'd imagine would fall based on safe-haven bids for those on the crosses rather than USD directly perhaps?

Anyone have any thoughts about USD/JPY and BoJ? It's like look out below...

Regards,
xXTrizzleXx
I would think your pretty on with CHF and JPY. Although now, after these decently volatile appreciations in JPY, I'm sure you know, they are warning to watch out for verbal intervention... So we should keep are eye on BOJ and SNB. I guess we can watch CHF/JPY and see how that's rolling too.

I would think from Noda comments, that unless they see some seriously volatile moves on JPY they won't intervene. As Sean Lee pointed out on fxlive recently, "With all of the forces at work at the moment, what with EZ debt crises and the US debt ceiling, Japan will get no help at all from any other central banks."
  • #2,457
  • Jul 14, 2011 1:45pm Jul 14, 2011 1:45pm
sigh.. want to put on a trade..cant see any reason to at the moment though. a buy below 78.50 on the usd/jpy might work.
  • #2,458
  • Jul 14, 2011 2:24pm Jul 14, 2011 2:24pm
Quoting Nervousone
sigh.. want to put on a trade..cant see any reason to at the moment though. a buy below 78.50 on the usd/jpy might work.
Maybe you don't need to hear this, but don't put on a trade for your own entertainment/amusement. You shouldn't be trying to trade each time you're bored, you should be trying to win each time you trade.
  • #2,459
  • Jul 14, 2011 2:50pm Jul 14, 2011 2:50pm
Quoting relyt
Maybe you don't need to hear this, but don't put on a trade for your own entertainment/amusement. You shouldn't be trying to trade each time you're bored, you should be trying to win each time you trade.
I completely agree. I've decided to stay out of trading this week because its volatile and my news sources just aren't fast enough to let me know whats going on. I'm getting very picky, I guess that's a good thing.

It just seems like a lot is going on with the debt talks and the euro thing. Don't think I have the skill yet to profit from it.
  • #2,460
  • Jul 14, 2011 2:55pm Jul 14, 2011 2:55pm
Quoting Nervousone
I completely agree. I've decided to stay out of trading this week because its volatile and my news sources just aren't fast enough to let me know whats going on. I'm getting very picky, I guess that's a good thing.

It just seems like a lot is going on with the debt talks and the euro thing. Don't think I have the skill yet to profit from it.
Oh, good job, then. Way to stay disciplined.

I completely understand what you mean when you say that you see some things happening but just don't feel like you have to skill to profit from it, yet. We're all still learning, although some of the guys in here are much further along than the rest of us.
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