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Auction Market Value Theory & Analytics

  • #21
  • May 6, 2014 11:21pm May 6, 2014 11:21pm
Quoting mzvega
{quote} Thanks for posting...... If you are trading a Futures Contract or a Volume based market, yes, your analysis would be dependent to Futures Data. However, if your trading in a tick-only based market such as FX your analysis is dependent only on tick data. It uses tick/price data, not tick volume. I do agree with you in the sense that it can be "broker manipulated at the customer execution level". However, I'm not one of those that think my Broker is out to get me. Its in his best interest that I'm profitable. I somewhat disagree that futures...
Mzvega,
Nice article, thank you.
And yes , FX market is leading, but the question is volumes, As retail traders we can use tick volumes (which are broker dependent), but our counterpart MMs use real volumes. MMs trading CME are well informed participants of market, therefore Volumes in CME are more presentable for analysis.
it's o'k to win ...
  • #22
  • May 7, 2014 2:34am May 7, 2014 2:34am
Quoting CurrencyAnalyst
What I found between the two Spot Vs Futures is as far as Lead Lag function goes. It is normal to have a 10 PIP/TIC differential most of the time. Remember futures is thinking with forward in time price participation with the exception of the front month being the 10+/- roughly lag lead area. ..
Sorry for getting thread off track already, I will only post once. I just find it annoying how often people post false info about differences between futures/spot prices when it's not hard to spend 5 minutes of googling to find the facts before posting false information whilst acting like they know what they are talking about.

"It is normal to have a 10 PIP/TIC differential most of the time." What about a couple of days before the futures contract expires? What about if the euro interest rate is 10% and the USD interest rate is 1%?

Maybe the difference is based mainly on the actual and expected interest rate differential between the 2 currencies between now and the futures contract expiry date, or cost of carry (which would mean they are worth exactly the same). This would also explain why the difference in the prices narrows to near 0 approaching the end of the futures contract and is not and has never been '10 pips most of the time'

Also there is no lead/lag in the price movements of the spot price and the futures price. There can be some very minor differences for a very short time for example;
-if someone hits market on a huge order in one market and not the other (doesn't happen too often cause it's not that smart and people generally don't hate money). More likely to occur through forced liquidation than anything else.
-the split second after nfp or whatever other major news
-fat finger
There will be others, but the vast majority of the time Arb bots keep them moving together tick for tick all day every day.

If you know a spot broker who has a lead or a lag to the futures price or a 10 pip differential most of the time, please PM me their name so I can start printing money by arbing.
  • #23
  • May 7, 2014 2:58am May 7, 2014 2:58am
Quoting havaiana
{quote} Sorry for getting thread off track already, I will only post once. I just find it annoying how often people post false info about differences between futures/spot prices when it's not hard to spend 5 minutes of googling to find the facts before posting false information whilst acting like they know what they are talking about. "It is normal to have a 10 PIP/TIC differential most of the time." What about a couple of days before the futures contract expires? What about if the euro interest rate is 10% and the USD interest rate is 1%? Maybe...
Yep difference can be 2 pips but right b4 contract expires it is zero,
Some times discrepancies appear in Real-time during news.
it's o'k to win ...
  • #24
  • Edited 3:46am May 7, 2014 3:15am | Edited 3:46am
Quoting zenseven
{quote} Mzvega, Nice article, thank you. And yes , FX market is leading, but the question is volumes, As retail traders we can use tick volumes (which are broker dependent), but our counterpart MMs use real volumes. MMs trading CME are well informed participants of market, therefore Volumes in CME are more presentable for analysis.
I agree with you Volume & Open interest studies are very interesting.
Volume analysis and trading a "picture" of volume are very different things

Thats the beauty of Auction Market Value Analysis, it's volume "independent" in tick based markets.
AMVT Analysis in tick based markets uses TPO’s as a measure of demand. The only time volume is used in analysis is to determined if yesterdays volume was greater or less than the previous day. Thats it.

In Auction Market Value Analytics the market is viewed as a continuum, a flow through time.......... volume is irrelevant
Markets are not efficient, rather they are effective - Jones
  • #25
  • Edited 9:40am May 7, 2014 9:28am | Edited 9:40am
Little to no trading occurs near expiration. Price can skew off and bid offer gap greatly Volume dries up The acknowledged front month rolls prior to that. Anyone that trades futures commonly knows that. If its a physical delivery contract or a financial contract this can make a difference.

Furthermore comparing a price from a real exchange vs a virtual offering is abstract. Easily taking a glance at any given Spot Fx broker you can have a different price from everyone of them. So yes on average you can safely say 10 pips +/- Futures will show on every device globally the exact same price, bid,offer.
"Look Left Think Right"
  • #26
  • Edited 11:53am May 7, 2014 11:44am | Edited 11:53am
Example difference: Right Now Oanda Live Spot FX Rate AUD/USD is (.9335) Spread (1.4) VS Futures 6AM4 Front month is (.9312) @ 12:40 PM EST
"Look Left Think Right"
  • #27
  • Edited 1:56pm May 7, 2014 1:28pm | Edited 1:56pm
Quoting CurrencyAnalyst
Example difference: Right Now Oanda Live Spot FX Rate AUD/USD is (.9335) Spread (1.4) VS Futures 6AM4 Front month is (.9312) @ 12:40 PM EST
If you would kindly refer to the first post. This thread is about “Auction Market Value Analysis” as it applies to FX. (Tick-only) based markets.
Unless you can support your use of volume with a book & page reference from one of the books written by Steidlmayer, Dalton/Jones, or Jones, it doesn’t make a valid discussion here.

When you provide the thread with an actual book & page reference, I would look forward to continuing the discussion.

A reference quickly eliminates those who have actually read something about the subject, from those who haven’t. If you can’t provide a reference from the material, it’s pretty safe to determined that your use of volume has nothing to do with “Auction Market Value Theory” or “Analysis”, and off topic. Please provide your reference before you continue to post here, Thank You.

Your use of the word “skewed” immediately tells me your methodology is using Gaussian principles, belonging to “Capital Market Theory” not “Auction Market Value Theory”. You’re turning this into a religious debate about “Theories”. You either subscribe to one theory or the other. You cant use one theory to argue another. It's like religions, You can’t subscribe to both. That would be schizophrenic, you can’t intelligently discuss anything with a “Nut Case”.
The topic here is "Auction Market Value Theory". Again, please provide your reference before you continue to post here, Thank You.
Markets are not efficient, rather they are effective - Jones
  • #28
  • May 7, 2014 1:55pm May 7, 2014 1:55pm
Market Profile, a History (Cisco-Futures)


Market Profile in futures is a trademark (1985, 1993) of CBOT that refers to a specific database developed by the CBOT, the Liquidity Data Bank (LDB). This data structure is a display of TPOs from clearing (TPOs record cleared price at time) and a value area calculated from volume at price. This methodology can be called LDB - Volume. An LDB - Volume Market Profile is not real time and is currently limited to CBOT futures, the only futures for which there is an LDB report. As advances in reporting continue, volume may be reported in the ticks of some futures. In such case, the 70% volume limits can be calculated. From the beginning the Market Profile was tied to the Gaussian (bell shaped) distribution. A part of the practice was to take the early, nascent distribution and identify it as the "third standard deviation", evidently assuming activity later in the day would fill out the bell shaped distribution curve.

First published in 1985 and updated in 1991, in the CBOT Market Profile manual, the phrase "Market Profile" has become, over time, a generic name to describe auction market analyses on a variety of markets outside of CBOT (e.g. Steidlmayer on Markets, Vol II, p 84, 93). Quote services now offer "Market Profile" analyses on markets not cleared by the CBOT. Also, a number of trader websites sell value area data identified as coming from the Market Profile. None of the three are possibly using CBOT Liquidity data for those analyses on markets other than CBOT because there is no Liquidity Data available.

The methodology used to create these new "Market Profiles" is a technique that utilizes quoter data (ticks) in place of the CBOT cleared data in the LDB. This technology can be called the "Tick - TPO", an approach developed and published by Donald Jones in 1987. The profiles developed from ticks are calledMeta-Profiles to differentiate them from the volume based CBOT Market Profiles.

The overwhelming limitations of the trademarked CBOT Market Profile methodology (cleared data report required, only CBOT futures covered and non-real time) was the impetus for the development of the Tick -TPO methodology. This method is a quoter tick based analysis, generating TPOs from tick “ranges" and using TPO “counts” to measure demand. "Tick - TPO" profile methodology is real time and can be applied to all markets that produce ticks. Tick - TPO methodology was published (1987) as a method for estimation of the Market Profile value area.

In most of the futures world, the words "Market Profile" will almost always refer to the Tick - TPO process, not the LDB - Volume process trademarked by the CBOT At CISCO, those reports following the CBOTmethodology will be clearly identified (e.g. Liquidity Data Bank reports, Market Profile).

The whole article can be read in its entirety here: http://www.ciscofutures.com/marketprofile_basic.html

AMVT Analysis in tick based markets uses TPO’s as a measure of demand. Generate TPOs from tick “ranges". Not "tick volume" it has nothing to do with volume at price, period. The only time volume is used in analysis is to determine if yesterday’s volume was greater or less than the previous day.
Markets are not efficient, rather they are effective - Jones
  • #29
  • May 7, 2014 2:05pm May 7, 2014 2:05pm
I apologize if I have offended your thread. I took interest in the topic as its title description is interesting I'm already trading using a price ladder of bids and offers that records action that has actually been traded at price points over time with indication of retreading at same levels when it occurs. I rather continued here regarding the spot futures difference at price level to show that if data is used from the futures market it may be offset from what ever data accumulation was gather from spot for the final conclusion Of Like Instruments.

Furthermore your title plainly indicates this as a theory therefore it is not etched in stone and easily can become a content within its own content debacle. no pun intended

No matter the approach were all looking at the same source offering nothing more. Personally I became a better trader when I stopped trying to be a Trade scientist.
"Less-Is-More"
"Look Left Think Right"
  • #32
  • May 7, 2014 6:16pm May 7, 2014 6:16pm
@BeyondTPO

“Steidlmayer on Markets Trading with Market Profile” 2nd edition page 25
“Price + Time = Value”
He did not say Time = Vol

He uses “Volume @ Time” not “Volume @ Price”
Time does not = volume. Where’s your proof of statement?
I provided mine ………………

Volume strips are nothing more than the keyed “Laser Lines” in “Steidlmayer on Markets Trading with Market Profile” 2nd edition page.
Read the book you’ll see he uses “Volume @ Time”

Again, unless you can support your statements with a reference that, he uses “Volume data" displayed as a “volume at price histogram" your misinformed. Until you can support your statements, your comments are unwelcomed. Analysis requires actual “data.” Not a handy “picture” of it.

Refer to the topic of the thread. Why did you follow me here? There’s a whole thread dedicated to what you do.
Steidlmayer’s “time variable” profiles are still displayed as TPO’s. He uses volume as a “text literal” on the chart. Not as a “picture” (histogram) of volume”
Analysis requires effort……………………………

My comments about Steidlmayer's Volume Strips

Show me one place where that software is available for use?
Show me one place where Steidlmayer’s makes it available?
Show me how you get it through the CME or that it’s even available for use????
Show me just 1 instance of it being used anywhere in the real world (just 1)……………………….
Other than that video show me, Show where "Steidlmayer’s Volume Strips" are being used?
Have you tried calling the CME see if this proprietary software is even available for use? Or even exists?
Markets are not efficient, rather they are effective - Jones
  • #33
  • May 7, 2014 6:38pm May 7, 2014 6:38pm
Quoting CurrencyAnalyst
I apologize if I have offended your thread. I took interest in the topic as its title description is interesting I'm already trading using a price ladder of bids and offers that records action that has actually been traded at price points over time with indication of retreading at same levels when it occurs. I rather continued here regarding the spot futures difference at price level to show that if data is used from the futures market it may be offset from what ever data accumulation was gather from spot for the final conclusion Of Like Instruments....
“In Auction Market Value Analytics"
Value area defined as including central 70% of TPOs
Comment: The value area of the "Market Profile" is defined as the central 70% of cleared volume in the CBOT publications*.

The Meta-Profile or Tick-TPO Profile in the CISCO publications defines value as the central 70% of "TPO counts". The TPO Value-Area calculation appears in "Mind Over Markets" (p333) without attribution to its source (CISCO) and without pointing out that without it, value could only be calculated for CBOT markets (the only source of cleared volume).
*Discussed in detail on CISCO website"

In its entirety
www.ciscofutures.com/marketsinprofile.html

AMVT does not deal with "at price" data; please provide your reference along with your response. There are many "volume analysis" threads with plenty opinions and a lot to say about the subject. In a tick-only based market, the CME concept of volume does not apply here. You won’t find it hard to find an active "volume analysis" thread.

"Market Profile" is defined as the central 70% of cleared volume. Available EOD. Its useless in real time that’s "why" TPO's are used for analysis.
Again it has nothing to do with "at price" data or volume. Without TPO's you can’t use calculate value in any other Market than other CME.
Markets are not efficient, rather they are effective - Jones
  • #34
  • May 8, 2014 6:01am May 8, 2014 6:01am
It was Don Jones who said:
In Value Analytics the market is viewed as a continuum, a flow through time. Profile variables are analyzed for their change over time, their relative values, rather than the less useful absolute numbers used in regular profile analysis

Tom Alexander was also a student of CISCO and continues to applies the same principles.

Tom Alexander: Well, because 25 years ago, I was like every other trader, and I was looking at everything under the sun and all the magic and all the numerology that's involved in the market, and none of it had really any kind of statistical rigor behind it. And I first became familiar with market profile, which is the brainchild of an ex-floor trader named Peter Steidlmayer. Steidlmayer was on the floor for years and he visualizes the concept of how the market develops and basically that bell-shaped type of thing when he was on the floor. And it was very, very popular in the middle to late '80s. As it turned out, nobody could really trade it the way Steidlmayer was articulating the concept. But through the years, I continued to search and to study market profile because it was very, very different than most of your price-based stuff out there, all the oscillators and Fib stuff and Elliott wave and Gann, and all the magic that everybody seems to gravitate to. Long story short, there is a guy named Don Jones. Don is actually a scientist, he's a physicist, and I came across Don's work and he has done some incredibly profound research that furthered Steidlmayer's qualitative ideas and quantified, improved an edge. And that's what I continued to trade and research myself to this day, as Don does. Don and I became friends and it's very unique especially in the retail domain that there is something with some semblance of rigor behind it because to my knowledge there's nothing else out there in the retail domain that has any rigor behind it whatsoever.

http://www.moneyshow.com/articles.as...8-31127&page=4
Markets are not efficient, rather they are effective - Jones
  • #35
  • May 8, 2014 6:07am May 8, 2014 6:07am
subscribed this thread.....
welcome back mzvega


DRT
  • #36
  • May 9, 2014 11:08am May 9, 2014 11:08am
@ DRT
Markets are not efficient, rather they are effective - Jones
  • #37
  • May 9, 2014 11:09am May 9, 2014 11:09am
What does a hvn (balanced distribution) actually tell you? What does\can a “picture of balance” tell you about the market? That it may or may not go up, and that it may or may not go down?

AMVT Analysis allows you to look “inside” the distributions. Even in “balance”, there’s “imbalance”. Your analysis gives you an edge. The “picture” assumes balance.
The analysis of TPO’s will tell you if you have an imbalance that weighs more in favor of buyers or sellers.
You miss your edge, if have to “wait” to see what price”may” do. The data (TPO’s) gives you a quantifiable probability of what price will do. By being able to “anticipate” what price should do, you find your edge. By tracking this data every day, you can estimate how from one day to the next, if there’s an increase or decrease of buyer & seller participation. There are many other analyses that you can perform, I just mentioned the most obvious.
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Markets are not efficient, rather they are effective - Jones
  • #38
  • May 11, 2014 2:55pm May 11, 2014 2:55pm
Any occurrence of trading in a period creates a TPO at that price. (A TPO is a Time Price Opportunity, or, for Meta-Profiles, That Price Occurred). So the profile is a frequency distribution.

Each x or letter signifies that that price was traded at least once in the specified half-hour. An x or letter is called a TPO (Time Price Opportunity, or That Price Occurred). No matter how many times a particular price trades in a specified half-hour period, only one TPO is recorded. A TPO has nothing at all to do with volume.

It doesn’t matter what you read, all authors from Steildmayer, CME MP, Dalton, all used tpo analysis, in “conjunction” with pattern recognition. Jones more analytical. He doesn’t subscribe to the “holistic” approach of pattern recognition. And approaches it from strictly an analytical perspective “Looking at a picture of the data” can’t tell you anything, about the markets condition.

A Frequency of prices "used". A TPO is the smallest market "unit" used in AMVT. By breaking down the distribution into units you have quantifiable measures in which to do analysis. By counting top’s (looking at the frequency of prices used) above & below the POC is a way of measuring demand.

Frequency of “prices used” tell you where the auction begin & ends. Depending on whether or not you looking at the Minor auction (day TF) & Major Auction (LTF). By studying, in the minor auction, what % of the distribution range IB, tpo counts above the Ib give you a quantifiable measure of whose in control of the minor.TPO analysis within thin the balance. The major auction doesn’t use a 70% value area TPO's. The frequency of prices used, determine where the auction begins & ends. You monitor these reference for changes in its relative position than, its absolute values. This data is considered as Market internals. There are other reference points used.

The major auction is also displayed as a rotational profile. Same concept, but each letter of profile is represented by a day. We are on the same page with tick volume being of no use. Because you can’t "assign" direction to it, you can’t quantify chart patterns. However, by breaking the distribution into units TPO's you can go from "qualitative", to "quantitative" analysis.


TPO analysis gives you a method for finding the market's stress and its directionality. Quantifiable measures of length of time & price range of the balance. The amplitude, range & time as well. Trades aren’t based on what I think price “should” do. Rather I trade what the data supports.

It also offers a quantitative methodology for actually "testing" our ideas on the importance of balance dynamics. I’ll take a quantifiable guess over pattern recognition any day.

TPO methodology removes dependence on the concept of volume. That’s why Tpo analysis has always been used. In tick based markets that reports no volume.

30 minute data is the only data needed and a set of basic math skills.
Last time I checked tick data was free………………….
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Markets are not efficient, rather they are effective - Jones
  • #39
  • May 12, 2014 3:16pm May 12, 2014 3:16pm
Thanks for starting the thread MsVega. I admit that I know little about this subject and it's something I want to learn.
If you are good at something, never do it for free--Joker
  • #40
  • Edited 3:10pm May 13, 2014 2:47pm | Edited 3:10pm
Quoting jmn5611
Thanks for starting the thread MsVega. I admit that I know little about this subject and it's something I want to learn.
Sorry for the late response, I needed a “sanity break”
May I suggest you at least read “Mind over Markets”…….you can find it in the first post.

I posted the page info on how Steildelmayer used “volume @ time” in the previous thread. 95% of Traders believe in “capital market theory”. They view all things using “at price data”. The nature of the data used is governed by “chronological time”. “auction market Theory” the data use for analysis is not.

If you understand what a tpo is (I’ve given many examples) you know it’s not volume. Its frequency of prices “used” over time. Not at “chronological time” points. Frequency of prices “used” over time is not bound to, or governed by “chronological time”.

AMVT does not use “at time data”. A volume profile is governed by “chronological time”. Which makes it an unacceptable practice in AMVT.

The creator of the indicator tried over & over to explain. Everyone wants or expects this data to be plotted to start at a specific times, because they think a TPO chart is the same as a volume “at price “histogram” it’s not. Frequency data can’t be plotted on a “time series chart” (bar chart) the nature of the data doesn’t allow it.

Follow the conversations, “the indicator only rents\borrows” space on your chart”. Nothing else.

2012 http://www.forexfactory.com/showthre...56#post5335356
2012 http://www.forexfactory.com/showthre...32#post5335532
2011 http://www.forexfactory.com/showthre...00#post5227800
2013 http://www.forexfactory.com/showthre...75#post6340475
2012 http://www.forexfactory.com/showthre...59#post5354959

What part of it is so hard to understand? Only using (renting/borrowing) space on the “chart” as a place to display frequency data that's been calculated elsewhere. You can’t plot frequency data “at price” using a times series chart governed by chronological time. That's why you generally need to use a different "charting package".

The profiles are floating “on top” of the chart, not built “at price”. Even the creator of the indicator, tries to explain, it’s not a “volume at price histogram” (volume profile). They have long since run him off from the thread…………….

It’s now 2014 and the topic arises again. How many years have gone by, they still, haven’t read the thread, they still haven’t read any book on the subject in it’s entirely, if they had they wouldn’t be under the false impression that a “volume profile” has something to do with AMVT. Any “at price” data is not an “allowed practice” in AMVT. Theory doesn’t permit it……..but you can’t tell them that…………
Markets are not efficient, rather they are effective - Jones
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