Time & Sales question

[ozfader]

Recently I've developed an insatiable appetite for learning to interpret time and sales (aka tape reading). I'd be really interested to hear from other souls who are, or have been, treading similar boards and perhaps gain from the collective experience.

To start the ball rolling, I have a question............

I trade the EuroSTOXX50 futures out of Eurex, which is a totally electronic exchange, and therefore has no locals. Spread is always 1 tick. Why therefore in the properties of the T&S window, is there a "Trade Inside" option?

I realise that this is probably a rudimentary thingy for you experienced dudes, but for someone who has been trading for little more than 12 months, I'm finding it difficult to get a handle on this concept. I'd assumed that "trading inside" was what MMs and Specialists do, but there's no MMs or Specs in this market.

Below I've included (I hope) a pic of my T&S window showing trades at bid (red) and ask (green), as well as trades inside (white).

Can ANYONE please explain.............

[jay45]

This happens with what I trade when, for example ,
best bid 1 is 4170 and best ask 1 is 4171. All is taken
at best ask 1, leaving 4172/4170.Then someone bids
at 4171. The next tick at 4171 will be white as shown
in your T&S.

[ozfader]

Thx Jay for your reply.

So, if I understand correctly, all inside trades are made by buyers bidding between the spread which has momentarily opened up to greater than 1 tick?

[demarcog]

Originally posted by ozfader
Thx Jay for your reply.

So, if I understand correctly, all inside trades are made by buyers bidding between the spread which has momentarily opened up to greater than 1 tick?

Hi Ozfader,

That's not really the case.

If a buyer puts in a limit order bid to buy at a price, that price either becomes the new bid or joins the existing best bid price and is reflected in the time and sales bid price.

Every trade you see at the inside market or any price for that matter represents both a buyer and seller agreeing on the price and the resulting trade.

Most inside trades are market orders where either the specialist,, exchange etc matched up buyer and sell market orders.

I've seen people make a decent living off of "tape reading" but they focus exclusively on thinly traded NYSE stocks, less then 1m shares a day. The information presented in the tape becomes less meaningful the more liquid the instrument. The tape for active NASDAQ and futures contracts is way too fast even there was some predictive component which I doubt very much.

In addition the last bastion of the tape readers, the NYSE specialist system, is thankfully being phased out/merged into a new hybrid system which will dramatically increase the amount of electronic trading activity.

Keep in mind that in the past the spreads for many markets are much wider then we see now as you observed in a 1 tick market insides trades are very rare.

Hey if you can make money doing it, great. I would suggest other techniques for predicting price movement. Even the best tape readers I know are VERY short term anyway. In by the BID out by the Offer....or else....


Hope this helps


Glen

[ozfader]

Thx Glen for those pearls.

I feel the need to learn the art of tape reading to add another string to my bow, and help build a more detailed picture of what's REALLY happening in the market. I believe (eh, make that "hope") it's making a difference.

Nevertheless, I've definitely taken your comments on board. Individually, everybody has a preference or leaning towards their chosen strategy. At this stage of my learning curve I'm trying to gain as much info from as many sources as possible. Sifting out the gold will take some time.

By the way, have you seen Hubert Senters' tape reading video, trading a 2 min YM with T&S? Check it out if you get a chance at http://askthetrader.com/freetradingv...eading101.html Fascinating.......

Thx again.

Alan

[demarcog]

Originally posted by ozfader
Thx Glen for those pearls.

I feel the need to learn the art of tape reading to add another string to my bow, and help build a more detailed picture of what's REALLY happening in the market. I believe (eh, make that "hope") it's making a difference.

Nevertheless, I've definitely taken your comments on board. Individually, everybody has a preference or leaning towards their chosen strategy. At this stage of my learning curve I'm trying to gain as much info from as many sources as possible. Sifting out the gold will take some time.

By the way, have you seen Hubert Senters' tape reading video, trading a 2 min YM with T&S? Check it out if you get a chance at http://askthetrader.com/freetradingv...eading101.html Fascinating.......

Thx again.

Alan

Alan,

Thanks for the kind words, you are very welcome.

It wasn't my intent to discourage you in any way from pursuing this method . It sounds like I didn't and that you are more experienced with techniques then I was led to believe by reading your post.....a good thing.

I will definately check out the link and appreciate it.

I tried this method for six months and just couldn't make money.
Basically in thinly traded stocks on NYSE, the basic technique was to become familiar enough with a few stocks to recognize a larger bid. Usually 5-10K shares, then we would simply buy at the market and when the large bids were gone, immediately get out.

Probably the most profitable technique was recognizing a market short. because a short can only be executed on an uptick, if an offer (ask) price was repeatedly for exactly 1 cent above the bid, this indicated a "market short". Again we would jump aboard, using a pay service that allowed us to short immediately.

As I said, people made money (maybe 10 percent). I was much more interested in TA and wanted to focus on automated trading strategies. Hope it works out.


Glen

[ozfader]

Glen, definitely check out Hubert's video. He's a showman, but a good one, and his use of the tape in a fast flowing market is hypnotic.

Since reading your last post I came across this thread from Anson, who coincidentally trades the EuroSTOXX50 using T&S as well. Extremely informative but equally disturbing........ http://forum.esignalcentral.com/show...a&pagenumber=2

[demarcog]

Originally posted by ozfader
Glen, definitely check out Hubert's video. He's a showman, but a good one, and his use of the tape in a fast flowing market is hypnotic.

Since reading your last post I came across this thread from Anson, who coincidentally trades the EuroSTOXX50 using T&S as well. Extremely informative but equally disturbing........ http://forum.esignalcentral.com/show...a&pagenumber=2

osfader,

I'm burried trying to get my automated systems up and running but always receptive to new trading techniques.

If these tape based techniques that you are researching appear promising then perhaps we can work together and test them out.

If you can quantify the exact logic into a programmable set of trading rules, perhaps I could get it coded up and we can test it.

FYI, Jason's file share contains among other gems several bid/offer analysis programs which I'm sure you will be interested. Should we proceed together or you individually theycould be the foundation upon which the systems are based.

Good luck,

Glen

[ozfader]

Glen,

I'm always interested in collaborative endeavours. My problem with the T&S is the that the more I learn, the more confused I get.

I'm currently looking at MarketDelta as an option, and will also check out Jason's efs studies. If I can narrow the parameters of the T&S method into a tradable set of rules them I will definitely pass them on to you.

So much to do, so little time ....................