Tim's Market Depth

For the next 30 days I am going to try my best to show the In depth knowledge I have accumulated over the last 7 years of attempting to learn to trade. I now am proud to say I am making a living trading. Its not easy and I learn something new everyday.

I have found in trading that you start out no different than most children do in life. You start out into the world wanting to absorb and move faster than you are prepared to. You stand and instead of using reasoning to move slow and at a intelligent pace you get overzealous and fall. You may have started with pennies or you may have dove into options full bore. Chances are luck was with you and you did great at first then the normal patterns began to emerge. You got greedy and lost total control of your account. Some like to refer to trading as gambling. But true traders know that it is no more gambling then a student of medicine practicing on patients. Like pilots who aren't considered masters till over 10,000 hours of airtime, trading takes screen time. Perseverance and skill sets that evolve most of the time slower than most want.

When I first started i went through the gambit of indicators. In this time I learned a few things. ANY indicator can be used to create profit if used properly and with the correct insight. The path that I chose to take about 1.5 years ago is less known in the trading world. It is not used as often due to its cost and typical over-discussion of trading principles.

This thread will not be a platform for me to justify my trading. It works for me and that's all I care about. You can post all you want about its merits or not but like stated earlier any indicator can be used if used in the correct manner. For the next 30 days I will share some of what I currently use. Some I consider proprietary, while some is open-source if searched out properly. I am currently on my laptop and not my trading PC, so I will explain the purpose of this thread the best I can without pictures.

BACKGROUND ON THINKING

Some will discuss till blue in the face about the justification of bid/ask data. Here is the process of my current trading.


I use DTN IQFEED. This feed is a very well respected feed when data is required by custom indicators ect.

I use Microsoft Excel

I use Ninjatrader with custom Indicators built by me and other select people.

I have chosen to open this thread up for about 30 days for a few reasons.

I have found a way to automate most of my postings which is great. And therefore won't take away from my daily trading. Which I need because frankly I don't care enough to waste time here anymore to bicker on forum's. I will have the pc post the just of my ideas and criteria daily and I can check on it later.

DTN market data offers my access to the last trade and the bid and ask quote at that time. This information is collected using a software program that collects data on well over 500 technical's and futures and stocks on my PC for future analysis. This data is then converted to a format my indicator can read. The indicator organizes the data in a form like Market delta but imo in a more advanced way. It organizes bid trades and ask trades i manner that allows you to see Longs and Short "inventory". This is especially helpful in liquid environments such as the ES futures market. Which can then be applied to SPY options ect.

In the software a bid transaction is counted as a Sell and a ask transaction is counted as a Buy. These are then tracked and applied to price. As price moves you can track inventory through time. Showing divergences ect. I also extensively use internals such as NYSE tick ect. I daily do more algorithmic analysis of this data some going back two years. I will post the most important of this info in this thread. Again as stated earlier this thread is for 30 days starting next Monday. I will be posting the rest of this week preliminary ect while I get the computer side working correctly. I will not waste time fighting about justifying my ways. But I will share it to those interested. I will share data I have collected and interpreted and also graphs ect.

This is not the Godicator. Interpretation and money management is key. But I think you find the insight a refresher compared to most of the threads on HSM. It dives farther into market analysis then most on this sight. Analyzing each trade. Not just candle charts ect. I have spent numerous hours and tend to spend now 12-16 hours or more a day staring at 4 monitors programming in C# etc. have paid my dues and feel the information that you will receive is special and please don't waste my time with waste. I trade for a living and if irritated I will not waste my time posting.

If you made it this far reading congrats and hope to see you more often. I encourage questions etc. Again this is just going to show some of the insight I have gained. By no means is it a perfect setup or can be blindly followed but I feel it would help you in your quest.

Tim

For your enjoyment I suggest watching this video that you could argue is very comparable to current circumstances.

Scarily familiar. I look forward to peoples comments.

http://video.pbs.org/video/1308436568/#

Ok I have been busy but here is an example of the Custom indicator I have been using.

Breaks down each candle (in this case 8 take range). Left-sided volume at each tick.

Blackbox is the highest volume for that bar

the Orange box is the last price before the bar changed

on the right side is tracking ask transactions and big transactions, in this case going back 10 days in the September ES futures contract.

Certain levels which can be seen can provide support and resistance.

Going into tomorrow resistance would be at 1110.50
support levels would be, 1099.75, 1098, 1096,1092.25, 1090,1083.50,1077.25

on the left side is volume profile
on the bottom you will have cumulative volume in blue, the Delta for each candle which is the ask transactions minus the bid transactions , and also the max Delta value and minimum delta values.

I will post more later tomorrow, as can be applied to options futures stocks.

the point of all this is to track money flow, and actual overflow of bid transactions and ask transactions creating zones of support and resistance where bigger money is holding on to Long's and shorts. As price comes into a point of resistance you really see on the right side of the chart harmony contracts are held short or long. This can be interpreted as divergence and create excellent trading opportunities. Any longer-term timeframe you can trade this method with options. An example would be when price is rising what short accumulation is occurring. These are great opportunities to buy puts. Two days before the 1000 point drop there was over 50,000 contracts held short. Not that this caused the drop, but it provides an insight to bigger money inventory net long or short.

here is example from today, as seen in the chart below prices falling, but where could price find support? By looking on the right side can see at 1105.75 there is a variance between 11,028 and 7085.




In the following picture you will see price came down to exactly 1105.75 and then bounced. By using this information and market internals you knew far ahead of time where the best place to place the trade would be.



while nothing is perfect this system allows you to have ample time to analyze market internals and place trades in accordance to resting accumulation of larger traders.

I was doing some reading tonight and found some very good quotes I would like to share.

Your thinking should be: When your position is right, you have to do nothing instead of doing nothing when you are wrong!

How many traders ever hoped it wouldn't be proved wrong instead of hoping it was correct? If you are hoping it is correct, it obviously wasn't ever proven to be correct. Remove the position early if it doesn't prove correct. By waiting until a position is proved wrong, you are asking for more slippage as you will be in the same situation as everyone else getting the same message.

If the market does not prove the position correct, it is still possible the market has not proven the position wrong. If you wait until the market proves the position wrong, you are wasting time, money and effort in continuing to hope it is correct when it isn't.

Which would you choose? You have an opportunity of a 10% probability of making money in the long run if you take a position until you have lost 10% of your equity or made 10%. Or take the opportunity to have a 90% probability of making money if you only keep a position for three hours unless it has proven to be correct by that time. It is pretty clear which choice you would make.

Well since I analyze each trade that goes through, what I found on that day was interesting. It was orderly. I can show you examples of unorderly. News releases this week gave some unorderly results. Why?? maybe most werent in the loop. But on that fate full day "someone" was prepared to get out. But at that same time they were prepared to get in. By analyzing the data the only conlcuion I came to was this.

The market is currently being proped up by money that is not natural to the market place. In the rise that we had during our 1 months epic run there was far more liquidy introduced then in prior moves of the same example. This disturbs me in depth. The only place this amount of equity can come from is the government itself using money to prop up our economy.

I think personally it ties into Goldman Sachs. Which unfortuantely goes into consiracy theory and frankly I trade what I see. But I will eb honest. The HFT is controlling amrket play. but it isnt HFT as we all ahve come to learn it. They are not scapling here or there. They can fire off 900 ES futrues contracts a second but and this is a BIG but. That deostn mean they scalp. This amrket is being propped up and at any moment in time it is going to all fall apart. Does that mean we cant run 1k first?? No. But the algorythms are designed to be orderly. And that is the trail they left behind on the 1k drop in 20 mins. A nice orderly selling. Yeah sounds suprising that taht kinda fall is orderly but I trust you it was. It was orderly because computers have no emotion they trade on principal alone. They were told to sell if certain things happen. Goldamn sachs paid back billions to the government in 1 year having no losing days. This allreminds me of reserach I did on the 1929 crash. And we are follwoing it to the tee. We are in 1930 new years day right now and the worst is ladi before us. And like dear in the headlight we welcome the new year thinking the worst is behind us.

Anyway I will quit rambling. I will psot more, I am not suprised few ahve psoted. Thats when you know what you ahve is great is when few care. I trade my system well and enjoy the time in coding ect.


have a great night


Tim

posted this in another thread but gives insight to stock analysis. This was hindsight but something I am working on