Hartle & Flow

Another new feature coming with release 7.5 is executed bid/ask volume data from the exchange’s electronic order book is available for custom studies and conditions for bar charts. This market data is similar to the TradeFlow volume work we provide for traders using TradeFlow charts and studies.

Volume analysis is a key part of my work for gauging where the market is going next. Here, I will show some examples using the executed trades at the ask price (buying) and the executed trades at the bid price (selling) as custom studies. And, I will set up a condition for marking the price bars. The bars are colored green based on the condition that more trades were executed at the ask price or red if more trades were executed at the bid price.

Let’s walk through the example, which uses the chart of the 9-minute bars of the E-mini S&P 500 futures contact using the pit-session trading. The first custom study is called “BestAV”, which is the total amount of contracts traded at the best ask price (buying) for the 9-minute bar. The second study is called the “BestBV”, which is the total amount of contracts traded into the best bid price (selling) for the 9-minute bar. The next study, “AVminBV”, is the difference between the BestAV and the BestBV studies. The bottom study is just the total executed volume for the 9-minute bars.

Now, we’ll walk through some interpretation of these three custom studies. First, at point A on the bar chart, using the pit session trading period, the market opened with a gap above the previous day’s high (resistance), and traders hit more bids than lifted offers. The price bar is colored red. The AVminBV study is showing a negative reading because the histogram bar for the BestBV study is taller than the histogram bar for the BestAV study. The market headed down, and the price bars are colored red because traders were hitting more bids than lifting offers.

However, looking at the AVminBV study with the arrow labeled B; we see the histogram bars started climbing despite being in negative territory. This divergence between the falling price bars and the climbing histogram bars indicated less traders were hitting bids relative to traders lifting offers as the price was dropping.

The market rallied and at point C, the price bar edged to a new high. But, the volume of trades was very light (Point C on the BestAV and the AVminBV studies), indicating very low participation on the move to a new high for the rally. The low buying was a negative sign.

Next, the market move down and took out the previous day’s low (support) at point D. However, the AVminBV displayed divergence, and even though the low price bar is colored red, the divergence by the study indicated traders were starting to lift more offers relative to traders hitting bids. In addition, the bar closed at its high. Despite the selling, the market could not move down. The market rallied again.

This is just one way to use this data. And, I know other traders will find more ways. Once, you see the value of this volume data, please check out TradeFlow charts and studies, and see how that information can help you.

This entry was posted Monday, March 12th, 2007 at 1:14 pm and is filed under CQG Studies, Analytics and Trading with CQG. You can leave a response, or trackback from your own site.