More on TFlow and Aggregation
I have discussed TFlow in the past, but this article is the basis for a series of future articles built upon TFlow charting. A quick review is in order.
TFlow charts and studies bring to traders key market details. Primarily, whether traders are hitting bids or lifting offers to generate the last price. This information is the basis for the TFlow bar. The high is the best asking price and the low is the best bid price (the inside market). The width and color-coding of the TFlow bar is determined by the actual volume of trades at the ask or bid price. A portion of the TFlow bar is colored green based on the percentage of volume at the ask price and red based on the percentage of volume of trades at the bid price. The width and brightness of the TFlow bar is determined from the current bar’s volume relative to the historical look back period.
This chart is the basic TFlow chart along with the TFlow Volume study (the total amount of trades made at the ask price and the bid price are plotted as histogram bars) and the TFlow On Balance volume line. The TFOBV is the running sum of volume of trades at the ask minus trades at the bid price.
One issue with individual TFlow bars is the inside market can move very quickly. Consequently, for some markets, such as the e-min S&P 500 futures contract, the TFlow bars are plotted at a very fast rate. The high level of velocity of price information can be hard for a trader to absorb. To reduce the velocity, and still get the key information, CQG offers aggregated versions of the TFlow bars.
There are three types of aggregation: bars, range, and smoothed. Right-click on the TFlow bar to bring up the menu for aggregating TFlow bars.
Aggregated TFlow bars means less screen real estate is used; key support and resistance levels are highlighted, as well as trending action is emphasized. The first example is bar aggregation.
Bar aggregation combines individual TFlow bars into one TFlow bar. If the setting is for 3 bar aggregation, then each time three individual TFlow bars are complete, one 3 bar aggregated TFlow bar is plotted. Between one to 20 individual TFlow bars can be the basis for bar aggregation.
Range aggregation uses a price range. Between one and 20 ticks can be used for the range. For example, if you select range, and change the TFlow chart to range aggregation and then type in 3, the TFlow chart will be a 3 tick range aggregation chart. Here, tick is used as the minimum price increment for the high-low range of the TFlow bar. For example, an e-mini S&P 500 3-tick range aggregation chart would be 1486.25 to 1487.00. All TFlow Charts are three ticks in range unless the market is swept, which we will discuss tomorrow.
The final version is smoothed TFlow. Here, a proprietary algorithm is applied to the TFlow price data. Up to 20 bars for smoothing is available. The example presented is using a three bar smoothing. The TFlow price action now has a better defined appearance regarding the trend and points where the market changes direction.
Each aggregated version detailed here included the standard TFlow studies. Other studies can be used with aggregated TFlow bars, and the elements of TFlow can be the basis of custom studies, as well. All of these will be discussed in future posting here.