I was taking a look at the distribution of volume for the ES futures for trades during the first half of Friday's trading session. Of particular interest:
* Trades of 20 contracts or more made up about 7% of all trades, but accounted for about 56% of all volume in the ES contract;
* Trades of 10 contracts or more constituted a little less than 15% of all trades, but comprised a little over 70% of all volume;
* One-lot trades accounted for slightly under 50% of all trades, but only about 8% of total volume;
* Trades of 100 lots or greater accounted for only about .6% of all trades, but about 15% of total volume.
Many professional traders trade in lots of 100 contracts or more, but it is rare for these traders to execute trades in such large blocks. Rather, they employ clerks and/or automated algorithms that commonly break their blocks into smaller pieces of 10 contracts or more. While it is possible that a run-of-the-mill retail trader might be executing 20 contracts or more at a time, that is the exception, given high retail commissions. More often, these larger trades are placed by prop traders or are part of larger block executions from institutions.
Where are large trades hitting the market? At breakout levels? At the bid? At the market offer? Early in the day? By tracking *who* is in the market and when, we can infer important sentiment trends and shifts in the stock market.
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Saturday, January 03, 2009
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8 comments:
Dr. Steenbarger, exactly how do you parse this information out? As someone who is beginning to trade rather large sizes myself, I am very interested in this.
Brett,
first I want to wish you a happy and prosperous new year.
On your topic, you might try to expand your statistic to a further category:
Single or multiple trades taking place at a certain price level within a short period of time.
Big traders have another option to hide their big trades, if they are not eager to enter or exit.
I have often seen the market run up (or down) to a certain level and pause, try again, pause again and finally breakthrough or get beaten back again.
Big traders may place their orders at the bid to buy or at the ask to sell and just let the market work through the order, even refreshing the order in an Iceberg trading style, until multiple of 100ths of contracts have traded at that pricelevel. This usually will not happen at a daily high or low, but somewhere around the 1/3rd or 2/3rd area of the daily range, when big traders try to turn the market around by providing support or resistance.
Best regards,
Chris
Brett,
How specifically do you set Market Delta to read the Big Traders? What time frame chart do you use and what size/amount of contracts do you filter with?
I have some confusion how to deal with the fact that the 100 lots may be divided into smaller lots as you expressed.
Thanks so much,
Bryan
Thanks for the info, dr. Steenbarger!
However, the set of data excludes CFDs' trading and spreadbeting. Do you know how much of the trade CFDs make? I think they might be a growing segment as the margins are as low as .5% for S&P500 contracts and the like.
Best wishes for the New Year!
Jaroslaw
Hi Jeff,
I downloaded the data from my quote platform and analyzed in Excel.
Brett
Excellent point, GlobeTrader; thanks much and happy new year to you also!
Brett
Hi Bryan,
I find setting the footprint bars to 20 contracts or greater and using 5 min bars is helpful for my style of trading--
Brett
Hi Jaroslaw,
Yes, I'm just focusing on exchange-traded volume; that seems to be useful in my analyses--
Brett
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