Market Leader informed
I would like to say a couple of words dedicated to the first anniversary of the FUTURES TRADE AND STOCK EXCHANGE Faculty abouthow we came to trade on the basis of stock market volumes and what it all eventually resulted in.
After working for some time on popular platforms that provided detailed information we understood that having a host of data packed into a nice terminal wasn’t quite enough for successful trading and a lot of things either didn’t work in the form available to us or were useless.
In January 2008 we chanced upon information about Market Profile – or МР. We studied it and ultimately came to the conclusion that the MP theory was quite accurate in reflecting market sentiment though a model that it results in has a number of assumptions because of lack of primary information. But this didn’t prevent this ideology from developing at all as such analysis essentially involved medium-term nature of trading with minor inaccuracies changing the picture of the situation very little.
At the same time, our team members (within the Statistics and Money Management Department) of the future FTSE Faculty started more closely looking at terminals that offer data directly from trading floors and seeking ways to modernize the concept. Real volume data were disclosed at that time to a very limited degree, especially in the Post-Soviet area because of the policies of dealing centers that were doing their best to involve as many people as possible with the popular non-exchange terminal, MetaTrader. The very subject of opportunities offered by volumes was in part covered on Western and domestic forums by developers and users of different platforms and terminals.
This is how one can look inside each bar and spot a misbalance of powers in the market and major players in a timely manner:
Through development of our own ideas and concepts we came up with the idea of Volume Profile, or distribution of market orders by the price depending on their actual volume. Yes, we’re not the first to come up with this, but we walked our path independently. As time passed, the Russian net became full of the then new information about possibilities volumes offered and advantages of the Volume Profile. Indeed, we admit that many techniques used to work. However, the market has changed, and trading methods with it. And one had to break primarily one’s own stereotypes to see ‘deeper’.
Volume is the part of informationthat the market offers, and the missing links naturally include price and time. When analyzed as a complex, these three components show the closest way to victory. Nevertheless, we keep to the opinion that different approaches to analysis of real volumes and other information from the market is an abstract and individual process similar to the existing multitude of price analysis systems (without the volume).
Our team evolved along with our software, ClusterDelta, or, to be more precise, its predecessor based on MS Excel features that we used back then to process information coming from the exchange. At first it was a perfect solution as we had a simple way of adding necessary elements and deleting useless ones after testing.
But given a number of drawbacks of MS Excel itself and experience of operating other platforms we already gained we decided to do everything from scratch and create a convenient platform for visualization of clusters and volume profile.
The result we got a year and a half later meets our expectations – a convenient and space-saving platform which, most importantly, was very easy on computer resources.
However, this platform isn’t positioned as an autonomous product: though Cluster Delta isn’t linked to a specific terminal one should be aware that clusters are in fact only part of market information. So, the price chart and some market data indicators are better viewed in the trading terminal itself.
Anyone can test the platform today. You only have to download it and choose the instrument to have clusters displayed.
Options and specific features of the platform in brief (functionality):
- cluster chart
- volume, delta, volume x delta, ask x bid
- data display filters
- certain volume filters
- a wide variety of color settings for the interface
- volume profile for the relevant period
- two alternative communication channels to data servers
- adjustment for any time zone
- data updated every 10 seconds
2.0 Net Framework or higher should be installed before launching the platform.
The cluster chart can be represented as volume, delta, volume and delta by the price, the number of Ask and Bid quotes. General formulas ASK+BID=Volume, ASK-BID=Delta.
To make visual perception easier, maximum volumes are highlighted with different colors – the minor and major filter limits can be set for the small volume filter. Anything below the minor filter limit is not highlighted. The volume between the minor and major limit has an individual color setting (Cluster Filter Minor Bg), volumes above the major limit also have an individual color setting (Cluster Filter Major Bg). The maximum volume above the major limit is highlighted uniquely (Cluster Max Volume Bg).
The volume profile in the left part is built independently (of data in the main part of the screen) for the user-specified period of time.
The approximate look is as follows:
One can also filter the volume by the number of transactions per minute as an increased frequency of transactions is one of the criteria that the movement is about to end. Please note what the chart of the Euro December futures looks like with a filter of 250 lots a minute at the time this article was being written (Kiev time).
We won’t describe functionalities in full on pages of this magazine – you can simply find all this by following the link with software description and downloading it (open access), asking your questions or leaving an opinion or suggestion.
Text: Igor Vasev, Head of the Future Trade and Stock Exchange Faculty
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