Bond Trading Example

Posted in Footprint® Chart by tharnett on October 22, 2009

Yesterday we received an email from a very satisfied customer with an annotated screenshot of his Footprint® chart. He has given me permission to post it to the blog as an educational example. It is of the 30yr bond and shows his thought process as the market traded.

This example clearly shows the value a Footprint® chart can provide to a trader. Because each price bar is broken up price by price, there is added transparency for the trader to gauge tests and retests of known levels.

Another benefit provided is the ability to see intra-bar and read increases or decreases in volume as price attempts to move directionally. This can be used to monitor volume as price breaks out or begins to trade vertically (trend). The Footprint® can be used to confirm such a move by showing increasing volume at higher and higher or lower and lower prices, depending on the direction of the trend.

To me, this example shows a person who knows what to look for and when to really focus in on the Footprint®. He has found a way to qualify the potential beginning and end of a move. The person who shared this can be found in our user community site by clicking here.

CME Equity Futures Enhancement

Posted in News by tharnett on October 7, 2009

On October 4th the CME went live with some changes in how they send out data for their equity futures contracts. We have had a bunch of questions and rather than providing you all the technical jargon, we will try to summarize its impact on you as a MarketDelta user.

:: Summary ::
The CME has begun “unbundling” some ticks/trades that were previously being sent as a single tick. From inspecting charts of the ES, it appears that the net result of this change is that approximately 2.5 times as many ticks or trades are being sent on average, WITH a much smaller average size per trade. The change does not effect the volume, just the number of trades (more trades with a smaller average size).

:: Here is what it means and what you will begin seeing ::
1) More Tickbars: If you are using tickbar charts, you will start seeing approximately 2.5 times as many tickbars per day as you were before because there are approximately 2.5 times as many ticks per day. The CME claims this will give the user a more accurate tickbar picture.

2) Slower Backfill: Backfill or downloading of historical data will take longer since there will be more ticks/trades to download.

3) Larger Database: The amount of the space in the database required to store a day of tick data will increase. Thus, the time it takes to backup or verify the database will increase.

4) Fewer Big (large lot) Trades: If you are filtering trades based on volume (in Time and Sales windows or using the Volume Breakdown indicator), you will see fewer large trades since many of these larger trades have been replaced with a few smaller trades. This change is rather substantial. The number of large trades (> 199 lots) per day on the ES dropped from approximately 1800 to approximately 400.

Here is a chart that demonstrates the changes most likely to be observed:
CME Data Changes

These are daily bars (day session only). The first three days/bars are before the change, while the last three display the larger tick counts after the change. Notice the volume per day stays relatively consistent, while the number of trades per day increases from around 170k/day to around 370k/day. The lower pane shows the average size per trade, which drops from around 12 contracts per trade down to an average of 4.5 per trade.

And below is a 10,000 tickbar chart (10,000 trades per bar). I set this to cumulate each bar (add each bar to the next) to clearly show the number of trades/tick per day has significantly increased.

You can see that the number of tickbars per day more than doubled after the change went into effect. In order to get the same number of bars per day as before, a user would need to multiply his periodicity by something around 2.5. So a 100 tickbar chart would change to a 250 tickbar chart, etc.