Vol and Contracts?

[underground]

I'm sorry I did not know where to place this but I thought I might do it in the general dis. section. If I'm wrong sorry for the post:

Just curious if someone can help me out or point me in the right direction. I was having a debate with a few friends and need a mathematical equation (model) to prove the below question. I think it has something to do with volume and liquidly but I’m not sure how to calculate it mathematically.

Question:

Simple said if you purchased into the prevailing trend how many contracts would you need to purchase in a lot to help push, move, coax the price? I’m not saying moving the market or causing a huge price change I’m just wondering what it takes to cause a minor price change? For example using the E-mini Russell say you enter the market long at 704.3 how many contracts would you need to purchase to move the market 0.1 or 0.2 ticks above 704.3 to 704.4-704.6 for a short period of time say seconds to a minute? 500 contracts? 5000 contracts? 50,000 contracts at a time?

[NinjaTrader_Ray]

Maybe I am missing something but if you want the ask price to increase by 1 tick, then

Contracts Required = Current Ask Volume

by two ticks

Contracts Required = Current Ask Volume + (Current Ask Price - 1Tick) Volume

Ray

[underground]

makes sense to me seems like a simple enough solution.

So is the current ask volume in the superdom (highlighted yellownumber within NT's Sumperdom) calculatedin multiples of 10's or 100's rather than the actual number i.e. current ask volume highlighted yellow= 500 so does that mean 500 contracts, or 500x10 = 5000 contracts or 500x100 = 50,000 contracts?

[NinjaTrader_Ray]

Yellow is not current ask volume. the ask volume is the lowest value in the sell column. That is real volume as well. If it say 100, there is 100 contracts on the offer.

[underground]

So in the attached jpegcalled "ES" you would need to do the following to increase the price for a few seconds.

If you wanted the ask price to increase by 1 tick, then

Formula: Contracts Required = Current Ask Volume

Answer: 40 contracts @ 1279.50

by two ticks

Contracts Required = Current Ask Volume + (Current Ask Price - 1Tick) Volume

Answer: 40 contracts @ 1279.50 + 96 contracts @ 1279.50

1 tick - if you purchased 40 contracts the price would jump up 0.25 for a fews seconds because all the contracts available at 1279.50 are filled correct?

To bump it up 2 ticks (0.50) you would need 40 contracts @ 1279.50 + 96 contracts @ 1279.50 - correct?

If you dideither of the abovestrategies the price would increase? Do you have an idea for how long?

[cody]

I'm curious why you would do that. Can you please expand your thoughts on this.

Thanks.

[underground]

It was just a thought about moving pricing for a sec within the market - the thought was how much money wuld one need to throw into a trend to increase the price by a 01. tick or 0.2 ticks because I'm sure it can be done but the question is you would need a ton of captial to do it. I was saying if you purchased say 5,000 or maybe 50,000 contracts at once it would cause a price spike. Thats all cody

[cody]

OK, but you should keep in mind that volume comes to volume.

[underground]

cody - ok then how would you add Vol to the equation to give it a better feel to the whole idea?

[cody]

It depends what you're trying to do. With EMD or ER sometimes 5 or 10 lots will move the market a tick or two.

in QG 1 lot can move the market a full point.

What are you trying to accomplish, in an economic sense, or did you just want to put up prints at some price? Also, what time of day are you trying to do this?

[underground]

What are you trying to accomplish, in an economic sense, or did you just want to put up prints at some price? Also, what time of day are you trying to do this?

1 - I was thinking if you thru a ton of contracts on the table so to say,like a lot of 5,000 or 50,000 at once, into the dominate trend the sudden purchase mighthelp drive the market up a tick or two in that direction. I was thinking that amount would cause a spike in vol. and price. Thus help drive the market higher/lower depending your purchase.

I was thinking that's how the big boys might do things some times but not always. Plus If you did that and it worked 50% of the time you might get that 0.1 tick profit if thats what you were looking for.

The time of day would be during market hours (intraday) usually first thing after the morning open, when things start to settle into the daily trend.

[cody]

Perhaps a better idea, is to wait until lunchtime when the market is drifting and you'll catch small players and force them to stop out, especially if you are near a chart point which many follow.

[underground]

So you are saying wait until 12:00pm ET and then squeeze the little guys out. With a huge lot on the table. Correct.

But wouldn't placing an order of that size anytime during the day in a good solid trend help keep it moving also?

Plus do you think there's a math formula to provethis idea some what? Such as simple put purchase all ormostof the available supply at a certain price would thus cause the demand to increase (price). Plus you would need to take into account Vol. outstanding contracts etc etc I think.

[cody]

underground wrote: So you are saying wait until 12:00pm ET and then squeeze the little guys out. With a huge lot on the table. Correct.
-->I am saying wait until there is not as much liquidity as when the market open. Never risk more than you are prepared to lose. Unless you want to risk a major arb player seeing your volume and crushing it.
But wouldn't placing an order of that size anytime during the day in a good solid trend help keep it moving also?
-->You can try to run stops any time of day. They tend to be around chart points that get lots of publicity.
Plus do you think there's a math formula to provethis idea some what? Such as simple put purchase all ormostof the available supply at a certain price would thus cause the demand to increase (price). Plus you would need to take into account Vol. outstanding contracts etc etc I think.

-->You could engage a PhD to data mine this for you and find out.

I dont understand why you would risk a devastating loss to pick up a tick or two though. Seems irrational. Keep in mind some headine risk, offsetting volume risk or simply execution risk could all nail you pretty hard. Plus if you're the volume at that time, how would you unwind the position? If you look at ES etc, there are trades for 20,000+ lots from tiem to time that barely move the market.

[underground]

Cody,

I guess the problem as I see it then, are these unquantifiable
uncertainties:

1) Invisible asks & bids waiting to pounce on the available price.

2) Some of the bid/ask offers are decoys;

3) No one knows if following traders will take the bait and follow up
with any subsequent trades (trend followers).


There is little chance to determine with any certainty how far the price will move following any trade, other than the immediate available bid/ask.

There really is no way of determining what amounts to predicting the future price. There are far too many uncertainties & variables at work in the markets, not to mention the all-pervading Quantum nature of reality. (Apologies to fundamental Fibonacci & Gann believers).

[cody]

I thought about your comments and think,

1. The markets are not as chaotic as you make them out to be. They appear chaotic as so many non-linear variables appear, yet lack the same value as they appear to, eg, how do you determine thevalue of a NY Times article saying Bush is an idiot? You dont. You let others, namely the market, do it for you. If the market discounts the article so do you. But many traders think, individually, their opinion counts, so they take a position and lose money. Then blame the market for being irrational, when, the trader acted irrationally.

2. As markets are composed of people, cycles and psychology take hold. You need to determine the markets mood before acting. No one likes to talk about psycho-babble, but considerthe impactnews has on us. I think Punch magazine 20 years ago, highlighted this by asking what do you talk about AND for how long. Their casual research determined that a landslide in India killing 1,000 was equal to a snowstrom in Belgium trapping 50 people in their hotel, which was equal to local traffic and is not as important news as the kid next door who broke his arm playing soccer.

Interesting topic with no real answer.