Above nosotros encounter a nautical chart of what I refer to every bit Event Flow for yesterday's session inwards the ES futures (6/12/17). I volition survive discussing this mensurate during this afternoon's costless webinar as well as inwards especial item at this summer's workshop inwards Chicago. (Here are details regarding the webinar as well as workshop). In a nutshell, what I'm doing alongside consequence period of time is breaking downwardly the day's activity into volume-based events, where each bar represents the cost activity of each grand contracts traded. What I'm interested inwards is the cost behaviour *within* each bar. If cost closes to a greater extent than toward the high goal of the bar, I volition categorize that bar every bit a "buying" bar as well as vice versa. The nautical chart depicts a cumulative running total of buying as well as selling bars, inwards the agency of an advance-decline line.
Most of the fourth dimension the Event Flow business volition follow cost relatively faithfully. It is the divergences that are of especial interest. Notice, for example, how sellers were dominating inwards the afternoon, simply ultimately were unable to force prices below their morn (and below their previous day's) low. The inability of sellers to movement cost lower (or vice versa) creates a province of affairs where those participants volition survive forced to comprehend when flows as well as prices turn. Note the dainty rally inwards ES (blue line) later sellers are trapped inwards the afternoon.
Event Flow is a complement to other ways of inferring the psychology of marketplace participants, such every bit upticks/downticks (NYSE TICK) as well as Market Delta. Event period of time is easily constructed for whatever musical instrument trading centralized volume. It is also relatively robust alongside regard to the participation of optimal execution algorithms, every bit noted inwards quant query (see here as well as here). Algos may survive buying bids as well as selling offers inwards an efficient manner. This would non necessarily exhibit upwards inwards measures of upticks/downticks simply would survive reflected inwards cost behaviour inside sparse book slices. Event Flow tin survive aggregated over longer fourth dimension frames to supply bigger motion-picture exhibit views of marketplace participant bullish/bearish psychology.
I've mostly constitute traders much to a greater extent than interested inwards focusing on their psychology, rather than the psychology of the markets they're trading. That's a large mistake. Typical cost charts are far besides blunt every bit tools for assessing the psychology of the marketplace. With Event Flow, nosotros don't get got to rails the marketplace transaction past times transaction simply tin withal obtain a relatively finely grained assessment of how those around the marketplace are behaving.
I hold off frontward to sharing to a greater extent than at the webinar this afternoon as well as the workshop inwards July.
Further Reading: Tracking the Stock Market With Upticks as well as Downticks
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