The following graphic demonstrates the rotation to Buy Programs in the Hole at year end, as measured by the Program Trading Algorithm, MacDaddy.
Happy Trading in '09.
Happy Trading in '09.
Recently in S&P 500 Category
Remember Black Monday? What caused it?
The most popular explanation was Program Trading.
(see - http://en.wikipedia.org/wiki/Black_Monday_(1987)#Causes).
Back then, software had yet be created that could track and either prove or disprove this theorem.
Today, this type of Program Trading monitoring software exists and is referred to as TLA (Transaction Level Analysis).
Below is a view of yesterday's 400 point drop in the Dow and what the corresponding S&P 500 Futures Sell Programs looked like.
You will note that the price of the Dow 30 does not begin computing until the 9:30 a.m. EST open. To show more interesting data the S&P Futures market is also plotted in the pre-market because that is when The Machines (our vernacular for the computers that initiate the buy and sell programs) kicked on when the NFP (Unemployment Number) came across the wire.
A couple of things to note are:
1. The Buy Programs never really lit as can be seen by only tiny spurts of Green
2. The huge amount of selling that poured into the close...Margin calls show no mercy.
Keep in mind how the Law of Supply & Demand pertains to how Program Trades effect changes in price:
1. Buy Programs usurp Supply thereby pushing up Price.
2. Sell Programs create (increase) Supply thereby pushing Price down.
Hope that you found this interesting.
The most popular explanation was Program Trading.
(see - http://en.wikipedia.org/wiki/Black_Monday_(1987)#Causes).
Back then, software had yet be created that could track and either prove or disprove this theorem.
Today, this type of Program Trading monitoring software exists and is referred to as TLA (Transaction Level Analysis).
Below is a view of yesterday's 400 point drop in the Dow and what the corresponding S&P 500 Futures Sell Programs looked like.
You will note that the price of the Dow 30 does not begin computing until the 9:30 a.m. EST open. To show more interesting data the S&P Futures market is also plotted in the pre-market because that is when The Machines (our vernacular for the computers that initiate the buy and sell programs) kicked on when the NFP (Unemployment Number) came across the wire.
A couple of things to note are:
1. The Buy Programs never really lit as can be seen by only tiny spurts of Green
2. The huge amount of selling that poured into the close...Margin calls show no mercy.
Keep in mind how the Law of Supply & Demand pertains to how Program Trades effect changes in price:
1. Buy Programs usurp Supply thereby pushing up Price.
2. Sell Programs create (increase) Supply thereby pushing Price down.
Hope that you found this interesting.
Some have asked, "Under what conditions does TLA (Transaction Level Analysis) work best?".
The simple answer is 3-fold.
TLA works best:
1. For futures contracts over equities/options/forex
2. Certain markets such as S&P 500 and Crude Oil
3. When the market are busy
Hope this helps.
The simple answer is 3-fold.
TLA works best:
1. For futures contracts over equities/options/forex
2. Certain markets such as S&P 500 and Crude Oil
3. When the market are busy
Hope this helps.
A technician mapping the S&P 500 market would probably conclude that we have begun a new down leg.
The best way to profit from this would be to find entries to go short. Your choices are to either sell into the down-drafts or to sell new highs. Both approaches can be very profitable and also quite risky.
How to Use TLA to Minimize Risk
Selling into the down-draft
In the example below, using a TLA algorithm, such as MacDaddy, when price is approaching a recent low, as long as MacDaddy, which is measuring the strength of the Program Buying and the Program Selling, is strong to the downside, a trader can enter into the direction of the market.
Depending on the makeup of the trader, their time horizon, internal Technical Analysis, Risk Tolerance and Money Management rules, they can exit before, at or after the identified low.
Selling the High
For longer trades, a trader will need to sell a high and then ride the down-draft.
Here, MacDaddy, is also handy. The easiest way to apply MacDaddy, is track new highs and when MacDaddy diminishes in strength with the new highs, or is negative at a new high, a trader is safe to enter short with a stop just above the recent high.
Happy Trading.
The best way to profit from this would be to find entries to go short. Your choices are to either sell into the down-drafts or to sell new highs. Both approaches can be very profitable and also quite risky.
How to Use TLA to Minimize Risk
Selling into the down-draft
In the example below, using a TLA algorithm, such as MacDaddy, when price is approaching a recent low, as long as MacDaddy, which is measuring the strength of the Program Buying and the Program Selling, is strong to the downside, a trader can enter into the direction of the market.
Depending on the makeup of the trader, their time horizon, internal Technical Analysis, Risk Tolerance and Money Management rules, they can exit before, at or after the identified low.
Selling the High
For longer trades, a trader will need to sell a high and then ride the down-draft.
Here, MacDaddy, is also handy. The easiest way to apply MacDaddy, is track new highs and when MacDaddy diminishes in strength with the new highs, or is negative at a new high, a trader is safe to enter short with a stop just above the recent high.
Happy Trading.