Howard,
I completely agree that the bid/ask data is of marginal value for most stocks. Many games are played, and I have experienced them first hand.
However, there are a couple of instances where the bid/ask is very useful to me.
1. Thinly traded issues. Often, the bid/ask is far away from the last traded price, and a market order is a big mistake. You need to look at the bid/ask and size available to make a trade. Even a little guy trading several hundred dollars can move the market on these issues. You have to land your order right on the bid/ask, otherwise they will move the bid/ask away from your limit order without ever making a trade.
2. ES futures. I trade and watch these every day. The bid/ask is 80% stable up to execution. The traders really do want to get filled. bid/ask of double the normal size on a price really does pose some S/R and scare the traders away from that price. I can improve my trading execution by a tick using this info. Of course a big order can come in and flush all the limit orders away in an instant, but that is part of the game.
So, the information is useful under the right circumstances. No information is 100% reliable to make money. That would be a market inefficiency and would soon get closed. The general rule is 80% reliable is as good as it gets -- and the other 20% will take away all your profits if you don't protect them.
BR, Dennis
On Nov 23, 2009, at 6:34 PM, Howard B wrote: Greetings all -- In a conversation I had recently with a practitioner of high frequency trading, including flash trading, he pointed out that it is not unusual for bids and offers to be modified many times for every trade that is eventually executed. Many means somewhere between two or three times and several hundred times -- much of that activity taking place in millisecond and microsecond time frames. In other conversations and in my own experience, traders often place an order with a bid or ask price designed to learn something about the market, but have no intention of being filled. One fellow described these orders as "cancel if close". In my opinion, bid and ask prices do not add information that is helpful to individuals and small trading organizations. Thanks, Howard On Mon, Nov 23, 2009 at 9:57 AM, Tomasz Janeczko <groups@xxxxxxxxxxxxx> wrote: Hello,
Bid and asks are sent by IQFeed and eSignal and IB,
and they are shown in Time&Sales window in AmiBroker.
http://www.amibroker.com/guide/w_timesales.html
Historical data is different story. Various feeds supply various information.
IB does not deliver tick historical data at all (best resolution is 1 second).
IQFeed as written below delivers historical tick data in form of TRADES only.
eSignal depending on request you send can deliver trades only, bid/ask only or both (including
all bid/ask changes that happen *between* trades).
Access to historical bid/ask was not given in form of arrays in AB because
of differences outlined above (only some sources deliver necessary info), and because
there was no room in quotation structure. With recently introduced changes (added aux1/aux2 fields)
now it is technically possible to deliver historical bid/ask matching trade records (the way IQfeed does)
but that requires extra code in the plugin(s) and it is under development.
Note also that in the past I have been doing research on bid/ask relationship vs trade prices
and found that there is really lots of manipulation occuring on bid/ask and level2 books and
hypothesis that relationship between bid/ask/trade is market driving force was found to be false.
People often forget that nowadays lots of trades come from dark liquidity pools as they are required
to report trades made but they are not required to report quotes (bid/ask) so they don't appear
in order books *at all*. You won't see any quote from dark pools. You will see the trades, but they
are reported with delay as large as possible.
So called "alternative trading systems" (dark pools among others) are required to report trades to the Consolidated Tape on a
90-second delay.
This leads to very distorted picture and makes bid/ask analysis very questionable.
Best regards,
Tomasz Janeczko
amibroker.com ----- Original Message ----- From: "iqfeed" < iqfeed@xxxxxxx> To: < amibroker@xxxxxxxxxxxxxxx> Sent: Monday, November 23, 2009 4:18 PM Subject: [amibroker] Re: Tick data, how important is bids/asks? > Just to clarify, IQFeed does provide bid/ask quotes in the stream. We send every trade, as well as every bid/ask price and volume > update. We don't store each bid/ask update in history however. Instead, we only store trades, and the bid/ask price at the time > of the trade which allows 3rd party software to determine if a trade occured at the bid or the ask. Trades are often interpreted > as a buy or a sell based on if the trade hit the bid or ask and we provide the information needed to determine this. > > > --- In amibroker@xxxxxxxxxxxxxxx, "Potato Soup" <potatosoupz@xxx> wrote: >> >> I'm working with IQFeed tick data. They don't seem to provide bid/ask quotes, just trades. What's the consensus on whether this >> matters? I've seen it argued that a lot of games go on with quotes, fakeouts, etc. And that trade ticks are all that matter. >> Seems though for less liquid instruments you'd really want updated quotes, or the true price could be quite far from the last >> trade. >> >> I realize most AmiBroker users don't trade on ticks, but thought I'd ask here for comment anyway. >> > > > > > > ------------------------------------ > > **** IMPORTANT PLEASE READ **** > This group is for the discussion between users only. > This is *NOT* technical support channel. > > TO GET TECHNICAL SUPPORT send an e-mail directly to > SUPPORT {at} amibroker.com> > TO SUBMIT SUGGESTIONS please use FEEDBACK CENTER at > http://www.amibroker.com/feedback/> (submissions sent via other channels won't be considered) > > For NEW RELEASE ANNOUNCEMENTS and other news always check DEVLOG: > http://www.amibroker.com/devlog/> > Yahoo! Groups Links > > >
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