Ok, I admit it. The title’s a riff on a lyric from the old Dire Straits song Money for Nothing. You’ve probably heard it, or maybe you wish you hadn’t. Either way, it’s relevant because I often see traders talking about “the 12:00 turn”, or “the 9:00 turn” or a reversal that’s supposed to magically materialize at specific times of trading day. Of course, the implication here’s that if you only knew about it ahead of time you could place (or close) your trade and rake in the coin. You know… money for nothing, chicks for free.
So I decided to ask and answer the questions. Can you get money for nothing? Are chicks really free?
For this study I took the last 90 days of 1 minute data from each of the instruments in below, used the Acme Zig Zag to export the swing data then graphed it in Excel. The only real variable in each of the instruments is the setting for the minimum swing size. I wanted to filter out the itty-bitty ones and still end up with sample size (aka “the N”) that could product statistically significant results. So I experimented a little with each instrument until I came up with a minimum swing that produced somewhere between 1000-2000 swings over that 90 day period. The specifics are in each section below.
All times are Pacific/UTC-8.
CL – West Texas Intermediate Crude Oil
- Minimum Swing Size: .2 point
- Sample Size: 1706
CL definitely has a tendency to reverse in the 8:00-8:20 window, as well as the 11:00-11:30 window. Some other notables are the long poles near the half hours between 6:00-7:30… the first 90 minutes of the session.
ZB – US Treasury Bond
- Minimum Swing Size: .1 point
- Sample Size: 1961
ZB has several common reversal times, the 5:30-5:40 window being the most prominent with other notables around 6:00, 7:00 and 11:45 – 12:00.
ES – S & P 500 Index
- Minimum Swing Size: 5 points
- Sample Size: 1762
Because the US equity indexes have the most significant cash-versus-futures session of all the instruments in this study it’s not really surprising that the most prominent reversal times are the open and close of the cash session. But it’s worth calling out the cluster of times from 9:00-9:15 AM as well as 11:15-11:40. There are some other long poles in there that tend to coincide with clock times,but honestly, they’re probably not frequent enough to call an edge. One thing I can say, though, is that ES operates on a rhythm not really apparent in the other instruments.
NQ – NASDAQ 100 Index
- Minimum Swing Size: 15 points
- Sample Size: 2501
NQ’s the rowdy kid. It starts the cash session kicking and screaming, then settles down considerably. As with ES, there’s a cluster of regularity around 9:00 and then another 11:15-11:30. This shouldn’t be too surprising – there’re a number of stocks in common with these two indices.
RTY – Russel 2000 Index
- Minimum Swing Size: 3 points
- Sample Size: 2057
Like NQ, RTY’s also a pretty violent out of the session gate. Many of the names in this index are not particularly liquid, so it’s not really a shock that this thing is basically a mosh pit that settles down after not too long. After the initial herks and jerks, the 6:50-7:05 and 7:30-8:15 windows yield a lot of swings, though I’d be hard pressed to say this is specific enough to trade with or against. Like the other stock indices, that 11:15-11:40 window has something to it. Buy and sell programs are tending to start up in this window once Wall Street gets back from their 3 Martini lunches.
Money for nothing? Chicks for free? Probably not, sadly. But is there enough regularity in these instruments that you should be paying attention and be ready to act during significant time windows? Absolutely.
Until the next time… trade ’em well.
The compilers are still smoking hot, but we’ve dabbed enough sweat off our brows to release an update to the Acme 8 suite. This is a pretty big one… it includes lots of new features, a couple small fixes, two brand spanking new products and one mega package:
- The Balance Zone is a new and simple way to view and trade balance areas and profiles
- The Volume Zone is a simple and very handy way to analyze volume and watch it become support and resistance
- By popular request we’ve released a new Ultimate package, which is pretty much the whole Acme 8 product enchilada
As always the low-down on this update is in the Change Log.
Summer only comes once a year (sadly) and so it is with our dog-days savings event. But both are here now… use coupon code SUMMERSAVE18 at checkout and enjoy sweet savings of 20% before the popsicle melts away on August 17th 2018!
Ok, today we’re once again done slinging bit hash (for now)! We’ve released an update to the Acme 8 suite that includes several enhancements, some minor bug fixes as well as 3 (mostly) brand-spanking new products:
- The Value Candles are back (see the Acme 7 Volume Profile VPOC). We think the new name’s a lot catcher.
- The Zig Zag is back too!
- Last but not least, we’ve released our first-ever custom bar type. Many of you have seen me use the Acme Range-Rebound bars on my charts and asked how you can get your mitts on some. Well, the wait is over.
The full low-down on this update is in the Change Log. Check it out, if you’re into reading that kind of stuff.
Until the next time… trade ’em well, amigos!
Today we released a suite-wide update which included several minor fixes and security standards upgrades. Get it here.
Every now and then I see a comment or quip where it seems pretty clear that a trader might not really get it. By it, I mean liquidity… aka order flow. Not being judgmental here, the term itself is confusing. I mean there’re a couple very different aspects to order flow and that’s really the cause of the muddle.
Active vs Passive Order Flow
There’s “active” order flow and then there’s “passive” order flow. Active order flow’s the volume that’s actually traded. Traded volume can be called active because it requires a market order (a willingness to pay the spread) in order for a limit order on the other side to be matched and traded out of the order book. The source of the market order can be considered an aggressor. And then there’s passive order flow – passive because it’s basically an advertisement for business. It’s telling the world I have x number contracts or shares to buy or sell at a given price. These orders are telling the world come and get me… if you’re willing to pay the spread.
So this confusion’s understandable. I like to call the active variety of order flow traded volume or tick analysis and call the ebb and flow of orders in the market depth book what it is… order flow proper.
To that end, in Part 2 (click here for Part 1) I want to show a good example from today in NQ of a counter intuitive order flow concept: liquidity attracts price. You can use this concept to help you answer (at least) three fundamental, objective questions:
- Are buyers/sellers responding to available liquidity?
- What’s the potential for price continuing to move in the same direction?
- What’s the potential for price to stop or reverse?
Below we have a chart series spanning 2 hours from about 7:45AM PDT to 9:45 AM PDT, and it pretty clearly shows how order flow can reveal to you what’s about to happen.
1. Just before 8:00 significant bid liquidity steps into the market and sellers begin responding. Bids are added, sellers continue to eagerly respond and drive down through the bids:
2. As price moves down, bid liquidity notably dries up around 6215. Offers also dry up very briefly at the same time. This can be an important clue for a cessation of hostilities, or a turn in a swing with power. Astute readers will notice what develops as price bounces from 16ish…
3. This move has passed 25 handles in just a few minutes. Some late sellers decide they want in (or out, we don’t really care which), but buyers aren’t reacting. Sellers now start to move at market and press price down another 20 handles in 15 minutes.
4. Notice the difference between the first leg of the move (above) and this one? Yeah, the bids are LESS and the offers are MORE. This liquidity imbalance is a clue that something is likely to happen. You guessed it. It’s about to attract price, but the other way round.
5. After a brief liquidity drought (get it?) new bids step in near 6200 and then begin using market orders to lift the offers for a fast 15 handle rotation the other way.
That’s it for this installment – hopefully it’ll be less than a year until my next installment. In the meantime… trade ’em well.
News from the Back 40
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