CME E-Micro exchange futures contracts available for trading - page 4
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Why 0? I, for one, have saved a lot of money.)
This is both important and not.
1. On the one hand, the trader must understand that neither he, nor hundreds of others like him, will move the price a single point, because the ask or bid will be swamped by new and new supply and demand volumes, which will be piled up by the exchange robot.
2. On the other hand, the trader must understand that the price will move against the largest number of open positions to one side. This number is almost impossible to calculate, because it is difficult to distinguish players' trades from fictitious robot trades, (which make trades for hundreds of contracts and for units). That is to say, the sustation will add up in the opposite way to the natural movement. The more traders buy, the lower the price will fall. The more they start to sell - the higher it will go up. As soon as they reverse their positions, the price will reverse its movement.
In other words, it will be exactly the opposite. Buy more - the price will go down. More selling - the price will go up. That's how the exchange earns.
Peter, you are good!
IMHO, very few people are able to understand it on their own. Everything is absolutely correct.
It's called a market maker's market.
Let me explain what I mean by "fictitious" in this particular case. These are transactions made between the exchange and the exchange (or its intermediaries), through which the liquidity spillover and price movement is managed. That is - the trades are real, but they do not belong to traders. Their purpose is (1) to create price volatility and volume on the trading floors, (2) to manage price movement. Limiters in the stack are set to paralyse any trader's price management process. The volumes are too large for traders to move the price. And there are relatively few real traders on those floors. This, by the way, explains why they lower the entry threshold and make all sorts of micro futures contracts. There are very few people there now.
That's what's so annoying: "Limiters in the stack are set to paralyse any trader's price management process. Volumes are too large for traders to move the price.And there are relatively few real traders on those platforms" Genius! If there are few traders, why "paralyze" them? )) Maybe, let them live? ))
Peter, well done!
IMHO, few people are capable of understanding this on their own. You have written everything absolutely right.
It is called a market maker's market.
Thank you. Of course, I can be wrong in details, inaccurate in wording, not knowing the nuances, but I spent a lot of time and effort to research. The goal was to capture the global essence of what's going on by probing everything in practice. Hopefully, it worked.
That's quite a delivery: "Limiters in the cup are set to paralyse any trader's price management process. Volumes are too high for traders to move the price.And there are relatively few real traders on those venues" Genius! If there are few traders, why "paralyze" them? )) Maybe, let them live? ))
Correction: Limiters belonging to the stock (market maker) robot. There are most of them out there. If you just assume that these limiters belong to the market maker, you will understand why traders cannot move the price in such a market. Ask and bid volumes grow in proportion to the traders' open positions. The more positions traders open at the Ask price, the more Limits the robot will set on that price. Therefore, the price will not move until the robot itself moves it in the right direction. This is what I call the "paralysis of any trader's price management process".
In simple words: For every volume of demand of traders, the robot disproportionately imposes its supply volume, for which the price will not move. After all, in order for the price to go up, it must redeem the entire volume of supply, and it is too large for traders. It turns out that most traders buy, the price does not increase, and most sell, the price does not fall. Why? Because the robot superimposes its supply and demand volumes on top of the volumes of the opposing side of the traders.Correction: Limiters belonging to the stock (market maker) robot. There are most of them out there. If you just assume that these limiters belong to the market maker, you will understand why traders cannot move the price in such a market. Ask and bid volumes grow in proportion to the traders' open positions. The more positions traders open at the Ask price, the more Limits the robot will set on that price. Therefore, the price will not move until the robot itself moves it in the right direction. This is what I call the "paralysis of any trader's price management process".
I will leave out of brackets the phrase: "belonging to a trading robot", which would be like putting a shop and a market maker in the same line. What is the point of it: "The more positions traders open at Ask price, the more Limits the robot will set at this price"? If there are a lot of Limits, it does not mean that the market will stop and that's it If 10 people bought 10 TV sets during an hour, it does not mean that the next hour they will also buy 10 TV sets. Maybe the opposite is true: if there are many Limits, it is like eating a meal - you will find people who want to eat it. But all this reasoning is just a mental exercise, which has nothing to do with stock trading
In simple words: for each volume of traders' demand, the robot disproportionately imposes its supply volume, for which the price will not move. After all, in order for the price to go up, you need to buy out the entire volume of supply, and it is too large for traders. It turns out that most traders buy, the price does not increase, and most sell, the price does not fall. Why? Because the robot superimposes its supply and demand volumes on top of the volumes of the opposing side of the traders.How do you know what the so-called majority are doing? If things were as you describe, the price would be at the same point
How do you know what the so-called majority are doing? If everything were as you describe, the price would stand at one point
The market maker moves the price. He does not need the traders to move the price, because HE is the counterparty to those deals. He is the one who sells and buys traders' contracts. He only needs traders' open positions, but he does not want them to move the price on their own. After all, it means that he will pay them out of his pocket when they start to move the price up or down in droves. Therefore, he squeezes their supply and demand volumes with his own volumes. When their positions are already open, he starts pouring his liquidity through his "pockets", making trades "with himself" and moving the price against the highest number of open positions. If the most open positions are in buy, he will move the price down, if it is in sell, he will move it up. It will move the stop-losses of one side and then it will move it against the other. And so on without end.
In such a market you can make money, but instead of technical and fundamental analysis, you need to find out every moment, in which direction there are more open positions of traders, and carefully (with small volume) join the minority. Then go out on time.
You need to separate trades made by traders from market maker's ones. This is not an easy technical task.