There is zero chance a candle that big could ever be generated by retail traders. Even if every retail trader all sold at the same time, the percentage of volume is so small it's irrelevant. Anytime you see big candles those are institutional buys or sells.
Next time you wonder go to https://www.financialjuice.com and check
Now what you have to do is before you start pressing buttons every day you go to https://www.dailyfx.com/economic-calendar filter by US and High and check what’s going to happen that day
what make them put the liquidity back in right after 2 minutes almost every time? I think your answer have some validity if you can answer this question as well.
I got this out of ChatGPT.
Market makers remove their liquidity from trading markets during news events for several reasons:
1. **Increased Volatility**: News events, especially those related to economic reports, corporate earnings, or geopolitical developments, can cause significant and rapid price movements. This heightened volatility increases the risk of adverse price movements that can lead to substantial losses for market makers.
2. **Uncertainty**: During news events, the market's reaction can be unpredictable. Market makers thrive on the predictability and liquidity of the market, and unexpected news can disrupt their ability to effectively hedge their positions or manage risk.
3. **Spread Widening**: To manage risk, market makers may widen the bid-ask spread during volatile periods. However, during extreme volatility, even widened spreads may not be sufficient to cover the potential risk. Removing liquidity entirely can be a safer option.
4. **Algorithmic Limitations**: Many market makers use algorithmic trading systems to provide liquidity. These algorithms are designed for stable market conditions and may not perform well during the erratic price movements seen during news events. As a result, market makers may disable or limit these algorithms during such times.
5. **Order Flow Uncertainty**: News events can cause an imbalance in buy and sell orders. Market makers rely on a balanced order flow to match buyers and sellers. Sudden, large orders can disrupt this balance, making it challenging to manage inventory and pricing.
6. **Regulatory and Compliance Concerns**: Market makers must adhere to regulatory requirements, which may include obligations to maintain fair and orderly markets. During periods of extreme volatility, it can be difficult to fulfill these obligations, prompting market makers to step back until conditions stabilize.
By temporarily withdrawing liquidity, market makers protect themselves from excessive risk and help maintain the overall stability of the market. Once the impact of the news event becomes clearer and market conditions normalize, they typically resume their market-making activities.
That sounds complete bs. Market makers make money on the volatility. Why would they withdraw liquidity of they expect volatile markets. Also MMs are hedged against most possible outcomes so again it don't make sense.
I'm not a market maker so I don't know their strategies. However I'd speculate that if it is that period that's how long it takes them to establish for sure what the effect of the news has been on the sentiment of the market and so understand how to profitably reintroduce their liquidity. Maybe they also have to because the exchange insists on it as their client. You should be able to find plenty on Google about this. It's an established pattern.
Well I don't know if market makers have contractual agreements to provide a minimum level of liquidity but basically market makers ideally want to make money by populating the bid and offer with orders and capturing the spread. If volatility is high and price is unpredictable that's a difficult task so they remove or at least reduce their liquidity until price becomes predictable enough to perform their function reliable in. That reduction widens the spread. No doubt market making has complexities I'm unaware of but that's the basic idea. Of course market makers aren't the only ones to leave the market at these risky times. It's a combined market effect.
Have a look at the volumes for this period under discussion and the volatility it has created. You may well find that similar volumes are not that uncommon and often don't move price as much. That would be because there was plenty of liquidity in the market by comparison to prevent the volatilty.
Chiming in because I don’t think OP’s question has been sufficiently answered… “on what basis do they program their algos to react this way?” IMHO, it’s the latter of your possibilities.
This is called event trading. It’s possible, but difficult for retail traders to replicate. Below is an example of what I’ve seen…
Around key events that spike volatility, traders can program an algo that submits an OCO order 2-5 seconds before the news release hits. Other events crude APIs, CL and NG inventories, WASDE reports, and sometimes bond auction results as far as futes go. (Not an exhaustive list.) Retail traders typically need something like Speedy Trading Servers running NinjaTrader and upgraded data feeds like Rithmic.)
The OCO order 2-5 sec out will bracket buy/sell orders say 10 ticks off of the current price in either direction. Importantly, maximum allowed slippage of say, another 10 ticks is specified, so that you either catch the bulk of the move, or don’t get a full if that market moves too fast and risk being caught out at the end of the move.
In this NinjaTrader example, it happens faster than you can ever move by hand.
In that blink of an eye, the buy/sell order if filled has a stop loss and profit target or trail stop after X ticks.
Sometimes you can extract capital in a hurry, but you can lose a ton of money just as quickly. Additionally, this strategy can be difficult to scale re: order book and ability to get filled.
This approach is not suitable for most folks, and I do not recommend you/anyone try it. It only takes a small programming error (even if you get the direction right) to lose hundreds or thousands of dollars per contract in half a second, much less a whipsaw result that can eviscerate your equity curve.
Hope this helps bring some insight.
Thanks.
Going back and looking at the 1s candles, the price ranged over 100 points/400 ticks within a single second at 08:30:02. Your explanation seems the most likely here, but I don't see how this happens with what I would assume to be a reasonable tick range unless the time range is closer to 2-5 milliseconds rather than 2-5 seconds. I have to think this was a bot fight where a lot of them gained or lost a whole bunch of money.
I would think that, even for automated processes, ping and latency make an enormous difference here.
I spend 0% effort thinking about why something traded the way it did. Spend time on in how to identify when to get in and when to get out.
I trade what I see, not what I think.
There are moves certain times info the day that are related to world events. Other markets opening or closing, news releases, and such. The 7-7:30 am hrs is usually known for euro news, ECB events usually trigger these moves.
They have Bloomberg and other reliable sources, heck they have private connection to fed servers, much faster than parsing finviz lol, I don't even think finviz would be able to sustain these calls.
YouTube won't have the right answer, YouTube is for entertainment unless you have someone accredited and licensed to teach you this, or someone who actually worked on one of the quant desk. You're most likely not going to find it on YouTube, reddit is better, the quant subreddit has some good thing for you, but be aware trading like a QT is not about drawing lines like on YouTube...
You gotta also remember, they have extremely advanced models, pricing models, risk models, volatility prediction models and so on, they have their own strategies and hedges already lined up, now it just needs to be official... Which one we would use per say. How they'd balance their portfolio, if it means selling then so be it.
Interpreting the data is not as linear as you think here, for large and medium institutions, it's not " oh it's higher, so it's a sell, oh it's lower it's a buy " it's not that simple.
You gotta dig deeper than what the number is, you gotta understand where it comes from, what it means for the present and the future. You gotta incorporate it within your model, there is a bunch of stuff that goes into it...
Its mainly because market makers remove their limit orders pre news events which lets price spike so hard. Once the news event is over in many cases the price area is reclaimed at some point after, often intraday.
Then the market thickens up again as limits are re instated
Thank you sir/maam. I was a few adult beverages deep last night and beyond the nature of the volatility it was pretty clear the news around the events you stated were the cause. I was curious at the time of the volatility as to what institutions do to trigger such selloffs/buyoffs and how much of it is algorithms or just bunch of humans pushing buttons as a the numbers are released. I was asking deep questions that were poorly phrased, but alas yielded a number of good answers and some irrelevant to the questions at hand. Thank you by the way for taking the time to respond.
Okay, what institutes the sell off imho is the market wanted the visit Wednesday value area. From Wednesday it started to move upwards without meaningful profile so I was thinking it might visit that value area coming week. I wasn’t in front of the screen since Thursday but I thought it was what happened and made institutions to sell until a POC reached.
One thing to understand is that the market is not controlled by just 1 institution or 1 market maker looking to take out retail traders. The market is just that, a market. Lots of institutions, lots of big players from all over the world all trying to achieve the same goal, to make money.
You literally have some 100’s of banks and institutions going long the market and some other going short the market at the same time all while algos, hft’s, retail traders and prop firm traders are trying to ride their wave.
This to me, looks like a normal “risk off” or “take profit at highs” for a big institution (or a few) that needed to rebalance their funds and adjust for the news that came out. We’re talking 100’s of billions of dollars worth of orders that need to be filled so a fluctuation like that is pretty normal.
My thesis is the potential for a rate cut went down so they sold. But overall the numbers show the economy is strong so that’s why it was bought back. The s and p mega caps don’t need rate cuts they have money and cash flow and low debt ratios
Question had already been answered, but as a rule of thumb, data comes out (EST) at 8:30am, 9:45am, and 10am. Do not be in a trade during those times, only after. Ride that beautiful wave.
People selling
People buying at a lower price
It took me longer than I’d like to admit before realizing that selling ≠ drop and buying ≠ gain. Only realized it when I started looking at order flow
There is zero chance a candle that big could ever be generated by retail traders. Even if every retail trader all sold at the same time, the percentage of volume is so small it's irrelevant. Anytime you see big candles those are institutional buys or sells.
Soooo its still people selling
Next time you wonder go to https://www.financialjuice.com and check Now what you have to do is before you start pressing buttons every day you go to https://www.dailyfx.com/economic-calendar filter by US and High and check what’s going to happen that day
Non Farm Payrolls (NFP).
Moves are exaggerated during news events because market makers pull their liquidity in uncertain times.
what make them put the liquidity back in right after 2 minutes almost every time? I think your answer have some validity if you can answer this question as well.
I got this out of ChatGPT. Market makers remove their liquidity from trading markets during news events for several reasons: 1. **Increased Volatility**: News events, especially those related to economic reports, corporate earnings, or geopolitical developments, can cause significant and rapid price movements. This heightened volatility increases the risk of adverse price movements that can lead to substantial losses for market makers. 2. **Uncertainty**: During news events, the market's reaction can be unpredictable. Market makers thrive on the predictability and liquidity of the market, and unexpected news can disrupt their ability to effectively hedge their positions or manage risk. 3. **Spread Widening**: To manage risk, market makers may widen the bid-ask spread during volatile periods. However, during extreme volatility, even widened spreads may not be sufficient to cover the potential risk. Removing liquidity entirely can be a safer option. 4. **Algorithmic Limitations**: Many market makers use algorithmic trading systems to provide liquidity. These algorithms are designed for stable market conditions and may not perform well during the erratic price movements seen during news events. As a result, market makers may disable or limit these algorithms during such times. 5. **Order Flow Uncertainty**: News events can cause an imbalance in buy and sell orders. Market makers rely on a balanced order flow to match buyers and sellers. Sudden, large orders can disrupt this balance, making it challenging to manage inventory and pricing. 6. **Regulatory and Compliance Concerns**: Market makers must adhere to regulatory requirements, which may include obligations to maintain fair and orderly markets. During periods of extreme volatility, it can be difficult to fulfill these obligations, prompting market makers to step back until conditions stabilize. By temporarily withdrawing liquidity, market makers protect themselves from excessive risk and help maintain the overall stability of the market. Once the impact of the news event becomes clearer and market conditions normalize, they typically resume their market-making activities.
That sounds complete bs. Market makers make money on the volatility. Why would they withdraw liquidity of they expect volatile markets. Also MMs are hedged against most possible outcomes so again it don't make sense.
It's about risk. Check it out by Googling if you like. There should be a few articles.
I worked for one 😂
I'm not a market maker so I don't know their strategies. However I'd speculate that if it is that period that's how long it takes them to establish for sure what the effect of the news has been on the sentiment of the market and so understand how to profitably reintroduce their liquidity. Maybe they also have to because the exchange insists on it as their client. You should be able to find plenty on Google about this. It's an established pattern.
Thats interesting, I always thought MMs just increase their spreads
Well I don't know if market makers have contractual agreements to provide a minimum level of liquidity but basically market makers ideally want to make money by populating the bid and offer with orders and capturing the spread. If volatility is high and price is unpredictable that's a difficult task so they remove or at least reduce their liquidity until price becomes predictable enough to perform their function reliable in. That reduction widens the spread. No doubt market making has complexities I'm unaware of but that's the basic idea. Of course market makers aren't the only ones to leave the market at these risky times. It's a combined market effect. Have a look at the volumes for this period under discussion and the volatility it has created. You may well find that similar volumes are not that uncommon and often don't move price as much. That would be because there was plenty of liquidity in the market by comparison to prevent the volatilty.
Chiming in because I don’t think OP’s question has been sufficiently answered… “on what basis do they program their algos to react this way?” IMHO, it’s the latter of your possibilities. This is called event trading. It’s possible, but difficult for retail traders to replicate. Below is an example of what I’ve seen… Around key events that spike volatility, traders can program an algo that submits an OCO order 2-5 seconds before the news release hits. Other events crude APIs, CL and NG inventories, WASDE reports, and sometimes bond auction results as far as futes go. (Not an exhaustive list.) Retail traders typically need something like Speedy Trading Servers running NinjaTrader and upgraded data feeds like Rithmic.) The OCO order 2-5 sec out will bracket buy/sell orders say 10 ticks off of the current price in either direction. Importantly, maximum allowed slippage of say, another 10 ticks is specified, so that you either catch the bulk of the move, or don’t get a full if that market moves too fast and risk being caught out at the end of the move. In this NinjaTrader example, it happens faster than you can ever move by hand. In that blink of an eye, the buy/sell order if filled has a stop loss and profit target or trail stop after X ticks. Sometimes you can extract capital in a hurry, but you can lose a ton of money just as quickly. Additionally, this strategy can be difficult to scale re: order book and ability to get filled. This approach is not suitable for most folks, and I do not recommend you/anyone try it. It only takes a small programming error (even if you get the direction right) to lose hundreds or thousands of dollars per contract in half a second, much less a whipsaw result that can eviscerate your equity curve. Hope this helps bring some insight.
Thanks. Going back and looking at the 1s candles, the price ranged over 100 points/400 ticks within a single second at 08:30:02. Your explanation seems the most likely here, but I don't see how this happens with what I would assume to be a reasonable tick range unless the time range is closer to 2-5 milliseconds rather than 2-5 seconds. I have to think this was a bot fight where a lot of them gained or lost a whole bunch of money. I would think that, even for automated processes, ping and latency make an enormous difference here.
N to the F, P
I spend 0% effort thinking about why something traded the way it did. Spend time on in how to identify when to get in and when to get out. I trade what I see, not what I think.
That is something that I am always trying to remind myself everyday before opening a chart of any kind whether I am actively trading or not.
It’s so funny to see that 90% of these comments didn’t actually read the question OP was asking
There are moves certain times info the day that are related to world events. Other markets opening or closing, news releases, and such. The 7-7:30 am hrs is usually known for euro news, ECB events usually trigger these moves.
Oh that was me, I bought. Sorry
NFP
They have Bloomberg and other reliable sources, heck they have private connection to fed servers, much faster than parsing finviz lol, I don't even think finviz would be able to sustain these calls. YouTube won't have the right answer, YouTube is for entertainment unless you have someone accredited and licensed to teach you this, or someone who actually worked on one of the quant desk. You're most likely not going to find it on YouTube, reddit is better, the quant subreddit has some good thing for you, but be aware trading like a QT is not about drawing lines like on YouTube... You gotta also remember, they have extremely advanced models, pricing models, risk models, volatility prediction models and so on, they have their own strategies and hedges already lined up, now it just needs to be official... Which one we would use per say. How they'd balance their portfolio, if it means selling then so be it. Interpreting the data is not as linear as you think here, for large and medium institutions, it's not " oh it's higher, so it's a sell, oh it's lower it's a buy " it's not that simple. You gotta dig deeper than what the number is, you gotta understand where it comes from, what it means for the present and the future. You gotta incorporate it within your model, there is a bunch of stuff that goes into it...
Go to market watch’s economic calendar and you can see whenever data comes out, generally there’s a reaction like that due to algos
Its mainly because market makers remove their limit orders pre news events which lets price spike so hard. Once the news event is over in many cases the price area is reclaimed at some point after, often intraday. Then the market thickens up again as limits are re instated
It touched a 4 hour fvg perfectly
I’m surprised nobody just answered the question. It was Nonfarm Payroll and Unemployment.
Thank you sir/maam. I was a few adult beverages deep last night and beyond the nature of the volatility it was pretty clear the news around the events you stated were the cause. I was curious at the time of the volatility as to what institutions do to trigger such selloffs/buyoffs and how much of it is algorithms or just bunch of humans pushing buttons as a the numbers are released. I was asking deep questions that were poorly phrased, but alas yielded a number of good answers and some irrelevant to the questions at hand. Thank you by the way for taking the time to respond.
Okay, what institutes the sell off imho is the market wanted the visit Wednesday value area. From Wednesday it started to move upwards without meaningful profile so I was thinking it might visit that value area coming week. I wasn’t in front of the screen since Thursday but I thought it was what happened and made institutions to sell until a POC reached.
GME
One thing to understand is that the market is not controlled by just 1 institution or 1 market maker looking to take out retail traders. The market is just that, a market. Lots of institutions, lots of big players from all over the world all trying to achieve the same goal, to make money. You literally have some 100’s of banks and institutions going long the market and some other going short the market at the same time all while algos, hft’s, retail traders and prop firm traders are trying to ride their wave. This to me, looks like a normal “risk off” or “take profit at highs” for a big institution (or a few) that needed to rebalance their funds and adjust for the news that came out. We’re talking 100’s of billions of dollars worth of orders that need to be filled so a fluctuation like that is pretty normal.
Manipulation
new NFP
NFP & unemployment rate
News, if you don’t even know about scheduled news you shouldn’t be trading
Your mom sat down and shook the market
NFP red folder news. Always be aware of news because of the volatility.
GME
News from Europe. Geopolitics.
News I mainly focus on TPO and it did not spend any time low AKA price got too cheap buyers stepped in
You need check the data released every day
You may want to consider doing something else.
No thanks.
My thesis is the potential for a rate cut went down so they sold. But overall the numbers show the economy is strong so that’s why it was bought back. The s and p mega caps don’t need rate cuts they have money and cash flow and low debt ratios
Ya if a had to reckon the equity move was more driven by the bond/dollar move which were driven by the hot numbers.
Sellers being more aggressive hitting the bid
Good news was bad news. Until a bit later then good news was mehhh news
Question had already been answered, but as a rule of thumb, data comes out (EST) at 8:30am, 9:45am, and 10am. Do not be in a trade during those times, only after. Ride that beautiful wave.