4 useful tricks with the “Big Trades Indicator”
The Big Trades Indicator is an indicator for the volume analysis of the current market situation, which finds large trades and shows them in a chart – at what levels, with what volume and in which direction the trades take place. You could say, “Big trades manifest themselves through color surfaces on a chart.” It’s not that simple. After reading this article, you will understand what we mean.
In this article:
- Why exchanges want to hide big trades.
- Principle of displaying large trades.
- The Big Trades indicator settings.
- To use the Big Trades indicator in your trade.
- Examples & 4 useful tricks.
What is Managed Money?
The markets are thought to be driven by managed money, also known as string-pullers, smart money, insiders, or hedge funds. They have different names, but the essence is the same.
As I said, the term “managed money” refers, for example, to large investors, banks, hedge funds, investment funds and financial management companies. It is considered “managed” as it has huge financial and human resources that allow the collection and processing of an impressive amount of data from open and closed sources as well as the execution of high-quality analyses with the aim to make profits on the financial markets.
Managed Money and smaller traders do a similar activity on the same exchanges – they buy and sell stocks, bonds, futures and options. However, the volume with which managed money works is much larger than that of retail and private traders. It is quite difficult for “managed money” to hide its presence as they work with significant positions. Managed Money, however, has a great desire to hide its intentions in order to simplify its trading and, above all, to make it profitable.
Why stock exchanges want to hide big deals!
After the introduction of online retailing, the analysis options were extended to include the flow of price quotes. A retailer now has access not only to a chart, but also to the Time and Sales List (The Tape), where it can identify the presence of a larger retailer.
A private analyst previously couldn’t notice large trades at different price levels on the tape. Lately, traders have been following the advent of such trades and used them as an indicator of a direction in which it is worth opening a position.
It has been assumed that an open trade in harmony with “smart or managed money” has a greater chance of winning.
It is known that different exchanges transfer the quotes differently, some only send ticks and passed volume, others show direction and volume of bids and demand. When an exchange transmits a trading direction, everything is pretty simple. However, if no trading type is specified during a transfer, the ATAS platform can use a special algorithm to identify a trading direction. In any case, the user has access to the tape with all the information:
A negative change to the system, the transfer of order flow to the world stock exchanges was introduced in 2015 for the transmission of information.
The new MDP 3.0 protocol collects the information sent by the Switchboard in packets with a capacity of up to 1,420 bytes. If multiple messages (trades/price information) are sent at the same time, they are bundled into the same package. A message is not divided into multiple packages. You can research this innovation on the CME website.
The FIX/FAST protocol that was used before May 2015 worked differently and was better for the private trader. This protocol sent each message from the Mediation Agency as a single package. This concerned the order book, the trades executed, price quotations, etc. It allowed to recognize individual trades on the tape.
Now, under normal circumstances, it is no longer possible to correctly identify and integate individual large dealers. With ATAS and the supplied algorythmus, it is now finally possible to work again with a meaningful tape and order flow.
Big trades indicator
To reassemble such trades, a special algorithm is required. This algorithm is based on the Big Trades Indicator of the ATAS platform. This indicator summarizes a large number of similar trades in one trade and transfers its signals into the chart in the form of a marker.
In the following example, the indicator marked all areas of a future in which large trades took place with colored squares. The green color indicates the purchases and the red the sales.
Big Trades Indicator Settings
To add the indicator to the chart, select the Indicators menu item, select it from the list, and click Add.
Let’s look at the indicator settings:
Set alert so as not to miss an important moment. Then you hear a sound signal when a large trade takes place.
The Visualization section contains parameters of the indicator display in the chart. You can specify the display size and pattern type, among others:
By default, the Filters section provides automatic filtering for the minimum and maximum volume that is displayed. However, if you disable automatic filtering, the platform will only consider the volumes that you would specify. In automatic filtration mode, the indicator itself identifies volumes taking into account the specific characteristics of each instrument.
In the Filtration by time section, you can set time limits within which you want the display to be displayed. No ads are displayed outside of these limits.
In the Colors pane, you can set the display colors for the indicator.
How to use the Big Trades indicator in your trading:
Here comes the most interesting part. The use of this indicator in daily trading.
First of all, we don’t know beforehand whether a big player opens or closes his position. We have a certain price range which fixes a large initiative trade. Therefore, an important task is to understand the context and what the trader’s intention might be.
First, see how many price levels Big Trade covers. If the price included several price levels (the value could be between 2 and 20 ticks for different instruments but also greater), we can see that the “big trade” did not experience any border resistance and there were no icebergs or other interests in the price preservation.
Secondly, it should be noted whether there was a limit volume in the specified section. The DOM level indicator, which defines the areas in the graph where a large limit volume has been detected, will help us with this. When a large trade came across the border resistance and was stopped by it, we can see that there is an opposing party.
Thirdly, where the price moved after the advent of a large trade. If the price moved towards trade, we should note that there is no contradiction. However, if the price moves into a reverse phase, this is most likely a sign of a trap in which the big trade collapsed. The market is full of such traps.
Fourth, if your broker transfers an open interest, check whether the Open Interest value has increased or fallen. The Open Interest value allows large trades to be divided into the opening and closing of positions.
4 helpful indicator tricks
Indicator tricks lie in an interpretation method for large volumes in a chart. We will show four interpretation sinterpretations. The logic described could be applied in a similar way to other instruments/timeframes.
Example 1: A large selling price covers several price levels and moves the price in its direction, while open interest increases.
Conclusions: A large seller expects a price drop, opens a position and trading towards a big trade will most likely bring profit.
Example 2: A large buy trade opens a position, does not move the price in its direction or moves it slightly, but the trend is moving in the opposite direction.
Conclusions: A buyer does not control the price and suffer losses, the trend will develop against the buyer and it makes sense to open a position against the big trading direction.
Example 3: An uptrend, a big buy-trade, covers the limit volume, the open interest decreases and the price continues to move.
Conclusion: A large seller who opposes the trend expects further movements and fixes the loss with a purchase if a sufficient volume of a limit seller is available. The situation is uncertain and a trader should refrain from opening a trade until the trend is confirmed.
Example 4: A big trade included several price levels, the price shifted from the level when the seller level was tested, the seller holds his positions.
Conclusions: A large seller expects the price decline to continue, and trading towards big trade should be opened when the seller level is tested.
We have presented you with various possible situations on the market and how interpretations of the intentions of the main players can be formed with the help of the Big Trades Indicator. There are many more situations in real life. We recommend that you use the Big Trades Indicator along with volume analysis indicators such as delta, volume, open interest, market profiles and others, and also evaluate the capabilities of the RangeUS chart that eliminate unnecessary market noise and focus only on important price ranges.