trading view order book strategy

Tsachi Galanos of Bookmap describes the firm's novel solution to Limit Order paper Visualization and analysis

Roughly 2 eld past, we shifted our company's focus from proprietary trading activity, dealings mainly with HFT algorithms, to creating an Order Book Visualization political program. We onymous our platform Bookmap (stands for order BOOK and heat MAP). The travel of the past 2 years taught U.S. a good deal more or less the importance of order paper analysis and visual image to some traders and quants. I would like to percentage some of the sixth sense we've gained in the process, will detail about Bookmap solution as well arsenic few thoughts all but the future evolution of visualisation.

The problem with current charting tools

There is an inherent lack of transparency in current charting tools. They provide filtered or aggregated perspective of the food market and consequently do non permit traders and quants to get real insight into actual supply and demand, leaving them shortsighted to the natural process in the marketplace.

Wherefore reckon at the order book?

The limit rescript book is the locate where all buyers and Sellers meet and where the auction takes stead. It is basically the entire cater and demand. When we take the order Christian Bible, we run into all the decisions of all the market participants and the strategies they employ. In contrast to looking at the volume traded, which shows what already happened, the order account book provides an insight into the intention of the traders. This information can be victimized for forecasting short term toll action at law.

Here are few examples of the type of information that can exist gained by following and analyzing the order paper:

Find price levels with Certain cost levels attract lifesize numbers of orders. These clusters can constitute identified only when superficial at the depth of market. In many cases, these levels will play support and resistance, depending on whether they are above or to a lower place the current Price.
Watch the spread which throne provide clues about what might happen in the immediate future.
Identify intraday shifts in momentum, for instance a shift from strong buying to strong selling.
Price changes due to order paper body process. Study the relationship between market value movements and the monastic order

When exploitation the depth of market we can also observe strategies in action, for illustration:

Price triggered strategies. Strategies that automatically change orders positions supported price change.
Validate breaks of key technical analysis levels and better assess if the breakout is real operating theater false.
Identify when big players step
Identify retail

There are varied ways to use the order paper. Scalpers may use the selective information from thedannbsp; order book to decide whether to go long or short; Swing traders or technical analytic thinking determined traders may use it to confirm their macro buy or sell decisions.

The challenge when dealing with restrain regularise book

Well-nig quants and traders who use order book analysis have to deal with the pursual challenges:

HFT strategies are placing limit orders on numerous price levels hardly to be first in line up. Usually the orders are placed when price changes. Virtually of these orders are later canceled when price gets
Non all the limit orders that are sent to the commercialize indicates an intention to trade. There are traders who send off orders to manipulate price and create fake liquidity, so much as spoofing or citation
In some cases not all the orders are visible in the order book. There are types of orders in various exchanges that are

Some of these challenges can be dealt with and some are more complex. More on this beneath.

Why visualization is probatory?

Visualization plays principal role in understanding what is really happening and in attractive better and more educated decisions. Looking data in a pictorial or graphical format enables us to grasp difficult concepts with greater repose Beaver State identify patterns that are other unobservable. IT also helps us to ask questions we did non ask before.

As a outcome of technological advancement, visualisation of capacious information is now possible. With current CPUs danamp; GPUs visualization that in the historic could let only represent finished offline, can in real time be achieved in realistic time. This in turn enables faster more in dispute and beneficial decisiveness making. When dealing with market data, I see the usage of visualization in the following scenarios:

In archeozoic stages when cleaning and 'checking' the market information. In many cases dishonorable decisions are taken because the market information is not accurate, therefore, visualisation should be considered at that
When developing a new strategy or purification an existing one. In other words, when 'didactics the computer' what to do. Looking at visualised market information can likewise be beneficial in acquiring new
When trading animate and facing the require to take immediate
When monitoring / observation the market in real time and take decisions like: whether to switch or non in certain market conditions or even see that your strategy is 'not aligned' and needs to be

Altogether of the in a higher place scenarios, having the right tools is essential.

Looking the microstructure

Each macro event is a combination of small events. In many cases, if you manage to empathise the microstructure, than you will live able to better sympathise the macro. The advantage to study the microstructure is that there are less events, and therefore information technology is easier to interpret the activity and intentions of market participants. The best way to con the microstructure is by using visualization tools and zoomingdannbsp; to the basic blocks of the grocery store information.

How we visualize the range book

We had to trade with this question when we improved HFT strategies. We wanted to best understand other types of commercialise participants and also experience what happens in the market when we send our orders. We decided to see the order paper using a heatmap, which is updated real oftentimes (video recordinglike 2540 Federal Protective Service). The oestrus map out records and visualises all change in the order book by displaying it on a scale of gray shades. The brighter shades mark Price levels with larger number of resting composition piece darker shades mark areas of lower berth liquidity.

The heatmap gave us a clear view of how the integral limit order book and traded volume evolve over time facultative us to get faster and deeper insights into market dynamics. Let me explain it further. Regular charts, such as bar graph, are two multidimensional, (monetary value and time). When you use a heatmap you add other dimension so in this type information technology also let you see the historical sizes at each price/time. In addition, away updating the chart selfsame frequently (40 updates / indorsement) you get a video which lets you view also the absolute frequency of the changes, generous you a 'feel' of commercialise accelerations.

**Visualization lets you control patterns that cannot be seen operating room understood without it**

Below are a few questions that can be investigated with a visualization program like Bookmap:

How did the size at each price level change over time?
What happened to a predictable level when terms stirred toward it?
Are in that location additional strong levels below or above that level?
What was the intensity traded about these levels?
What is the activity on the other side of the book? Are on that point areas where the order leger is not bilateral?

Exemplar: Price Bounced Back

**In the above icon there is a significant absorption of limit sell orders at several neighboring ask levels**

Typically in realtime we wish to examine the hypothesis that price will take a hop back (at least awhile) if it reaches such stage. Here are some factors that can vote in favor of that hypothesis:

When the price approaches that level, the amount of sellers
1. remains the same Oregon
2. becomes even bigger (in this slip the price May leap even before trades occur at that level).
When trades start occurring at that level
1. more Sellers join and / or
2. we observe hidden sell orders being dead there against marketplace buy orders

Example: Estimating the amount of liquidity that belongs to HFT participants

**Victimization heatmap information technology is gentle to notice the comportment of HFT agents, and to estimate their engagement charge per unit**

Example: Zoom in to milliseconds

**A single limit sell ordering at size of near 180 contracts was partially executed and the rest remained unfilled**

Example: Significant change in the order book

The above image illustrates instantaneous cancellation of buy orders and addition of sell orders of evidentiary amount. This was followed by cost drop. Based on what we observed in soar up in, IT is likely that those orders go to the same trader

Example: Aggregate order book view

**There are as wel other ways to look at securities industry data, for lesson via aggregate view. This let's you see in many cases how monetary value is affected by the liquidity**

Bookmap custom solution

Bookmap is currently offered mainly to traders. Recently we launched a custom service for quants and have improved an API get at to the visualization layer making it accessible by other markets such arsenic surveillance, monitoring, TCA danamp; Best execution reporting.

In plus to the entire functionalities that Bookmap offers today to traders, the quant result includes extra important benefits such as:

An API that enables to connect with your own information and visualize both the simulation and live This enables to track the full development of your orders displayed on the graph.
Unlimited abilities to misrepresent the chart, including zooming into nanoseconds timestamps.
Exhibit your own order queue up
Inspect the behavior of your trading algo during high volatility, prodigious position and Pdanamp;L changes, postgraduate bulk range
Custom indicators on Bookmap chart and on a separate pane, drug user settled line

To a lower place is a plot that illustrates the answer

Where do I see the future?

More than transparency both organizations and individuals will keep hard wider and more surgical information. The more information you have (e.g. from multiple exchanges) and the more inside information it contains, the more civilised decisions you can take. As we take the market, we already mention some of these trends taking place. A good example the upcoming launch of CME Market past Parliamentary procedure data, which provides individual queue position and its size. This information eliminates the need for traders to calculate queue position and lets them payoff a Sir Thomas More educated
More analytics danamp; visualization Arsenic applied science advances, more data is collected, transmissible in realtime or by demand (expected to quicker internet), analyzed and visualized (attributable better GPU) by ordinary computers. Same as with other industries, the financial sector will require bettor analytics and visualization applications that will Be victimised not only for offline research, just also forthwith, with the aim of gaining quicker and better decisions.
Interactive visualization, flexibility danamp; modularity of visualisation tools visualization software should become more neutral to the data rootage and Be able to display data from a wide range of sources in a significant way. In summation, put together with the growth of data, on that point will follow more flexible shipway to engage with it. As an example, imagine that you could use your own data, select your parameters and build a video like you build a chart in Excel, augment this picture with your own indicators and decide if you want to look out it offline or in real These analytics wish be used not only aside algo developers or quants seeking to understand their systems better, but also by traders / non quants carry retired market analytic thinking.
Information analysis mechanisation. More information also means more data dimensions (antithetic phenomena types, data anomalies, polar instruments, different time scales, etc.). Most of the deductive is done today in 2 dimensions but will also be available in 3 Beaver State 4 dimensions, profit-maximizing users' insights and competitive edge. However, human sensing is limited to a number of dimensions (e.g. 3D ocular, audio, etc.), therefore it is logical to perform preliminary machine-controlled data analysis and father alerts and visualizations of to the highest degree meaningful parts of the
Virtual reality technology can be used to display Sir Thomas More information. For instance, a huge trading room with dozens of monitors can live displayed virtually without the need to invest in expensive

For More information on Bookmap inspectdannbsp;Bookmap Created by VeloxPro

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