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I am investigating algorithmic methods to determine when stop orders are being triggered. There are certainly some events I see on the tape where it seems likely that stop orders were a part of the order flow. If I can see them then it must be possible to detect algorithmically with some accuracy.
BookMap claims to have an algorithm that detects stop orders based on MBO data.
It is unclear if Bookmap's algorithm actually does what it claims. I think I may need to connect to the Rithmic API directly and track events as they are received to understand if you can use this data to accurately detect stops.
Some other areas possibly worth investigating?
When price moves or sweeps several ticks at once.
When Level2 updates and order feeds appear to be out of sync.
Predicting stop locations based on large volume nodes and ATR.
Estimating net market positioning based on assuming stop orders are individual participants completely exiting a position.
Trading: 6C (Low Margin,) 6E, CL, GC, ES and Maybe DX for smaller tick value
Posts: 1,394 since May 2011
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@TWDsje, This thread may or may not be reviewed by the sophisticated programmer(s) you would need for this. May I recommend that you repost or provide a summary of this thread with a referral in both the free indicator and the Looking to hire a programmer if you are willing to pay for it.
Yeah the issue here is not the programming ability. It's more knowing enough about how the exchange works to know what to write. So far though it doesn't look like anybody knows any more about it than I do. So I think the next step is just going to be getting access to the Rithmic API and seeing if I can find anything playing with it.
there's one setup I use that most likely involves stop orders. big buy/sell order (iceberg) and when that level breaks it can go fast the other way. normally it's smarter to take the same side as the iceberg for a nice scalp. but when it fails, there could be some stop orders in place.
here's an example:
Right so the hope is that if we can more accurately identify stop orders we could analyze better how those situations happen. Sometimes a breakout will reverse, and sometimes it continues. Part of what makes such action difficult to analyze is you can't tell what are stops from trapped traders, and what are new people jumping in.
Trading: 6C (Low Margin,) 6E, CL, GC, ES and Maybe DX for smaller tick value
Posts: 1,394 since May 2011
Thanks Given: 1,719
Thanks Received: 1,020
Ninja Trader Forum has a request for MBO data in NT8. But these requests are always rated by number of NT Forum members expressing interest. May I request members go here and submit a vote for it like I did:
It does appear to be possible with MBO - BUT - after the event AND - only for server side orders (which is most retailers). Stops held on co-located servers (which TT uses) will not be identifiable.
It's all AFTER they are fired though.
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Sure. You wouldn't see synthetic stops either, and I realize we're not talking about seeing resting stops just triggered stops. That's exactly what I want to see. I want to count the orders to test a few theories. If there's a move and there's a higher or lower percentage of stop orders in it I think that might reveal a small edge in what happens next. Because you know that there's a higher chance of those orders being people exiting positions rather than entering positions.
I've been thinking about this after watching one of the bookmap webinars. I like the idea of what they're talking about but wasn't immediately convinced by their charting (although obvs it takes some getting used to).
I'm slowly regrouping after a long time away from markets and thinking of a research project. This data should all be available through MBO as far as I understand? Is Rithmic the only source?
