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Yep. VWAP.
VWAP reversion algos brought to you proudly by the "liquidity" providers in equity capital markets and 70% of stock volume traders.
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ok, but what are the green and purple? 2nd derivatives?
BBs
kleptocracy
Bollinger bands - but they actually seem really wide.
I'll repost my comment from the other day again - and Tyler I know you don't "owe" me a response but I really would like to hear your perspective on this. Either a post or a reply. I use this site for balance and information - and its very helpful. I appreciate the things you point out and they've helped in my trading. I agree with a good bit of what you say. But I have to call you out on this one - unless you can explain what's so fraudulent about this, I dont buy it. I trade this pattern *daily* with good success.
Looking forward to your insight.
Repost:
I gotta throw in the towel here. i can't find any shenangians, chicanery or tomfoolery in VWAP reversion.
so many buyside traders are benchmarked to vwap. and so many algo's are set to vwap. so, yea, if a stock is too far above that, and the only at-market buying interest is at or around the vwap, it will create a natural air pocket that a stock will trend to...as it falls, the algo's kick in a buy a little and support it around that price (and yes, that price moves over the course of the day).
same if we're below vwap, buyside traders have every incentive to buy as much as they can up to the vwap - creating a natural trend towards that price. once its there, they stop hitting offers to keep their benchmark vwap below market vwap. its just how it works.
i need a little more explanation as to why you're insinuating massive fraud . and this is coming from someone who actually has entered in a simple participation vwap order and bought blocks over the course of long time periods. beyond that, i day trade WITH this vwap as a benchmark (support / resistance)
get technical if you have to. show your math. there are folks on here that dont know what a vwap is. but i'm getting the sense that there are also folks on here that do, that are starting to yearn for a little more than ambiguous assertations of fraud.
Me again - and i just want to stress I'm not from cnbc, I'm not a lurker (I have a log in, for some reason it doesnt stick on this computer), and I'm not trying to discredit anything.
Saw your response to someone else below and looking forward to the white paper. If there's something I'm missing on vwap, i def want to know. I trade this pattern (+ RSI) intraday and I'm about 88% successful - but that could just be luck / a function of current market dynamics & liquidity. If thats the case I want to know, b/c my luck will eventually run out and I'll be caught flat footed.
yeah if they're BBs they did look wide, but with a longer MA and a higher deviation setting, they can look like that. No matter, it's about the vwap.
the royal blue or aqua bluish green..?
Zerohedge, you keep talking about VWAP yet you fail to explain why a particular graph you show is important or what it shows.
You do this with stuff other than VWAP, and I'm not sure all of your readers understand what your point is.
Graphs and Bloomberg captures are great, but you should at least spend some time explaining what it is you are saying so that some of your readers like me can get it.
I'm just not that smart. And if I don't get it, I can't imagine people in the SEC or Congress can get this stuff either.
Thank you
You are most likely giving our elected rep's more credit than they are due.
http://www.chrismartenson.com/blog/fed-buys-last-weeks-treasury-auction/...
Cool, wonder if our chineese masters have been paying attention to these details.
Holy smokes..... Thank you for that post.
Very interesting. Thanks
It's going to suck to see equities and bonds tank at the same time.
Another Thanks!
Ben the Debaser hard at work.
http://www.bloomberg.com/apps/news?pid=20601087&sid=acHzsgcOptGI
And the Fed bought $14.2B of it? Wait a second...
Last minute pump will fail today. We shall end red.
I believe they are the moving avg's what time frame I do not know...
Hey, check out all the intraday patterns setting up today on over 50% of the financials and then check the XLF.... Financials topped out today.
Boy it's amazing. The people who traded in the morning were really using a wide spread and then huge amounts of volumes started popping in with no spread at all.
That's amazing how almost 3 times the trading volume can produce half the spread.
INCONCEIVABLE.
like goldmans batting average last quarter?
mutually exclusive events?
someone's gonna catch a MAD beatin' from Rahm tonight - obviously didn't remember to re-set HAL for this afternoon's regularly scheduled 3:30ish blast off.
I'm not sure how to react to that....am I happy? Or do I have Stockholm syndrome and miss my tormentor(s)? I fear they are setting a bear trap for tomorrow - no matter WHAT the employment numbers are, they'll dance around with their annoying bell-laden ankle bracelets, hippee-wear all aflutter with the matrix-like euphoria that can only come from a complete and total dislocation from reality.
Hold me, I'm scared.
If you remember the post on macro-economics Monday (I think), the traders edge was that on days of POMO sales, the market was painted into the close - assumption being SLP purchasing vehicle following the proceeds. The paper stated that it is a balancing act when the government is issuing treasuries and they typically try to strengthen the dollar and treasuries leading up to the large treasury offerings (and the market falls). So on 8/6 when they had a POMO and there was no painting of the tape on Wednesday - the paper suggested that the market could flatline or go negative leading up to the offerings on 8/14. This seems to have held up - market down since Wednesday, but once they issue the treasuries all bets are off on direction (the last offering could be accompanied with supporting the market again through SLP).
And now you know the rest of the story.
INCONCEIVABLE> Princess Bride fan?
probably, however today, I've just been sitting and starting at blinking red and green numbers for way, way, WAY too long. Methinks I have a bit of a fever.
You keep using that word. I do not think it means what you think it means.
Yeah, yeah, yeah. VWAP. Whatever. My schadenfreude has gone unrequited for far too long. This is like watching a NASCAR race which has no wrecks. It's leaving me quite miffed. Time to release the monkeys from the closet. But, gazing upon Michelle Caruso-Cabrera's cleavage counterbalances all that just fine. Y'all can get as catty as you like, I don't care. All that buxom softness . . . mmmm.
You might be interested in this magical place called Evony?
That's near Ibory, if I recall correctly.
Today was the start of the correction. Looking for 5-10 percent. Market is as overbought as i have ever seen. The tell was the s+p not able to hold 1000. To many balls are being juggled one just dropped today.
S&P bumping up against the headboard over and over....
I am long Iocane powder.
...Has anyone checked to see if Bernanke has six fingers on his hand?
I'm short mostly dead and long completely dead.
TD check this out about Goldman's 10-Q analysis.
http://ftalphaville.ft.com/blog/2009/08/06/65771/the-curious-case-of-gol...
Click the ADS people, servers need money to run.
I am long paper shredder manufacturers
Hi all - can someone point me to a post that explains the theory behind this?
Iocane, as we all know, comes from Australia, which is entirely people by criminals. It is also the home of the AUD, and so Iocane is a complimentary holding next to FXA.
Iocane, as we all know, comes from Australia, which is entirely peopled by criminals. It is also the home of the AUD, and so Iocane is a complimentary holding next to FXA.
Crocs is up over 30% in after hour trading. I think we all knew the recession wasn't really over until CROX participated fully (a seven bagger from their 52 week low).
crikey, dark pools
Can someone give me a short explanation of what I am looking at on this chart and its significance.
volume big to booster it
can someone explain to me what this post means? i have looked up vwap in wiki and everything, still don't get it. sorry for the stupidity.
I'm a novice here, and I've found that the more knowledgable ones rarely asnwer these requests for explanations. I've just learned to do some web research to try to get up to speed. (I don't know what these vwap posts mean either.)
I'm starting to pick up a lot just by checking in daily and following as best I can.
I think the excitement is the blue line is converging with the other two lines which may represent the 50 and 200 day moving averages. When the price line converges with the averaged lines stuff may happen. I think.
The "more knowledgeable" ones on this site know that posting VWAP charts is meaningless. You get no explanation because there isn't a good one to give.
Here's what it means.
Tyler likes to throw 20 or 30 bags of crap at the wall, hoping something sticks.
His obsession with VWAP is yet more proof that he is clueless about what actually goes on.
Hope that helps.
You couldn't be more right.
Tyler has no idea what he is talking about. I was irritated before now I am embarrassed for him.
VWAP is volume weighted average price and it simply takes all the volume traded at each price times that price and takes a cumulative average of that figure. It is no big deal at all and Tyler has the misperception that something fraudulent is occuring. By the way, VWAP orders are almost exclusively liquidity taking. Many institutions use it as a benchmark and is really just a simple execution technique where if you have big size to trade, you slice it up and trade it in relation to where other flow has traded. It's really just a moving average that includes volume. What's next Tyler, evil moving averages? My e-Signal program calculates VWAP. Are they next in line for some GS style bashing?
Unfortunately you are completely missing the point. There is nothing fraudulent going on - it is merely the VWAP algos running at numerous "so called" liquidity providers, that keep reversing stock price to the "strange attractor" which by dint of how most algos are programmed, happens to be the VWAP. I will post a white paper shortly demonstrating this phenomenon. Also, read on the Sigma X data I presented why VWAP is so critical when it comes to liquidity provisioning in dark pools.
As to whether it should be fraudulent, that is a different matter - however, with 70% of stock volume controlled by HFTs and other CDT mechanisms, VWAP is a terrific way to calculate market "noisiness." And over the past several weeks, VWAP has been the dominant factor, implying that aside from program trading running amok, there is really no other major sources of price direction (cash trading) either up or down.
Hopefully that explains it, and don't worry, your e-Signal is completely safe.
Tyler, it sounds like you're lumping HFT and VWAP algos into the same group. Why? VWAP strategies are usually used by buy-side traders with large orders who don't want to execute too much of an order at once, for fear of getting a bad price in volatile markets. They may put the entire order into a VWAP, or just a chunk of it and selectively use more aggressive liquidity taking strategies at opportune times throughout the day. These types of trades are the very antithesis of HFT.
Ok, but why does the VWAP align for the SPY, rather than per security or per sector?
It can only mean 1 of 2 things:
-no one trades individual securities any more, or
-HFT / prop desk's actions manipulate the market
All it means is that everyone is chasing beta right now. Why does it always have to be manipulation when there are so many other easy answers?
SPY has a beta of 1. You cannot chase beta in SPY.
Maybe manipulate wasn't the right word; i mean that HFT has a dominating influence over the market.
Buy-side algos would only cause a VWAP revert in individual securities. Since it's in SPY, it can only be someone who is there for the volume.
Bear with me, here is how I see it. GS's HFT has enough volume on SPY to be the dominant trader. HFT will "prefetch" your order for you and always "prefetch" a little bit more than they need - the trend is their friend. After a while, they accumulate their limit (most likely a function of liquidity, exposure and profit), so they reduce their exposure (at a profit). This may cause a reversal since they are the dominant player, but it doesn't have to.
The fact that it always reverts to the VWAP is a testiment to their efficiency. If they make up 50% of trades, accumulating then selling would always end up at the VWAP (at a profit with no residual exposure!). Infact, being more aggressive with their fetching would result in high efficiency and a lower overall risk.
An explaination complete with a low VaR and predictable profits! I should have been a HFT programmer.
SPY trades about 200 million shares/day. At a price of $90 that means that for GS to make up 50% of the trades they'd be turning over $9 billion every day. That alone renders your explanation useless. But it also sounds like you are contending that this supposed $9 billion worth of SPY buying and selling is done by Goldman's prop desk, "fetching" for the customers of their ETF desk? This makes no sense. And trading that large of an amount of money in a single instrument does not a low VaR make. Stick to your day job.
Principle trading is 70% of NYSE volume, GS is 50% of that.
So GS is 35% of total NYSE volume. HTF doesn't work well on leveraged ETFs and less liquid securities, so for the few GS has chosen, yes, they are 50% of activity.
As for VaR, it is extremely low since; it's SPY, large positions by definition are at a profit, high liquidity is assumed, and positions are liquidated EOD.
And $9 billion, sh*t many scalpers will churn millions/day in the 3x ETFs by themself.
I would argue that VWAP is a measure that weeds out "noise" and demonstrates where the most number of shares are being transacted. I would also argue that "the past several weeks" is a very small sample size for your assertion. Even so, why wouldn't you trade on it if you believed it be true? Wouldn't you love to "game" the computers?
I did read your piece on the involvement of VWAP orders in SIGMA X and still don't know why you said "SIGMA X Rarely If Ever Discloses VWAP "Child" Orders To The Market" when it states on the first page: "In August, Goldman Sachs introduced its new Liquidity Enhanced VWAP algorithm and SIGMA X crossing jumped to 30 percent. The Liquidity Enhanced VWAP algorithm looks to execute targeted volumes by placing non-displayed child orders in SIGMA X at the mid-point prior to going out into the displayed market." Meaning that 70% of the child orders are disclosed to the market. So, what gives?
...and if its HFT strategies that kick in during divergences from VWAP and trade towards convergence, so what? If there's actually money to be made it'll get arb'd out in a month or two (or less) and then it'll be on to some new signal. Given the time frame of your charts it looks a lot more like day traders pushing this than HF. If HF algos were running a VWAP reversion strategy the divergences would be miniscule and last a few seconds at most.
If you are actually a programmer that has intimate knowledge of the algorithm and it's intended goals, I might believe you, otherwise you are talking out of your ar$e...
Do you ever have a real opinion about anything on this site. All I see are asinine fanboy comments that display no real understanding of the topic.
It's about manipulation on many fronts to influence politics, as well as maximize profits (a la Gotti).
They use volume to goose the market at leveraged technical trading points to utilize innocents like you to further their scheme without mens rea, which most certainly they have.
Ummm... what? That is the conclusion you reach from looking at a VWAP chart?
"By the way, VWAP orders are almost exclusively liquidity taking."
Gotta call you out on that one. Most VWAP orders under 10% of ADV can get at least half of the fills done passively, if not a lot more. VWAP algos, at a very simple level, work by posting shares in 5-10min increments. At the end of each bin whatever hasn't been executed on the passive side will then cross the spread in order to stay on schedule.
You are right. I stand corrected.
Is there a URL where the VWAP reversion trade is explained. Can't see how HiFi traders would benefit.
I don't even know why they let the markets open in the morning.
I think the markets should be open only from 3:45 to 400pm EST. That way everyone can outbid evryone else and be all done in 15 minutes. Why run the computers the whole day ?
It is a boost to those that watch our electric usage in the attempt to ascertain our true economic activity.
I always find it interesting when the markets reverse direction on volume. It always points to someone moving things in their direction.