Using Volume Control To Hear the Order Flow

With Volume Control enabled in PriceSquawk you have three ways you can vary the trade AUDIO volume based on the trading volume of the market you are listening to. You can have the sound volume change based on the individual trade size, or the accumulated trade volume at each price,  or based on the accumulated trade volume over a specified time window.

PriceSquawk gives you three threshold values to use in each of these scenarios, the Minimum, Middle and Maximum settings, to control the sound levels.

With only Volume Control enabled PriceSquawk essentially behaves like an audible Time & Sales, varying the sound volume based on these three trade size thresholds. So if I put in settings of 0, 10 and 20, what we would hear is the size that is being traded on a per trade basis.  If someone trades a 10 lot then we can hear that 10 lot, and then if someone trades a 20 lot we can differentiate between those  two  trades based on the audio volume.  The minimum value setting here can be used to filter out trades below a certain size….or to hear block trades above the minimum size. You can use the Time & Sales window in NinjaTrader to give you a feel of how the sound should be changing.

Basic Volume Control is great for the tape readers, as you can instead HEAR  the tape and thus focus your gaze back on the DOM or Charts.  You also get a great feel for the PACE of the market when listening to it in this mode,  and as the trade intensity picks up and larger orders hit the market, the change in market flow really becomes obvious as the sound level changes and intensity and frequency of trade sounds increases.

Now, if you tick the Use Accumulated Volume check-box in the config tab, then the Sound Volume changes based on the accumulated volume that occurs at each price level, that is, the total volume traded at a price level.    So for example if we have a large order sitting at the offer, and traders continually hitting into it, we can hear the sound volume increasing, which alerts us to an order that is absorbing volume at the offer.

If we hear the audio volume reach a maximum and continue to trade at this sound level, then what we are hearing is an iceberg order refreshing.   The accumulated value will reset if trades occur at a different price level, but what you’ll find is at turning points, as size continually absorbs market orders,  the sound volume will repeatedly reach a crescendo, because large traders are trying to get filled across a range of price levels to either exit a position, or build a position without moving the market against themselves.

I always have this configuration enabled for the Bobl, while I am trading the Bund..  This is because the shorter term bobl is thicker than the Bund, and large traders are often absorbing size in this market while the Bund still has some momentum.  Hearing the size absorb in the Bobl is one of the main things I like to hear to support my case for a move in the Bund, and it is something I often miss when watching the DOM in a myopic state being too caught up in the motion of the Bund, mystified as to how far the move can stretch.

Using accumulated volume to change the sound level  is the best way to listen out for large orders that you would usually identify doing quick arithmetic when watching the DOM.. ie I have only seen 200 offered, but the volume profile has increased by  1000.  I think it’s easier to rely on hearing the sound volume increase to know hidden orders are accumulating size.  As short term moves mature it really becomes obvious as the trade sounds crescendo, that bigger traders are starting to step in and absorb the market orders.  It can also work the other way, in that you can get reassurance that buyers are still behind the bids in the later stages of an upward move, and they are not just filling in the bids to keep pushing the market up.

Now with the third option, PriceSquawk accumulates the traded volume across a time window instead of at a single price level.   This is a new feature released with version 2 of PriceSquawk.  To enable it tick the ‘Time Window’ box and set the number of seconds to accumulate the trade volume.  It uses a moving time window, in that as each trade occurs, the traded volume is accumulated over the previous time window from that point in time.  If we have it set to a value of 30 seconds, then the accumulated volume as a trade occurs, is equal to the total volume traded over the last 30 seconds.

Using this configuration of PriceSquawk, we can get an amazing feel for the order flow, as the sound volume increases and decreases as volume flow enters and exits the market.   You can filter out sounds of slow trading activity easily using the minimum value so you only hear when new flows are entering the market.  You can hear the intensity at healthy tops and bottoms as size continues to trade over a period of time.  This configuration is ideal for thinner and faster moving markets where size will trade across a range of prices, and the increase in sound level as trades occur makes it obvious to the new flows entering the market and potential opportunities.

I have been using the Time Window feature in the Bund and wish I incorporated it in the first version as it really helps capture the flow of the market.  I think a time window of 30 seconds is quite sufficient for most markets but you can change it to anything up to a value of 300 seconds, or 5 minutes.  I leave the Minimum value at 0 so I can always hear the price action in the Bund, and set the middle value to a few hundred depending on the days action, so I am sure to tune into the action when there is elevated order flow.  The maximum value  I have mostly had set to above a thousand, which is what is easily trading in areas where real size is exercising its opinion on the market, and some very good risk reward opportunities can present themselves around these times.

To find the right settings for your market is quite simple.  I suggest starting out with some reduced values and gradually increasing them until you find meaningful variance in the trade sounds you are hearing.  If you want advice on how to setup PriceSquawk for your market, shout out in the forum and we can figure out some useful settings for you.