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James Sogi

Philosopher, Juris Doctor, surfer, trader, investor, musician, black belt, sailor, semi-centenarian. He lives on the mountain in Kona, Hawaii, with his family.

6/3/2005
Escaping Flatland, Part III, by James Sogi

Synthesize with interesting results.

Market Delta breaks each bar into a box for each price tick level and each box shows the number of bids and offers, the number of strikes at the bid or offer, and the difference between the number of bids and offers at any one time for stocks or futures, and records them in numerical display and by color code. Dark dark to light for hi to low volume, and blue if strikes at offer or offers outnumber bid volume or strikes at bid or red if bid volume or strikes at bid outnumber number of offers or strikes at ask. The point and figure structure makes market structure easy to visualize if so inclined.

A few notes and thoughts:

  1. The top few ticks of each bar were almost always blue, where strikes at ask outnumbered strikes at the bid, which is the exact wrong time to buy at the top tick. Likewise, the bottom ticks of each bar were almost always uniformly red, showing that the majority of market participants were hitting the bid at the worst possible moment and selling the bottom tick. The assumption is that a seller hits the bid. This was fascinating to see.
  2. Breaking the bars into to price tick levels and showing the numbers of transactions cumulatively and displaying color adds additional information to the same screen space without chart junk or clutter.
  3. It is said on the SL that volume itself contains no predictive information. I have not seen convincing tests of that hypothesis that volume does or does not contain predictive information. The number of trades may have information and may reflect liquidity. The Globex algorithm would have to take into account the number and volume of strikes at either bid or ask to set the inside market. Even if it is purely descriptive, the numbers and colors convey more digestible information in a usable manner than the T&S window and a bar chart. There's something here, but its not real clear, yet, what it is. Testing is difficult when Market Delta does not allow download of the data into table form, and is a real weakness of the program. Ability to stream data for analysis like the DDE links would be a great thing. Charts in general are so limited to descriptive or archival purposes.
  4. The chart relationships displayed as color or numerals are fixed as described above, but would much better if they allowed the user to define what ratios to display and stream data to spreadsheet or R. I wish I could design my own color 3d chart system and on the fly data analysis, but R won't take streaming data, yet. Existing technology is behind the form.

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Jim Sogi, May 2005

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