Introduction
Order Flow / Professional / Ultimate
Welcome to the MotiveWave™ Volume and Order Flow Analysis Guide! If you are reading this document then you have already installed MotiveWave™ on your computer and you are ready to start using the application.
If you have not yet installed MotiveWave™ or registered for a trial on our website, please read the Installation Guide before continuing on with this document.
The purpose of this document is to highlight and explain some of the recent features added to MotiveWave™ for analyzing volume and order flow.
Terms and Definitions
The following are common terms and their definitions that explain some of the concepts in Volume and Order Flow analysis:
Absorption
Absorption occurs when a buying/selling trend is “absorbed” by a large order (or large number of orders) and the trend reverses. Absorption is defined by a Bid or Ask Imbalance that is followed by a reversal in price of X ticks.
Ask Volume
Ask Volume is the volume that occurred (traded) at the ask price. This volume typically represents buying activity and is sometimes known as Buy Volume or Up Volume.
Bid Volume
Bid Volume is the volume that occurred (traded) at the bid price. This volume typically represents selling activity and is sometimes known as Sell Volume or Down Volume.
Delta DOM
Delta DOM is the difference between the sum of bid sizes and the sum of the ask sizes that are in the DOM ladder. Positive values indicate support and negative values indicate resistance.
Delta Spread
Delta Spread is the difference between the best bid size and the best ask size. This is similar to the Delta DOM but only considers the best bid/ask.
Delta Volume
Delta volume is the difference between the Ask Volume and the Bid Volume (ie Delta Vol = Ask Vol – Bid Vol). Positive delta values indicate buying pressure and negative delta values indicate selling pressure.
Extended Trading Hours (ETH)
Defines the time of the day outside of the regular trading session where after hours trading occurs. Volume is typically lower during these hours.
Imbalance (diagonal)
A buy imbalance occurs when ask volume at a given price is higher (by a given percentage) than the bid volume at one price level below (sometimes known as diagonal imbalance). Sell imbalance occurs when the bid volume is higher by a given percentage than the ask volume at one price level higher.
Initial Balance Range (IBR)
Conventionally, this is the range (high/low prices) that the instrument reached during the first hour (60 minutes) of trading.
Instrument
An instrument is the security that is being traded. All instruments trade on an exchange and are uniquely identified by a symbol/exchange. There are several types of instruments (such as stocks, futures contracts, contract for difference (CFD) or FOREX).
Naked POC (NPOC)
This is a Point of Control (POC) that does not overlap (touch) in future sessions (sometimes referred to as Virgin POC).
Open Range
Open range is similar to Initial Balance Range but with a shorter period. Typically this is the range (high/low) that occurred during the first 5-30 minutes of the regular trading day, but will vary depending on the market.
Point of Control (POC)
Represents the price (or price range) where the highest amount of trading activity occurred. This may be based on volume (for a Volume Profile) or time (for a TPO chart).
Price Range/Interval
Volume/Market (TPO) profiles can optionally be depicted using price ranges instead of individual prices. This is typically useful for highly volatile instruments (large price ranges) or instruments with very small tick sizes (such as FOREX).
Regular Trading Hours (RTH)
Defines the time of day where regular trading occurs for an instrument.
Resistance Line
This line visually indicates where a possible over supply of ask volume may exist to provide price resistance to keep the market below the line.
Support Line
This line visually indicates where a possible over supply of bid volume may exist to provide price support to keep the market above the line.
Tick Size (Min Tick)
The Tick Size represents the smallest movement in price for an instrument. For stocks this is typically one cent (0.01). Values for other instrument types (such as Futures Contracts or FOREX) vary widely. These values are typically set correctly in MotiveWave™ but you may need to adjust manually depending on the broker or data service that you are using.
TPO (Market Profile)
TPO stands for “Time and Price Opportunity” (sometimes referred to as Market Profile). Similar to a Volume Profile, it graphically illustrates the amount of time spent at each price (or price range) over a given period of time (typically daily, in 30-minute sub intervals).
Trade Volume
Trade volume represents the number of trades that occurred over a given period of time. This is similar to volume, but only considers each trade and not the number of units that were exchanged. Trade volume will always be less than or equal to (<=) volume.
Trading Hours
Trading hours define the times of the day when an instrument is available for trading. Some instruments (such as Stocks or Futures) have regular trading sessions and extended (after hours) trading sessions.
Value Area
The Value Area is the price range (centered around the Point of Control) that encompasses X% of the trading activity (typically 70%). The value area may be computed using volume or time.
Volume
Volume represents the number of units (stocks, contracts etc) that were traded (exchanged hands) over a given period of time.
Volume Profile
A volume profile graphically depicts the volume traded at each price (or price range) for a given period of time. This identifies how trading activity is distributed by volume (exchanged units).
Tick Data
The Volume and Order Flow analysis tools described in this document rely on tick data to present accurate results.
Tick data is a record of the trades that occurred for an instrument. Tick data is not available from all Brokers and Data Services and in some cases only partial information is available. It is very important to understand these limitations as they will affect the accuracy of the information that is presented from the Volume/Order Flow Analysis tools.
There are two types of tick data:
Live Ticks – These ticks are generated from a Level 1 feed (live price updates) and are stored in memory. By default, MotiveWave™ will keep up to the latest 2000 ticks, but this is configurable in the Preferences Dialog (Configure -> Preferences from the Console menu bar, see “General” tab). These live ticks are merged with the historical ticks where appropriate.
Historical Ticks – These are ticks that have occurred in the past and are downloaded from the Broker/Data Service or from the MotiveWave™ back fill server. The amount of data available will depend on instrument and the source.
Each tick may contain the following information:
Trade Time – this is the time at which a trade occurred (in millisecond precision).
Price – This is the price that the trade occurred at.
Volume – Number of units that traded hands in this trade
Ask Price – The best ask price at the time of the trade (used to determine Ask Volume)
Ask Size – number of units available at the best ask price at the time of the trade
Bid Price – The best bid price at the time of the trade (used to determine Bid Volume)
Bid Size – number of units available at the best bid price at the time of the trade
Bid/Ask sizes are not currently used by the volume analysis tools in MotiveWave™ but are available in the Time/Sales panel and the Java SDK (see Tick interface).
The following table explains tick data availability. Brokers/Data services not listed (and that don’t connect via a gateway such as CQG, Rithmic or GAIN Futures) do not provide historical tick data.
Broker/Data Service | Time/Price/Vol | Bid/Ask Price | Bid/Ask Size | Historical Limit | Back Fill |
CQG1 | Y | Y | Y | 10 Days | Y3 |
GAIN Futures1 | Y | Y | N | ? | Y3 |
Rithmic1 | Y | Y | Y | ? | Y3 |
IQFeed | Y | Y | Y | 8 Days (60 Days After Hours) | Y |
eSignal | Y | Y | N | ? | N |
Barchart | ? | Y | |||
TradeKing | Y | N | N | ? | Y3 |
FXCM2 | Time/Price Only | N | N | ? | Y3 |
1 CQG/Rithmic/GAIN Futures are gateways to many different brokers. Check your broker connection to see if they connect through one of these gateways.
2 FXCM Tick Data does not include volume information and can be extremely slow to load.
3 Loaded from MotiveWave™ Back Fill server. Back Fill may not be available for all symbols.
Historical Bid/Ask Prices
Historical bid/ask prices are used to determine if the trade occurred at the “Bid Price” or the “Ask Price”. This is used to separate Bid Volume from Ask volume.
As illustrated in the table from the previous section, historical bid/ask prices are not available from some brokers/data services. In cases where this information is not available, the price from the previous tick will be used to determine if the trade should be used to tally Bid/Ask volume. When the price increases, it is considered an “Ask Tick” and when it decreases it is considered a “Bid Tick”. If the price remains the same, the Bid/Ask Tick is inherited from the previous tick.
Generated Ticks
For many of our supported Brokers and Data Services historical tick data is not available. In these cases MotiveWave™ will generate ticks using minute bars (and in some cases second based bars). Each bar will generate 4 ticks, each with one quarter of the bar’s reported volume:
Open – Open price of the bar with ¼ of the bar’s volume
High/Low – If the close is greater than the open the high is used first, then the low otherwise low then high. Each of these ticks has ¼ of the bar’s volume
Close – Closing price of the bar with the remaining volume in the bar
Bid/Ask volume is determined using the rules from the previous section where bid/ask prices are not available (ie: previous price determines bid/ask volume).
Depth of Market (DOM) Data
Depth of Market (DOM) data shows the cumulative sizes (at each price step) of active limit orders that exist above and below the current price. The number of available rows above and below the current price depend on the exchange and the source of the data. For most futures (especially from the CME), this is limited to 10 rows above and below.
All depth of market data is live data only (no historical values are available from the exchange). MotiveWave™ will accumulate historical Depth of Market data at 1 second intervals in memory the first time a DOM panel (or study that uses DOM data). This historical record of DOM data can be useful to see where the hidden market demand exists and help to predict the short-term movement of the market.
Summary of Volume Studies/Tools
MotiveWave™ has many different volume-based studies and two components. The complete list of these studies can be found under the Study -> Volume Based sub menu (see top menu bar). In this document we will be focusing on the following studies/components:
Time Price Opportunity (TPO) – Provides a graphical illustration of how much time is spent at each price.
Volume Imprint – Provides several different views of how the trading activity of a price bar (candle) breaks down with Bid/Ask volume.
Depth of Market – Order entry panel that displays the number of contracts sitting in the order book along with recent trades at the bid and ask.
Time and Sales – Displays time, price and size of trades as they happen.
Delta Volume – Plots the difference between the Bid/Ask volume
Cumulative Delta – Plots the difference between the Bid/Ask volume as it accumulates through the trading day.
Bid/Ask Volume – Plots the Bid Volume and the Ask volume together so that you can identify changes from buying pressure to selling pressure.
Speed of Tape – Displays the current and historical speed pace of the market for a given statistic.
DOM Power – Displays current/historical order demand at the bid and ask.
DOM History – Historical display of cumulative limit order sizes above and below the market price.
Big Trades – Displays large trades to see how large traders are positioned.
Speed Gauges – Displays active statistical values graphically on the price graph.
Volume Profile Component – Allows you to dynamically draw a Volume Profile by dragging the component from the “General” panel (or using the Mouse Tool). The range for the volume profile may be adjusted using the resize points).
TPO Component – Component version of the TPO study. The component allows you to dynamically select the time frame for the TPO/Volume Profile by using the resize points. This component is available in the “General” panel or as a mouse tool.
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