Question

Hi Anna,

 I am one of your follower on Facebook. I read about the GOLD trap which was very evident from the price volume indicator on Ninja trader.

How do I get this ? I have downloaded Ninja traders platform – Demo but am unable to setup GOLD and volumes like you have.

Your help would be appreciated.

Answer

Hi – m
any thanks and I’ll try to answer your question. As you probably know with 
the NinjaTrader platform, whilst this is free to download, you will need a 
data feed for intraday trading and also for most futures markets. The one I 
use is Kinetick, and whilst they do offer a free demo EOD feed, I believe 
this is quite limited and does not cover gold. The volume feed for Kinetick 
is based on contract volumes, so when this is applied to a chart, you will 
see the volume of contracts traded in the session. This is very different to 
tick volume which I believe is more descriptive of order flow and market 
activity, so let me try to explain.

When considering volume this can be thought of in many different ways. In 
the stock market we are dealing with a cash market, where real stocks are 
bought and sold through a central exchange, so here we are dealing with 
volume in terms of the number of stocks or shares traded in the session. 
However when we move to other markets it becomes a little more complicated, 
with volume being reported by different vendors in different ways. In 
principle there are two types of volume in the futures market. The first is 
the number of contracts actually traded, whilst the second is the number of 
trades. In the first case, where it is the number of contracts, if we have 
1000 contracts bought or sold on the day, this is the total for the market, 
and could have been executed in one order, or 1000 orders, or more likely a 
combination of small and large orders.

The point is, all this tells us 
is the size of orders going through the market, not how many orders. If we 
move to the second way which is using orders as a measure of volume, 1000 
reported here would be 1000 orders. In this case we have the activity in 
terms of trades ( referred to as tick) but not the size of these trades, or indeed whether these are buy or sell trades ( that’s where volume price analysis comes in!!). On 
the NinjaTrader platform with the Kinetick feed, the standard VOL indicator 
reports the first of these which is contract size, not tick volume.

 In other words what some data feed providers call tradable volume. Volume can be measured in many different ways, and this is one of the many reasons that trying to compare volume between data feeds can be tricky.

My personal preference is to use tick volume wherever possible. Tick volume, or the number of trades ( trade volume), is activity – pure and simple, and for evidence of this, you only need to consider a tick chart, before and after the open of the physical market. Tick activity on Globex for an instrument such as an index or commodity, my only be 50 ticks on the equivalent one minute chart. As the market opens the tick activity explodes on the screen rising to several hundred ticks, and if you are also using volume on a time to tick conversion indicator, then this is the perfect way to trade, applying volume price analysis, whilst trading a tick chart which is trading in synch with the time based equivalent. Whilst contract size is interesting, in the sense it tells us when an order is large or small, it does not represent activity as far as I am concerned. Large order size may well impact the market price action in the very short term, but activity will ultimately drive the market as the big market operators move en masse to buy and sell.

I hope this helps to explain and apologies again for the delay in replying.

 All best wishes and thanks again – Anna

By Anna Coulling