all right well welcome to the book map educational course this is going to be a

0:06

series here parts one through four we're going to go through part one today

0:12

tomorrow part two and then on Friday part three and then next week we'll do

0:18

it again and then get to part four as well which will be about more advanced

0:23

features today's course is going to be intro to basic market mechanics and I

0:30

hesitate to put the word basic in there this is actually it's essential to

0:36

understand this information but it is as well actually gets quite complex pretty

0:44

pretty quickly but these are the mechanics that move the market okay so we're going to go over
this in in

0:51

some detail and then you know show some some examples in book map and how you

0:58

can identify these all right risk disclaimer trading equities and futures involves substantial risk of
loss is not

1:05

suitable for all investors past performance is not indicative of future results for more information
you go to

1:13

book map comm become a member there and you'll have access to a lot of the free resources and
then you can reach out to

1:21

us at support at Velox procom or support at book map calm and I want to show a

1:30
few more resources here so here is our website we also have Twitter you can

1:38

follow us on Twitter and then we also have a youtube page and I'll reference

1:45

this a little bit later because there's a few videos I want to show you okay and

1:50

all right let's move on okay a little

1:56

bit about me my name is Bruce Pringle I've been a trader for ten years in a variety of markets I'm a
product specialist at book

2:02

map I lead the education trading here at book map in an expert in order flow and

2:11

market microstructure and I just showed the Twitter and the YouTube as well so and support at
book

2:19

matcom right okay so overall this series the goals

2:24

here what we're going to go through in this educational course okay we're going to provide you a
structure a structured

2:33

understanding of today's markets we're going to cover theories and practical

2:38

uses and we're going to give you something to take away and use alright so we're going to give
some strategies

2:44

and some setups some training exercises and this is all hopefully going to allow

2:50

you to with a high potential here to

2:55
enhance your trading execution alright this is going to be a reference guide for you to return to if
needed you will

3:03

always have it and then during the daily webinars we are going to cover this in

3:10

the live markets okay so you'll always have the course to come back to but in the live webinars
we'll go over a

3:18

current condition of the the live markets using the same techniques used

3:24

or learned from these courses okay and

3:29

we're also going to introduce you to advanced hft or high frequency trading concepts and
applications and this is

3:37

both for futures and equities traders okay alright today's course what we're

3:45

going to go through we're going to start off with basic terminology it's important to understand
that that we're all in the same page here and then we're

3:52

going to get into the market mechanics and beef mechanics visualised why price

3:59

moves price sweeps white price trend stops and price behavior how it moves

4:06

and then we're going to get into some of the training exercises later okay who is this course for
right so this is

4:14

for retail and professional traders alike prop traders Domar price ladder

4:21

traders and because we can show the historical limit order book and order

4:26
flow is also applicable to swing traders and

4:32

spread traders alright so for the AFT environment a lot of the quants in asia

4:38

few algo traders are especially going to understand this today's lesson but there

4:45

is still a lot of good information in here for for the quants financial

4:50

engineers and students and this can also apply to compliance officers yeah so

4:57

terminology we're going to start off with liquidity okay and we're talking about liquidity here
obviously in the

5:03

marketplaces we're talking about the the limit orders okay the the depth of the

5:10

market where traders are lining up to be buyer's or seller's their bidding and

5:15

offering in a market and they're providing liquidity they are making the market without them a
price would be

5:24

very very hard to define okay the bbo okay this is the best bid and

5:29

offer and that's the inside market exactly where a price is currently

5:36

trading hitting the bid and that's where we're going to talk about aggressive

5:43

volume that takes liquidity off of the the best bid okay so one hits the market

5:50

sell button and they'll take liquidity lifting the author offer is the opposite they'll hit the market
buy button and
5:57

they will take liquidity off of the best offer okay the LOB the the CLO B and the dome

6:06

a limit order book centralized limit order book and depth of market okay

6:12

they're all basically the same thing the the club is kind of important to understand though because
the

6:20

centralized limit order book is the really what we're talking about here and

6:27

and taking the data from there and then transposing that onto the chart

6:32

historically alright we're going to talk about aggressor a volume classification that's the market
buys and the market

6:39

sells the intent trade that is the the traders lined up

6:45

on the bid or the offer I in the depth of market the current order book is the

6:52

current state of that order book right now what's going on in the order book the depth on the
offer the depths on the

6:59

bid the a best didn't offer the last traded volume and and the spread okay

7:07

and then we're going to get in the historical limit order book and order flow which I'll define it will
see as we

7:16

go on because we record all this data in that current order book and then extrapolate that and
transpose it onto

7:23

the historical chart okay all right

7:28

let's see how can the order book an order flow data help you right well as I

7:35

was just explaining the current state of the market any dome will do this all right there's no lag to
it it's showing

7:43

you the liquidity at price levels is giving you the the best didn't offer and

7:48

spread the current price and the last traded volume it is the current state of the market okay and
then it gives you an

7:57

understanding a where price might go looking at high liquidity that you can

8:02

target that's going to be on the bet on the depths of market in the on them on the bid or they
offer okay and this

8:10

gives you an advantage over the competitors you can start to understand their activity recall that
this is a

8:16

zero-sum game structure within the marketplace okay and we're going to

8:21

integrate this information within the historical limit order book shortly okay

8:27

so market mechanics the we're going to go through some basic examples and now

8:35

this this course is about education okay but we're going to show a book map and

8:42

and why that's because it visualizes this behavior very very nicely and in

8:50

fact a story book map we came from the HF

8:55

environment developing algos trading in the high-frequency environment and

9:03

needed some sort of visualization of where those trades were getting filled

9:09

and phosphor was developed to understand that comprehend it and then I thought

9:17

that was a pretty good idea and that led into book map becoming a product okay so

9:23

that's why we're going to be showing book map here as to visualize these mechanics and you'll see
exactly what I

9:29

mean in just a minute okay so I need to show a book map I need to go over it here what are you
looking at in a user

9:39

interface this whole area here is historical data okay here's your current

9:46

data here okay this is your best didn't offer here your last traded volume here

9:52

and you'll see that this is the depth of market I'm going to show you book map in just a moment
here but this is the live

9:59

market is a graphical representation of the depth of market okay the current

10:05

state of that market all right so here's your your best didn't offer here your depth on the offer and
your depth

10:14

here on the bid okay all right so let's say let me show you book map and we'll

10:20

get it up here okay all right okay so

10:27

here's book map we're looking at the S&P emini and let's see I'll start off here

10:34

and we'll just work backwards very very simply okay I'm going to take off all of

10:40

the the data here so that we have something very very simple and straightforward to look at

10:53

okay and indicators alright okay so most

11:00

of us are very in tune to understanding a candlestick chart okay so here it is

11:07

in book map alright and no further explanation is needed you can see that

11:14

between each vertical dotted line here I have 15 minutes worth of data okay I'm

11:19

going to start layering information on top of this first I'm going to add the

11:25

best didn't offer okay now what we're looking at is the historical best didn't offer okay we can let
me zoom in a

11:32

little bit here and so you can see this move to the upside here well this was

11:39

the best didn't offer within this candlestick period okay so this is a one-minute chart and you can
see the the

11:50

the closure of that candlestick but here's where the best didn't offer was during that time okay the
red line is

11:56

the best offer the green is the best bid okay

12:01
now let's add on some volume dots okay so now what we're looking at here is the

12:08

volume traded within that best didn't offer okay so this candlestick that you

12:16

see here this one-minute candlestick chart well you can see the where that

12:21

volume took place you can see the type of volume it was I it was a lot of

12:27

buying that took place and you can see that we're giving you the overall delta

12:33

of this information as well so there was some selling in here but not as much

12:39

there was more bind in fact I'm going to zoom in here to this area I'm going to

12:44

take a quick closer look here so as I start to zoom in we can really zoom down

12:50

and and show exactly what unfolded in these markets okay we can see the

12:56

algorithmic activity here at very sub-second levels now we're down at the microsecond level here
okay all of this

13:04

data is recorded but you can see as i zoom out this just becomes a bigger green dot okay and then

13:11

you can see as I continue to zoom out we give you the overall Delta because there's so many so
many trades that took

13:18

place here that we need to give you we

13:23

only have so much screen space to give you something that is useful so this this data is aggregated
only visually or
13:31

graphically okay and you can see now what comprises Candlestick okay from the

13:37

previous one here so this is very much like a footprint chart you can start to

13:42

understand where the volume took place how much a what type and within how much

13:51

of a time period here okay so that's the traded volume now we have that on the

13:58

chart and now we're going to add the heat map here okay

14:04

so let's add that okay so now what are

14:11

we looking at here okay well all of this this heat map is the

14:18

historical limit order book it's all derived here from the dome okay so as I

14:23

was explaining earlier let's just go right back to this current market this

14:29

window here we're giving a graphical representation of the liquidity in that

14:34

limit order book okay so like right here we can see thirteen hundred and forty seven contracts

14:39

well that bet area is painted bright white and the current order book window here so we know
right right away there's

14:47

a reference here very high liquidity on the offer okay so that's what the it's

14:54

just a graphical representation of that limit order book now where this really
15:00

gets interesting is that's the current market this window here but we we take

15:05

this data and we transpose it onto the historical chart and let me zoom in just a little bit and you
can start to

15:12

understand the behavior of these traders here on the bid okay look how they're

15:18

adding and pulling the quiddity in this area okay so we can start to understand their intent to

15:23

trade at some of these levels do they really want to be buyers or not okay so

15:30

that's the book map interface in general and we'll look more at it a bit later

15:39

but then I do want to compare this to a dome just so you guys really get this

15:46

down all right so here's a here's our dome we have our best price here well

15:52

let's go through the price ladder here as you can see in the dome and here it is in book map okay
the depth of offer

16:00

okay here it is in the dome these numeric values here and you can see that

16:05

those numeric values match up here in in book map now I also included the

16:11

graphical representation of these numeric values here okay that is the offer here on in book map
okay here's

16:20

the depth of bid okay so this is the liquidity here in the limit order book in a dome and then in
book map okay and
16:29

then here's our inside market alright our level one data our best didn't offer our BDO

16:35

okay so we just have our best didn't offer and you can see they match you're within the dome
okay and then finally

16:43

our last traded volume this number here matches with the last price and here's

16:50

your last traded volume with your last last price here okay all right so now

16:58

let's get into the integration of that current data

17:04

okay the going through the order flow data integration here the current data

17:10

the real time in the dome is fleeting you know it's a you'll see those numbers

17:17

display very quickly and then they'll be redisplayed with and refreshed with new

17:23

data so you have to remember those areas that may have been high liquidity or low

17:29

liquidity and and that to be a little challenging to do because

17:35

you have to remember specific areas and then when price comes back to those areas are they still
bidding or offering

17:40

do they still show interest that's where the historical limit order book and data

17:47

comes in very very handy okay so we record all that data and then you can

17:53
see and understand how we're looking at at book map we can understand how it unfolded in
detail in specific areas and

18:04

it's very easy to see it and that gives us context to those those areas as well

18:10

okay so like I like I mentioned that let's say we have a double top pattern well they were bidding
there before or

18:17

are offering there before with high liquidity and if we return back to that

18:22

area are they still interested we'll get context from understanding the auction

18:27

in those areas okay this gives you a nice advantage over your competition all

18:33

right so now let's jump in here and and yeah here's our historical dome our

18:39

current dome in the book and then here's our current dome in book map okay and

18:46

jump in here and that why does price move okay we're going to cover aggressor volume okay
market transactions and the

18:53

intent of trade okay the a centralized limit order book auction okay so why

19:02

does price move okay aggressor volume explained here we're talking about the limit orders are
their passive they sit

19:10

or they rest in within the depth of market okay they provide liquidity they

19:16

want to be buyer's or seller's within those specific areas on the price ladder

19:21
okay market orders this is the aggressor they cross the spread and they consume

19:27

the liquidity on on the in the depth of market okay they'll consume the limit

19:32

orders okay so most of us are familiar

19:37

with this but this is the classification of the volume that we'll be looking at here is the agressor
classification the

19:44

market orders okay the train action all right price trades where this

19:51

aggressor is matched with the liquidity in the best bid or offer and then now

19:57

let's start to jump in here and we'll go through some examples okay here's current price trading on
the

20:04

best bidder offer okay here the last trade that just took place here was it was a market by with a
volume of one

20:10

right here okay now this is just illustration we we can see the spread here we have the liquidity
within the

20:20

best didn't offer here we have 12 contracts on the offer and on the best

20:25

bid we have 16 contracts okay this is where it last traded here so that is the

20:30

current price okay now a very very

20:36

simple market sell order they gave the aggressor hits the hits the bid with a

20:43
market sell order okay they consume the liquidity here so we did have 16

20:49

contracts while they consumed won and now we have 15 contracts and price has

20:54

now changed price has moved okay one tick and this is how the market moves

21:02

the aggressor is the one that that can move the market okay now here's an

21:10

example of what that looks like in book map and you can see the the aggressor

21:15

here these little green dots here our market buys okay and price was trading

21:20

here at at fifty to eighty nine we're looking at oil okay and then you see the

21:26

aggressor here market sells with the red dots on the best did and so it's just

21:34

going back and forth here now you can see something pretty interesting already

21:39

and you can see the complexity we're going to get into which is this very very simple binary
example we're

21:46

recording here algorithmic activity okay I mean very very clearly you can see you

21:52

can see the time and the orders and the size of the orders are all equivalent

21:57

here so these these two algos are battling and forth okay and you cannot start to

22:04

understand that this this is really how these markets trade today okay there's

22:10
all these algorithms that are trading the back and forth and we can understand their behavior here
within the

22:18

historical limit order book okay all of that record which would be rather difficult to see in a dome
okay here's

22:26

another example as well and we're going to see a lot of this kind of information and data displayed
in book map this is a

22:35

algo here that is lifting the offer but it's not really lifting price here okay

22:41

it's trading on the best offer okay and you can see it's very very clearly with

22:48

the the mechanical movement here or the buying and selling that they are

22:53

consuming liquidity here but they're not lifting price against them okay so this is they're
accumulating a position here

23:00

over time without moving price against them so now let's get into next widest

23:12

price move the imbalance in the intent of trade okay so what we're going to talk about here

23:18

large and balances in the order book that's cues the auction all right now

23:25

the size of these limit orders is going to affect the best didn't offer right so

23:31

they may pull liquidity they may add liquidity you know there might be a big

23:37

spread now when the mechanic mechanics

23:42
here operate and you get our market sell order to move price it hits the bid well

23:49

we might see a big move in that price without much volume as because they

23:56

pulled their liquidity there is an imbalance and they pulled their

24:02

liquidity on the on the bid and and the transaction occurs at a new lower price

24:09

okay let's go through the example right here's our volume one okay

24:14

we and and then they hit the bid here with another volume of one alright so 12 contracts 16 here
on the

24:21

bid one is consumed that becomes the current price now we have an imbalance here in the depth
of market on the on

24:28

the offer okay you can see previously we had you know pretty equal a book here all right

24:36

rather equal I think there was a bit of a skew in the on the bid side but then

24:43

we can see this is rather balanced right now we have an imbalance okay

24:49

120 contracts versus it was 16 okay 24 contracts and 32

24:56

they turned into 85 and 72 so we have a very heavy imbalance here in in the

25:02

limit order book okay they're they're offering here with a lot of high

25:09

contracts okay big contract sighs how that affects price okay well we can see

25:15
here these 15 and 18 contracts here on the bid these guys that they get scared

25:21

they don't want to to trade any longer at these levels and they'll pull their

25:26

liquidity okay so our last trade still occurred here with that volume of one

25:31

okay but the best bid has now shifted down a couple of six okay so now we're

25:40

down here to tix lower at at 22 contracts okay alright so with a volume

25:48

of one okay sell market volume of one they've moved price now one two and

25:55

three three ticks here okay we consume one contract here and that becomes the

26:03

current price and this is how the intent of trade can affect n move price and

26:11

when in periods of high liquidity you're going to see this all the time okay and

26:19

I'm sorry of high volatility so

26:24

fundamental releases or economic data releases as well as just a skittish market

26:30

there's a lot of volatility because there is a lack of liquidity and in any

26:36

imbalance with high liquidity you'll see pushes and poles of markets very quickly

26:43

okay this is what this looks like in book map okay we have high liquidity

26:49

here that stays in the book but we come up into this area here and they get very
26:54

very aggressive we get it in balance in that book and you can see that how how

26:59

how price is affected here okay that is pushing price down into an area and you

27:10

can see we're going to get very advanced about this we're talking about potential spoofing here
into a liquidity here on

27:17

the bid okay but the imbalance in that book okay so advanced concepts the potential

27:26

spoofing here.i imbalance to a drive price lower and maybe get off bid filled

27:35

in at lower price levels okay there's also you know strategies that you can

27:43

and we're going to go over later with momentum looking for momentum or

27:50

spoofing you can start to look for that or layering icebergs in ignition

27:55

ignition algos alright so let me cover the ignition I'll go here I you can see

28:00

the example with the imbalance here in the in a limit order book on the offer

28:06

we see it once they come in again that algo is still working here and then

28:13

finally you can see this one here and it finally does drive price lower okay so

28:18

now we're going to start to understand and comprehend this data within the

28:24

historical chart okay because it's all recorded here and you can see the you
28:30

know the you know we're not we're not talking about just this is not just a milliseconds of data
where you know this

28:37

is 10 seconds between each vertical dotted line here you know so we're looking at you know

28:43

like a minute here of price activity a little bit more okay but you're going to

28:50

be able to utilize and consume that data and look for you know a potential order

29:00

execution here that's going to be enhanced right here's another example we

29:06

have very high liquidity here on the best offer jumps into the book very

29:11

quickly and I'm going to show you sequence here okay so we can also see them down here on the
on the bid at this

29:19

twenty four twenty level and let's how did this unfold okay so here's that same

29:26

action is here again and we can start to see how it affect price okay

29:32

affected price and drove it lower into some of these lower areas here we're

29:39

going to we're going to talk about this concept a bit later but I'm going to introduce it between
short term high

29:46

liquidity skewing the auction okay and then longer term liquidity here that

29:51

remains in the book okay so this longer term liquidity is already already understood by the auction
right but this
30:00

new information that jumps into these areas and then pulls it needs to be

30:06

digested by the market okay and you can see that in balance that heavy and balance has an effect
on price here's

30:16

another example you can see this is the open and 9:00 9:30 open here we see an

30:24

imbalance here driving up into high liquidity here longer-term high liquidity it was uh basically in
the

30:31

market from the get-go of the 9:30 open and then here's our imbalances with

30:37

shorter term high liquidity driving price up into some of these areas okay

30:45

so next concept let's go over sweeping of the order book so what we're talking about here is just
not moving price back

30:51

and forth we're trading through one or more price levels is an important

30:57

concept to understand this is typically how price trades into a new range all

31:04

right and we're going to witness this with a combination of imbalance in the order book and very
sizable aggressive

31:11

market orders okay so here's an example we'll start off again here here's our

31:17

market by volume of one but now you can see here we have a market cell with a

31:25

volume of 50 okay so what occurs they're hitting the bid with 50 contracts here we have 15 15
contracts on the on the
31:35

best bid at this at this point okay well it sweeps through that 15 so 15 trade

31:42

that is the last last trade that took place here is still the current price

31:49

now what remains of that 50 lot order well it still still markets sell but

31:58

it's already swept this price level but it traded his team so there are 35 contracts remaining in that
big market

32:06

sell order okay so what occurs next price level still hitting the bid it

32:13

sweeps through this price level here with the 18 contracts right and and you

32:19

can see we swept it and now there's 17 left still remaining in that 50 lot

32:25

order and it is still hitting a bid here but we have 22 contracts here okay so

32:32

what unfolds alright okay it takes 17 of them but there's still five five

32:38

remaining okay and that is our sweep of the book okay this this 50 lot now is

32:45

filled okay and you can see we swept down that you know a few few ticks here

32:51

into lower levels all right important concept to a lot of times it

32:59

depends on the market center Marcus you'll see this a lot more often the es

33:05

you will rarely see this but can see the spread has widened out here because they swept through
all these
33:12

levels here but where's the best offer it's still up here at this at this level with these 12 contracts
okay so um

33:21

there's a vacuum here within it there's a bigger spread to spread widens out between these two a
lot of times the es

33:29

so very very quickly we'll fill in right what does that look like in book map

33:34

alright well this is a fundamental release and we can see the just massive

33:42

red dots here sweeping each price level as it goes lower okay you see the vacuum

33:49

effect that we're talking about as we return almost back to where we dropped

33:54

from here and here's another example and this is a market market by okay sweeping

34:04

sweeping up to new levels and we see the this is the initial release you can see

34:09

that here's a 1030 this is oil is the oil inventories actually nothing really

34:17

occurred for a few seconds and then all of a sudden maybe they really listed the offer here okay
okay let's look at some

34:25

of the advanced concepts and some of the sweeping here all right like for example looking for
pullbacks

34:31

start to enter if you're if you believe that the sweep here was we're going to

34:38

start to accept down to lower levels well then you can start to enter some of your limit orders in
some of these areas
34:44

here okay if we're looking for that pullback into some of those areas because there's been a
vacuum alright

34:51

guys I see your questions here I'm going to go through all the questions um later but I want to I
want to continue on and

34:59

get through the presentation okay so you could also play momentum looking for

35:06

that sweep and then joining in or maybe you're looking for rejection I'm going

35:11

to show an example of that you're also going to see book flipping you might see sweeps into
icebergs and then those

35:19

ignition algos as well okay all right so here we are with an

35:25

example in oil again and you can see we swept down through to a lower level here

35:34

and it looks like prices starting to accept down below this lower level here

35:39

here's our pullback to it and we get another continuation all right we

35:44

actually see another sweep to the upside okay and this one it sweeps up into

35:51

basically where it dropped from up here but then it's one this is a little

35:56

different here and I'll explain in just a second all right we see yet again another sweep okay
probably starts to

36:03

accept above this level and we sweep through it we get our pullback here and we sweep on down
yet again and we can
36:10

see very nicely and cleanly we get our pull back right to where we drop from so this concept of
sweeping although the

36:17

mechanics look very simple is very profound you can start to see we're going to lead to a very nice
setups to

36:26

understand looking for those vacuums or maybe you want to join the momentum on

36:33

the way up anyway we can start to look at some of these

36:40

levels here and then also how they start to affect the volume profile we're going

36:45

to cover volume profile tomorrow but you can see as I drew a line across here I'm going to have
our point of control up

36:50

here basically for this range whoops sorry and and we that's where we come up and

36:57

test now the sweep down through this area here is going to be your low volume node and you can
see it here and yet

37:04

again here's where we swept down and broke from again here and that is your low volume note
here so now you're going

37:11

to start to understand the sweeping action and moving to lower levels or higher levels within the
volume profile

37:19

okay now here's an example of rejection okay and we can see that that is again

37:27

oil that we have a rained situation developing here we

37:33
down into a lower level but we turn right back into the range okay so you

37:42

can you can also play it that way if this is a lot of times what you've seen this kind of behavior stop
runs getting

37:50

traitors you know stopped out running the wrong way maybe bine or I'm sorry selling the

37:56

breakdown here and then trading back into the range and then you can see they actually trade it
to the opposite side

38:02

here and grab all the stops on the other side all right so there's the potential

38:08

here for understanding this and trading it as rejection okay here's the concept

38:15

here of a flip of the book so here's our sweep as you can see and then here's the

38:22

the limit orders on the on on the bid here okay we swept through it and yet

38:30

now what are we return back to okay we you know actually I would start to anticipate returning
back to this level

38:37

here but now we're starting to understand a flip of the book because high liquidity here on the on
the bid

38:44

has now flipped to the offer and that's where we come back and test all right not only once but
twice and three times

38:52

here okay so you're going to start to extrapolate and understand this data within the historical
limit order book

38:58

chart all right so that's sweeping let's

39:04

get into why price trend stops I'm going to go through absorption and exhaustion

39:10

okay absorption it's the limit orders that that take up and absorb all the

39:17

aggressive buying or selling okay it could also be iceberg orders but we're going to cover that in
the advanced

39:23

session and let's go through an example okay start off again with our market by

39:31

volume here of one and that's where current price is trading but there's a

39:37

distinction here okay we have longer-term high liquidity down here and the depth on the bid okay
so

39:46

twenty-five contracts and compared to very very high compared to all the rest

39:51

of the book and now let's just speed things up here we sweep the book lower

39:56

into some of these lower levels here that 50 lot is you know there were 22

40:02

contracts here it takes is 17 now there are just five left and that is the current price okay so we still
have now

40:10

we're down at one tick away from our 125 contracts okay so they sweep it again

40:17

here sell market order volume of 50 okay what happens okay it hit the bid those

40:24

five trade and now we have a volume of 45 trading into these 125 contracts okay

40:33
a 45 trade now that becomes 80 contracts here on the on the best bid they

40:40

absorbed all of those contracts over those 45 okay from that that 50 lot okay

40:47

they hit it again here okay market sell with the volume of 50 what unfolds okay

40:53

so hitting the bid we have 80 contracts here okay 50 of them trade and now there are 30

40:59

left they absorbed all of that order at one price level okay and so now this

41:11

this one trader our bliss a is one actor one trader they they came into the

41:17

market very aggressively with 150 contracts one slept the book lower one

41:23

swept the book just one price level and then was absorbed and then that last fifty lot was
completely absorbed at

41:31

that price level okay and their 30 contracts still remaining at that price

41:36

level okay so let's say someone jumps in now and with a market by volume of just

41:42

one okay well if they're if the spread is still had widened out after that

41:48

sweep and remains that condition just with a volume of one they've moved the

41:53

price up three ticks alright so this can allude to a lot of different

42:00

things we can start to understand trapped volume and some of these areas or you know maybe
you're trading in down

42:06
into an iceberg order here on the on the best bid okay alright so as mentioned

42:14

the aggressive buyer lifts lifts price our list the offer which is one contract and that becomes they
take one liquidity

42:21

one contract with liquidity off of the twelve here and that now becomes current price okay and
let's go through the

42:31

example here in book map what does this look like okay here's our high liquidity here on the offer
okay we see the

42:39

aggressive market buys trading into that area and they remain in the book these

42:45

guys up here at forty four twenty they want to be sellers and you can see they

42:51

continue to be aggressive market buys continue to trade into that area and

42:58

then the the limit orders on the offer absorb all of that aggressive buying and

43:05

it finally dries up here and then we can see that they very aggressively I then

43:12

hit the bid with large market sell orders we trade below that level

43:17

interestingly enough just like the sweep we we trade now below at a new level

43:23

here okay you can see some same same concept here down on the bid they're

43:29

they're starting to absorb it down here but they actually overpower the limit buys here and they
sweep through that

43:36
level okay but this is the absorption part up here okay another example

43:42

trading into high liquidity here you can see the aggressive mark itself taking

43:50

place here on the best bid and they just don't take it any lower okay so any of

43:55

that aggressive selling has been absorbed and and then we can see the price they start to lift the
offer with

44:03

aggressive market vine liquidity pulls here and we continue on up okay

44:10

let's go through a few advanced concepts be Bottoms view bottom reversals

44:15

pullback strategy that we covered earlier you can look for stop runs trap volume and book flipping
as well and

44:23

let's take a look right well here's our sweep down to the bottom and then you

44:29

can see look at how they very aggressively come in here this is this is gold and they come in here
with 149

44:36

contracts at this price level here of at

44:41

12 44 and a half and and they remain in the book okay the you would maybe start

44:49

to anticipate a move back to where it broke from but this information here understanding the
depth of the of the

44:56

market gives you that insight that we're not going to back up to here because

45:02
these guys want to be sellers at a lower level all right

45:08

here's an example in Apple you know we book map was also available for for

45:15

equities in the US and let's go through this a really nice example here of absorption okay you can
see the

45:24

aggressive selling into some of these areas here and finally down here we see

45:31

2557 contracts trade on the best bid you

45:37

can see it's all selling here okay and our in our profile alright and you can

45:43

see all of the selling here look at the buy in here there's very little right completely absorbed by
the larger

45:49

traders with their limit orders okay and this is going to be our example with the

45:55

V bottom here but the all absorbs here we do actually get that retest but we

46:02

don't go all the way down to the bottom we get we can start to anticipate those retests to maybe
where we start to see

46:10

some vine come back in alright and and this is what it looks like on the higher

46:16

time frame okay so a real very quick sharp drop into an area here

46:24

on the on the bid completely absorbs and you can see the reaction that it had in

46:30

the be bottom okay alright so that's it

46:36

with the absorption let's go over exhaustion okay what is it it's the lack

46:41

of aggressive volume activity so you can

46:46

see here we're going to go through the market the by market order here volume

46:53

of 50 okay and that had already occurred so we still have 12 contracts here and

46:59

that is the current price okay on the best offer okay now they come in and

47:05

they sweep the book lower lower here 15 contracts and and then and then 13 and

47:14

then there's they're still hitting me hitting the bids here now we have a sell

47:19

market order volume of five occurs here into these ten contracts I do need to

47:28

just mention here look at the lack of now doesn't have to be lack of liquidity

47:35

for it to be exhaustion it's a lack of aggressor a volume that makes it

47:41

exhaustion but a lot of times you won't see very high liquidity alright so we

47:47

come down into and now we're hitting the bid with five contracts into ten on the

47:53

on the on the bid so it trades those five and you can see that becomes now

47:58

the current price okay next example they continue to hit the bid we do have

48:05
another sell here of five what occurs will they sweep that level okay that's

48:12

your last traded volume now we're trading down here on the best bid into these eight contracts
alright but then

48:21

that's it there's there's no more buying there's a lack of you can see that it

48:29

started off as pretty big but it started to dry up in some of these lower levels

48:35

here and instead now they don't come down and test the the best adhere these eight

48:42

contracts and instead they market by with a volume of five lifts the offer

48:50

into these ten contracts here and though that becomes the current price okay

48:55

alright this is what it looks like in book mapping you're going to see this all over the place in book
map all right

49:01

you can see we come down into an area and they're pulling liquidity in this

49:07

area here but look at the the agressor okay there's nothing no trades that took

49:12

place here here here we finally get a little bit of market sell here but we test a little bit lower

49:20

and there's complete lack of trading one tick lower okay well we rotate back up

49:26

we come back down again and complete lack of trading no one's interested in trading at this level
okay so the the

49:34

mechanics here are that if no one wishes to trade at this level

49:40

well price is going to trade higher it's going to look for a liquidity now on the

49:45

on the best offer and now it's looking for for sellers and where are the

49:51

sellers well they're up in some of these areas but there you can see them pulling their liquidity
alright as mentioned a

50:01

lot of times what you get with this absence of the aggressor is in these

50:10

trending markets you'll see the pull backs and you'll see very little

50:16

aggressor volume take place at some of these areas okay so you can see complete

50:21

lack of we have one two three four basically test here in into this this

50:29

price level in gold and and no selling okay so we rotate back up and we

50:35

actually sweep the book one higher we get a minor pullback here and and you

50:40

can see there's there's no one interested in selling okay there's the sellers are out of the market
basically right we also see look at the limit

50:47

order book here we see in a skew that auction so where do we come back up into okay we trade
back up into the is

50:54

searching for that high liquidity on the on the best offer we start to trade into

51:00

that area we get a pullback again and we can see lack of aggressive selling

51:05
alright another sweep and then and then you can see we get the nice pullback

51:11

here but the lack of lack of selling right so I start to to pcs together into

51:18

some strategies looking for exhaustion points after a sweep all right okay

51:25

advanced concepts here starting to understand that lack of activity well

51:32

one concept I just wanted to to go over here was a it doesn't necessarily mean

51:38

the that there's a lack of high liquidity okay that may exist alright

51:43

and this in this example it does and that it looks like they're starting to absorb it here but then
there's just a

51:49

lack of aggressive buying alright we get one two three tests here and no interest

51:57

at all we start to rotate lower okay and I'll also want to integrate this into the bigger picture since
we're looking

52:03

at you know micro structural stuff here in the bigger picture this is what

52:09

occurred right we we can see the aggressive behavior with the limit order

52:15

book wanting to offer at lower price and then no one's willing to really take

52:21

them on in these areas here alright okay

52:26

and again the same concept of you can see there's a little bit of trading that

52:31
takes place here but look at the overall alright as we sweep higher here into a

52:37

new price level and there's just a very very little aggressive selling compares

52:44

the aggressive buying okay a lot more green dots here all right some sideways action here but now
you start to see in

52:51

the trending areas a lot of green dots up in these areas very little trading

52:56

here on the pull backs okay and you can see the trending environment higher and

53:02

where do we go so machine for high liquidity that you find here on the on the best offer okay all

53:11

right so that's some of the basic market mechanics but then and this is a

53:19

essential stuff to understand but we also want to integrate into this how it

53:25

not just why it's moving or stopping but how okay so the volatility the depth

53:33

of liquidity thinner markets versus thicker markets all right thinner mark

53:38

is like gold for example you're going to see a lot of volatility you're going to see a lot of price
movement backwards

53:44

and forth because there is a lack of liquidity all right thicker markets like the S&P

53:49

or the bonds are going to be slower moving and you're going to see a lot of pull backs and
retracements back to

53:56

areas where they broke from they start to comprehend the behavior of the price
54:02

movement and are you really going to gain a lot of insight with some of these

54:08

basic mechanics okay looking for flurries of activity okay within the

54:14

auction or the volume or within time cycles like the S&P cash open and we're

54:22

in the Nasdaq as well start to understand the speed of the markets how

54:28

quickly is that occurring or was it a slow movement that took place okay it's going to give a lot of
insight to some

54:35

of these basic mechanics all right yeah the fast slow retest liquidity shifts

54:42

etc each market has this own unique characteristics but these basic

54:48

mechanics are all the same all right so

54:53

let's end up here and part one some of the training exercises okay so go back

55:00

and start to identify these basic market mechanics okay that we just covered and

55:07

start to mark up your charts the more the better I look for the variations in

55:14

how price moved within these examples okay you can consider using the book map

55:19

replay mode is an excellent way of seeing this data you can replay it again

55:25

and again within that replay file and then you can start to draw your own conclusions from these
examples noting
55:32

the different times different markets the varying liquidity the speed that it

55:38

moves etc alright so once you start to

55:44

comprehend that you can start to anticipate these kinds of mechanics occurring in real time right
so

55:52

understanding these basic market mechanics are critical this will lay the foundation for the next
few few lessons

56:00

that we're going to cover all right okay so I'm tomorrow we're going to go

56:07

through and part two is we're going to take a step back and look into the bigger picture historically
start to

56:14

understand order flow within structures okay microstructure and even maybe a bit

56:21

bigger okay we're going to we're going to go over auction theory and n volume

56:26

profile all right okay let me get to your questions and then we'll wrap it up

56:33

in and call it a day okay yes it's being recorded recording

56:44

will be up on the YouTube page

56:52

all right let's seize your algorithmic

56:58

activity Michael no it's not all aggressive market orders but that

57:06
example I showed a very basic example of accumulation is clearly an algo okay but

57:13

most mostly algos are you see shifts in liquidity in that limit order book but

57:20

it can be a combination as well all right

57:29

yes our our what this is recorded is the

57:37

sweep in the book a stop run it could be but not necessarily whatsoever and we're

57:43

going to go over that a bit more tomorrow within some of the structures okay looking at micro
structures okay

57:57

action you're talking about looking for a pause yeah

58:09

well I mean you're going to start to you're going to notice that you know let's say you get you see a
very

58:14

aggressive sweep down into an area well we're going to cover it more in the

58:20

setups starting to understand that aggressive sweep I did it auction correctly on the way down or
way up and

58:28

if that is the case it will lead to you know you know higher probability of you

58:35

know looking for exhaustion on the way back up and yeah and then that that's

58:42

where you can be you know starting to place your your limit orders Gunther no

58:50

FX futures book map will work with but not for X and not the spot market the
58:56

reason being is there's no centralized limit order book when exhaustion becomes

59:08

induction to the opposite side well not

59:16

not really um you know I mean the exhaustion is just the lack lack of

59:22

activity so the market needs of liquidity and and the aggressor to trade

59:29

to be matched for that to take place

59:35

Maurice yet we know know a sink or swim

59:41

platform at the moment option yeah I'm

59:46

sorry the you you won't see the other this is GoToWebinar you don't see the other people's
questions here

59:57

let's see John yeah the dots in book map

1:00:03

are the best the aggressor all right they're taking liquidity okay

1:00:18

yeah action them well I mean you read

1:00:25

that sweep you know understand that sweep and how it's auctioning and then that and then start
to anticipate and

1:00:31

like again like go through the exercises here you know to see it again and again

1:00:36

in in replay mode potentially here and then you'll start to get an

1:00:41

understanding of what you're exactly what you're looking for you'll be an expert at it alright
absolutely Marisa

1:00:50

this is a something them Maurice is asking about swing trading and finding

1:00:57

volatility for option trades as well yeah absolutely this is what is is

1:01:04

distinct and unique here is that that now with the historical limit order book

1:01:11

let me take the candlesticks off here okay so let's look at the S&P right now

1:01:18

okay well you can start to understand you know in it because it's all recorded

1:01:25

even for swing traders very easily you can start to incorporate this into your

1:01:32

your trading I mean you look at how we came down into and then we see the buying interest
down here on the bid and

1:01:38

then where did it come up to okay well you can start to target these areas start to understand
these areas of high

1:01:44

liquidity here at the ED 2430 in the SP okay okay let's see action more about

1:01:57

exhaustion okay

1:02:11

I'm not I mean okay so exhaustion let's just take a look at a current market

1:02:16

right and I you're let's look at some of

1:02:22
this trending action okay so the look at

1:02:28

the this I mean it's not you know these areas here I mean it's not complete exhaustion but look at
the amount of

1:02:35

trading compared to the higher highs ok these are higher lows okay sweeps up okay and this is you
know

1:02:42

we see it every day alright we see sweep up and return back here and we see a lack of selling

1:02:50

activity look at look at the overall buying here in this area and we can see

1:02:57

that it's up trending we see more volume and green aggressive buying at higher

1:03:03

highs on the pull backs we see very little volume of aggressive sells okay

1:03:08

now it might be complete exhaustion this is complete exhaustion here we see methane that
traded here but look at

1:03:15

some of these other little areas here there's very little here it exhausted here we've got a retest
though and we

1:03:22

can see the there's just really a lack of selling activity alright

1:03:35

okay all right a few more questions here and then let's wrap it up

1:03:52

Maurice if you're talking about you know you're talking about the Greeks in in

1:03:58

options and you know I don't know I mean how those are going to be valued in your

1:04:06
you know looking at your your IV for example okay that that's that's

1:04:13

something a little different right but I mean you think this is you're still going to see this the same
type of

1:04:19

behavior here and I don't know if the IV

1:04:25

is going to go down on some of these pull backs right potentially but maybe not right so it's a
derivative and

1:04:34

that's that's a little little more challenging there's another layer of information there okay all right
and let

1:04:47

me see here just a few more questions and we'll call it a day

1:04:55

well option okay so here's an example of the sweep of the book here to the you

1:05:03

know in the S&P you're talking about this 1030 area very aggressive it

1:05:08

actually starts right here and there's a little bit of selling in some of these areas but look at the
majority right and

1:05:16

this was a so aggressive and and such a quick charge up well you know there's

1:05:24

there's a complete lack of interest here we're starting to look at you can start to see a book flip
here as well start to

1:05:31

materialize they're they're buying here on the they want to be buyers here on the bid but this was
aggressive enough

1:05:39

that we don't even get a retest of the area okay so we just have a higher
1:05:45

trading range up here alright so that's that's how you're going to have to start

1:05:50

to comprehend by looking at your examples and studying and understand like you know you don't
get that

1:05:57

pullback right look at this look at this sweep here onto the higher side you can

1:06:02

start to understand that well this wasn't as aggressive right it doesn't take as many ticks to

1:06:09

the upside here we get a pullback to where we actually broke from here all

1:06:14

right so that's a that's how it's going to help but you're going to have to you know start to put
those pieces together

1:06:20

yourself you know we're covering the market basics here and then we will go over

1:06:27

more in later in some of the other

1:06:33

educational sessions SJ I mean a on

1:06:42

average what's the approximate monthly return using book map I mean that's

1:06:47

going to vary you know tremendously different trades traders different

1:06:53

styles of trading you know they might be trading once or twice a day or they might be trading like
hundreds of times

1:06:59

a day or thousands of times a day yeah action that the stocks are look a

1:07:05
little different there's a lot less liquidity for the most part compared to the futures all

1:07:13

right guys well yeah thanks for coming and tomorrow we're going to go through part two and just
that review again here

1:07:23

part two is going to we're going to look at some of the micro structures and the

1:07:29

same market mechanics within the the structures all right we're going to

1:07:34

start to get into auction theory and volume profile within the order flow okay all right all right guys
yeah thank

1:07:44

you very much yeah all right I hope it was helpful and we'll see you tomorrow okay take care