Quote Originally Posted by shawn_molodow View Post
Hi Pascal & Billy,

We know that volume and Institutional activity is almost always highest at the end of the day, but I was hoping you guys could share your thoughts on the topic b/c it seems so high...

I would love to hear your thoughts on the subject, but here are some Q and practice points I have:

* In the last minutes, the volume is typically highest, but price progression can be pretty small, and the RT MF shows significant changes by as much as 1/2 ATR (i.e. +0.1%) in the last 5-min (sometimes even the last 2 or 3 minutes). This is reported sometimes as late as 16:04 PM. I assume when the values are volatile (spiking up and down) that this primarily due to time disparity between the various exchanges reporting their data, i.e. inherent to the data feed. But, I am mainly talking about when we don't see large spikes in both directions, but a clear directional change in the last few minutes.

* IB quotes on are still at good bid/ask spreads on IWM within several minutes of the close (say <16:05 or so), so I consider this to be an advantage to me to trade after the close (AH) and I can see how the RT MF and price close for the day. For example, on Th, Mar 8, I did not exit my short position... b/c I was waiting to see how RT MF closed (w/n 0.1% porosity), and I saw the price w/n the 0.2% of the porosity of QR1 (80.45), and I knew I could trade after-hours. Note, the leveraged ETFs spreads are poor immediately after close and I see trading them AH's as being unfair.

* there seem to be discontinuity in the RT MF from close to open (the red pins mark these points)- I thought there were some techniques to minimize this, e.g. disregarding the first min, etc. Anyway, what do these discontinuities mean?

Thanks,

Shawn
The EOD spike is probably due to the "At the close" orders. As of now, I want to keep that data. Later on, we will probably be able to operate a back-test and see whether it is best to keep or remove the last minute of trading.

Concerning the first few minutes of trading, we have decided to simply delay the calculation start by two minutes, so that we avoid early instabilities. These instabilities are due to the fact that some stocks started trading, while others did not. Hence, we noted that a spike in the first minute was often canceled by an opposite spike one minute later.

Since the MF is recalculated every minute from the first minute, delaying the start of the calculation by 2 minutes (but still including the earliest data,) avoids the early instability.

Therefore, when you see an opening MF spike, it is a real spike that shows how large players are reacting to the overnight price gap/news.


Pascal