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Financial & Capital Markets (Pro) > Stage 1: AMT (Auction Market Theory) > Flashcards

Stage 1: AMT (Auction Market Theory) Flashcards

1
Q

Why does the price shift?

A

Due to a shift in market value perception from the market participants due to a change of economical & fundamental data.

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2
Q

What is the nature of price around a profile?

A

Price tend to leave price/area with low/no value, to an area with Value.

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3
Q

What are the key price levels of the day to monitor the profile & side games with?

A

The Highs & Lows of the previous day(s)

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4
Q

What’s the key thing to start with at the start of a trading day?

A

Developing a Hypothesis for the day

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5
Q

Which markets is the footprint mostly useful at?

A

It is most useful in the Oil & Stocks markets than in the Currencies markets., and realizing market demand.

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6
Q

Why are many companies collecting data every day?

A

For the purpose of price discovery for the sake of measuring value areas.

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7
Q

What type of Statistical distribution do most statistical data show?

A

A Bell curve distribution

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8
Q

How is the data to realize market demand collected?

A

Through the use of Intelligent systems & technology, companies can collect REAL MARKET DATA from the market, for the purpose of measuring market deanmand.

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9
Q

What’s another name for Fair price & what does it actually mean?

A

Equilibrium price. it means that most market participants are satisfied transacting at those price levels.

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10
Q

What’s another name for Price discovery?

A

Market making

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11
Q

Key Questions:
- Why does the price move?
- How does the price move?

A
  • The price moves because there is an excess of market orders wiping out the resting orders. (More Demand than Supply), or Supply running away (Bail).
  • The price moves through PRICE DISCOVERY. Testing various price levels, so as to test levels of SUPPLY & DEMAND over time.
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12
Q

What happens when the price goes to the extremes of fair value in a balanced market?

A

Since in these regions, there is a short of demand, the price will tend to go back to the fair value, where every market participant was satisfied to transact in & decent levels of Supply & Demand.

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13
Q

What’s the nature of Imbalanced markets & fair value?

A

Imbalanced markets tend to find new areas of fair value. (They shift)

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14
Q

What happens when the price goes to the extremes of fair value in a balanced market?

A

Since in these regions, there is a shortage of demand, the price will tend to go back to the fair value, where every market participant was satisfied to transact in & decent levels of Supply & Demand.

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15
Q

How do you comment on the dominant forces in the financial markets?

A

The Financial markets, unlike any other traditional markets, do have multiple dominant forces.

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16
Q

So what does it mean when we say that there are a lot of Dominant forces in the Financial markets?

A

It means, Supply & Demand is always there & there is a lot of Liquidity.

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17
Q

If there is a lot of Supply in the markets, what then shall we be keying at?

A

We shall be keying at Demand, since Supply won’t necessarily move the markets, rather the Demand (Market Orders)

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18
Q

What do efficient prices mean & what are inefficient prices?

A

Efficient prices - This means that the chances of making a profit there are almost slim., Next to none. Financial markets are an example.

Inefficient prices - This means that the chances of making a profit are there—for example in Traditional markets.

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19
Q

If prices are so efficient in the financial markets, what does this cause?

A

Tiny profit pockets. (Or increments), due to lots of competition (Supply).

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20
Q

What is recently causing the prices in the financial markets to become even more efficient?

A

The advancement in technology

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21
Q

What can we decide now, if the financial markets are so efficient?

A

We should focus more energy in the demand side of the Financial markets rather than the Supply.

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22
Q

What causes market imbalances?

A

A change in fundamental data in the economy.

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23
Q

Is comparing candlesticks to candlesticks, right? (If not, what is right then)?

A

It’s not right. That is comparing an individual price point. Instead, do compare fair value to another fair value.

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24
Q

“CAUSE” & “EFFECT”, what does it mean?

A

It means we compare “VALUE” & “PRICE”.

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25
Q

How does the Volume profile build up over time?

A

When Transactional data come in.

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26
Q

How do we gauge the fair value in a chart?

A

Through the approximate Standard Deviation bands from the mean of a profile (Be it volume profile or Market Profile)

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27
Q

In Imbalanced markets, why are fair value areas of importance?

A

Since they are the places where the markets will go bounce off, or seeking new fair value.

28
Q

In the financial markets, what element can we control of?, & What can we not control?

A

Time is what we can control. SUPPLY, DEMAND, LIQUIDITY, & DIRECTION, are those that we can’t control.

29
Q

What controls the DOM nowadays?

A

The Algos

30
Q

What does the DOM show as compared to the Volume Profile?

A

The DOM shows a wide range of values. While the Volume Profile shows the General condition & state of the market.

31
Q

The market never trends, instead it?

A

Balances the Imbalances!

32
Q

What are vanilla markets?

A

These are the markets which don’t have some structure into them. And they aren’t driven by variables like velocity, decay, and time, but rather by human emotions.

33
Q

What are Structured markets?

A

These are the opposite of the Vanilla markets, they do move by some variables built into them like velocity, time & decay.

34
Q

In relation to financial markets, what key Terms should we know:

A
  • VWAP = uses mean
  • VPOC = It’s the mode
  • Standard Deviation = Are the Value Area High & Low Bands of the Histogram
35
Q

Why does the Volume Profile build the way it builds?

A

Central Tendency due to the psychology of people doing things at a comfortable level.

36
Q

VWAP, what does this mean calculate on?

A

It checks on where most transactions took place by price levels.

37
Q

What’s the shortfall of the Volume Profile?

A

It created multiple distributions, as compared to the Market profile, which you can split & check on the real concentration of Market orders.

38
Q

What’s the long-form ETH & RTH?

A

Electronic Trading Hours & Regular Trading Hours

39
Q

What is the Initial Balance?

A

The first X period of Regular Trading Hours

40
Q

What determines the pattern of the market?

A

The:
- Volume
- Market players

41
Q

2 best markets to trade & why?

A

E-mini SXP500 & Crude Oil.
Because they do have a lots of Contracts liquidity, hence even the volume profile is clearly visible.

42
Q

What’s the origin of the RTH?

A

RTH or Regular Trading Hours originates from the Historic Open Outcry at the Chicago Mercantile exchange, when traders were shouting to place & receive orders in he physical exchange.

43
Q

2 best markets to trade & why?

A

E-mini SXP500 & Crude Oil.
Because they do have lots of Contracts liquidity, hence even the volume profile is clearly visible & hence better decisions while trading them.

44
Q

What are the RTH of our best Assets to trade? (Crude Oil, & ES-mini)?

A

For Emini: RTH is 14:30 to 21:15 GMT
For Crude Oil: RTH is 14:00 to 19:30 GMT

45
Q

What happens when a trading session: Say the RTH or ETH comes to an end?

A

The DOM resets.

46
Q

What are the Key characteristics of the RTH session?

A
  • There is a lot of liquidity
  • It’s where most contracts are traded at
  • It has lots of volumes
  • Its Volume profile is nicely distributed
47
Q

What are the key characteristics of an ETH session?

A
  • Lots of illiquidities
  • Low volume traded
  • Volume profiles are highly thin & distorted
48
Q

Why is the Market profile better compared to the Volume profile?

A

When merging, Volume profiles, say of a wider period of time, it tends to contain multiple distributions, making the VPOC & SD not correct (skewed).

49
Q

So what’s the solution to the distorted Volume profiles when determining values?

A

The solution is to CREATE OUR OWN COMPOSITE PROFILES!, Marking contextual levels, through using MARKET PROFILE!

50
Q

Why is the Market profile better compared to the Volume profile?

A

When merging, Volume profiles, say of a wider period of time, tend to contain multiple distributions, making the VPOC & SD not correct (skewed).

51
Q

What data can we deduce from the Market profile?

A

Time price Opportunity (TPO). At what price did price spend how much time (How Long)

52
Q

What is the main nature of the Volatile markets & their profiles?

A

Volatile markets are so illiquid, hence they do have a very thin profile.

53
Q

What’s a Single print?

A

It’s a period in time of a market profile where there are only a Single TPO (A Letter), meaning at that particular period, the Market barely spent time at that price level.

54
Q

What usually happens in Single prints of Market profiles?

A

The price usually zips through & never spends tie there.

55
Q

What are Poor Highs/Lows?

A

Also called Unfinished Auctions, they are the regions where the market barely finished transacting. The TPOs there spent a brief amount of time.

56
Q

What do Poor Highs/Lows (Unfinished auctions) cause?

A

They do cause Stop Hunts.

57
Q

What is the Volume Profile & Market Profile have in terms of value?

A

Static value

58
Q

What are the algos looking at, when prices come at the VAH or VAL?

A

They look for absorptions & Supply side games in those areas.

59
Q

What happens in an Imbalanced market?

A

The value area shifts to find new areas.

60
Q

What does the building of orders around the POC mean?

A

it means that, there is a possibility of markets to shift new areas of value & go Imbalanced.

61
Q

What do we do around the POC?

A

We can start thinking of managing our trades

62
Q

When checking the Contextual Areas & you are unsure, what do you do?

A

You split the profile & try to check & see what is the market trying to achieve between those two regions. And where it spent more time in (Whether spent some little time, or jetted off immediately).

63
Q

How long should you at least hold your trades as a 1H Intraday trader?

A

3 days

64
Q

How do you comment on Strong Profile days?

A

They are made by combining the Profiles of multiple days

65
Q

Should thin profiles be merged in marking contextual levels?

A

No, thin profiles should not be merged in marking contextual levels., because there are no pockets of value built yet.

66
Q

What happens in a Rollover & Composites?

A

The Composites tend to slightly shift, s you need to easily adjust them chap chap!

Financial & Capital Markets (Pro) (5 decks)

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