Forums > Trading > Pace of Tape Indicator Calculation

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 robwant Total Posts: 2 Joined: Jul 2022
 Posted: 2022-07-21 17:37 https://www.youtube.com/watch?v=CQXFAtRgdIwDoes anyone have any slightest idea of how this indicator being calculated ?My understanding is :tape speed = market order volume in the interval(time in seconds) / time in secondsor tape speed = number of market trades in the interval (time in seconds) / time in secondsHigher the ratio, higher the speed which means higher the volatility. Does anyone notice flaw in this calculation here ?I am planning to use this indicator to indicate intraday market volatility in the markets.
 ConditionalExpectations Total Posts: 12 Joined: Jul 2021
 Posted: 2022-07-28 07:12 In principle, this could be a good idea, but I have some concerns. What I have to say applies equally to both definitions, so I do not distinguish between them here:First, neither quantity implies anything about intraday market volatility in general. A simple Robinson Crusoe economy with two participants trading an equity can be constructed so that the volatility of the equity is "scale invariant" to the tape speed of the equity, provided an appropriate adjustment to the participants' utility functions. This example proves that, as long as you know nothing about the economy surrounding an asset, you can't say anything definitive about the asset's volatility based on its tape speed alone. To make money with this indicator, you must therefore study the market surrounding the asset you're attempting to arbitrage. To do so, it is computationally intractable to work from first principles; you must acquire market data and apply some form of regression analysis or machine learning to it, which will give you a model that predicts intraday market volatility from tape speed. Ideally, you would only perform your analysis on a portion of the original market data, giving you "hold out data," that could then be used to establish a confidence bound on the profitability of your tape speed indicator.Second, I am concerned that statistical arbitragers have researched similar quantities for decades. If there is an opportunity for arbitrage, it has likely been discovered and exploited. Otherwise, since the quantities involved are so straightforward, there is probably fierce competition so that the opportunity exists on a miniscule timescale. Do you have the infrastructure (which might require you to program FPGAs, or get into bidding wars for real estate close to exchanges, or invest millions on infrared communication systems) to trade that fast?Third, Jigsaw Trading's definition of tape speed is frankly irrelevant, and the presenter in the video is a charlatan. He isn't "predicting" the "moves" and "absorption" of the markets with his "tape speed" indicator. He's giving nonsense explanations that don't hold up to the facts of reality, throwing around technical terms like "market maker" and "lower in expectation" to give the impression of expertise. Or worse, he's looking at market data with a slight delay so that he can "predict it" from his other monitor. Most customers of these programs lose money, primarily to professional traders working at systematic and algorithmic firms in Chicago and New York. Their strategies are closer to the approach I outlined in my second text block than the "technical analysis" chicanery you find on Warrior Trading, Jigsaw, et cet.Fourth, I see that you are a new poster. Hopefully you don't take offense when I say that you might be an amateur based on the audience of the video you shared. It seems that this video is selling the idea that you can work for yourself as a day trader using technical analysis; this idea is very, very wrong. I implore you to forget about Jigsaw Trading and spend some time on NP learning about professional finance. The objective of people here is to make big money by 1) applying higher level mathematics to the markets2) as employees of financial institutions.This can be a very good living, and is worth looking into if you have an interest in trading. What kind of background do you have? EDIT: There is an addendum that I want to make to the Robinson Crusoe counterexample in my second text block. It is popular in finance textbooks to discuss the impact of the number of market participants on volatility. The orthodox economics is that the more participants in a market, the faster the rate of price discovery, thereby bounding the fair market value to tighter neighborhoods of equilibrium at a faster rate. You can find examples in those textbooks demonstrating this principle. Some of these examples are good examples of high tape speed (provoked by the greater number of market participants) coinciding with low volatility. Silence Dogood No. 4
 robwant Total Posts: 2 Joined: Jul 2022
 Posted: 2022-08-01 07:46 hello conditionalexpectations !I definitely value your response, You are right!https://twitter.com/BahamasTrading/status/1498750913367916547this guy shared this idea, so decided to peak.
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