Pit noise

Just reading through "Mastering the Trade" now and earlier came accross the concept of listening to "pit noise" in the background whilst trading.

Does anyone actually use this as an indicator to help them trade and any comments?

MRC & Co said:

Just reading through "Mastering the Trade" now and earlier came accross the concept of listening to "pit noise" in the background whilst trading.

Does anyone actually use this as an indicator to help them trade and any comments?

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What are you planing on trading Pork Bellies??

Hey! What a co-incidence. I subscribed to the free 3-day trial this week for the S&P500 pit, after hearing some hedged recommendations.

Long story short ... after 1.5 days I turned it off. Drove me nuts. It was the service with the commentary, with the actual noise in the background. Even if it drove me nuts I would have persisted if I thought it would add value, but I couldn't see it doing so. There are times when I think it might be useful, but there are some serious questions that I was asking myself which I couldn't answer to my own satisfaction.

Now the long story.

The pit (S&P500) trades about 20% of the value of the screen-based product (the emini ... sorry TH ... the $50/per point FUTURE CONTRACT ). There's a problem right there for me ... why would I listen to the contract that is the little brother (or sister ... nothing if not PC) for direction on the much larger volume contract? I had heard that sometimes the pit leads the screen, a big local can search out stops in the abscence of 'paper' interest for example and move the market, a move a scalper for instance could take advantage of. Numerous times I did hear a 'top-tenner' (big local) was attempting to shift the price (look, to be fair after 1.5 days I don't think I can draw a fair conclusion, but each time the top-tenner did this he was so wrong....maybe it was a spoof while his office scooped up the screen-based contract...a possibility and if someone as dumb as me can think of this I imagine these guys can, and do).

There was an appreciable increase in pit-noise as we went through significant levels. But ... I can see the significant levels in front of me... the noise just confirmed it. I dunno, maybe this is a useful thing?

There was a substantial rally (I think it was Wednesday, might have been Tuesday), the start of which co-incided with Morgan Stanley buying big on the floor. But there were many times that big names like this came in, transacted in size, and had zero impact on the ensuing price behaviour ...

After so long screen-based trading (I have never traded in a pit/on a floor) maybe I am just used to screen-based trading - the moves all flow through the chart or whatever I am looking at (TH looks at the DOM and sees moves flowing through there). The noise was a distraction.

To be fair to the vendors, I only took a 3-day trial, so maybe a longer period of experimentation would have changed my perceptions. The trial was free, so by all means when you are ready give it a go. Even if you want to try it for a month its not going to break the bank. I wouldn't worry about follow-up pestering sales calls - these guys were so disorganised it took me over a week just to arrange a free trial. I ended up going straight to tech support and they connected me, the admin/sales people were just hopeless. Since the trial ended, no follow up at all.

The main benefit is to hear to change in sentiment, usually an acceleration in noise. The reason is that an acceleration in noise means activity and usually one pit will be the first to feel a new move, usually because of liquidity. On the SFE where I used to trade in the BAB pit, if we started hearing an acceleration in noise in the 3yrs we'd see if it was selling and buying and then go with it. So it becomes a knock-on effect within same market sectors. Changes in sentiment tend to be felt in the futures markets first because of the leverage and liquidity. No point listening for an acceleration in noise in Pork Bellies then selling Crude. A more appropriate way would be listening to an acceleration in S&P 500 then selling some leader stocks.

Thanks fellas.

To be fair to the guy who wrote the book, he states you need at least a couple months listening to pit noise and let it become kind of subconcious, before you actually rely on it.

He talks of the noise exploding in the pit, but that this it the time to sell (if price has been heading higher), much like when the ticks reach +1000.

He more stated he waited for the pit noise to gradually get louder, then go in the direction of the market, and sell when the noise explodes. Also, if the market is rallying and the pit noise is loud, then the market pulls back and the pit noise is quite, that momentum is up and to buy these pull backs.

As far as the "top teners" Timmy, he stated its best to wait until you hear one is tuck short. Get in as they start covering.

However, he also talks a lot of the market internals, ticks for example, which I think along with price and pivots, will tell you a lot of what is going on alone.

Think I will more look at the market internals along with price for now.

On another note, the author also states he gets on the move before it takes place, which I find against most things I have learnt, tried and read. But may work for him.

Cheers

Mr C what market are you planing to use this info on.

MRC & Co said:

On another note, the author also states he gets on the move before it takes place, which I find against most things I have learnt, tried and read.

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Its the only way to trade intraday. Everything else gives you crappy R:R and will have you whipped out of more positions than not.

MRC & Co said:

Thanks fellas.

To be fair to the guy who wrote the book, he states you need at least a couple months listening to pit noise and let it become kind of subconcious, before you actually rely on it.

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To be fair to the vendors of the products too I tend to agree. I just don't think I can stay sane that long if I am listening to it. Each to his own I suppose, but I wouldn't not recommend it - give it a try see what you think.

MRC & Co said:

He talks of the noise exploding in the pit, but that this it the time to sell (if price has been heading higher), much like when the ticks reach +1000.

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Absolutely ... but I can see this on my screen...

MRC & Co said:

As far as the "top teners" Timmy, he stated its best to wait until you hear one is tuck short. Get in as they start covering.

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Yes, now this I agree with, I didn't mention this aspect but this can be good for a scalp or two.




On this...

MRC & Co said:

On another note, the author also states he gets on the move before it takes place, which I find against most things I have learnt, tried and read. But may work for him.

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Trembling Hand said:

Its the only way to trade intraday. Everything else gives you crappy R:R and will have you whipped out of more positions than not.

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I agree with TH, especially as the trade tends towards a scalp sort of scale. Oh and BTW - doing this is f****** hard... (is for me anyway).



MRC, here is a link to Carter trading with pit noise:
http://www.tradethemarkets.com/public/1846.cfm

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Trembling Hand said:

Mr C what market are you planing to use this info on.


Its the only way to trade intraday. Everything else gives you crappy R:R and will have you whipped out of more positions than not.

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I am not planning on using pit noise as I can use ticks, trin, PT, pivots etc anyways (plus like Timmy, I think it would drive me mad). However, on the YM & ES (along with trading our very own SPI and Gold). Just wanted opinions as to who has tried to use it and results as Timmy has given, thx.

Wouldn't the second paragraph depend on whether or not its a trending or a choppy day? On a choppy day, use pivots etc to help enter/exit plays (so true in this scenario). Or you could also wait for a bounce off R, S, before you enter and a MA to catch trailing stops for exits, so still waiting for price to confirm. For trending days, wait until price moves through important pivots before you enter and try to ride the momentum for the day or until it bounces off the following pivot?

MRC & Co said:

I am not planning on using pit noise as I can use ticks, trin, PT, pivots etc anyways (plus like Timmy, I think it would drive me mad). However, on the YM & ES (along with trading our very own SPI and Gold). Just wanted opinions as to who has tried to use it and results as Timmy has given, thx.

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You do know there is not a trading pit for the SPI.

MRC & Co said:

Wouldn't the second paragraph depend on whether or not its a trending or a choppy day? On a choppy day, use pivots etc to help enter/exit plays (so true in this scenario). Or you could also wait for a bounce off R, S, before you enter and a MA to catch trailing stops for exits, so still waiting for price to confirm. For trending days, wait until price moves through important pivots before you enter and try to ride the momentum for the day or until it bounces off the following pivot?

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Very very few trending days on the spi. Depends on your targets but I would guess 95% of days are various forms of chop!! But for the first 3 months of this year we had an unusual amount of trending days but almost certainly that will dry up. Got the stats on my trade station might dig them up later.

Trembling Hand said:

You do know there is not a trading pit for the SPI.

Very very few trending days on the spi. Depends on your targets but I would guess 95% of days are various forms of chop!! But for the first 3 months of this year we had an unusual amount of trending days but almost certainly that will dry up. Got the stats on my trade station might dig them up later.

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Yes, I think the link Timmy provided, which is the same one I was looking at as referred by Carter, is only for the ES I beleive. However once again, I don't play to use it, at least anytime soon.

Chop is fine with me! Do you mean on tradestation (the platform?), does it keep stats on such things and what paramaters are used to define if a day is choppy or trending?