LDBRES Research System-   the Minor Auction:

Market Analysis using LIQUIDITY DATA BANK (LDB) Volume                        

When you are in a trade, the burning question is: 

"Should I stay in, move up a stop, get out, reverse???". 
That is, what is my confidence in this move at this point? 

I need to know the MARKET's confidence in itself; that is the 
best measure of a market's potential for continuation.  

Trading volume measures the overall market's confidence.  

A move with increasing volume implies continuation. Falling 
volume implies change.  

Trading volumes from the LDB are available at the end of the 
trading day for the CBOT and MERC contracts in the LDB data.

As you become familiar with the LDB data, you will find 
yourself almost automatically recognizing: 
-- the probability of continuation 
-- a number of other market reference points.


Market dynamics at turning points are complex.  

In a strong up-move, for instance, value leads price (until the 
end) and buyers get more and more confident as they buy and 
price rises.  This encourages further buying and so on until 
value stops rising (and price stops rising, or falls!).  As 
price nears value, buyers start losing confidence in further 
price rises and volume sags.  


Often, the commercials, who are the most knowledgeable about 
value, finalize the trend's demise: they will 'cap', or buffer 
the market by selling near the top. This action usually signals 
the beginning of a new balance.

All the player's behavior can be tracked and interpreted with 
the Liquidity Data Bank (LDB), a clearing house report that 
shows the volume at every price and also shows who on the 
floor created that volume. The LDB report also includes a 
Market Profile (half hourly price ranges overlaid to form a 
bell shaped distribution). 

You can Download the LDB data daily from CISCO; store it on
your PC and analyze it with the LDBRES program. 


Futures auction markets go through an endless cycle of: 
- balance (the bell shaped curve), 
- testing the balance (false breakouts), 
- trend (distribution), 
- balance, etc.  

Players active in the market are:
- Locals (scalpers who lubricate the market): CTI1
- Commercials (the (only) businessmen on the floor): CTI2 
- Off Floor Members (short term speculators): CTI3 
- Public (longer term speculators): CTI4  
Each plays a role, each shows his sentiment by how he trades, 
i.e. his volume and it's location in the day's trading range.

A reading of the volume behavior of the 4 classes of traders 
- provides an in-depth understanding of market sentiment, 
- locates value (winner of trading volume popularity contest) 
- clarifies each participant's attitude toward price  
- clarifies the price's relation to value.  

This permits the development of a number of reference points 
which you, the trader will utilize for your trading decisions.


Trading Reference Points from the Liquidity Data Bank

1.  Value and how it is changing.  Value is the 'fair' price 
    that the most traders are comfortable with.

2.  Buying and selling pressure and which is dominating.
    Buying/selling pressure comes from increased demand.

3.  Who is buying, who is selling. In distributing markets 
    (trends) the public's increased buying/selling drives the 
    move; in balanced markets commercials buffer price.

4.  Volume confirmation or non-confirmation of price action.
    Increasing volume confirms a price move.

5.  Commercial traders participation and changes. Commercials 
    must trade every day. In balanced markets they do their 
    regular business in the middle of the price range and then 
    'buffer' at the  wings (sell tops, buy bottoms). In trends 
    they go with the flow.

6.  Relative behavior of commercial vs public. Commercials 
    dominate balanced markets, the public dominates trends.

7.  Whether the market is distributing (trending) or bracketing: 
    Brackets (bell shape) characterize balance, trends have an 
    elongated distribution.

8.  If a balanced market is getting ready to distribute:
    a. The market  'shuts down' (low vol, narrow trading rng).
    b. Or the envelope elongates, vol is up, close near extreme.

9.  A trend is nearing the end (poor continuation). Commercials 
    begin selling tops or buying bottoms as the trend fades.

10. Trade Facilitation:  Markets facilitating trade are char- 
    acterized by wide price ranges that brings in many players.
     Measured by:
    TF factor = (# TPO's) divided by (# half-hour periods). 

CISCO provides LDB trading volume data for all the Chicago
Board of Trade and Chicago Mercantile Exchange markets
before the start of morning trading the next day.

The LDBRES data management system resides on your PC. It will 
download LDB data from CISCO and store it in the appropriate 
files on your PC.  
 
The CISCO program LDBRES: 
- makes the trading volume comparisons and analyses 
- list out LDB reports and CISCO Overlay Demand Curves.