V.11:7 (285-291): The Hourly Liquidity Data Bank As A Tool For Day Traders by Donald L. Jones & C. Young

The Hourly Liquidity Data Bank As A Tool For Day Traders by Donald L. Jones & C. Young

How hourly data from the Chicago Board of Trade's Liquidity Data Bank can help day traders manage their positions.

A typical day trader takes a position and then waits for the trade to workout. Most traders have found that micromanaging a day trade is poor technique, so working a trade out means that either a target is reached for a profit or a stop is hit for a loss. New information from the Chicago Board of Trade's hourly Liquidity Data Bank (LDB) lets the trader evaluate open day trades from cleared volumes that are released as the day goes on. With the hourly LDB data, trades that have stalled can often be recognized and eliminated and successful trades reevaluated as they approach the target, with an eye toward continuing the trade beyond the initial target and/or turning the trades into a longer-term swing trade.

Each hourly LDB report provides the cleared volume traded at each price by the commercial and public members. Commercial members (Cti2) trade only for their institutions, while the public members (Cti4) fill orders for nonmembers. The volume traded and the period-to-period variations in the volume can be used to tell if a price move is supported and by whom. An article in the January 1993 issue of STOCKS & COMMODITIES using daily LDB reports, "Commercial floor traders identify value," detailed how the commercials defined value by unusually heavy volume in certain price regions, clarifying how the commercials set support and resistance levels. Because the market is closed by the time the daily LDB reports are released, support/resistance levels that are set this way are applied the next day. Hourly data from the LDB speeds this process into the current day. In addition, public trading during breakouts can now be recognized and used in ways not possible with daily LDB reports.