RJO Vantage has a tool called the "Market Book." The Market Book provides live access to the resting bids and offers in the electronic market. The effectiveness of the Market Book becomes more and more apparent now that 90+ percent of total commodity volume is executed via electronic trading platforms. As a former pit trader in the S&P 500, I find myself used to looking at the depth of the market's bids and offers to establish any strength or weakness biases the market may have at a given price level. I now use the market book as much as I do the Commitment of Traders Reports. This morning's action in August live cattle was an excellent example of how the Market Book can increase the effectiveness of one's trading strategies. Cattle have run up considerably for the month of June without any type of pullback. Over the last week, the market has consolidated just above the 103 level. Knowing that cattle prices tend to peak around Independence day and given the month's run up, I felt like we could see extended selling on a penetration of the support at 103. I was watching the market as we neared the support this morning looking for the tell tale signs of a stop run to begin the decline. I expected to see standard volume on the available bids....maybe 2-6 contracts on every bid price under the lows, with an occasional 10 lot. Had I seen this, I would have been anxiously looking for a bid to hit to get my contracts sold. However, as the market declined to the support / breakout level, it was greeted with 10 - 85 contracts at each bid. This is an exceptionally large and supportive bid in the cattle market! Therefore, rather than rushing to get my contracts sold, I decided to wait. As I waited, the market climbed and climbed. The point is, had I placed an entry stop at the breakout level, I would have found myself stopped into a short position in a fully supported market. The beauty of the market book is that I was able to get a "read" on the market's bias and avoid putting my accounts in harms way. If you haven't spent any time with it, I highly recommend that you do. The market book can be a valuable tool in a trader's arsenal.Any questions, please call.866-990-0777.Andy.
