Filtered Imbalance with Severity

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al Vinjamur
Last seen: 6 months 1 week ago
Joined: 11/11/2019 - 10:38
Filtered Imbalance with Severity

Am still a newbie and am trying to create a measurement that would be the result of the following steps:

1. Bid Ask imbalances should be at least 1:4
2. Difference between Minimum Bid or Ask Volume in the measure should be at least 100 contracts
3. Sum the number of imbalances that meet 1 and 2 (Severity Factor)
4. Sum bid volume and ask volume that meet criteria and calculate Filtered Imbalance
5. multiply step 3 result with step 5 for bar specific Severity Imbalance Ratio
6. the calc in step 5 can be tracked across bars to see higher volume persistence of meaningful order flow

* since this is intended to be used on an equi volume bar, they can be compared across bars. the tick range or delta bar implementations will have different normalizations

I have multiple and more nuanced ideas of the same thing as not all imbalances are the same.
Where do I even start? How should I think of utilizing various tools for this OR do I need to go thru C++ for this?? Please Help!!

0
Eddy_F
Last seen: 2 months 2 weeks ago
Joined: 07/30/2014 - 16:18
Hello Al,

Hello Al,
Welcome to the IRT community. Let's start with the good news: you don't need any C++ programming or 3rd party add-ons : everything you've asked for can be done natively in IRT, typically using the Price Volume Pattern indicator and its implementation in the RTL language (i.e. the PVP token).

For more information on the PVP indicator, several videos are available here.
https://www.linnsoft.com/techind/pvp

Many order flow patterns or measurements (including your severity imbalance factor) can be detected & analysed via custom indicators involving PVP tokens.
Then, you can make use of the whole IRT and RTL toolbox, i.e. these custom indicators can be used to generate signals for live trading or backtesting, or for even more complex uses, such as creating a weighted "order flow" based composite index for a group of instruments (index or stock) similar to a typical market breadth statistic (such as the TICK TRIN).
Of course, setting up PVP token parameters is not an easy task if you are not yet familiar with IRT and its RTL language, which is why I've prepared a chart that should ease your initiation:

https://www.linnsoft.com/charts/filtered-imbalance-es

First of all, on this chart (I picked ES with a 5000 contracts volume periodicity), the imbalance ratio (400%) and the minimum contract difference (100) are introduced as V# variables (V#80 and V#81) which you can adjust using buttons.
As a reminder, using V# variables for this kind of input has many advantages.
As these V# variables are linked to the instrument, you can change instruments on your charts, and the PVP parameters will automatically adjust to your preferred values for the new instrument. Moreover, if you want to test systems that include PVP-related inputs, you can use the trading system optimization features to find the most profitable imbalance settings, etc.

You may notice the following settings (see attached screenshot below with the indicator settings) :

In the volumescope indicator settings, the Bid/ask text value is colored whenever the imbalance ratio (i.e. the minimum percentage of the strong side=V#80) is reached (irrespective of the imbalance difference criteria).
Using 2 PVP indicators, a hollow circle is added to detect each time the imbalance difference criterion (V#81) is also reached.
Then, to obtain the number of imbalances for each bar, we need to create custom indicators using a PVP token, which provides a wide variety of "output results", such as the total number of imbalance patterns in the bar or the bid and ask volume corresponding to the filtered imbalance price levels
In fact, one could create a single custom indicator to get the final formula you're looking for (the gravity imbalance factor), but I've broken the formula down into several parts to make it easier to "digest".
Finally, I've used the bar statistics indicator to display some of these intermediate calculation steps (as this indicator can display the value of any "custom indicator" in addition to the most commonly used predefined bar statistics).

In the subpanel displaying the filtered imbalance difference, I've added the full bar delta (as a thin histogram), as it's always interesting to see the relative contribution of the filtered imbalance to the full bar imbalance.
The panel below displays both the filtered imbalance ratio (please note that the absolute value may be less than 4 in case you have a filtered buy and sell imbalance on the same bar) as well as your severity imbalance factor.

As you mentioned, there are many possible variations and nuances, but the vast majority of order flow patterns can be programmed with PVP and/or MPH indicator tokens.

For illustration purposes, I've just added 2 additional PVP indicators to the chart to color the background of the Volumescope when you have “cluster” patterns (i.e. filtered imbalance as per your settings on at least 2 consecutive price levels).

Anyhow, you may import the shared chart definition into your own IRT instance. Let me know if this matches your expectations.
Eddy

Edward01
Last seen: 4 days 16 hours ago
Joined: 08/09/2018 - 10:41
TKS!

Eddy,
I was hoping you would answer that... I think you did better than I could have. I see there were multiple ways to get there as far as layout, style, but what you came up with is awesome! Tks for sharing! I am going to take a look at this and if I have any questions I will post on the forum here if I think it will add anything for the rest of IRT users.

Edward01

al Vinjamur
Last seen: 6 months 1 week ago
Joined: 11/11/2019 - 10:38
Thank YOU!

Eddy

Thanks a ton. I'm playing with stuff....will circle back....

aLV