Strength Level Indicator is a part of Global+ package and is drawn on the upper chart. It contains two modes: Underflow and Resistance
- The Underflow algo reads the quantity in the order book and the size of the transactions made. If the transactions are bigger than the amount of liquidity in the order book, we assume it is an iceberg order. It might not work on some data sources as it relies on depth data being aggregated.
- The Resistance The indicator detects how fast limit orders are added to the order book after a transaction. Users can configure the delay since the transaction and also filter the min size. With small delay value and high-quality data, it may produce results similar to Native Iceberg, although this option is less reliable than the Native Iceberg＊.
Strength Level Indicator works with many data providers and many exchanges. The quality of the detections depends on both your market data provider and the sequence of events received. Because of the inaccuracy of data provided and the algorithm used, false positives can occur. For instance, when there is an unrelated size increase shortly after a trade, despite those belong to two different users and are just a coincidence, the algorithm will see it as an Strength Level).
＊Native Iceberg is a part of the Stops & Iceberg Tracker add-on, which is part of the MBO bundle. The subscription is available for purchase on Bookmap Marketplace. It can be tracked with CME MBO data only. Right now, supported by Rithmic only.
These icebergs are the type of iceberg orders managed directly by the CME exchange. The Stops & Iceberg Tracker precisely displays the executed part of the iceberg. It is presented on the bottom Indicator Panel.
Strength Level Indicator Application
The Strength Level Indicator add-on displays hidden volume as numbers on the COB column and as a number of hidden contracts on the heatmap. Bookmap generates the iceberg indications based on the difference between the actual pending orders offered at that price level and the actual number of orders that transacted at that price level.
For example, if the Strength Level Indicator displays 43, this signifies that 43 more contracts were transacted than were available in the order book at that specific time.
The display of the hidden orders on the COB is based on the chart viewable time range; i.e., the number of hidden orders displayed is the number of hidden orders identified during the viewable chart range.
In contrast, the display of the strength level on the chart does not depend on a specific chart range and is placed at the relevant time and price on the chart.
Strength Level Indicator Interpretation
Traders can assess the possibility of hidden liquidity at certain price levels with the Strength Level Indicator. Since hidden orders are usually associated with the activity of more sophisticated players, traders may also use this information to assess possible short-term price action and areas of resistance or support.
Strength Level Indicator Settings
To enable the Strength Level Indicator, click the Studies Panel icon above the chart and check the Strength Level Indicator box.
- Users can control the colours of indications for sell and buy orders.
- Users can also set voice alerts and apply an order size filter for the alerts.
There are no specific settings for the Strength Level Indicator.
Strength Level Indicator Limitations
Strength Level Indicator can only display hidden orders after the execution of those orders has taken place; it is not forward-looking. It cannot display hidden orders currently resting at specific price levels. As mentioned earlier, discrepancies are likely to occur on low-quality data.
Even on colocation servers, high-quality data and timing are very important for proper iceberg detection. We recommend starting from a setting of 5ms delay and testing the results. In fact, the best option to filter out some noise will be 0.5ms. For example, 50ms is quite a long time in the HFT environment.
Bear in mind, though, that in general, discrepancies will occur; this is the nature of the business and technology. To get very precise iceberg detection would require the highest quality data with a collocated dedicated connection directly at the exchange.