Recently I have spent significant time integrating the new CME MDP 3 protocol into all my algos and in doing so, I have been scouring the forums, etc. for any got you’s I could find. There is a firestorm of protests over the switch from reporting trades from the perspective of passive liquidity (resting orders) to that of the aggressor (the trade that crosses the spread).

The issue seems to be the disruption of tick charts. What was once measured by the component trades against resting orders, is now summarized into the one trade of the aggressor. While this still may be a 1 lot against a 1 lot, producing 1 tick, it may also now be a 100 lot against a series of 1 lots, potentially reducing what was 100 ticks comprised of 1 lots each to a single tick (volume of 100).

The trade is the same, the effect on price is the same, only the reporting is different, so why all the furor? My take is simple; someone (the CME) threw into disarray the magic numbers associated with all that is good and right in the world of tick charts.

I actually saw the words conspiracy and stole (and many words not appropriate for this forum) in the discussions. In my opinion, one of the great differences between professional traders and those who will soon leave the field is the belief in magic numbers and silver bullets but would like to hear the thoughts of others who can share their perspective on this.

Scott, you most likely know my thoughts, they have remained more or less the same for the past 10 years: the market is a dynamic environment and the rules of the game are part of this environment. Only in my own memory they have changed dramatically at least 3 times, changing the landscape completely — by this I mean everything from the way trades are reported to repeating price patterns occurring at any zoom level. The main principle is still unchanged though: either you play along with these new rules or leave the game. It's possible of course to blame the market (as a philosophical category), the regulators, exchanges, data vendors, whatsoever, or, if you prefer, gods, spirits, extraterrestrial aliens and masonic lodges, but in my opinion there's one thing any aspiring traders should understand and mentally agree with: markets are NOT created for speculators. They are NOT created for you to make profits in it. If you're comfortable with understanding this principle, you can make money in any environment, if not, well, we can expect to hear just yet another conspiracy theory.

My humble 2 cent, not sure if it's 100% match with your original question.

@Alex - that is an awesome way to put it - the markets are NOT created for speculators. Even though I make my living trading, I normally think in terms of providing liquidity. Who am I providing it to and why do they want it?

@Alex - What I found so perfect about the way you put things is, while I don't mean to imply there aren't magic numbers and silver bullets (I have my own versions of both), it is the belief in them that will get you into trouble. My support/resistance levels worked today, yesterday, the day before yesterday and for as long as I can remember but I am fully aware they may not work tomorrow because the market has changed in some fundamental way.

As you mentioned, I too have seen shifts in the market environment. I went from click trading to algos, to hft algos and finally back to slightly less than hft, all because the market dynamics changed.

I now often see pack behavior in algos so rather than bemoan this new challenge, I started looking for what they consistently signal on a slightly longer time frame. I see algos now completing known TA patterns only to trap traders who counted on that pattern holding; I am not going to fight them, I simply follow their signature and know to stay out of the market for those few seconds/minutes it will take for things to play out.

There was a great line in a US television show called Breaking Bad. The main character responded to his wife's fear of someone knocking on their door and shooting them with - don't worry about that, I am the one who knocks. I am NOT the one who knocks but I do know when NOT to answer the door.