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redbaron1981 Mar 21, 2011 1:24pm | Post# 961

And yes I am anticipating a stop hunt through that TL and I will be joining them.

A stop hunt at that level will give you all the liquidity you need from the TA guys pockets.

Thats my thinking anyway.

Tilt Mar 21, 2011 1:37pm | Post# 962

And yes I am anticipating a stop hunt through that TL and I will be joining them.

A stop hunt at that level will give you all the liquidity you need from the TA guys pockets.

Thats my thinking anyway.
For my pocket...I get enough liquidity even when the market is closed http://www.forexfactory.com/images/icons/icon10.gif haha
I have a minibar http://www.forexfactory.com/images/icons/icon12.gif

I'll be watching with interest how all this goes down...

nasir.khan Mar 21, 2011 2:17pm | Post# 963

Maybe DS didn't include it in the first chapter of his book, because the real truth is that the markets ARE predictable?

Yes I am sure people are making money 'like around news events' and the people with inside information.

But there are like a thousand more potential strategies, mispricings, and inefficiencies to capitalize on. Just because some people haven't found them yet, or are not yet open to certain possibilities, doesn't mean they do not exist.
if u take a tour through forums u will notice the PREDICTING specially in terms of technical and maybe fundies (dint read much debates on fundies so not sure) is not a good thing to do, it brings rigidity and clouds your view/judgment etc.

So in technicals u are advised to observe what happens on S/R and REACT instead of predicting before the event. So if price reaches a trendline u should't anticipate that it will break through or will bounce on it but should observe the price behavior and act upon it to profit from it on the other hand if u had anticipated for a bounce and price went through the trendline u will be not able to profit from it and may also loose some money. Well it makes sense in pure technical terms of trading. But interestingly i think as soon u have drawn a trendline on our chart u have started the process of predicting, though to a very small extent here and if your are in your early days in trading u will pretty much get biased subconsciously even if u dont notice it, so again coming to the same point that dont anticipate/predict but react.

But in orderflow trading (from what i've read through this thread) the most basic concept is to PREDICT what, when, how,who, why (WWHWW) will generate orderflow. So after knowing/assuming/believing that WWHWW will generate orderflow u are pretty much done with your analysis job and all there left is to execute the trade. So offcourse there will be a part where u use a last tool like orderbook / PA to CONFIRM your views but u are pretty much done with regards to having a bias which was pretty much based on predictions.

I have not put my first orderflow trade yet so i really dont know how its actually get done but thats what my perception is about OF trading in my head and i know this is just only one way to trade it out of a thousand ways.

PS;

I was about to hit the "submit reply" button and i thought hard about it again cause predicting or just believing about 5 dimensions of a trading approach and betting your hard earned money in it did't really made sense to me. So i thought about Options. If you know WHERE they are, WHO is the righter and buyer, WHEN it expires and WHEN/WHERE it could be taken out. You have pretty much worked out things and there is no prediction part about it and all there is left to use that tool (PA-Orderbook) to profit from it. So well yeah there are ways to trade OF where u KNOW everything instead of predicting. Again i am looking at things from a very narrow minded perspective so probably could be Way-off. (ohhh BTW by YOU i dint mean u, was just thinking out loud)

Nice,.... what a contradictive post.
.

seagreen Mar 21, 2011 4:40pm | Post# 964

i think they have some early news or something on bloomberg

i thought that trichet spoke too,but he didnt

dont know,they say that its portugal,
I dont think it was Portugal news. It wasn't selling EUR but buing USD. IFR says US Treasury announced 140bln worth of mortgage based paper sale.

triger88990 Mar 21, 2011 5:15pm | Post# 965

I dont think it was Portugal news. It wasn't selling EUR but buing USD. IFR says US Treasury announced 140bln worth of mortgage based paper sale.

it seems to me that you guys have for every price movement different story for it to back it up,and even of that story you aren't sure of it,lot of confusion and everything is after the fact.

You are acting more on rumors and gossip than some certainty

This things will not help you to much and all of the reasons aren't enough for making any methodologie that you can capitalized on it.

By all means what you do is not even closer for what you try to call order flow trading

As I say before the reason can wait

all the best!

seagreen Mar 21, 2011 9:19pm | Post# 966

it seems to me that you guys have for every price movement different story for it to back it up,and even of that story you aren't sure of it,lot of confusion and everything is after the fact.

You are acting more on rumors and gossip than some certainty

This things will not help you to much and all of the reasons aren't enough for making any methodologie that you can capitalized on it.

By all means what you do is not even closer for what you try to call order flow trading

As I say before the reason can wait

all the best!
By no means I was going to trade that information, just saw the news on IFR. Btw, it looks like there's bunch of stops built up on USDJPY under 80.90. We might see a cascade.

dr_who Mar 22, 2011 4:47am | Post# 967

Can someone please outline what the significance of knowing where stops are ? If you look at any market depth, most of the trades placed there are stops of one sort or another, so going on a 'stop hunt' doesn't mean much to me. Obviously I've missed something here.
And then when 'stops have been taken out' (difficult for retail traders to do with their tiny trades), what does that mean ? Does it mean that the market always collapses in the direction which will make our trades profitable ?

Greenhaze Mar 22, 2011 5:22am | Post# 968

Can someone please outline what the significance of knowing where stops are ? If you look at any market depth, most of the trades placed there are stops of one sort or another, so going on a 'stop hunt' doesn't mean much to me. Obviously I've missed something here.
And then when 'stops have been taken out' (difficult for retail traders to do with their tiny trades), what does that mean ? Does it mean that the market always collapses in the direction which will make our trades profitable ?

I will bite this one

Stops might be taken out becouse of many reasons. Lets say you want to buy usd/jpy without affecting price to much. Assuming that the market might be thinner on the upside becouse of G7 intervention it wouldnt be wise to dump big order into the market. There are rumors about stop orders stacked below the 80.40 so in case of price being near the 80.50 support you may want to check the liquidity. If its low enough to push the price lower, you will want to trigger stops below where you could unload your shorts and put up even bigger long position. If the order is big enough price would probably spike higher keeping the breakout players on the wrong side of market with their stops above former support price. BTW this is good place to look for pinbars buob etc.

dr_who Mar 22, 2011 9:03am | Post# 969

Thanks Green for your attempt to enlighten me. I'm sure I'll get there in the end. When you say 'rumours of stops' I take it you mean 'virtual' stops, because all you'd need to do otherwise is look at the market depth to see where the liquidity is, assuming you've got access to some sort of consolidated feed (which of course most of us dont have).

Greenhaze Mar 22, 2011 9:17am | Post# 970

Thanks Green for your attempt to enlighten me. I'm sure I'll get there in the end. When you say 'rumours of stops' I take it you mean 'virtual' stops, because all you'd need to do otherwise is look at the market depth to see where the liquidity is, assuming you've got access to some sort of consolidated feed (which of course most of us dont have).
I meant there are some rumors about stops below 80.50 area from various sources. I take this kind of news with grain of salt but it makes sense to me in current market environment. From technical analysis point of view 80.50 area looks strong so stop loss placement below that level seems pretty obvious without any rumors.

grkfx Mar 22, 2011 10:13am | Post# 971

I have not put my first orderflow trade yet so i really dont know how its actually get done but thats what my perception is about OF trading in my head and i know this is just only one way to trade it out of a thousand ways.
Whether someone has placed an "order flow" trade or not kind of depends on the reasons for why you believe the trade went in your favor.

Every time the market makes a 50 pip move, 100 pip move, 500 pip move, 1000 pip move, chances are there is a pretty good order flow reason for the move. The difference lies in how the trader interprets 'why' the market moved in his favor.

So if you place a trade and make 200 pips on that trade, and your system stated to buy on this and this moving average crossover. You diligently follow your system and it eventually rewards you with a 200 pip win on one trade. You are just following your system and believe it has positive expectancy.

Now I don't believe the moving average crossover "caused" price to move 200 pips in your favor. I don't believe the moving average crossover generated order flow worth 200 pips to take you into profit. But everyone has a different interpretation of "why" the market moved.

On the other hand lets assume another trader had a 200 pip profit on that same exact trade. But instead of attributing it to the moving average crossover. That trader has figured out "why" the market moved. That trader has figured out what caused the market to move. That trader figured out what will generate enough order flow to really move the market. That trader is an "order flow" trader in my opinion. Why? Because that trader knows the real reason why the trade succeeded. That trader knows what really caused traders to enter the market to move price.

Now what is the difference between those two traders? Well here is the difference.

The trader that traded with moving average crossover (or any other system that does not generate order flow)thinks he has an edge, and thinks that he has positive expectancy. In reality since the moving average did not cause price to move, then that trader has no edge at all. If the reasons for you entering the trade do not generate order flow, then you do not have an edge.
Now the next time that trader trades the moving average crossover, that trader hopes the probabilities will be in their favor for the trade succeeding. Keyword is probabilities. He knows that some moving average crossovers will fail miserably and others will succeed gloriously.

The difference with the order flow trader is that the order flow trader knows the real reason why price moved. Since he knows the real reason why price moved, if they can break down those reasons into a system and figure out the next time that system will generate a signal, then that trader has a huge edge. So next time the order flow traders system signals something, that trader does not have to play the probability game, or hope to win some and lose some. The order flow trader knows why price moved, so their trades have high winrates 70-100%. They know that if they can correctly find the reasons that move the market, and find the next time those reasons will happen, then market WILL HAVE TO MOVE, it has no other choice.

On the other hand the moving average crossover trader, is just hoping that over the long run, some sort of profit develops. The order flow trader does not have to worry about such things because he/she has a gigantic edge in each and every trade that they place, because they know the real reason why the market will move. They know the true order flow generators.

scott89 Mar 22, 2011 1:33pm | Post# 972

Nervousone,

there are ways to get to the information if you know how banks operate in the OTC market.
!!!!

A stop hunt at that level will give you all the liquidity you need from the TA guys pockets.

Thats my thinking anyway.
Are you a Bankd Dealer? An hedge fund trader? Do you usually trade 100s of millions or even billions? If not, you don't need that liquidity.

redbaron1981 Mar 22, 2011 1:40pm | Post# 973

Are you a Bankd Dealer? An hedge fund trader? Do you usually trade 100s of millions or even billions? If not, you don't need that liquidity.
I think you've missed the point entirely here Scott.

Question: If the Banks and the hedge funds are moving the market where do you think they'll be entering there orders.

Answer: Wherever they can get enough liquidity.

Now would you rather trade with them or against them?

Tilt Mar 22, 2011 1:53pm | Post# 974

The difference with the order flow trader is that the order flow trader knows the real reason why price moved....
Great post grfx!
One question though...
You wrote,OF traders knows why price moved,past tense,after the fact it moved? Can the OF trader know before when the price is going to move? Does he just plays with probabilities on the information that he has at his hand?
I mean from a retail trader perspective...

Thanks
Regards

scott89 Mar 22, 2011 1:54pm | Post# 975

I'll answer you with the same post I wrote you a couple of days ago:

I'm not talking about brokers, I DO know that brokers do not hunt...
I am talking about central banks, commercial banks, institutions, hedge fund and any other player that needs liquidity to enter and ecit the market. A stop hunt is done for that reason, where could you find the needed quality if not in a cluster of stops?
And again, you do not stop hunt, or let's say you don't need it if you don't have billions to trade, you just exploit these situations where you KNOW what's happening and what's gonna happen in the near future 90% of times, so...

redbaron1981 Mar 22, 2011 2:21pm | Post# 976

Order Flow Analysis.
 
After reading through lots of Darkstars posts several times this week I think this might help you guys with obtaining the order flow mindset.

Quote from Darkstar.

"The market as a whole calculates fair value as a discount of the possible future outcomes for given events"

Tomorrow we have a vote in Portugal as to if they should impose Austerity measures to reduce debt.

Quote from WSJ:

LISBON—The future of Portuguese Prime Minister José Socrates hangs in the balance this week, as the outcome of an austerity on Wednesday could lead to his resignation and push the government closer toward taking a financial bailout from the European Union and International Monetary Fund.

So this event has a 50/50 outcome. However this has also been said:

The main opposition parties plan to vote against those measures. Mr. Socrates, in turn, has said he will quit if that happens.

I would put this as 80/20 against Austerity. This is a personal estimate.

So if the market is constantly discounting these probabilities. So current price is either 80% wrong or 20% wrong depending on the actual outcome. Now if we can pick an outcome we should be able to capture the spread between the discount and the actual event(providing we pick the correct outcome). So obviously it would be good to trade on events where you are fairly certain about the outcome.

I think that this is similar to how Grkfx is trading, and here is a few more quotes from Darkstar:

"You have to suffer through the daily swings in market perception, but at some point in the future the market price will represent the consequences of the actual outcome. As long as you have a good grasp of the situation influencing the market, I can't image a simpler way to trade profitably."

"There are dominant themes in markets all the time. When news related to the dominant theme is positive or negative, that news will move the market logically. News that isn't related to the dominant theme often impacts price in an illogical manner because nobody really cares about it. If you are experiencing illogical price movement after a news announcement, it's a good bet that your looking at irrelevant data."


And one last quote about the entry:

"Generally I like to find situations where I have a really good idea about the eventual outcome of some event. Then I want for sentiment to diverge considerably from that outcome and take a position that would bring it back toward the outcome I anticipate. Not only does this give me the biggest profit opportunity, it also gives me a good chance of spending the majority of the positions life in the money."

Its well worth going through all Darkstars posts and lots of times. There so much information there for the taking. Thanks Grkfx for getting me on the right track.

Good Luck.

James.

Monroe Mar 22, 2011 2:31pm | Post# 977

After reading through lots of Darkstars posts several times this week I think this might help you guys with obtaining the order flow mindset.

Quote from Darkstar.

"The market as a whole calculates fair value as a discount of the possible future outcomes for given events"

Tomorrow we have a vote in Portugal as to if they should impose Austerity measures to reduce debt.

Quote from WSJ:

[color=red]LISBON—The future of Portuguese Prime Minister José...
Yes that was good stuff. So then, after this, it would be a matter of using the mechanics for the entry I would assume. Stop hunts, or bargain hunting...

I have heard it many times that trading corrections is the way to go... overreactions, mispricings....

So an orderflow trader would need to understand what's going on, and place orders in line with the market movers.

Monroe Mar 22, 2011 3:00pm | Post# 978

Also, this is more longer term as we are dealing with macro factors and money flow and sentiment, but if you're trading intraday, although sentiment is definitely something you always want to pay attention to because this effects behaviors of traders that make a difference... but overall I am seeing options, big orders, and stops are the big factors, so no matter what the backdrop may be, if someone has a big order or options are in play... well, who and what is moving price then?

redbaron1981 Mar 22, 2011 3:03pm | Post# 979

Monroe,

As Darkstar says hes looking for extremes in sentiment. What I would say is take a look at the Euro at the moment. Ok its been bullish on rumors of a rate change but I'm still thinking that the Portuguese issue is quite major.

Another quote from WSJ

The political crisis comes at a delicate time. Portugal faces repayments of €4.23 billion ($6.02 billion) in debt next month. Uncertainty about the future course of economic policy ahead of an election would likely increase Portugal's already high borrowing costs, and make it more difficult to avoid a bailout.

Now that would be really bad for the Euro, and thats what makes me think that the Euro just looks far to extended at the moment.

James.

LasVahGoose Mar 22, 2011 3:14pm | Post# 980

Monroe,

As Darkstar says hes looking for extremes in sentiment. What I would say is take a look at the Euro at the moment. Ok its been bullish on rumors of a rate change but I'm still thinking that the Portuguese issue is quite major.

Another quote from WSJ

[color=red]The political crisis comes at a delicate time. Portugal faces repayments of €4.23 billion ($6.02 billion) in debt next month. Uncertainty about the future course of economic policy ahead of an election would likely increase Portugal's already high borrowing costs, and...
I really don't know much about trading, but it would appear to me you are only looking at ONE side of the currency PAIR.


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