Many traders claim that they incorporate order flow in their trading. As I understand it, order flow is information on bid and ask volume by price level for pending and closed orders. Footprint chart ,Market Depth and Level II for futures show order flow. However, some order flow traders don't use tools like footprint chart or Market Depth. They claim that the moving average, stochastic or MACD indicators they use show order flow. I'm really confused. Can anyone comment on that ?
- Joined Mar 2011 | Status: I should be on your ignore list | 5,597 Posts
{quote} there is no way a retail trader can get true order flow. using indicators/fibo to predict order flow is merely a thesis in itself. like all thesis, assumptions have to be made. eg: i will sell eurusd if it retracts to fibo 38.2%. because order flow suggest to follow the trend, get in at a retraced price. and retracement often goes to fibo levels. (this is an assumption)
However: "Order Flow" example usdjpy 1M (just happened)
No assumptions except 1 "Buy low, Sell high" i.e so called "Smart Money" (sarcasm intended)
... enough to allow for a BE and let it go ... repeat
- Joined Dec 2015 | Status: Trader | 1,519 Posts
Hi DonPato, When you have some time, can you explain a little how do you see those three concepts ? Cheers
OK. so can you show on chart those phases(Climax Exhaustion Absorption)?
This the area where the order flow is dominated by one side or the other, and results in large candles with very small wicks. You can see these usually in two general areas of your chart...the beginning of a reversal, and somewhere near the end of the move. Each location is caused by different things. The first (near the beginning of a reversal) is where the stops from the dominant order flow have been run, flooding the market with orders and pushing it in one direction quickly...my mentors affectionately call this, "the woosh". The other place where you will see this is toward the end of a move, where opposing order flow gives up (again stopping out) and the late trader (usually the retail guy following his MACD or Moving Average) jumps on the "trend" and things this move will continue...
So here's the order flow concept question to consider. Once everyone who is going to participate, HAS in fact participated, what happens to price? Think about this for a moment...lets say long...once everyone who wants to buy HAS in fact bought...who's left to continue driving prices higher? Has this happened to you? You see a "strong move" in the market and you think its has all the criteria (you were taught to look for) and you get on too. Soon afterward, price does NOTHING, or even starts going back. What happened?
You were taken in by climax volume. Everyone was now on board and no one is left to drive prices any higher. Our friend just posted some excellent example of this with his own indicator...and shows that the tick volume in forex CAN be used in a very similar fashion to that of futures
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- Joined Dec 2015 | Status: Trader | 1,519 Posts
Lets take same chart without the renko indicator (I think its renko bars he is using)
You can clearly see here that the climax both started and finished each swing move...but more than that...they were "precursers" to the end. If you are one who trades reversals, (and BTW everyone who is a "trend trader" should be looking for that reversal at the bottom of a retrace) then your biggest question is always, "when is this reversal going to be over?" This perhaps can give you an idea...wait for that climax move to show up first...then move on to the exhaustion, and finally the absorption to make your entry with the "smart" money.
You can clearly see here that the climax both started and finished each swing move...but more than that...they were "precursers" to the end. If you are one who trades reversals, (and BTW everyone who is a "trend trader" should be looking for that reversal at the bottom of a retrace) then your biggest question is always, "when is this reversal going to be over?" This perhaps can give you an idea...wait for that climax move to show up first...then move on to the exhaustion, and finally the absorption to make your entry with the "smart" money.
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- Joined Dec 2015 | Status: Trader | 1,519 Posts
Another example from the e-minis themselves...this is where my idea originates.
Note the red candles at the end of this last move down...climax volume. Here the coding is a bit different as I have access to buy/sell info. Each red candle has 3x the selling volume as buying volume.
Note also the delta volume below each candle...Also note at the top of this latest move down...the climax volume that started the move. I'd like to use this to also illustrate the next concept...that of exhaustion...next post
Note the red candles at the end of this last move down...climax volume. Here the coding is a bit different as I have access to buy/sell info. Each red candle has 3x the selling volume as buying volume.
Note also the delta volume below each candle...Also note at the top of this latest move down...the climax volume that started the move. I'd like to use this to also illustrate the next concept...that of exhaustion...next post
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- Joined Dec 2015 | Status: Trader | 1,519 Posts
Another example...this time in forex:
even without the special coding to color the bars, you can see the tick volume drops off dramatically even as price reaches new highs...same can be said for the lows seen here...new lows...yet clearly NO volume. (momentum?, churning?, grinding?) NO! exhaustion
even without the special coding to color the bars, you can see the tick volume drops off dramatically even as price reaches new highs...same can be said for the lows seen here...new lows...yet clearly NO volume. (momentum?, churning?, grinding?) NO! exhaustion
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