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Order Flow

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  • First Post: Oct 2, 2006 2:25am Oct 2, 2006 2:25am
Is there any way Order Flow can contribute to successful trading? I saw someone on FF talk about it, and would really like to know how/if it's usable. Any information would be much appreciated, thanks.
Quoting ssteiner87
Is there any way Order Flow can contribute to successful trading? I saw someone on FF talk about it, and would really like to know how/if it's usable. Any information would be much appreciated, thanks.
Well I believe DarkStar is (one) of the brains behind the use of OrderFlow. Perhaps he'll jump in here to give some more tidbits about how he uses it.

All I know is that short of paying for the high end service, you can get it for free as part of the news plugin for FXCM. It'll point to where buy/sell orders are supposedly being placed. I guess the key is to find out why they are being placed in order to best determine how you should follow suit...

Jason
Order Flow... This is the key. I would like to know about it too. Who(what large player) is going to buy a currency and know when they are doing it. AND WHY.

So far as I know FXCM is the only source that publishes this info. I hope not because I would like to know more.

Lou
I demo with FXCM (don't laugh) and I do know better than to trade with real money. However they do have this and I believe it is important in some way, but if you want to see the numbers and what they are, I can give them to you for an example or something.
ssteiner87,

I too have an account with fxcm mainly to get the Thompson data you mention. Cash flow into a pair makes the primary currency go up. Cash flow (buying) Eur/Usd will make it go up.


Lou
Here's a quote from FXCM's CEO:

"If 15% of day traders are profitable," says Drew Niv, chief executive of FXCM, "I'd be surprised."

I'm not sure that watching the order flow of the other 85% is going to give you any insight on market direction.

It is estimated that retail Forex trades (us) make up about 2% of all transactions. Not exactly the type of crowd capable of moving the market.
Phil, Isn't Thompson a news org that follows the institutional traders? I have always followed Thompson for info about options in FX for Stop hunt plays, mostly in the yen.

I am no expert, though. Scott


Quoting philmcgrew
Here's a quote from FXCM's CEO:

"If 15% of day traders are profitable," says Drew Niv, chief executive of FXCM, "I'd be surprised."

I'm not sure that watching the order flow of the other 85% is going to give you any insight on market direction.

It is estimated that retail Forex trades (us) make up about 2% of all transactions. Not exactly the type of crowd capable of moving the market.
Quoting smjones
Phil, Isn't Thompson a news org that follows the institutional traders? I have always followed Thompson for info about options in FX for Stop hunt plays, mostly in the yen.

I am no expert, though. Scott
Hey Scott! I don't know anything about Thompson. I don't listen to news or look at econ calendars.

I simply wanted to debunk the idea that your broker would be a good source of information for order flow.
Well I agree with you there. I get my Thompson info from another source. So I could not say about the FXCM source.



Quoting philmcgrew
Hey Scott! I don't know anything about Thompson. I don't listen to news or look at econ calendars.

I simply wanted to debunk the idea that your broker would be a good source of information for order flow.
Here is a paper that investigates this, from Norgesbank. They argue 'that customer order flows do contain information', though this research takes place at the bank level. The benchmark study in this field seems to be a chap called Richard Lyons, who has written loads of papers on this relatively new microstructure approach to FX. Importantly, they managed to look at the order book of Citi, the largest player in the mkt, and found that the order flow information was of practical use.

At the end of the day though, order flow is proprietary information and is a world away from the retail mkt. It would be interesting to see where Thomson got their info from, because I can't imagine a bank opening its books up to them - talk about throwing away your informational advantage!
"Always bet on black"
The information at Thompson is never the actual order flow. It is usually a story about where options and stops are residing, in mass. I have never seen actual numbers come from them. But, again I am not the expert at this... DarkStar could shed more light on it.

Thanks Scott


Quoting abobtrader
Here is a paper that investigates this, from Norgesbank. They argue 'that customer order flows do contain information', though this research takes place at the bank level. The benchmark study in this field seems to be a chap called Richard Lyons, who has written loads of papers on this relatively new microstructure approach to FX. Importantly, they managed to look at the order book of Citi, the largest player in the mkt, and found that the order flow information was of practical use.

At the end of the day though, order flow is proprietary information and is a world away from the retail mkt. It would be interesting to see where Thomson got their info from, because I can't imagine a bank opening its books up to them - talk about throwing away your informational advantage!
Quoting smjones
The information at Thompson is never the actual order flow. It is usually a story about where options and stops are residing, in mass. I have never seen actual numbers come from them. But, again I am not the expert at this... DarkStar could shed more light on it.

Thanks Scott
I always wondered why a trading institution would reveal where their stops are located and what options they are holding. When I traded at a firm Reuters would call everyday and snoop around to find out what we were doing. We always just made something up. Why would you give out that kind of information?
Quoting ssteiner87
Is there any way Order Flow can contribute to successful trading? I saw someone on FF talk about it, and would really like to know how/if it's usable. Any information would be much appreciated, thanks.
Yes. And no I won't teach you how to do it.
Quoting jlowder
Well I believe DarkStar is (one) of the brains behind the use of OrderFlow. Perhaps he'll jump in here to give some more tidbits about how he uses it.

All I know is that short of paying for the high end service, you can get it for free as part of the news plugin for FXCM. It'll point to where buy/sell orders are supposedly being placed. I guess the key is to find out why they are being placed in order to best determine how you should follow suit...

Jason
The service is called ifr-forexwatch provided by Thompson Financial. You can sign up at ifr-markets.com for $275/mo or use the lite version for free with the FXCM news plugin.

And this is a pretty acurate assessment...
Quoting smjones
The information at Thompson is never the actual order flow. It is usually a story about where options and stops are residing, in mass. I have never seen actual numbers come from them. But, again I am not the expert at this... DarkStar could shed more light on it.

Thanks Scott
Couldn't have said it better myself.
Quoting Darkstar
Yes. And no I won't teach you how to do it.
LOL... I was getting ready to say, uhmmm I doubt DS will tell you.

LOL.
Mr. Trend
Quoting philmcgrew
I always wondered why a trading institution would reveal where their stops are located and what options they are holding. When I traded at a firm Reuters would call everyday and snoop around to find out what we were doing. We always just made something up. Why would you give out that kind of information?
While it may not have been in YOUR best interest to share your positions and options, it certainly was in your counterparties. For example, I sell you a DNT with an $Xmil payout. Then I tell everyone that it exists so they can help me blow out your option as well as your defense trade stops. We all make money at your expense.
Quoting Darkstar
While it may not have been in YOUR best interest to share your positions and options, it certainly was in your counterparties. For example, I sell you a DNT with an $Xmil payout. Then I tell everyone that it exists so they can help me blow out your option as well as your defense trade stops. We all make money at your expense.
Yeah, I got that. DNT optons are traded OTC and as such are generally NOT leaked to joeblow's newswire. If a counterparty leaks information they will no longer be a trusted business partner and they will be on the outside looking in real quick. I would venture to say most option barriers are simply rumors and excuses to explain why the market turned at certain point. A news service nevers says "we have no clue why the market moved today". They get paid to make something up regardless of weather it is accurate or verifiable.
Nice Phil, LOL... I will just have to live with that.. You could be right, but it does not change the fact that it happens all the time, or their rumors are pretty darn accurate. Scott
Quoting philmcgrew
Yeah, I got that. DNT optons are traded OTC and as such are generally NOT leaked to joeblow's newswire. If a counterparty leaks information they will no longer be a trusted business partner and they will be on the outside looking in real quick. I would venture to say most option barriers are simply rumors and excuses to explain why the market turned at certain point. A news service nevers says "we have no clue why the market moved today". They get paid to make something up regardless of weather it is accurate or verifiable.
Maybe, but information comes out prior to price ever approaching the strike and then price action confirms it's existance. I have seen so many stop runs and option barrier defense plays, that I can't help but disagree with you. Unfortunatly I don't have any way to difinitivly prove to you who is saying what, so I think it best if we just agree to disagree.
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