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  • #341
  • Jul 20, 2017 8:21am Jul 20, 2017 8:21am
Hey khaolin! I will let the experienced traders here answer your question, all I wanna say is that I very highly recommend both Alan's book and gspajon's thread. In fact, I am currently re-reading that thread, and finding (yet again) lots of value.

GBP/USD:

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Are we seeing some buyers stepping in at the target zone, or is it way too early to tell? Philly Manufacturing sure did help some USD bulls to run back to pounds here.

P.S. Hope I'm not driving anyone mad with my colored charts
  • #342
  • Jul 20, 2017 9:29am Jul 20, 2017 9:29am
WOW a lot to catch up on...Again, I thank all of you participating for helping make this thread active again, with some real participation...especially swTRUE for resurrecting this thread from its death sprial.

First things first. Welcome khaolin!! I hope you feel you can participate any time you like. Your questions are not too basic to anyone...an even if they are, it is good for all of us, especially me to go over them often.
Quoting khaolin
...Regarding the entries how wide do you usually consider a zone for entries? For example, Would you guys have entered on this trade at the top? Because the way I was trained my Sell limit would've been too tight to be able to get back in this trade {image} Thank you for your help and keep up the good work, I really appreciate it and I'm sure a lot of other more silent traders do too!
I think I remember this chart from an earlier conversation, however I don't recall what market it was. However, assuming I was looking for a short, my entry would've been where you see the red circles drawn on your graphic. I doubt that I would've entered a sell order where you have indicated unless I was looking to sell that area, from a larger time frame evaluation. It is difficult to tell based solely on a single chart.

Again this brings up the "one market" concept that I will continue to harp on. It is ONE market not a separate market for each time frame. We are so accustomed to viewing things from a single time frame, (to simplify our understanding), that we forget that there is always a point of view that is both larger and smaller than we are currently looking at. So how the market expresses itself on your single time frame may be giving you the idea of something that is completely the contrary, which is why I struggled for so many years to understand order flow. Many say the order flow follows the larger charts...I say the opposite. The larger charts are eventually built by the tick charts. The division of time, we have arbitrarily placed on the market is for our own convenience and also confuses us. It is ONE market, and we need to understand that the division of time frames, is more so WHO is trading...longer term goals, or shorter term goals. Of these, who is more likely to have the volume that will move the market?

So that is why I always view at least three different points of view, that are well separated to get a better sense of the overall market.
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  • #343
  • Jul 20, 2017 10:09am Jul 20, 2017 10:09am
Quoting ZeleniCaj
{quote} Ah, the million dollar issue So far this clear vision of a trend/dominance developing on a smaller time frame evades me. Even in hindsight, even on the successful trades I've taken.
Excellent conversation on the concept of trend folks. I think you both struck a tone, that shows that the concept of order flow is key to understanding market movements. Careful expressing these view in the "normal" trading threads...they will be treated as heresy.

Terms, like anything else, come down to definitions. And definitions are personal and individual. Such has "swing points"...how are those defined? When does it actually clearly become a "swing point"...of course not until after the fact, much too late to act on it...

Likewise the definition of "trend". Above or below x EMA?, higher or lower swing points?. I would prefer to use CONCEPT of trend, and then let the individual find a definition that explains in his/her mind the realization of this concept. So let me throw this concept out at you all...

"Trend is merely a detailed view of a dominant condition that currently exists in the market"...Lets explore what that means.
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The above chart shows what I would describe as an obvious seller dominated market...it is a weekly chart (market is unimportant). More affectionately known as "whoosh". A cascade of selling consisting of both buyers stopping out and new sellers joining in. The last 4 candles appear to be vertical, and indeed in this chart they are. But that is only one point of view. Does this meet the definition of a "trend". I don't know but it is certainly a vertical move, and would be very profitable to participate in if we could...so lets look underneath this chart.
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Above shows the exact same market, exact same period of time, but from the point of view of 12 hr candles. Does THIS meet the definition of "trend"? By many definitions it does. But it is really a more detailed view of what the previous chart was showing. However this is how the order flow expressed itself to those that were "swing trading". There were area where the dominance was expressed clearly and areas where it exhausted, balanced, and even opposing dominance came in and then failed. All of this occurred "inside" those weekly candles. Looking at this chart a familiar pattern begins to emerge. One that I prefer to use as a "actionable definition". Bullish dominance = Higher swing points (both high and low), Bearish dominance = lower swing points (both high and low). It is familiar and correct, and corresponds to the greater theme of dominance...with me so far? Now lets look underneath this chart.
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It is these smaller charts where people get confused...again, the same market...exactly...exactly the same period of time. But I have circled in blue, those area where "trend" (by my own definition) was against the prevailing dominant selling order flow. How can that be? ONE market yet the order flow in fact reversed for a short period of time before resuming...so how can this be?

Yes the order flow on the small time frame did reverse and in fact showed a new trend in the opposite direction. Why? Think about this...WHO is trading those small time frames? Day traders perhaps? What are the objectives for most of them? Be in and out in the same day, if not in a few hours...NO? So wouldn't it make sense that at the end of the day, or the end of a week, there might be some profit taking for shorter term traders...even swing traders to cause this opposing order flow? In other words, profitable shorts are liquidating....to do this they MUST place buy orders...those buy orders combine and not only balance the selling for a short while, but actually reverse it temporarily. The key to this is that NO NEW BUYERS (with any significant volume) were willing to enter, so buying stalled and selling resumed.

So, using these different points of view, those of the big money/longer term goals, Swing traders with midterm goals, and the day trader, with small volume and short term goals, we can find which of these groups is really dominating the market. Thus if the larger money is at work you can hold longer...if it looks like the midterm money is at work, then pull out at the swing points...and if the short term money is driving the market, take your 50 pips and go home or, (as I do) chose NOT to participate.

I hope this sparks a little more understanding on why multiple time frames is a MUST for understand WHO is dominating the order flow and what their goals might be. This will allow you to do what the old sayings say, "cut your losers off...and let your winners run"; "The trend is your friend, until the trend ends." I'm sure you have all heard them ad nasueum. They are not very useful, but all are true. However, I consider the above explanation a far more useful way to think of and engage with the markets.

I hope this helps.
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  • #344
  • Jul 20, 2017 10:19am Jul 20, 2017 10:19am
Update on USD/MXN:
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Stopped out on my remaining short for 811 pips.
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  • #345
  • Jul 20, 2017 10:46am Jul 20, 2017 10:46am
Still watching GBP/USD:
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Price has moved into my target zone, almost to the pip, and the shorter term traders bought in. I'm sure that was profit taking, because the bounce was so immediate and so vertical. I am still watching to see some significant selling exhaustion appear. So far I haven't yet seen that. At least nothing I would consider exhaustion. So I am trying to be patient and watch for the "right" conditions to put in my order.
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  • #346
  • Jul 20, 2017 10:47am Jul 20, 2017 10:47am
Hi Guys,

Thank you for your fast answers! I'm afraid I chose my example poorly or at least I expressed my question poorly. I used this image from previously in the thread because I couldn't see entry "zone" for a short. What I mean is, for example, the lower zone for a buy is very clear to me and I would've drawn it about the same way. But I have a hard time seeing what would trigger me to a sell in the top zone.

Do you usually set a buy or sell limit or do you look at PA in your zone and sell/buy when it moves your way?

Again I apologize if all this is covered in great details in the rest of the material I have to read, but I've been placing my Buy and sell limits "in space" as you said hoping that the zones would be strong enough for a while so I'm afraid I picked up some bad habits and I'm trying to understand how to rely more on confirmation, but I'm afraid that I'll lose the trade because I won't know when to get in.

I'll use ZeleniCaj's example for clarity, would you set a Buy limit at the newly formed "zone in a zone" or would you wait for price to come back, look at it and then buy if it goes your way?

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Thank you for your time, hopefully, I can get up to the thread's speed fast enough. It's very inspiring to see how confident you are in your trading, I'm looking forward to getting to a similar confidence in my own technical abilities.
  • #347
  • Jul 20, 2017 10:51am Jul 20, 2017 10:51am
Ok, maybe this will be a better example for my question.

Would it be a mistake to place a sell limit at this 4h zone? or should I watch price come back to it and sell if it goes my way?

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  • #348
  • Jul 20, 2017 10:56am Jul 20, 2017 10:56am
Quoting khaolin
...would you set a Buy limit at the newly formed "zone in a zone" or would you wait for price to come back, look at it and then buy if it goes your way? ...
I am looking for a change in the order flow. Something that will indicate that the selling has exhausted, and the buying has balanced or become dominante again. I am looking for buying to resume because that appears to be the larger theme in the market right now. As I explained above, on the intraday perspective, some buying has come in. I suspect those are short term profit takers that are liquidating their sell orders. But I haven't yet seen the larger selling exhaust yet. So my order is still on the side lines.

Again, I am watching the ORDER FLOW...not the price action. Not price action signals...order flow. The resulting price action may express itself in a double bottom...a "V" bottom, a rounded bottom, who knows? I certainly don't. I want to see the order flow balance, then change to a dominant buying order flow. This may take awhile, or it may never happen we'll just have to wait and see...thus patience (very difficult for me).

It is not "confirmation" nor is it any given particular "PA signal". I never know how it will play out until it does. That is why I always encourage everyone to trade in the "now" moment. Right now, I see sellers are still interested in this market. Buyers are (like me) watching and waiting.
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  • #349
  • Jul 20, 2017 11:08am Jul 20, 2017 11:08am
Quoting khaolin
Ok, maybe this will be a better example for my question. Would it be a mistake to place a sell limit at this 4h zone? or should I watch price come back to it and sell if it goes my way?
I haven't been watching this market as closely, but in retrospect, it appears that this 2nd test of the weekly range, was an immediate sell off, givin very little chance to trade a retrace, unless you were watching very small time frames at that 2nd peak. I would not have found a good entry unless I was watching a 15 min chart or smaller. If see a change in order flow and then it doesn't come back within a few candles, I cancel my order and wait for the next opportunity or just look a another market. This is what I like to call a "shut out".

The order flow is so dominated with selling right now, that even the short term profit takers are unable to produce much of a pull back. You might look to see what happens near the bottom of the weekly range, somewhere near the 109 area.
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  • #350
  • Jul 20, 2017 11:14am Jul 20, 2017 11:14am
Quoting khaolin
Hi, I'm usually more of an occasional silent browser on FF but I wanted to take a few seconds to post in here to say thank you to DonPato for taking the time to share your knowledge with strangers. By reading through your thread, it is very obvious that you know what you are doing and it translates into clear explications. I've been trading order flow for about a year and it's been going pretty well but while I was going through the thread it made me go through my journal to realize that I often get caught trying to pick the top or bottoms with...
Khaolin, welcome brother! Look forward to your input!

I've remarked your chart with what I would be looking at. For the most part Don and I have the same view, but I do take more "history" into account when looking for order flow. So your box is the larger area where you'd expect sellers to come in, but more precisely where they came in in the past.

I believe I caught the second trade on this one. I normally look for two areas that make sense for sellers to come in. Often you will see sellers hit it at one level and then the market pull back a little further for the real dominance to come in.
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  • #351
  • Jul 20, 2017 11:28am Jul 20, 2017 11:28am
Thank you for your answer DonPato,

Patience and mostly fear of missing out seem to be my worst enemies right now. I'll try to wait for obvious changes in the order flow and pullbacks into them. I think reading your posts and gspajon's will help me gain more confidence to wait for the right time to enter.
  • #352
  • Jul 20, 2017 11:34am Jul 20, 2017 11:34am
swTrue,

I've seen your other posts where you mention the previous zones "history" and I have to admit that it makes a lot of sense! So far I've been taught to not "cut the candles", meaning that is a zone was "broken" it's not valid anymore. but you seem to have success with these zones acting a bit like a resistance line? I'll try to look into it more to get a bit more familiar.

when you say: "I normally look for two areas that make sense for sellers to come in. " do you mean 2 areas on top of each other or at the same "price" but further back in time?

Thanks for the heads up!

Also, sorry for Hijacking the thread. I'm going back to me reading for a bit.
  • #353
  • Edited Oct 4, 2021 3:12pm Jul 20, 2017 11:34am | Edited Oct 4, 2021 3:12pm
Quoting khaolin
Hi Guys, Thank you for your fast answers! I'm afraid I chose my example poorly or at least I expressed my question poorly. I used this image from previously in the thread because I couldn't see entry "zone" for a short. What I mean is, for example, the lower zone for a buy is very clear to me and I would've drawn it about the same way. But I have a hard time seeing what would trigger me to a sell in the top zone. Do you usually set a buy or sell limit or do you look at PA in your zone and sell/buy when it moves your way? Again I apologize if all...
It depend on the quality of the level for me. If it's level I'm ok with a set and forget. But if it's unclear, or maybe multiple levels I like to see "confirmation", dominance changing hands.

Here's a good example. I noticed this level on EURNZD, but as you can see daily is a jumbled mess. But I saw hourly had a nice little balance zone. Set the order last night, 3:1 winner.

Quoting khaolin
Hi, I'm usually more of an occasional silent browser on FF but I wanted to take a few seconds to post in here to say thank you to DonPato for taking the time to share your knowledge with strangers. By reading through your thread, it is very obvious that you know what you are doing and it translates into clear explications. I've been trading order flow for about a year and it's been going pretty well but while I was going through the thread it made me go through my journal to realize that I often get caught trying to pick the top or bottoms with...
Kha and anyone else interested. I've attached one of J Alan J's books I found online a month or so ago. I've read through some of it...still chewing. I know he has other books as well and Don has much more experience with his material so he may be able to point you to something better.

{ copyrighted attachment deleted by staff }
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  • #354
  • Jul 20, 2017 12:10pm Jul 20, 2017 12:10pm
Quoting swTrue
I've been thinking some on trend. Time frames are relative, depends on which you chose, it's just a snapshot of the market flow. But really trend is relative too. I say I trade with the trend, with the market structure, but that's only based on the time frame I chose. Most traders are against buying tops and bottoms but really a top/bottom of a "trend" could just be a pull back of a larger time frame. I don't really know what applying this thought process looks like systematically. I've taken this USDJPY trade against daily structure BUT it's really...
Update on this. I was up about 50 pips and moved my stop to BE. Normally on daily zone trade like this I'd give it more room to breath but because it was counter trend-ish I wasn't comfortable with it. Trade was stopped out at BE.

Look at the chart below, a good learning experience. What is happening on EurAud is more of what I expected on UsdJpy, but look at the difference in the buyers dominance. One is starting to chop around, the other looks like it's mid-pullback
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  • #355
  • Jul 20, 2017 11:05pm Jul 20, 2017 11:05pm
Hey swTrue,

You said on your weekly EurAud chart that it was in an uptrend. My way of assessing a trend might be off because I would have thought it was a downward move looking at the last two Peaks and bottoms (LH,LL). How do you usually assess trends on your charts?

I've also just finished going through this thread and started gspajon. I thought I had a good grasp on how to trade order flow but I only had a very partial understanding of the process, things are starting to make a lot more sense.

Thank you for sharing all this knowledge DonPato, swTrue and even ZeleniCaj. It's really making a difference in my trading.
  • #356
  • Jul 21, 2017 4:14am Jul 21, 2017 4:14am
Quoting DonPato
{quote} So, using these different points of view, those of the big money/longer term goals, Swing traders with midterm goals, and the day trader, with small volume and short term goals, we can find which of these groups is really dominating the market.
Hey Don! This is certainly key to "seeing" order flow. But frankly, I don't understand how to do it. How to determine which order flow, which group is dominating the market. Especially live, not on hindsight.

For example, yesterday you said on GBP/USD that the shorter term traders have bought in, but "bigger" term buyers, yourself among them, are staying out and waiting. If you may, could you explain how did you determine that?

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Would you say that the picture has now changed? I think I can see exhaustion, some balancing and then buying dominance, especially on the H4 chart - but I'm really not sure what to look for, yet.

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How is it possible to tell which force dominates the market right now?


Again guys, great discussion. The weekend is closing in, and I will have the time to sit and re-read most of it. This is golden
  • #357
  • Edited 10:33am Jul 21, 2017 8:07am | Edited 10:33am
Quoting ZeleniCaj
{...Would you say that the picture has now changed? I think I can see exhaustion, some balancing and then buying dominance, especially on the H4 chart - but I'm really not sure what to look for, yet. {image} How is it possible to tell which force dominates the market right now? ...
Yes your 4 hr chart is showing buying dominance with the close above the balance zone shown on this time frame. We're I trading this chart I might place pending buy orders at the top and bottom of the balance zone in line with the bodies of those candles.

Keep in mind the balance zone overhead. Price will have to fight it's way up through that area as well. So anticipate"choppy" price action before the "whoosh".
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  • #358
  • Jul 21, 2017 10:44am Jul 21, 2017 10:44am
Long on GBP/USD:
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I'm usually not very fond of entering trades on a Friday, but this one seems to show what I was looking for. I have entered a long position at the place indicated here, with another pending order lower. I have an approximately 50 pip stop on the aggregate position (should they both be filled). My lower order is in anticipation of the lower test. At this point, my "hope" is that it simply tests and then balances again and moves back up. We will have to see. Should this position fail, I will look to enter again a little lower, IF we get another workable signal.

Note how the 12 hr chart is still showing a balanced order flow over the past 24 hrs. The dominance displayed on the intraday chart is "absorbed inside the 12 hr candle, so it is difficult to see. This kind of entry is where many traders "wait for confirmation"...and if they get it, they price is significantly higher, and their opportunity to get a good price has passed, requiring a deeper stop and exposing more of their account to risk.

Sometimes to me it still feels like I'm "stepping out in front of a train"...
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  • #359
  • Jul 21, 2017 11:37am Jul 21, 2017 11:37am
Quoting khaolin
Hey swTrue, You said on your weekly EurAud chart that it was in an uptrend. My way of assessing a trend might be off because I would have thought it was a downward move looking at the last two Peaks and bottoms (LH,LL). How do you usually assess trends on your charts? I've also just finished going through this thread and started gspajon. I thought I had a good grasp on how to trade order flow but I only had a very partial understanding of the process, things are starting to make a lot more sense. Thank you for sharing all this knowledge DonPato,...
Khaolin,

I define trend by probably one of the oldest definitions in the book, but often overlooked. HH HL HH HL = UPTREND LH LL LH LL = DOWNTREND. I don't require there be multiple swings to consider it a trend, once an opposing swing is broken I see it as a trend/structure change. BUT as you'll see in the chart I've attached and like I was saying yesterday you'll often get a deeper retrace before the market continues with the trend. So in the EURAUD case that was my concern shorting it yesterday as we were bouncing off a deeper weekly buy retrace.

I was stopped out of EURAUD but it was a good lesson learned.
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  • #360
  • Edited 12:15pm Jul 21, 2017 12:00pm | Edited 12:15pm
Sorry...busy day yesterday and I completely missed your question...
Quoting ZeleniCaj
.... For example, yesterday you said on GBP/USD that the shorter term traders have bought in, but "bigger" term buyers, yourself among them, are staying out and waiting. If you may, could you explain how did you determine that? ...
This is difficult for me to explain, so let me apologize if this answer seems a bit obscure. To understand this you must first understand and completely grasp the "One Market" idea, and how it is expressed across multiple time frames. Also keep in mind that order flow is constantly moving. People are entering and deleting orders either manually or with computers according to their beliefs and/or trading systems or computerized algorithms.

Each of those orders has some larger goal in mind...again depending of the period of time one want to realize their goals. But most want to see some kind of result after entering "right now". In other words, whether they realize it or not, time is a factor in meeting those goals, as well as measuring progress toward those goals.

Thus, if you or I enter a position, we want to see it going our way, "right now"...what ever your definition of "right now" is...is it one candle, two candles...one hour, two hours...one day two days...how long are you willing to see your position languish in the uncertainty of open trade negative balance, until you are ready to pull the plug? That "right now" feeling, is in all of us, but most of us have not defined or even thought about it. Still others have what they call a "time stop", where they will close the position if it doesn't produce in x number of candles. This is all the definition of "right now".

Again when this happens, in order for anyone to close a position, you must enter orders into the order flow...again those orders contribute to the overall order flow...

So when I see the influence expressed on smaller intraday charts...as in the one you reference earlier, I see that this order flow has not effected the larger order flow say on the 12 hr or weekly charts. THUS, I conclude that this order flow is mostly day traders or swing traders taking profit on their counter trend positions. The larger term traders, are most likely already in with the majority of their position size, and would (i imagine) be adding into already profitable positions. So I would expect that order flow changes would be best seen on swing (daily or 12 hr charts) or smaller intraday charts.

So, referring to the intraday chart you posted earlier, you say buying coming in that formed a bottom (which occurred in my target zone). But that buying was muted, and could not mount any kind of challenge to sellers at the lower portion of the last balance zone. AND...it was the end of the day, and day traders simply left the market...leaving behind a tight range and nothing more.

I didn't see that any more "new" buying was expressing itself, nor did I see "new selling"...balance. But only on this smaller chart. Therefore, this order flow was smaller traders who have now taken their volume out of the market, and if big volume was at work, there would still be order left in the market, causing price to move one way or the other...but nothing...so either the big volume is already in, or it hasn't entered yet...I went with the later.

Compare that to today's price action...again looking at the intraday chart...price broke below the narrow range and was met with buying, that created a new higher high on this chart...This is the dominance (or at least may be the start of it) that I generally target.

In the end, nothing is certain, and the risk is always the same...that risk being that you entered against the prevailing order flow and lose. How much of your account you expose to that risk is a matter for another discussion.

I hope this explains a little better my thinking on this...sorry for the late reply...I missed it.
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