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Hey...what about Volume?

  • #21
  • Dec 18, 2017 11:25pm Dec 18, 2017 11:25pm
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 ?
  • #22
  • Dec 18, 2017 11:31pm Dec 18, 2017 11:31pm
Quoting Bicarus
{quote} your understanding on the 3 stages is spot on. however your analysis is flawed. mt4 volume is a tick counter which means it is localized to that specific broker. eg: broker A has relations to 25 LPs. the tick count, will be greater as compared to broker B whom only has relations to 10 LPs. simply because MT4/ECN are tuned to quote best bid/ask. having more LPs to vett thru will cause more changes. only if you are trading futures which requires a centralized exchange, then volume of a specific instrument will be more or less true
the correlation between tick volume (forex) and actual volume (Futures) is over 90%
the more LPs the closer the correlation.
  • #23
  • Dec 18, 2017 11:44pm Dec 18, 2017 11:44pm
Quoting pooh123
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 ?
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)
  • #24
  • Dec 19, 2017 12:39am Dec 19, 2017 12:39am
Quoting Bicarus
{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)
"there is no way a retail trader can get true order flow" 100 % correct

However: "Order Flow" example usdjpy 1M (just happened)

No assumptions except 1 "Buy low, Sell high" i.e so called "Smart Money" (sarcasm intended)

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... enough to allow for a BE and let it go ... repeat
  • #25
  • Dec 19, 2017 12:49am Dec 19, 2017 12:49am
Quoting Mingary
{quote} "there is no way a retail trader can get true order flow" 100 % correct However: "Order Flow" example usdjpy 1M (just happened) No assumptions except 1 "Buy low, Sell high" i.e so called "Smart Money" (sarcasm intended) {image} {image} ... enough to allow for a BE and let it go ... repeat
Let me disagree with you on that, we might not get 100 % of the book but we can have access to most of it. Of course not in forex but if you use its future in a regulated market which is 99.99 correlated you can have it.
Know yourself before fight with the market.
  • #26
  • Dec 19, 2017 12:52am Dec 19, 2017 12:52am
Quoting Autrader
{quote} Let me disagree with you on that, we might not get 100 % of the book but we can have access to most of it. Of course not in forex but if you use its future in a regulated market which is 99.99 correlated you can have it.
I agree

https://www.forexfactory.com/showthr...4#post10603204
  • #27
  • Dec 19, 2017 12:54am Dec 19, 2017 12:54am
Quoting Mingary
{quote} I agree https://www.forexfactory.com/showthr...4#post10603204
It should be a must in every trader to know that, but sadly is a fact that most of “traders” ignore.
Know yourself before fight with the market.
  • #28
  • Dec 19, 2017 12:58am Dec 19, 2017 12:58am
Quoting Autrader
{quote} It should be a must in every trader to know that, but sadly is a fact that most of “traders” ignore.
I would rather that most ignore it (:
  • #29
  • Dec 19, 2017 1:35am Dec 19, 2017 1:35am
Quoting Mingary
{quote} I would rather that most ignore it (:
Do I detect after all these years of disparaging the idea that possible edges exist a hint of optimism?
We are all One. Be present. Be the Observer
  • #30
  • Dec 19, 2017 2:22am Dec 19, 2017 2:22am
Quoting Iamfx
{quote} Do I detect after all these years of disparaging the idea that possible edges exist a hint of optimism?
No, not at all.
  • #31
  • Dec 19, 2017 2:50am Dec 19, 2017 2:50am
Subs. thanks and
Regards
  • #32
  • Dec 19, 2017 3:46am Dec 19, 2017 3:46am
Quoting DonPato
{quote} I don't think anyone else has put these three concept together... Climax Exhaustion Absorption When these three phases are present, a swing point is forming or is about to form. How powerful would this be when you are wondering WHEN to enter on that retracement to rejoin the trend...or WHEN to take profit on your trade?
Hi DonPato,

When you have some time, can you explain a little how do you see those three concepts ?

Cheers
  • #33
  • Edited 6:27am Dec 19, 2017 5:48am | Edited 6:27am
Quoting Mingary
{quote} the correlation between tick volume (forex) and actual volume (Futures) is over 90% the more LPs the closer the correlation.
They are not exact (contract rollover, hour difference) but very close. A good broker with solid volume (many clients, good LPs) should give good readings. I was a non-believer in volume too, but there are useful things you can get out of it.
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  • #34
  • Dec 19, 2017 8:21am Dec 19, 2017 8:21am
Quoting sakisf
{quote} They are not exact (contract rollover, hour difference) but very close. A good broker with solid volume (many clients, good LPs) should give good readings. I was a non-believer in volume too, but there are useful things you can get out of it.
Excellent coding saksif...I wonder if you'd be willing to share it? The histogram on delta volume looks very much like one I coded for the futures e-minis, but with out bid, ask volume I wonder how that information is extrapolated? At any rate I would like to refer back to your photos today if I may. They show excellent examples of two of the concepts I came to understand trading futures.
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  • #35
  • Dec 19, 2017 8:33am Dec 19, 2017 8:33am
Quoting Bicarus
{quote} your understanding on the 3 stages is spot on. however your analysis is flawed. mt4 volume is a tick counter which means it is localized to that specific broker. eg: broker A has relations to 25 LPs. the tick count, will be greater as compared to broker B whom only has relations to 10 LPs. simply because MT4/ECN are tuned to quote best bid/ask. having more LPs to vett thru will cause more changes. only if you are trading futures which requires a centralized exchange, then volume of a specific instrument will be more or less true
Again, I agree with this 100%...later today I will show how my idea formed of these concepts, but you are correct. There is no centralized exchange in the forex market and thus no clearing house to register the "true" volume, at any level, ie, that volume that is actually being transacted. Even futures can only show what has BEEN transacted...not what is waiting to transact...(order book) at any given level...at least my platform only shows pending orders 10 points above or below current price.

That being said, I believe there is value in tick volume...in fact I an many traders I know use constant tick volume as candle charts to trade with. I THINK...this concept for me is still unproven in forex...that by comparing the tick volume your broker provides you can show on a broad basis the concepts of climax, exhaustion, and absorption. I believe these come with a few caviats.

  1. Use the totality of the daily tick volume - I am uncertain tick volume is useful in intraday trading...for the reasons everyone here has listed.
  2. These phases don't always occur in order, thus can seem random. This is true no matter what market you trade.
  3. Like anything in forex, your broker controls what you see, so by using daily charts with sufficient stops, he cannot "gap" price to hunt your stop...at least not without drawing a lot of attention to what he's doing...this would be bad for business.

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  • #36
  • Dec 19, 2017 8:53am Dec 19, 2017 8:53am
Quoting forexcentric
Hi DonPato, When you have some time, can you explain a little how do you see those three concepts ? Cheers
Quoting Trader-Waldo
OK. so can you show on chart those phases(Climax Exhaustion Absorption)?
I will try...so lets start with a simple explanation of what these concepts are. The easiest to see and understand (and what most people call "exhaustion") is the concept of Climax Volume.

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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  • #37
  • Dec 19, 2017 9:06am Dec 19, 2017 9:06am
Lets take same chart without the renko indicator (I think its renko bars he is using)
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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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  • #38
  • Dec 19, 2017 9:26am Dec 19, 2017 9:26am
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.
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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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  • #39
  • Dec 19, 2017 9:44am Dec 19, 2017 9:44am
Exhaustion:
That state where price continues to move in the direction usually preempted by the previous climax. But on consistently lower or less volume. Many technicians call this "momentum". I strongly disagree. While price continues to move in the direction of the "trend" (at last as far as they have defined it)...the volume moving that price is lower and lower. Even on lower volume, price continues moving...this is mostly because there is really not opposing order flow to challenge it. Thus since the dominance is established, most new entries are in the same direction and because of very little opposing order flow, (to take the other side of the trade), price continues to tick in this direction in an attempt to attract new opposing order flow to fill the orders that are left in the market.

Many describe this as "momentum", "churning", "grinding". Its nothing more than exhaustion because the larger orders are already in and what little opposing order flow there might be is from these larger orders, taking profits out and "suckering in" the new entries.

In the futures market I have been able to quantify this as any candle where the dominant order flow drops below the average while at the same time the opposing order flow rises above the average. (Average can be what ever you want it to be). Here is an example
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  • #40
  • Dec 19, 2017 9:54am Dec 19, 2017 9:54am
Another example...this time in forex:
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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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