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Trading Institutional Order Flow

Quoting nkomo78
USD JPY Hii ,Please Correct me If I am Wrong ... these are my thoughts about usdjpy...Price Is About to reverse {image} {image}
Good analysis! In line with mine.

There is another overlapping DZ below your W1 DZ.
I am interested in that one. However, seeing that it is not fresh and had a deeper penetration, I will wait and observe where the price intends to go.
Live life king size !
Quoting Akt
{quote} Hello T4i Thank you for sharing your thoughts and challenges with the traders here. You are probably not alone so thank you for speaking up. Much appreciated here are some of my thoughts on the NZDUSD best wishes{image}
Hi Akt,
Re. your NZDUSD analysis here, I notice that when price returned to the daily, 4hr and 1hr demand levels, the level was still fresh and a trade could have been taken. Now assuming my entry timeframe is the 1hr, since price has already left and consolidated above the level, this demand level is no longer fresh. Therefore, we should probably not trade the pullback to the level again.
Is this right?
Thanks,
Vishy
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A LOOK AT A TOP DOWN ANALYSIS PROCESS FOR CURRENCY SELECTION


The concept of relative strength has been around for a few decades and is deeply ingrained in the trading of stocks. The use of relative strength is relatively newer to currency trading. Although currency trading is by far a larger trading arena, the market is not as well established as the stock market.

Therefore, in coming up with an assessment of relativity within the currency market, it is a useful exercise to look at how relative strength analysis is done in the stock markets for some instruction.

With top down analysis of stocks, the trader starts with the broad market index to get a view of the overall market trends. The importance of this cant be overstated because it is very important to understand the need to focus ones resources on trading the stocks that are in line with the broad market sentiment rather than fight that sentiment. In the case of stocks especially, which are naturally designed to go up over time (more of that in another article).

So, the stock trader starts with an index such as the S&P 500 or the Nasdaq 100. The trader decides which direction the broad market is headed and then drills down to the industry groups to look at industry groups that are outperforming the broad market. Then from the industry group he/she goes to the various sectors within each outperforming industry to find outperforming sectors within those industries. A more in-depth analysis of these outperforming sectors is then carried out to find the sectors that are the best performers. From here, the stock trader then goes even deeper to find the best performing stocks within the best performing sectors. Alternatively, he/she just trades the best performing ETFs of the sectors rather than taking the extra step of finding the stocks within the sector.

Although it sounds like quite an involved and long- winded process it is no longer as tedious. Several tools have been developed within the stock trading universe to make the lives of stock traders much easier and more efficient.

For forex traders, things are not as clear. There are several tools created out there for determining currency strength, many of which are not that clear and therefore not inspiring in confidence as to their uses. So for us on the Roundtable, we have developed tools we can trust, indexes of the major currencies that we use to conduct our top down analysis and make our work and focus much clearer.

Fortunately for forex traders there are only so many major currencies -EUR, GBP, USD, AUD, CAD, CHF, JPY & NZD. Indexes can be built for each of these currencies with would take the forex trader straight to the sector analysis section of a top down analysis, skipping the need for broad market and industry analysis as these are not present in the foreign exchange markets because they are OTC markets.

An analysis of the best performing currency sectors is the first place we start, We develop a framework to assess currency sector strength and then focus on the best performing currency pairs within the best performing currency sectors and do a more in-depth analysis of these.

A scoring system is used to help us hone in to the pairs that are trending at the time and therefore probably most ideal to trade.

Lets go through an example.

Say after doing a currency sector analysis you decided you wanted to buy the Euro. The question then arises, what should you buy the Euro against. It is not an efficient or cost effective approach to just buy the Euro against all the currencies, for the obvious reasons of increasing exposure and therefore risk to one currency should the trade fail, and also for the more obvious reason of ones capital base. For retail traders like us, we are not often awash with so much money as to buy the euro against all the majors at enough size that it would be worth the effort.

Therefore, in deciding which currency to sell so as to buy the Euro, we conduct the next stage of the analysis, comparing the currency pairs within the Euro Currency sector to each other to find the best behaving currency pairs to trade.

Looking at the 2 charts below, which would you rather trade, chart 1 or chart 2?

Chart 1 is of the EURGBP and chart 2 is of the EURUSD.


Look at the subgraph of Chart 1 - it shows that the EURGBP has underperformed amongst the euro currency pairs, whilst the subgraph of Chart 2 shows the EURUSD has been an outperformer amongst the euro currency pairs.

For sure, one would prefer to buy the EURSD and at least not got long the EURGBP.

This type of analysis can be quite a useful focusing approach for forex traders, to help in narrowing down which pairs to focus on for the day, week, or month.

Michael
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Be careful what you think because your thoughts run your life..Solomon
Quoting Vishy
{quote} Hi Akt, Re. your NZDUSD analysis here, I notice that when price returned to the daily, 4hr and 1hr demand levels, the level was still fresh and a trade could have been taken. Now assuming my entry timeframe is the 1hr, since price has already left and consolidated above the level, this demand level is no longer fresh. Therefore, we should probably not trade the pullback to the level again. Is this right? Thanks, Vishy {image}
Hello Vishy

Thank you for your question on the chart i shared on the NZDUSD.

In this case, if the entry was the hourly chart then the trader may have missed the initial trade. I see it returned to the 4hr level and rallied hard, as expected.
There was another retest of the 4hr demand that did take prices lower to that hourly zone and rallied for a decent trade.
Like you said, looking at the zone on an hourly chart, it is not fresh and so the tactics used to trade it would be adjusted to fit the lack of freshness. By this, i mean for example, using a confirmation trade at that level. Please note that confirmation can be done in a number of ways, for example, going down to a smaller timeframe like a 15min chart and seeing if there are new levels being created that one can use to join the long trade.

By the way, as you study the methodology, you will find that freshness is just one of the assessments of a zone that determine its quality and tradability. Other include, profit zone, how prices left the level, the time spent at the level before prices left, etc.

best wishes
Be careful what you think because your thoughts run your life..Solomon
Quoting nkomo78
USD JPY Hii ,Please Correct me If I am Wrong ... these are my thoughts about usdjpy...Price Is About to reverse {image} {image}
Hello nkomo78
Than you for sharing your thoughts on the USDJPY

Prices have reacted to the poorly structured demand zone below and are currently sitting at some supply. Granted it is not the best quality supply on the chart, not like the one just above it that you pointed out but it is still supply to be considered. If prices can't get through the current supply than this market will likely move lower.
It still has some work to do to go higher and with the trend being down on the monthly and weekly, it needs to start breaking supply for traders to consider going long

best wishes
Be careful what you think because your thoughts run your life..Solomon
Quoting ykn4f
Hello every one, I'm finally read all 300 pages and watch all the videos, so now I can try to post some analysis from myself, don't go hard on me, im new to trading :^) And thank you Akt for this thread, I'm lucky one to found this information on very beginning of my trading career {image}
nobody replied but it worked out
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Hi Akt and fellow traders,
I was curious - if you're using this methodology successfully, what kind of win rates have you been getting?
Of course, I understand that win rates are only a part of the story, and that it's possible to be profitable even with more losers than winners if you average a high reward:risk ratio.
But I'm still curious as I've noticed in my backtesting, I'm hitting profitable trades only 35% to 40% of the time. And I want to benchmark this with your data.
Thanks,
Vishy
hello everyone,

just an off topic question:

Do any of you manage accounts?
what track record do you use?
how to get investors?
do you guys start with family and friends?
what % do you guys take ?

I am just planning so I just wanted some information :-).
"Fall in love with the process and the results will follow" - Bradley Whitf
Quoting T4i
hello everyone, just an off topic question: Do any of you manage accounts? what track record do you use? how to get investors? do you guys start with family and friends? what % do you guys take ? I am just planning so I just wanted some information :-).
T4j- There are accounting firms I believe that specialize in this sort of thing. Depending on which broker you use (a good strong regulated one) will be able to assist with services too in this regard. There is a wealth of information out there about how to start a fund. Just do a search and you can find all the industry norms for this sort of thing. If you have an audited track record you can get alot of doors to open.
Do your time and enjoy the ride...
Quoting Vishy
Hi Akt and fellow traders, I was curious - if you're using this methodology successfully, what kind of win rates have you been getting? Of course, I understand that win rates are only a part of the story, and that it's possible to be profitable even with more losers than winners if you average a high reward:risk ratio. But I'm still curious as I've noticed in my backtesting, I'm hitting profitable trades only 35% to 40% of the time. And I want to benchmark this with your data. Thanks, Vishy

Vishy this is hard to answer because no one takes the trades the exact same way in the exact same setups even with the same methodology. So I don't know if you can benchmark. As you know win rates can fluctuate and even with a low rate of 35% you can still make money, but no one can predict ahead of time if that trade will be a winner.
Do your time and enjoy the ride...
Quoting ykn4f
{quote} nobody replied but it worked out {image}

Good work
Do your time and enjoy the ride...
Quoting Vishy
Hi Akt and fellow traders, I was curious - if you're using this methodology successfully, what kind of win rates have you been getting? Of course, I understand that win rates are only a part of the story, and that it's possible to be profitable even with more losers than winners if you average a high reward:risk ratio. But I'm still curious as I've noticed in my backtesting, I'm hitting profitable trades only 35% to 40% of the time. And I want to benchmark this with your data. Thanks, Vishy
Hello Vishy

If i may, like has been said, win rate can be a quite a deceptive metric because it does play on our human biases, of wanting to be right.

We have discussed here on T.I.O.F about the need to be very aware of "trader math" - it relates to the reward to risk ratio being the main determining factor for profitability rather than win rate.

Without going into it too much, having a win rate of 35-55% would put most traders in the top half of most raking tables for win rate because by most accounts, some of the most successful traders in the world have win rates between 40 and 60%. What makes a bigger difference is how much the trader wins when he does win, rather than the fact that he wins at all.

If one has a win rate of 40% and for each trade wins 3x what is risked compared to another trader who wins 50% of the time making 1x what he risks per trade. For a given sample size of trades, the trader with the higher reward to risk ratio will be more profitable.

So please consider including in your backtesting, an assessment of the reward to risk ratios of the trades in your sample sizes.

best wishes
Be careful what you think because your thoughts run your life..Solomon
It is always nice when the plan comes together.
Short at 4HR Fresh Supply Zone
Risk and Reward 1 : 2.7

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Quoting thiha
It is always nice when the plan comes together. Short at 4HR Fresh Supply Zone Risk and Reward 1 : 2.7 {image}
nice,

would you be so kind to share your thought process?
"Fall in love with the process and the results will follow" - Bradley Whitf
hello everyone,

I have a question regarding S.E.T.

in the past I always entered Stop-loss, Entry and Take profit beforehand.

lets say I want to sell: price does not reach my entry it just hit take profit order (buy) so instead of going short I am going long.

so in this case I cannot use a S.E.T strategy only S.E.

I am using OANDA, so how do you guys go about this?
"Fall in love with the process and the results will follow" - Bradley Whitf
Quoting T4i
{quote} nice, would you be so kind to share your thought process?
Hello T4i,
It was W-D-4Hr sequence with confirmation entry.
Please check the chart below.
Thanks
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Hello everyone, i have a question - does anyone has struggle with qualifying zones on a lower times frames like 10 mins and lower?
I want to practice more, thats why i switched to one instrument and 1h/15m/3m tfs, so i dont need to wait alot to see if i was right or wrong

sometimes charts looks super messy for me and i dont know is this zone can be charted like this or not
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Quoting thiha
It is always nice when the plan comes together. Short at 4HR Fresh Supply Zone Risk and Reward 1 : 2.7 {image}

Nice
Do your time and enjoy the ride...
Quoting T4i
hello everyone, I have a question regarding S.E.T. in the past I always entered Stop-loss, Entry and Take profit beforehand. lets say I want to sell: price does not reach my entry it just hit take profit order (buy) so instead of going short I am going long. so in this case I cannot use a S.E.T strategy only S.E. I am using OANDA, so how do you guys go about this?
You should be able to use a bracket order which will achieve what you want. Call you broker to have them walk you through it...
Do your time and enjoy the ride...
Quoting ykn4f
Hello everyone, i have a question - does anyone has struggle with qualifying zones on a lower times frames like 10 mins and lower? I want to practice more, thats why i switched to one instrument and 1h/15m/3m tfs, so i dont need to wait alot to see if i was right or wrong sometimes charts looks super messy for me and i dont know is this zone can be charted like this or not {image}
Zones on the lower timeframe are more for refinement after you identify your bigger picture zones.
Do your time and enjoy the ride...
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