A question asked in my main thread:-
"I have been attempting to trade using "price action" alone but results have been disappointing so far. Although I don't doubt that there are people trading profitably from a naked chart, I have been finding it very difficult...when the day is long I can interpret all kinds of things into a chart.
That's why I find the concept of "value" as it is introduced by Ray very interesting. I guess being able to read the orderflow also greatly improves your trading when you can fine tune your entries or see big players getting long/short etc. etc. Is there also a way you can read orderflow ( orderbook) in Forex ? I would assume that large institutions would have ways to get a better picture of where liquidity is in FX other than just guessing, using round numbers or looking at support/resistance............................................"
My Answer: Unfortunately the nature of Spot Forex is that there is no centralised exchange. This means that there is no Limit Order Book, and that even getting reasonably representative volumes on each candle isn't straightforward unless your Broker provides a number amalgamated across several Liquidity Providers. So no advanced Orderflow Analysis is possible in the spot Forex markets.
Even without a Limit Order Book, it is usually possible to get a very accurate idea as to where Stop Loss Liquidity exists (all retail traders are taught to put their Stops in the same place). You can also see from price action where large passive liquidity has been revealed in the past. If this liquidity was not exhausted and price returns (assuming no important news events have moved the value), then its likely that there will be liquidity at that level again.
During the US session when the currency Futures volumes are reasonably high, it is possible to use Orderflow Analysis on the equivalent currency future in order to trade the Spot FX.
However the banks tend to trade wherever the volume is good, so even they trade the Spot Forex markets - especially during the European session - which means that they too can't use Advanced Orderflow Analysis for those trades. So they have to rely on 'Value Lines' (e.g. the yields), Price Action, amalgamated Volume, levels at key times (e.g. Session Opens, Closes, 'Fix' times, levels at key economic news times, Round numbers/wholesale levels) and divergences against correlated markets such as similar currency pairs.
Please note that I'm mostly a news trader and don't use much Orderflow Analysis myself.
I hope this helps.
"I have been attempting to trade using "price action" alone but results have been disappointing so far. Although I don't doubt that there are people trading profitably from a naked chart, I have been finding it very difficult...when the day is long I can interpret all kinds of things into a chart.
That's why I find the concept of "value" as it is introduced by Ray very interesting. I guess being able to read the orderflow also greatly improves your trading when you can fine tune your entries or see big players getting long/short etc. etc. Is there also a way you can read orderflow ( orderbook) in Forex ? I would assume that large institutions would have ways to get a better picture of where liquidity is in FX other than just guessing, using round numbers or looking at support/resistance............................................"
My Answer: Unfortunately the nature of Spot Forex is that there is no centralised exchange. This means that there is no Limit Order Book, and that even getting reasonably representative volumes on each candle isn't straightforward unless your Broker provides a number amalgamated across several Liquidity Providers. So no advanced Orderflow Analysis is possible in the spot Forex markets.
Even without a Limit Order Book, it is usually possible to get a very accurate idea as to where Stop Loss Liquidity exists (all retail traders are taught to put their Stops in the same place). You can also see from price action where large passive liquidity has been revealed in the past. If this liquidity was not exhausted and price returns (assuming no important news events have moved the value), then its likely that there will be liquidity at that level again.
During the US session when the currency Futures volumes are reasonably high, it is possible to use Orderflow Analysis on the equivalent currency future in order to trade the Spot FX.
However the banks tend to trade wherever the volume is good, so even they trade the Spot Forex markets - especially during the European session - which means that they too can't use Advanced Orderflow Analysis for those trades. So they have to rely on 'Value Lines' (e.g. the yields), Price Action, amalgamated Volume, levels at key times (e.g. Session Opens, Closes, 'Fix' times, levels at key economic news times, Round numbers/wholesale levels) and divergences against correlated markets such as similar currency pairs.
Please note that I'm mostly a news trader and don't use much Orderflow Analysis myself.
I hope this helps.
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