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  • #81
  • Nov 30, 2008 5:48pm Nov 30, 2008 5:48pm
Quoting FXSurfer
Would this post be an example of using order flow info for trading?
Just checking to see if I'm understanding correctly.



Thanks Again!
Brent
I think its good for us to remember what the market needs to do to exist. Its in the markets best interest to fill as many orders as possible, Darkstar called it searching for liquidity, without a counterparty nobody can trade.

Who exactly controlls this "search" is a different question all together, deep pockets needed me thinks. Although this search can and will also happen naturally.

If you can locate a place where a large amount of stops will be/and do it consistently, there is a multitude of different trading plans you could put together to capitalize on it. Afterall, all you need to do is cover spread and then anything over that is a profit.

Leon
Living the adventure in my head.
  • #82
  • Edited 6:43pm Nov 30, 2008 5:58pm | Edited 6:43pm
Quoting NuckingFuts
I found this a great read Leon:

http://www.zen18752.zen.co.uk/html/forex_trading.html

Bottom line is a simple MA cross system can be profitable.

Get hold of a MA cross EA, put it on a daily chart and backtest for 5-10 years. 10 and 20 periods for the MA are a good start.

Completely mechanical, no stops, short on cross down, exit and re-enter long on the cross up.

You may be surprised that it is actually profitable.

May not be 5% per day like many are blindly chasing, but it is still profitable in the long run.
But, is that an Edge or luck? It may well have been profitable and continue to be for another 20years, but what is the reason it was profitable?

Reading Tdion's posts first got me thinking like this. Although I dont know the guy, just reading his posts has helped me shake off a little of the fluff that sticks to you when hanging around the factory.

Leon
Living the adventure in my head.
  • #83
  • Nov 30, 2008 5:58pm Nov 30, 2008 5:58pm
Quoting FXSurfer
Would this post be an example of using order flow info for trading?
Just checking to see if I'm understanding correctly.



Thanks Again!
Brent
I am sorry I should clarify a few things. I use orderflow differently then how the banks use it. When I describe a big player buying where others sell, I am talking mostly about bank participation here. (Although technically we are all buying were others are selling…but I hope you get my point)

Example: They have a reason to get in the market, lets say long, and it’s a huge ass order. If they just hit the buy button right now, they will most likely shove price up through the roof as they buy out seller after seller at various price levels. If, on the other hand, they buy in at an area of high liquidity, then they can get in without driving price up as much, as there are more sellers at this level. When you see price bouncing on a level several times, this is often times one huge order that is taking several moves to work into the market. You are seeing support form. These levels form when price touches a point where the banks think there is sufficient liquidity, and they buy until all sellers are gone and price climbs to a certain level. Then they let price jump around for a while, do its thing, and come back down to the level again. They buy once more, taking out all of the sellers and spiking price up. They do this until their order is worked in.

I in no way play the market like this. I do not have orders nearly as large as they do to work in the market. I simply identify potential concentrations of order flow (in much the same way they do), but I have structured a strategy based on the reactions in those areas that I can take advantage of.

Now, I could ramble on this topic forever, but there is just too much and honestly I do not care about half of you that much anyway. Sorry. If you want to understand this stuff, then get reading. The information is out there. It is no secret. There are tons of concepts and market characteristics that can be explained by bank (and others) behavior. What I described is extremely simplified and dumbed down. Hopefully, however, this clears up a few things.
Headline: USD drops due to news of USD dropping!
  • #84
  • Dec 1, 2008 5:53am Dec 1, 2008 5:53am
Hi Gaston,

Is it possible that you could recommmend some books regarding orderflow?
  • #85
  • Edited 9:51pm Dec 1, 2008 11:43am | Edited 9:51pm
Quoting Leonlorenzo
Ps. Which brings me back to what I suggested earlier, Can Futures be used for this info. And if it can, what advantage does it offer over just trading futures. Actually, I dont recall Gaston saying tht he trades FX, maby im just making assumptions.
You are just right at the door. Do your homework from here. I won't handle you the food on the plate. Find it out yourself.
But don't forget to use stops to avoid your emotions.
  • #86
  • Dec 1, 2008 12:02pm Dec 1, 2008 12:02pm
Thanks op starting this topic and contributions from other gurus.

bow
  • #87
  • Dec 1, 2008 12:16pm Dec 1, 2008 12:16pm
Your welcome.

We take Cash and/or Gifts.... Nothing traceable, lol.

Leon
Living the adventure in my head.
  • #88
  • Dec 1, 2008 2:18pm Dec 1, 2008 2:18pm
Quoting highway
You are just right at the door. Do your homework from here. I won't handle you the food on the plate. Find it out yourself.
But don't forget to use stops to avoid your emotions.
Here's something I just put on the "How's and Why's" thread.
I don't understand the math but, you can see what's going on
with the Order Flow concept if you take your time and go
through it a few times.

http://www.forexfactory.com/showpost...2&postcount=22
  • #89
  • Dec 1, 2008 2:43pm Dec 1, 2008 2:43pm
Quoting FXSurfer
Here's something I just put on the "How's and Why's" thread.
I don't understand the math but, you can see what's going on
with the Order Flow concept if you take your time and go
through it a few times.

http://www.forexfactory.com/showpost...2&postcount=22
But on a serious note, I hope that understanding of this kind of equation is not essential. I see that some traders can program and are real math wizards, programming would obviously be a great help to be able to backtest a method.
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Living the adventure in my head.
  • #90
  • Dec 1, 2008 10:44pm Dec 1, 2008 10:44pm
Lots of eye-opening stuff in this thread. Kudos to you, Leon.

"Dead end..."? Not.



Gaston, would you recommend other books besides Trading and Exchanges: Market Microstructure for Practitioners?
  • #91
  • Dec 1, 2008 11:30pm Dec 1, 2008 11:30pm
LOL. Don't make it harder than it has to be.
  • #92
  • Dec 2, 2008 12:25am Dec 2, 2008 12:25am
Quoting Rabid
LOL. Don't make it harder than it has to be.
Believe me Rab, I hear you.

Larry Harris, the author, wrote this tome to be used as the text book for the intro econ class he was teaching at USC.

Hmm, I wonder if the Cliff Notes are available?
  • #93
  • Dec 2, 2008 12:51am Dec 2, 2008 12:51am
ROFL.

That book is incomprehensible for non-math people. And frankly, I don't know if quant skills really amount to trading skills. I took the plunge into quant stuff earlier this year, learned an awful lot, but never once did it show me how to trade. I felt my head getting bigger and bigger as my account got smaller and smaller.

I've come to think simpler is better, mostly. But simple in a way that matters, not just for the sake of it. I've come to like the market profile, atleast the concepts around it. The idea of market equilibrium and how to read price tests. Check out "Mind over Markets" and see what you think. Worth the money, IMO.
  • #94
  • Dec 2, 2008 12:58am Dec 2, 2008 12:58am
True.....still an interesting read as is "Market Wizards", "New Market Wizards" as Jedi suggested earlier in this thread. From what i gather from him Mr. Harris will be revising that book.....hopefully adding more forex related issues.

Quoting opie999
Believe me Rab, I hear you.

Larry Harris, the author, wrote this tome to be used as the text book for the intro econ class he was teaching at USC.

Hmm, I wonder if the Cliff Notes are available?
It's me...
  • #95
  • Dec 2, 2008 10:21am Dec 2, 2008 10:21am
Quoting topherhk88
1. I would be lacking the precision that I find necessary in my trading to properly exploit an edge.
2. I would almost certainly lose faith in my 'strategy' when I went into drawdown, since I would have no statistical drawdown expectations to help ground my battered confidence.
3. I would undoubtedly get caught up in the emotion of trading again, which is never something that has made me successful. Overconfidence or fear would inevitably erode my capital.
Chris
This is a great post. I identify myself with all that you are saying. That’s nice!
  • #96
  • Dec 27, 2008 9:56pm Dec 27, 2008 9:56pm
Gaston- I read a math paper analysing several companies in the stock market re: order flow and it's impact on price-

-He noted that news released to the public accounted for only 15% of price movement while price movement itself- or mechanical movement in the markets accounted for 50%!!! of price movements-

Very interesting- means that price moving in a direction influences it to keep moving in that same direction a large part of the time as I understood it-
  • #97
  • Dec 28, 2008 2:22am Dec 28, 2008 2:22am
Quoting topherhk88
Leon,

As you can probably see from my post count, I very rarely post to the forum. I have been trading for long enough now that, like many in the same position, I limit my posting to the few occasions where I can potentially add some value. For some reason, your post struck me as one of those occasions - I see someone who is on the right track, but just can't seem to get everything to 'click'. While I truly believe that most forums like this are largely comprised of the blind audaciously leading the blind, there are the few people like yourself...
I've been a FF member for quite a few years and this one of the few posts worth commenting on. Bravo.
  • #98
  • Dec 28, 2008 4:14pm Dec 28, 2008 4:14pm
Just noticed this thread. I'm allowing myself a little recreational read/write time over the Xmas break.

I too would like to say that the posts by Topherhk88 (#53,#72) and Gaston (#55,#73) are outstanding. Absolutely recommended reading for any forex newcomer. I'm going to bookmark them for myself.

Leon, I hope that you haven't given up completely. Hopefully 2009 will be the year where you discover your "aha" moment! As a technical trader, IMO there's no substitute for watching price movement, and simulators like vHands can help accelerate this process. Here are some of the key questions that I asked myself:

-- Are there definable areas where price occasionally stalls and/or reverses, and, if so, what might have been the cause?

-- Do prices occasionally return to certain level(s) following a decent breakout? What kind of wave patterns form following a breakout?

-- How does price behave around S/R? What types of S/R (prior conspicuous candle highs/lows; Fibo 38.2, 50, 61.8 levels; pivot levels; round numbers; trendlines; etc) are most reliable? What about confluences? [What happens when we have something like a triple top forming exactly on a pivot level in a downtrend (see chart below) - could we have made a low risk entry (tight SL) there?]

-- Aggregation of edges: what happens if we further combine this info with overbought/oversoldness, and/or longer term trends and chart patterns?

-- What clues can charts give us about possible bank agendas, order flows and stoploss hunts? (this is an area where I'm still very much learning)

-- What do big (high momentum) candles mean, at the beginning and end of moves?

-- More generally, what other types of candles, or patterns, or price velocity (more noticeable with vHands) occasionally signpost the beginning and/or end of moves?

-- During what times of the day do the biggest moves most often occur, for a certain pair? And following what types of pattern?

-- What happens if we use a currency strength meter, and trade only the strongest currency against the weakest one? (another area I'm still very much experimenting with)

Remember, we don't have to be right anywhere near 100% of the time. Getting on the right side of moves 60%-70% of the time is enough to provide a handsome edge. We can be as selective as we choose with our entries.

Here's my simple formula (with thanks to Gil Blake ):

1. Find a recurring ineffciency, pattern or phenomenon, amongst the chaos. (One is enough; more provide diversity, and increased opportunity.)

2. Convince yourself that it's statistically valid.

3. Devise a plan of entries and exits to exploit it.

4. Trade the plan!


MM is a no-brainer: size positions small (and consistently enough, percentage-wise) to keep you in the game.

Psychology is really nothing more than confidence: if you can't maintain discipline, then you didn't really get past point #2.

Maintain a philosophical outlook, know your risk on each trade, and play only with money that you can afford to lose.

Be very willing to think outside the squares, and beyond the unsubstantiated cliches that are posted on forums. Exits, MM, R:R and mindset are - in themselves - only part of the necessary answer. Without some kind of positive expectancy approach, a trader is really only guessing, and costs will ensure that his account will eventually bleed to death.

I'm still 'getting there' myself - it's a never-ending learning process - but I'm very confident that I have a much better road map now, than at any previous point.

Good luck, my friend.

And Happy New Year, folks - many pips to y'all in 2009!

David
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  • #99
  • Edited 2:11am Mar 1, 2010 1:47am | Edited 2:11am
Quoting bidie
Gaston- I read a math paper analysing several companies in the stock market re: order flow and it's impact on price-

-He noted that news released to the public accounted for only 15% of price movement while price movement itself- or mechanical movement in the markets accounted for 50%!!! of price movements-

Very interesting- means that price moving in a direction influences it to keep moving in that same direction a large part of the time as I understood it-
bump. There are some excellent posts in here.

I have been reading the usual texts on market microstructure as well as the "Introduction to High Frequency Finance" ca 2001 by the O&A staff geniuses.

The point made by Bidie here is one I have come across a bit & that flew in my intuitive face. The most accurate predictive models discount the effects of fundamentals and news and even asset sales and focus instead on the almost purely speculative nature of the fx market. And the movement of price at the tick level is not "noise", but the seed from which the mighty oak grows.

Anyway, still learning as I trudge through - but the Market Microstructure tomes are well worth the effort. Not sure it will change the way I trade - I scalp on the 10s charts anyway - but knowledge is power.

Good Luck.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #100
  • Mar 1, 2010 2:15am Mar 1, 2010 2:15am
Blast from the past. This was a great thread, I'll have to give it another read again some time.
Living the adventure in my head.
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