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  • #601
  • Sep 24, 2009 8:03am Sep 24, 2009 8:03am
Quoting Lou
The link opened to a blank page. Tried it a few times... same result.
that is a link of an expired session; that is, Limstylz gave a link to the website during his particular visit to that website.
maybe he can direct us to which website that was. is it the one on this post (http://www.forexfactory.com/showpost.php?p=3089424&postcount=599)? ok, thanks.
  • #602
  • Sep 24, 2009 8:07am Sep 24, 2009 8:07am
Quoting Scotty B
I don't know if they do. If SKFX emphasizes the speed factor, I assume he is watching time and sales/DOM in realtime and acting quickly on his observations. Time and sales IS orderflow. Depth of market is possible orderflow- a glimpse on the currently available liquidity/trading options. I think these guys use simple futures data to do their analysis, and laugh and laugh when they see us searching for something that does not exist; a chasing of the wind. I read a very intreaging research paper tonight that has convinced me of this.

Gaston said...

You may be right, I don't know.....could be under my nose, hell I could be doing some of it.. I don't know...
I just know I found things that worked well for me so much so that I gave up on that hunt a long time ago, but always wondered what they were looking at...
  • #603
  • Sep 24, 2009 8:26am Sep 24, 2009 8:26am
Quoting supremeChaos
that is a link of an expired session; that is, Limstylz gave a link to the website during his particular visit to that website.
maybe he can direct us to which website that was. is it the one on this post (http://www.forexfactory.com/showpost.php?p=3089424&postcount=599)? ok, thanks.
Yes sC, you are correct. I realised only after my other post with the 2nd link that this would be the case. My last post with the link to MarketDelta is the correct one.
  • #604
  • Sep 24, 2009 8:34am Sep 24, 2009 8:34am
Quoting Prime#
You may be right, I don't know.....could be under my nose, hell I could be doing some of it.. I don't know...
I just know I found things that worked well for me so much so that I gave up on that hunt a long time ago, but always wondered what they were looking at...
Yeah, even simply watching volumes in market delta at the bids and asks you'll notice that price goes into the direction of the dominant side. Also, you can trade away from the low volumes. For example, when price makes a swing high during an upmove on a lower time frame and you see that at or near the high there were under 10 contracts traded, you would have a pretty safe short setup. The possibilities are endless really, but thats more market profile trading than orderflow. I'll attach a chart of this just for the heck of it..It's an old chart I had saved, it's shows a swing low with weak volume and then a good up move.

If any of you are interested in playing with Market Delta, they do have a demo package you can use for one month. Sign up with them, and infinity futures for your data.

Scotty B
Attached Image (click to enlarge)
Click to Enlarge Name: EUSUPPLY.JPG Size: 240 KB
  • #605
  • Sep 24, 2009 8:37am Sep 24, 2009 8:37am
Quote
I would be curious to know how they determine bids from asks with a spot feed. If they are simply using tick counts, it's probably not good enough, and I doubt they are doing anything other than that. But if you are plugged into futures data, which is highly transparent, you could get bidXask counts that were much more accurate.

For sure, however, they specifically mention this method of measuring bidxask. I presume that the feed from the broker is not an amalgamated mix of bid/ask into one tick chart, but separate bid and ask (similar to dukascopy). They do state that combined with their market profile charts this paints a pretty good picture.

Obviously one would need to check this for himself.

Quote
I talked to a guy at a brokerage in Chicago a while back about the Market Delta fx futures feed and he said they get all relevent trade info down to individual buy and sell initiated trades.

Again, this would be dependant on broker.
  • #606
  • Sep 24, 2009 9:17am Sep 24, 2009 9:17am
Quoting Scotty B
Yeah, even simply watching volumes in market delta at the bids and asks..........


I dig everything you say..
Trust me mate, I've been staring @ MD charts for years from 3:30 AM - 3-30PM, I use the Ninja Plugin these days. I've got some pretty solid things I use them for that are built around concrete market mechanics...

With that said, I believe we seeanalyze the effects of the order flow in real time. But I believe the currency order flow experts already have the information that causes these shifts in supplydemand before hand. That's just my personal opinion, I really have no clue what they are looking at.

I just can't imagine NOT HAVING A CHART. Darkstar said no chart.
To not have a chart, you have to have the price levels already beforehand.

Now in the end it's all moot..
Either you are making money or you are not.
However I think all of us enjoy learning all we can.
  • #607
  • Sep 24, 2009 10:15am Sep 24, 2009 10:15am
Quoting Prime#
I dig everything you say..
Trust me mate,...
If you think about it, even the dealers at the biggest banks can only know so much. They look at their own customer orderflow and glean market insights from it. If you are a dealer at X bank, and a hedge fund buys a ton of Euro's from you, there is a good chance you will get long too. This is because orderflow from certain customers is informative, especially financial customers. When those people trade, they usually know something about fundamental values that dealers don't, this induces the dealer to then buy from another dealer and so on. Many times, orderflow will subtley reveal the outcomes of news before it's publically realeased. One time Gaston mentioned that when price ticks up by one pip, something was just factored into the market. I think this is what he was refering to. So orderflow transmits information.

Objectively speaking, the dealer actually knows nothing until he has orders to look at. If he does not have stop orders attached to open orders on his book, then he can't know about stop orders unless say, another dealer shares information with him about stops in his book. But once a dealer receives orders, he does have an informational advantage. Because the forex is unregulated, dealers can do things that dealers in other markets would be disbarred for. Like taking advantage of large market orders from customers and stepping in front of them, taking advantage of stops, sharing info about customer orders, thinning out liquidity in places where TP's will trigger ect..I could go on all day about how dealers could take advange of what they know. And thats my point, all they need is customers to click buy or sell and they've got them already.

Now, I've already said this, but if you have streaming time and sales data, and your purpose is to trade orderflow, you really wouldn't need a chart. At this point, I am 90% certain that this is what the orderflow guys are doing. It's not nessisarily about having price levels way before hand, but keeping tab of buyers and sellers in real time and trading accordingly.
  • #608
  • Sep 24, 2009 11:39am Sep 24, 2009 11:39am
Quoting Scotty B
If you think about it, even the dealers at the biggest banks can only know so much......

First off thanks for the conversation, much appreciated. With all due respect I think we are looking at it from 2 different angles. I think you're going bottom up and I'm trying top down.

All we need to know is WHO, WHY, and WHEN.That's it.

If we know WHO is going to make the move, WHY they are making it, and WHEN, then we can put ourselves in position to take advantage of it.. it'll will be all over but the crying and ... and the crying is the resulting order flow and price action we see.

A fukton of money? You would make assloads of money if you knew that.
(4 fuktons = 1 assload)

If we know who, why, and when then we wouldn't care about charts, MD, T&S, DOM"s or anything. It's not like "trading" as we know it.

Gaston said once that most people see a currency as a chart, they don't see the country behind it or the politics, that stuck with me for some reason. These guys don't trade a lot and are real meticulous about picking spots.

I always felt they knew the who, why , and when and that is what I was trying to seek back then-- who, why and when. Order flow, price action, etc I felt was just a byproduct of the who, why , and when.

cheers
  • #609
  • Sep 24, 2009 7:32pm Sep 24, 2009 7:32pm
Quoting Scotty B
I don't know if they do. If SKFX emphasizes the speed factor, I assume he is watching time and sales/DOM in realtime and acting quickly on his observations. Time and sales IS orderflow. Depth of market is possible orderflow- a glimpse on the currently available liquidity/trading options. I think these guys use simple futures data to do their analysis, and laugh and laugh when they see us searching for something that does not exist; a chasing of the wind. I read a very intreaging research paper tonight that has convinced me of this.

Gaston said...

I must have read the same paper because I came to the same conclusion. Through the standard sources there is no spot order flow information. There may be some institutional datafeed that I'm not aware of, but there is public info available in the fx futures, and for those people who have read the papers and done their homework they will recognize the value of this public order flow information. The other piece that Darkstar mentions is a feed that gives:

Quote
To trade order flow you need data from outside the chart. Level 2, a brokers orderbook, a service that gives you info about brokers orderbooks, etc. There is a fuckton of money to be made from orderflow trading if you know what your doing, but you need the datafeed.

And no, I won't tell you where to get a datafeed. Some things are better off not being shared.

"A service that gives info about brokers orderbooks. I'll take issue with Darkstar on his last statement. I believe he actually has revealed what service he uses but in the spirit of maintaining the "mystery" you'll have to do a search on his posts to find it.
  • #610
  • Sep 24, 2009 7:39pm Sep 24, 2009 7:39pm
Quoting Prime#

I always felt they knew the who, why , and when and that is what I was trying to seek back then-- who, why and when. Order flow, price action, etc I felt was just a byproduct of the who, why , and when.

cheers
Sorry, but that would mean the ultimate Holy Grail quest.
  • #611
  • Sep 24, 2009 10:27pm Sep 24, 2009 10:27pm
Quoting FXEZ
A service that gives info about brokers orderbooks. I'll take issue with Darkstar on his last statement. I believe he actually has revealed what service he uses but in the spirit of maintaining the "mystery" you'll have to do a search on his posts to find it.
We've already brought up IFR Markets, is that what you are referring to? In all honesty, I really hope Darkstar and the others are not dependent on some service. What happens when this little man quits whispering secrets in your ears? Nothing good ever lasts, especially something like this, if it is infact what they rely on. Good traders have control of what they are doing, they are certainly not dependant on some service that could vanish tomorrow.

I think that trading orderflow is a skill that starts with a thorough understanding of the market you trade in. Something that a person needs to develop. Thats why there are so few of these guys, nobodys interested in doing any homework. I'm not directing that at you, just pointing out it is the norm. On a funny side note, we don't know if these guys are even legit or not, we're just giving them the benefit of the doubt.
  • #612
  • Sep 24, 2009 11:42pm Sep 24, 2009 11:42pm
Quote
We've already brought up IFR Markets, is that what you are referring to? In all honesty, I really hope Darkstar and the others are not dependent on some service. What happens when this little man quits whispering secrets in your ears? Nothing good ever lasts, especially something like this, if it is infact what they rely on.

These services (IFR and the like) may or may not have continuing value, but beyond them there is another source of market depth. However datafeeds that cater to institutions and require 1M accounts are not relevant to most forum visitors. I suppose if one has a large enough account to swing the market a few pips, it could be a useful way to decide whether to stop hunt. It's not something that's going to make a difference to most of us.
  • #613
  • Sep 25, 2009 12:04am Sep 25, 2009 12:04am
Thoughts and observations

{Disclaimer - To those concerned, If I step on someone's edge I will remove details if nec. I am trying to learn from you not destroy your income source}


Unfortunately it has been said that to achieve profits we must capitalize on other participants pain. So we need to know where someone is positioning themselves and what will cause them pain. Or, we need to position ourselves with someone who is perpetrating this pain.

Hypothesis 1
When a certain participant is accumulating inventory and is shocked by something (sudden knowledge of X), they need to unwind quickly before others take advantage of their weak position. We are looking for them to show their hand in this situation and we can do this because of the volume they need to get rid of. They will generate 'order flow' information to us either before or after the event that caused them to need liquidity.

Before the event if what we are looking for in order flow alerts us to a large supply on one side of the market (identifiation of a one sided market being our edge) and then we wait for an event to happen that would cause that liquidity to suddenly reverse (application of edge). We know they are there so we enter as they try to unwind.

After the event if it is only by perceiving the pattern of their actions in order flow as they attempt to unwind into an illiquid market that we find our edge. So our edge is still identification of a one sided market but it is applied immediately.

Hypothesis 2
Alternativly, we are looking for a certain participants 'play'. Their intention is known to us because we identify the pattern in order flow that is produced by implementing this play. We then position ourselves to profit with them. They operate out of certainty due to their superior knowledge derived from their own order flow information. Obviously, if they become aware that speculators have identified their operations and are reducing the profitability of the 'play' then they will change the pattern and there goes the edge until you can discover a new pattern that identifies the play.

I am betting on the second hypothesis due to the hesitancy of traders to divulge too much information on how to find the pattern. The play will be related to the running of stops due to the effects of a succesful stop run moving the market enough for the play to have benifit to the instigator who is trading with large volume.

You cannot know with certainty if there will be a stop run without information derived from a source other than the chart. You can easily identify the aftermath but to affectively participate you need this 'other' information.

Other thoughts

Are there times when we can know where and why orders are placed and who is placing them. YES, it benefits certain dealers to divulge information about what they are doing, I believe this is usually the case when the dealer has an interest in protecting a certain level or pushing price above a certain level.
Example, When digital options are expiring and price is out of the money we can easily access reports as to where XYZ will try to contain prices. This has been said before. To some extent you could call this order flow information.

Another more sinister possibility is that some participant may want the market to be looking at certain levels in order to position the market a certain way so they can capitalize on a strategic 'play'.



More pieces of a puzzle

Generally speaking, it is the execution of stop orders that will trigger a market to rise or fall rapidly. Why? because when a stop order is executed it becomes a market order, the market order will result in hitting the bid or the ask at the next available price. But what if everyone has pulled their limit orders due to 'some information', or, what if all the limit orders have already been taken out at these levels. The next available price that will take the volume of the market order may be quite far away. Resulting in new stops being hit and new market participants are factoring in the price decline/rise.

The succession of stop orders resulting in market orders will produce very large price movements within seconds/minutes as the ripple effect spreads outward triggering more and more stops until a pool of liquidity halts the movement. For this to happen though, there must be a lack of liquidity preceeding the stops being taken out.

The Trap

Why would an institution run the stops?
Inst = institution implementing stop run play
There must be a small amount of volume in the path to the stops, the Inst is aware of a large supply of liquidity not far above the stops, (this is probably commercial in nature and deep providing an exhaustion point for the move). The Inst is also aware that by triggering the stops a large amount of volume will hit the market that they will happily take the other side of.

After implementing the play the Inst has profited from the temporary surge in price as they take price to the stops and exit using the liquidity provided by executing the stop orders, they also absorb any remaining liquidity at this level.

The Inst is now positioned at a protected price level due to their knowledge of the orders residing just above (below) them. They have taken away most of the liquidity on the way to this point so there is almost complete certainty on the part of the Inst that price will fall from this point. It is now a one sided market.

THE PERFECT TRADE. Assuming the Inst is Short, any trades that hit the bid from here will make the market jump down, there is a vacuum on the buy side, except for some trades entering at the break out point who are now placing stops that will fuel the inevitable fall.

Furthermore, due to the nature of the cash markets there is nothing stopping a number of institutions from colluding to further ensure a 99% certainty of price dropping from this point.

What order flow can we see that will show this operation as it is happening? how can we find out where the large pool of liquidity reside? What does the market look like for an Inst to implement this play?

We may be able to guess this operation is taking place by reading charts but perhaps with the aid of certain additional information sources we can be 99% sure the operation is taking place.

P


more to come
  • #614
  • Sep 25, 2009 12:43am Sep 25, 2009 12:43am
Quoting Scotty B
We've already brought up IFR Markets, is that what you are referring to? In all honesty, I really hope Darkstar and the others are not dependent on some service. What happens when this little man quits whispering secrets in your ears? Nothing good ever lasts, especially something like this, if it is infact what they rely on. Good traders have control of what they are doing, they are certainly not dependant on some service that could vanish tomorrow.

I think that trading orderflow is a skill that starts with a thorough understanding of the market...
I wasn't aware that it had been already discussed but yes you surmised correctly. I think there was a post here on FF a while back that discussed the economics of why banks have a vested interest in blabbing about certain customer orders, and this is the primary reason why these types of services are likely not going to be going away anytime soon. They make $$ by telling. Option plays are probably the best example. But like anything, the magic isn't in the news service, charting method or DOM. It's about developing a strategy to take the information - (because that's what all three of those have in common) and synthesizing it into something that is exploitable under a given strategy. It's just that there are more valuable bits of information. Knowing where the orders are clustering is valuable information. You can get that information by figuring it out from a chart, seeing the action on the DOM when it gets to that level, or having a whisper tipping you off to look at a certain level. I would say the third option is the easiest way to get that information, but it still needs to be backed up by analysis of the minutia. It's easy to miss it when studying a chart if it isn't an obvious S&R level, or the DOM if you don't know where to look ahead of time or aren't looking at the moment it is happening.
  • #615
  • Sep 25, 2009 8:40am Sep 25, 2009 8:40am
Quoting Porkpie
Yes exactly, but Limit Orders are also not guaranteed as the market may turn before price reaches it.

Guru Larry says " Well informed traders tend to submit market orders rather than limit orders...as they subject the limit order traders to adverse selection".

Its all about Fast Trader's (Skfx). The fast traders will get in before the limit orders if these limit orders are on the right side of the market. Therefore the limit orders may never get filled. Its the fast informed traders competing with the slower informed traders.

Trading...
I have not read the whole thread but, on post 193 you posted a paper about informed traders and types of orders. The data they use is old from 1990-1991. IMHO this article is somewhat irrelevant. Since then there has been a lot of changes, from decimal pricing, internet trading , retail trading, globalized markets, faster exchanges, huge volume expansion, options, HFT, etc. Even though the paper was preliminarily drafted in March 2009 and still has to be written, nearly a 20 year time difference is huge.

The other thing is their definition of informed traders. Essentially they describe an informed trader as one who trades in the correct direction. An uninformed trader is one who trades in the wrong direction. Essentially according to their definition, I can be an informed trader if I flip a coin it tells me to buy, and then after the news event I am considered an "informed trader"

An informed trader must be identified ex ante to the event and results compared ex post. They obviously don't have a method to do that.
  • #616
  • Sep 25, 2009 12:03pm Sep 25, 2009 12:03pm
I have a feeling, posters on this thread are trying to create their own 'order flow religion' or trying to find a 'new age philosophy' to guide their life /sarcasm.

I can assure you it is much simpler than that.

http://en.wikipedia.org/wiki/Supply_and_demand

http://en.wikipedia.org/wiki/Price_mechanism

That is exactly the point espoused by slimcat and pipmutt in the quote below. Order flow is the buy and sell, the demand and supply of the market. Where demand and supply reach equilibrium is PRICE. Repeat that to yourself and try to understand the Supply and Demand wikipedia article. On the chart in the article order flow is the Q or quantity, and how much quantity of Supply or Demand is in the Market influences the P or price until the Demand and Supply curves reach equilibrium.

Attached Image


At that point in TIME you have price. Then what do we as humans do to understand price better. We plot it on a graph with price on the Y axis and time on the X axis. Those are the graphs we create. All the while time goes forward and quantities of supply and demand change, and we see that corresponding change in the graphs. We can even interpret this change with pinbars, support and resistance, etc.

Quoting slimcat
As orderflow is obviously the reason for all price action in the market ie pinbar formation bouncing off support etc etc it is easy to say that that is the reason why the pinbar formed, of course it is ..orderflow leads to price action.
What I'm trying to say here is that I think the way the OP is using the word orderflow is misleading as there is no evidence in any of his posts to suggest that he is reading it.

If I wanted to teach people about orderflow why would I post charts?
If I wanted to teach people about PA which results from orderflow...
Quoting pipmutt
I think that's where the confusion started, people took 'read order flow' in the literal sense, a kind of viewable book with all the orders in, people are downloading fx futs demo platforms and forex spot demo platforms with broker's Level 2 data for crissakes

I agree that the probable places for orders are on the charts but it still leaves a question mark over the statement the OP made, "you don't need the charts believe me" (http://www.forexfactory.com/showthread.php?p=3001996#post3001996), and I think that's where all this...
You may not literally be able to read orderflow (in forex), but you can interpret it through charts.


My rant on level 2:

Most people don't have access to 'level 2' in forex. Its much more prevalent in centralized exchanges. I don't and I'm pretty sure most of you don't either, most are just BSing. Even if you did, the market is $3.21-$3.98 Trilliion(http://en.wikipedia.org/wiki/Foreign_exchange_market) in a 24 hour period on 6 continents. Even if I have the orderflow for the CME, there are hundreds, maybe thousands of banks, brokers, institutions, mom and pop shops all over the world on 5 other continents, with an order book I can't see.

Its not like the level 2 on a centralized exchange (i.e. NYSE, NASDAQ) where all the limit orders are in one place, and can be seen by all. Contrast that with the forex market, for example the CME book may show limit sells on EU at 1.40 of the value of $20 billion, but on some other continent some other bank who is not showing their cards on any exchange is ready to buy $80 billion at 1.40. That MIGHT blow right threw your 1.40 limit sell, depending in other quantity factors.

-snacker
  • #617
  • Sep 25, 2009 12:27pm Sep 25, 2009 12:27pm
Quoting thesnacker

You may not literally be able to read orderflow (in forex), but you can interpret it through charts.

I dunno how much value it would be though, it's just a discretionary guess and couldn't be traded on, there's absolutely no complete data for an OTC market like forex. I suppose tick volume might help if you knew how to interpret it, but where is a reliable source?

Way too many variables here, what rates are you seeing? Indicative rates / price changes? Deals? What???

....and way too much mystery and intrigue...."I know but I ain't telling"....yeah, right!
  • #618
  • Sep 25, 2009 1:12pm Sep 25, 2009 1:12pm
Quoting pipmutt
I dunno how much value it would be though, it's just a discretionary guess and couldn't be traded on, there's absolutely no complete data for an OTC market like forex. I suppose tick volume might help if you knew how to interpret it, but where is a reliable source?

Way too many variables here, what rates are you seeing? Indicative rates / price changes? Deals? What???

....and way too much mystery and intrigue...."I know but I ain't telling"....yeah, right!
When I said interpret through charts I meant, support/resistance, pinbars, patterns and such.
  • #619
  • Sep 25, 2009 1:19pm Sep 25, 2009 1:19pm
Quoting pipmutt
I dunno....but where is a reliable source?...
eSignal (http://kb.esignalcentral.com/display/2n/articleDirect/index.asp?aid=3108&r=0.3485529)? 200-300(?) sources/contributors.


Quoting thesnacker
When I said interpret through charts I meant, support/resistance, pinbars, patterns and such.
  • #620
  • Sep 25, 2009 1:26pm Sep 25, 2009 1:26pm
Quoting thesnacker
When I said interpret through charts I meant, support/resistance, pinbars, patterns and such.
Right right, and that's tradeable.
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