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  • #761
  • Jan 16, 2010 11:17am Jan 16, 2010 11:17am
Thanks for the exchange of ideas today, guys!

The forum's been having a real dry spell lately - unless you count the astrology thread -
  • #762
  • Jan 16, 2010 12:04pm Jan 16, 2010 12:04pm
Quoting PipAdder
I believe Porkpie means "orders sitting at those levels" when he says "stacked orders".

Actually, I like the "stacked orders" metaphor very much. There is a guy called Sam Seiden who has several online seminars and therein he talks about this stuff (google him, they are worth a look). He started as a floor trader somewhere before everything was computerized, and he always mentions how he could literally see orderflow by looking at his desk and noticing at which prices level the thickest stacks of pending order slips were sitting... that was...
If those stacks of tickets were all stop orders then I'd be pretty excited, but it sounds to me like good old limit orders. The problem is that limit orders don't move price, but they do allow it to move. I've become a full blooded momentum trader, but if I was more contrarian I might care about limits more. If for example I knew that there was some level full of limit sells, I might take that as a place of value and maybe I should consider selling off of it..Thats just boring to me though, because the only way price is going to move down off of it is if traders start hitting bids after that point is reached. All those limits will do is stop price from moving up momentarily if at all. I'd love to see price eat right through them and keep going though. Thats my kind of setup..Luckily I wouldn't need to be staring at the depth all day to see this happen..
  • #763
  • Edited 2:18pm Jan 16, 2010 1:50pm | Edited 2:18pm
Time and time again price will snap away from these areas in the direction of these orders as they are triggered cashing in on the uninformed going in the opposite direction. There is a good reason why price will move and thats both the sheer amount of limit orders and profit taking at these places. You have to pick the right place/zone thats the key. It's wrong to think that trading with a stack of limit orders is contrarian. Getting into a move before the herd is far from boring. You become part of the invitation and the herd pays you well for it with very limited risk. The bigger picture is important.



Quoting Scotty B
If those stacks of tickets were all stop orders then I'd be pretty excited, but it sounds to me like good old limit orders. The problem is that limit orders don't move price, but they do allow it to move. I've become a full blooded momentum trader, but if I was more contrarian I might care about limits more. If for example I knew that there was some level full of limit sells, I might take that as a place of value and maybe I should consider selling off of it..Thats just boring to me though, because the only way price is going to move down off of...
  • #764
  • Jan 17, 2010 3:53pm Jan 17, 2010 3:53pm
Great thread. Just finished it, have learned lots. Much appreciated everyone!!!
  • #765
  • Jan 17, 2010 5:16pm Jan 17, 2010 5:16pm
There are over thousands of systems or methods in which to trade the markets,and none is better than the other,it's just the trader's interpretation of a perticular method and his psychology of that method.Once you are making consistence money that's all that matters.A Rose by any other name smell the same.QUESTION WHEN WAS THE LAST TIME you identify strong order flow or better yet a strong supply area or a strong demand area and the market began to trend and did not cross these most popular MA,20 or 50 SMA? It has been said that MA's are lagging Indicators,HA Ha HA but when was the last time a trending market did not cross a popular MA.Please explain.
  • #766
  • Jan 18, 2010 2:31am Jan 18, 2010 2:31am
Quoting Scotty B
The funny thing about this thread is that there is a huge gap between theory and practice. There is really next to nothing in this thread that will help you in filling it. I don't mean to be disrespectful, but even SKs charts are somewhat illogical in the context of trading orderflow.

You can't see anything but price on a price chart. I think thats why they are called price charts.
You're correct my friend. My studies on the subject of order flow have taken me far and wide. I've been at this a long time and I feel like my education has finally started to round out. The book mentioned several times in this thread (Larry Harris "Trading and Exchanges") is just a starting point and a boorsomely basic one at that. Allow me to sum up the most important part of it: "the only traders who make consistent $$$ are the ones with superior information - typically information about value (fundamental or technical/order flow). Don't trade if you aren't an informed investor/trader" So basically hardly anyone on FF has any business trading according to LH. Nice - and likely true :O

The papers on the subject, while educational and phd-ish in nature don't move the ball toward an executable strategy that much either. But I'm glad I read them for the few insights they contain.

As for bridging the gap, I believe a good starting point is the book "Mind Over Markets" by Jim Dalton. It's just a start and yes, it's an old book that is mostly out of print about using a funky 80s charting technique. But at the core the book does the best job I have seen in putting the market structure together into a coherent explanation so that it is accessible to the average trader or would be trader. I believe its core concepts are sound: balance/imbalance, initiating/responsive, control, value, use of price/volume distributions to explain market structure and some other important concepts that I can't seem to think of off the top of my head. The concepts are sound but it's possible that some of the analysis methods / tools in the book may not be as sound. You'll have to sift it like anything else you read. And by the way, it ISN'T a book about strategies but about understanding market structure. But the light bulb turned on when I read the dual auction market description as a way to explain how the market operates.

You're also right that a price chart doesn't contain order flow information. Price and volume are necessary to understand/see order flow. We private traders may never see banks' private order flow records but price distributions and (volume distributions for futures markets) can be had and analyzed as an additional way to move the ball forward. I believe that staring at the DOM is a red herring. It mostly consists of potential order flow, not actual order flow and is far less useful than staring at price/volume distributions IMHO.
  • #767
  • Jan 18, 2010 10:03am Jan 18, 2010 10:03am
Quoting FXEZ
You're correct my friend. My studies on the subject of order flow have taken me far and wide. I've been at this a long time and I feel like my education has finally started to round out. The book mentioned several times in this thread (Larry Harris "Trading and Exchanges") is just a starting point and a boorsomely basic one at that. Allow me to sum up the most important part of it: "the only traders who make consistent $$$ are the ones with superior information - typically information about value (fundamental...
The most valuable commodity I know of is information, wouldn't you agree???

Gordon Gekko
Trading is the game of fear and greed.
  • #768
  • Edited 4:21pm Jan 18, 2010 4:10pm | Edited 4:21pm
Quoting Fx chartist
The most valuable commodity I know of is information, wouldn't you agree???

Gordon Gekko

..yes but errrr....most of it is bloody useless (in trading at least)! So what is more useful than 'information' and that is knowing that most of it is bloody useless..which you could say is err, information..ok, ok you win!

No actually you don't win.

Experience is more useful than information and experience as the owner experiences 'it', isn't something you can package and transfer and sell to someone else. Therefore, compared to information as a 'commodity' (which is where some of the uselessness comes in), 'experience', although considered information, can not be commodified. Yet when compared to knowledge as a commodity, experience is priceless. Experience will change how we use information and sort the useless information from the valuable information.'Valuable' being subjective of course. There are not many universal truths in trading. If there were there wouldn't be much of a market would there.

Yes I know, I am bored and pedantic.
  • #769
  • Jan 18, 2010 4:33pm Jan 18, 2010 4:33pm
Guys, there are two types of trading being talked about here. Trading order flow from a dealers perspective is entirely different than trading it from a retailers perspective, and the two should not be confused. A successful dealer is by no means a successful trader.

A dealer does trade information, and does so quite effectively. It is not enough for them to simply pocket spread or transaction costs, but they are expected to outperform even that by using techniques such as front running and price shading. They do this from the info they get from the orders they hold: order flow trading at its purest. Information is vital to them.

A retailer cannot trade like that, however when a dealer shades price for example, he is putting himself at risk for arbitrage. Now I know most dealer-arb traders work with lagging dealers instead of leading ones, but the concept is really the same. The dealer quotes a price outside the norm (as defined by interbank prices) to, say, trip stops that he see's his customers have placed. A nimble retail customer might see this happening and play alongside the dealer for a quick profit. If done successfully you will have pocketed money the dealer was trying to snatch, but they were the ones taking on the risk of quoting that price to begin with. That is the concept anyway.

Moves like this happen on larger scales in the real market where the prices are not artificial like your dealers. These larger scale moves take place if liquidity is thin and the market is more malleable, if the target is obvious, or if there is some coordinated attack at a certain level (a rare event I'm sure). If you can identify where these targets are then you might have a chance. This would be order flow trading in the sense that you are using the idea of one-way order build up to make decisions off of, but you are not really trading pure OF.

PS. A potential setup is brewing on the Euro right now...
All I ask for is a chance to prove that money cannot make me happy.
  • #770
  • Jan 18, 2010 4:45pm Jan 18, 2010 4:45pm
Quoting Marsh
Guys, there are two types of trading being talked about here....
Thanks for the informative post Marsh. I apply the idea of one sided orderflow to loss liquidation. Many times, stops will be in roughly the same place and when they are triggered you see strong one sided orderflow onto the respective bids or asks. If you know this is about to happen you can front run these orders with little to no risk.
  • #771
  • Jan 18, 2010 5:22pm Jan 18, 2010 5:22pm
LOL, and then it happens. Low liquidity, slow market, 25pip run up to take out the stops behind 1.44 on Euro. Happened sooner than I thought...but still. What next? Nothing. The move is done, and Tokyo open is about to start, different ball game.
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All I ask for is a chance to prove that money cannot make me happy.
  • #772
  • Jan 18, 2010 5:33pm Jan 18, 2010 5:33pm
Quoting Marsh
LOL, and then it happens. Low liquidity, slow market, 25pip run up to take out the stops behind 1.44 on Euro. Happened sooner than I thought...but still. What next? Nothing. The move is done, and Tokyo open is about to start, different ball game.
You make a good point. The market does crazy things when liquidity is thin. Often times it is the low liquidity moves that run over the big stops. Like the mouse that scares the elephant. The big dumb elephant.
  • #773
  • Jan 18, 2010 5:43pm Jan 18, 2010 5:43pm
The big stops are are down below right now on EU. Nobody has lost much on this up move. 1.4300 is the magic number for now. This could change..The longs could get lucky, but like I said, there is no real meat to this buying. If we see real buyers come in, then we'd have a good little long opportunity, but thats just not the case right now..What a boring day.
  • #774
  • Jan 18, 2010 10:37pm Jan 18, 2010 10:37pm
Is anybody still on this wild goose chase? I have to say im pretty disappointed. I thought i'd find some solid info on order flow here, but this thread looks like witchcraft to me.
  • #775
  • Jan 18, 2010 10:40pm Jan 18, 2010 10:40pm
Quoting FXTradeX6
I have to say im pretty disappointed.
Get used to it. If you want to learn to trade, you're gonna walk the road of disappointment for a long time.
  • #776
  • Jan 18, 2010 10:56pm Jan 18, 2010 10:56pm
Quoting FXTradeX6
Is anybody still on this wild goose chase? I have to say im pretty disappointed. I thought i'd find some solid info on order flow here, but this thread looks like witchcraft to me.
Go learn technical trading and intermarket relationships.

If there is 1 or 2 threads to recommend, it would be Igrok method and his FF disciple Belakas thread. You won't look back... but u need to understand and comfortable with the concepts.
The future depends on what we do in the present.
  • #777
  • Jan 19, 2010 7:49am Jan 19, 2010 7:49am
Quoting FXTradeX6
Is anybody still on this wild goose chase? I have to say im pretty disappointed. I thought i'd find some solid info on order flow here, but this thread looks like witchcraft to me.
While I cannot decide for you what makes sense and what doesn't, order flow trading is anything but witchcraft. If you think about for half a second you realize that you are trading based on real life market mechanics. Orders are what moves markets, there is nothing magical about it. This is often opposed to TA or FA, which claim that patterns move the markets or news moves the markets. Between taking a trade because of an understanding of liquidity, or taking a trade because a candle looks like the middle finger, I would sooner say the latter to be closer to "witchcraft" as it is generally not based on something as concrete as orders.

But again that is for the individual to decide. I know several traders who make a handsome living trading from chart patterns, but I also know some (ok 2, lol) who trade using order flow based strategies and are successful.

Personally I am open to learning whatever is needed to succeed.

Edit: For another example watch Euro again. Strong move down, with a bounce off of a tested level. That bottom that just formed is getting watched you can count on. Think about who is in the market and what kind of orders will be building around that level. Even with the conviction that the market will test the level again can give you a direction, at least in the short term.
All I ask for is a chance to prove that money cannot make me happy.
  • #778
  • Jan 19, 2010 12:47pm Jan 19, 2010 12:47pm
Eu sure did stomp those poor longs overnight..I love those quick trades. Right now we have a nice battle setup. We have some big potential losses in both directions. Judging by current price action, I think the sellers will get stomped today. Their stops are resting in the 1.4310 area.

This doesn't mean that a good little up move will happen, just that the PA is supporting this possibility at the moment. PA in the context of orderflow is the way to go. It's a little more risky than waiting for the stops to be triggered to trade, but your trading week is made a lot shorter if you can take your portion and be out with the help of those extra pips.

Like I said, we have a dual setup going. Price could breakout to the shortside and take out the bulls..Orderflow is mostly a waiting game.

Good trading,

Scotty B
  • #779
  • Jan 19, 2010 1:33pm Jan 19, 2010 1:33pm
As I stated last night, the upmove that was going on in EU was phony. It was a low liquidity move. If you don't pay attention to the orderflow then you might be tempted to get long as many probably did. Never never trade into low liquidity! Most of the time it is a trap. There are ways you could take advantage of these moves with your bucket shops, but if you were in the real market you'd just wait to get in.

I'm also watching GU today. Right now there is a pin bar (or Pinocchio nose) on the 1hr with drop in price. Blind PA traders might dive in and sell right now, but this move has no conviction in it. The big boys are not throwing their money at it, at least not yet. This tells me to beware.

The stops in GU are on the high side right now, I'm personally waiting for that to set up. If the market proves herself and puts her money where her mouth is I might be willing to short the Pound, but I'm calling her bluff for now.

Anyways, just thought I'd throw in my 2 cents for this pair.

Scotty B
  • #780
  • Jan 19, 2010 1:49pm Jan 19, 2010 1:49pm
A picture..Selling right now would be pure gambling..It could work, but you'd be thanking lady luck more than anything else..If you count on her to trade, she's gonna burn you good in the long run.
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