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Domino's Price and order flow trading

  • #561
  • Apr 11, 2010 2:05pm Apr 11, 2010 2:05pm
So, what does the current order-flow on EUR/USD tell you guys.
  • #562
  • Apr 11, 2010 4:03pm Apr 11, 2010 4:03pm
Quoting Scotty B
Hey Sutts,

Sorry I didn't respond to you, please don't take it personally. Sometimes I intend to respond to someone and I come back later to find several new pages have appeared in a thread and I simply forget about a post.

Anyways.. Good work thinking about what I presented. I do not beleive that the large market sell would be filled with the market buys, market orders don't trade with market orders. As I've thought more about my own question, I think in a fast crazy market a larger spread would momentarily appear. Price would go up and down...

Thanks for responding Scotty, sorry for jumping to conclusions.

The way you describe the mechanism does make sense. So spread could widen if a big market buy ate into the offers while a big market sell ate into the bids at the same time and for some reason the usual back fill of new more aggresively priced limits didn't take place to narrow the spread...but as you say in such a large and liquid market this would just be momentary.

I do think strict time precedence is an important feature of modern order matching systems so the market orders described above would probably be filled in the order they were submitted, taking price one way and then the other.

I also take your point about where limit orders can exist. Thanks also to FXEZ for clarifying. So...limit orders generally cannot trade with other limit orders. The only exception would be where a marketable limit order is submitted (buy limit at or above current ask or sell limit at or below current bid). In such a case the limit order would be treated as a market order with a limit on the fill price and its appearance in the order book would at most be momentary.

I wonder if you can help me with a further question please...

If I place what I'd describe as a buy limit order just above the recent swing high (along with all the other momentum crowd) in anticipation of a breakout, what exactly is this order? It can't be a standard buy limit as that would have to be placed below the current ask. It can't be a marketable buy limit order either as that would be executed immediately as a market order with an execution price limit.

So is this order actually a buy stop that sits waiting to be triggered on the brokers system and does not appear in any public facing order book? When triggered, I guess this would be submitted as a marketable limit order at the trigger price (current ask). As such, a bunch of these orders would have no price moving ability. We have issued a strict price limit and are not allowing our order to chase a fill up the price ladder like a market order would. The most we could hope for is for these orders to eat up the current offers at the limit price, allowing real market orders to break through and pursure offers further up the price ladder.

Can you see the problem I'm having here? We're all talking about buy limits above swing points which should add to momentum and propel price higher but a limit order by definition cannot chase price!

Any ideas?
  • #563
  • Apr 11, 2010 4:12pm Apr 11, 2010 4:12pm
Quoting FXEZ
I didn't want...

Thanks for your help and insights FXEZ.

Would be great if you could confirm please that under no circumstances can market orders trade with other market orders...I've just never seen this written anywhere.

Thanks!
  • #564
  • Apr 11, 2010 4:51pm Apr 11, 2010 4:51pm
Quoting Adal
So, what does the current order-flow on EUR/USD tell you guys.
bullish
  • #565
  • Apr 11, 2010 4:56pm Apr 11, 2010 4:56pm
Quoting domino
bullish

No kiddin.
  • #566
  • Apr 11, 2010 5:21pm Apr 11, 2010 5:21pm
Quoting Sutts
If I place what I'd describe as a buy limit order just above the recent swing high (along with all the other momentum crowd) in anticipation of a breakout, what exactly is this order?...
Yes, to do the momentum play you'd issue a buy stop for the breakout. This is just a conditional market order that only your broker sees/knows about. When your stop price trades, even for one lot, your broker will then execute a market buy on your behalf. This will contribute to further upside liquidity consumption, especially if there is a lot of buy stops in the area, whether they are stop losses (exits) or just plain old buy stops (entries).

You bring up another order type though. There is such a thing as a stop limit order. It works like a regular stop order--it has a price condition attached to it, that when your stop price trades, your broker will issue a limit order at the price you've selected.

There are several variations of order types. Here are a few more, you can thank Larry Harris for the descriptions.

Market If Touched Order:

A market order that is activated when price reaches some preset touch price. In contrast to stop orders, traders submit market if touched orders to buy when prices fall to their touch prices or to sell when prices rise to their touch prices.

Tick Sensitive Orders:

Basically orders that are opened depending on whether or not the last price was an up or down tick. From Harris, "Tick sensitive orders are essentially limit orders with dynamically adjusting limit prices." (pg 81, Trading and Exchanges)

Market Not Held Orders:

You give your broker the task of deciding whether or not you will offer or take liquidity. He basically manages the trade execution according to his judgment.

There are other intricacies that come into play with different orders as well. I'd suggest investing in the Harris book. It's nice to have as a reference right on your trading desk.
  • #567
  • Apr 11, 2010 8:01pm Apr 11, 2010 8:01pm
Quoting Mr-Forex
Sorry that was a litte bit imprecisely.

If the price goes to a certain level and nobody is willing to sell or fill the orders, price normally comes down.
That’s what you see on footprint charts for example 0/226 bid/ask traded.

@Forex: IMHO, what you said is wrong, how come the market goes down if nobody is selling? It doesn't make any sense at all. The footprint chart you describe above indicated that you're misunderstood about it.
Trading is the game of fear and greed.
  • #568
  • Apr 11, 2010 8:41pm Apr 11, 2010 8:41pm
Quoting Fx chartist
@Forex: IMHO, what you said is wrong, how come the market goes down if nobody is selling? It doesn't make any sense at all. The footprint chart you describe above indicated that you're misunderstood about it.
Just to add onto this if nobody is willing to sell then ofc price will go UP because obviously sellers view the current price too low. Similarly if nobody is willing to buy at a certain price then price will ofc go DOWN to entice buyers.
  • #569
  • Apr 11, 2010 8:43pm Apr 11, 2010 8:43pm
i wonder if it is at all possible for you guys to make this any more complicated.

my god. my bs detector is going rampant.

can someone who has actually worked at a bank or brokerage as a trader please speak up and set everything straight. Ronald Raygun perhaps?

maybe i've missed these posts.
Congratulations ScalaFX for coming out of the closet!
  • #570
  • Apr 11, 2010 9:01pm Apr 11, 2010 9:01pm
@Scotty: I think if you placed your order at the wrong side of the market ( limit sell @ 99 whereas the best bid and best offer is 100/100.02) you'd get fill at 99 instead of 100 as you said.

@Sutts: As I understand, limit order can be matched against limit order. Let's use Scotty's bid/ask example, you and Scotty both a place a limit buy and sell order at 101, your limit buy order will be matched against Scotty's limit sell order. However, if someone submit a market sell order along with Scotty's limit sell order at the same time, the market sell order will be matched against your limit buy order as market order has a higher priority than limit order. Scotty's order will be entered in the order book and the best bid and best ask now is 100/101.
Trading is the game of fear and greed.
  • #571
  • Edited 10:50pm Apr 11, 2010 9:59pm | Edited 10:50pm
Quoting Fx chartist
@Scotty: I think if you placed your order at the wrong side of the market ( limit sell @ 99 whereas the best bid and best offer is 100/100.02) you'd get fill at 99 instead of 100 as you said.

@Sutts: As I understand, limit order can be matched against limit order. Let's use Scotty's bid/ask example, you and Scotty both a place a limit buy and sell order at 101, your limit buy order will be matched against Scotty's limit sell order. However, if someone submit a market sell order along with Scotty's limit sell order at the same time, the market sell...
???

how is that even POSSIBLE. Only one thing can be processed at one time, so whoever got in first gets their order executed first. If someone puts in a limit sell at a level which matches an existing limit buy then great a transaction occurs... but if a market order comes in first then so be it the market order goes first.

to do what you suggest is to say that any limit orders are held for some undefined time in the oft chance that someone wants to put in a 'priority' market order. as far as i am aware it is only in the realm of quantum physics where two things can coincide in the same space/time? FIRST IN BEST DRESSED!

err, what?

edit : as for the first part... how can you get filled for a sell at 99 if the highest bid is 100? the idea of selling, EVER, is to sell as high as possible and this is how markets work. if the highest bid is 100 and you limit sell for 99 / 50 / 2 / 0.0000001, whatever, then you get filled for as much volume as will match at the 100 level. :S

edit 2 : following last sentence... for as much volume as will match at the 100 level and then step to the next bid below that to keep filling if further volume is still left to sell, to the point at which the limit sell was marked for. so if you marked it as 99 then you get filled at 100 for as much volume as is available, and if further selling volume is left then you step down until you are either filled completely on the transaction or you have hit the 99 level and are unable to go lower due to this being the LIMIT.

perhaps a previous post is in order http://www.forexfactory.com/showthre...96#post3609096 .

edit 3 : goddamn i can't spell.
Congratulations ScalaFX for coming out of the closet!
  • #572
  • Apr 11, 2010 10:32pm Apr 11, 2010 10:32pm
Quoting nubcake

my god. my bs detector is going rampant.
  • #573
  • Apr 11, 2010 11:13pm Apr 11, 2010 11:13pm
Please gentleman. This is a NO BS ZONE....
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  • #574
  • Apr 12, 2010 12:07am Apr 12, 2010 12:07am
Quoting pipmutt
That was it, thanks Dan!

Now there's an institutional guy, you heard it from the horses mouth (figuratively speaking!). We could really use his input in this thread, as well as other like him who have worked/work on the institutional side.
What is it you guys [Aston/Pip/FXsurfer] would like to know in particular (I have not had the time to go through the thread)?

regards
daytrading
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  • #575
  • Apr 12, 2010 12:23am Apr 12, 2010 12:23am
Quoting daytrading
What is it you guys [Aston/Pip/FXsurfer] would like to know in particular (I have not had the time to go through the thread)?

regards
daytrading
Hi DT,

Since this thread has been having some good interactive discussion between experienced traders on the subject of orderflow I just thought it might interest you (thus my PM). As far as I'm concerned, these informed dialogs are the greatest contributions to the forum - the rest is basically the blind leading the blind. No specific question from me but, I'm sure that the others will have some.

Hoping things are all good with you!
  • #576
  • Edited 12:35am Apr 12, 2010 12:27am | Edited 12:35am
The best way to explain something like this is live (through a chat?) on fast TF's.
It is the ultimate way, which tests tutor and learner...
Biggest joker
  • #577
  • Apr 12, 2010 12:28am Apr 12, 2010 12:28am
Ok,

I really don't have much time for taking part in active discussions but will answer the odd direct question if my knowledge allows.

Everything is well, thank you for asking.

regards
daytrading
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  • #578
  • Apr 12, 2010 12:51am Apr 12, 2010 12:51am
Quoting domino
well I spent all day trying to find a motorcycle thats what im doing lol... not so much looking at charts haha.. Im thinking about a 1948-1953ish HD panhead.. I have an obsession with vintage... wanna get a good that I like there is about 1,000,000 square miles of the united states I need to explore on it.

I have a 1972 MotoGuzzi that was given to me by my uncle. I was only a toddler when he bought it and i was so facinated that he promised it would be mine one day.... it needs a lot of work on it but will eventually bring it back to its old splendor
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The quality of your life is brought about by the quality of your thinking.
  • #579
  • Edited 1:23am Apr 12, 2010 1:05am | Edited 1:23am
Quoting daytrading

I really don't have much time for taking part in active discussions but will answer the odd direct question if my knowledge allows.
Hi DT, I've got a couple.....

It's been suggested in this thread that banks and financial instutions are all on the same side and don't trade against each other but instead conspire together to target retail traders positions, is that correct?

It's also been suggested that accurate DOM data is available at the institutional level via say Reuters or Bloomberg, is that correct and is everything 'out in the open', or do institutional traders try to hide their intentions from other market participants?

Sorry one more, is currency futures data a reflection of (or representative of) the cash market or vice versa, ie does one lag and one lead or are they independant of each other?

I know you're busy so even brief replies may provide a little much needed clarity!

Thanks!
  • #580
  • Apr 12, 2010 1:43am Apr 12, 2010 1:43am
Quoting pipmutt
Hi DT, I've got a couple.....

It's been suggested in this thread that banks and financial instutions are all on the same side and don't trade against each other but instead conspire together to target retail traders positions, is that correct?

It's also been suggested that accurate DOM data is available at the institutional level via say Reuters or Bloomberg, is that correct and is everything 'out in the open', or do institutional traders try to hide their intentions from other participants?

Thanks.
Pip,

There is no need for institutions/banks/funds to 'conspire' against retail traders. Reasons to enter the market for retailers are in most cases quite different from those of the professionals. With 'reasons' I don't mean the intentions of either to make a profit, but the actual reason to enter at specific price points.

It is not only true that different departments might have opposing (or unaligned) positions, it also happens between different traders in the same department (mostly proprietary dept.).

Where there is a difference between the retail and the institutional side (I call is institutional rather than professional because there are professional retail traders out there who might get offended if I'd call them unprofessional), is the amount and category of different information used/interpreted by the institutional side.

These people use much more fundamental data in terms of interest rates and current climate to make their decision on a a currency (note: not currency pair). Of course they use information on occasions that is not available to us - like internal data referring to large option expiries for example. Besides the individual traders approach to position taking, they have a greater variety of data (through their analysts for example) available to generate a bias towards buying or selling.

I have no idea about 'DOM' data - but in the spot FX market, a trader can easily disguise his/her intentions through order types such 'time-slice', 'iceberg' and just by entering with market orders. Futures, where data like open interest and volume is recorded is of course different and more technical - but I would conclude that there is no conspiracy except sometimes taking advantage of the fact that typical retail trading plays in the hands of the professionals.

Hope this helps.

regards
daytrading
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