Order Flow - Finding cluster of stops on chart

I'll just drop it here.
I know it's a jump ahead we should take later on, after figuring out stop hunting, but i just wanted to share.

This is about "Episodic Volatility", just to have a grab on what it is.
Picture is attached.

The last price (price where the last trade occurred, price we usually see on chart) does not move if there's not a trade so if the last price is 1.2555, and the ask is qouted to .2570, the last price will not move to the ask price if someone does not put a buy trade. Actually the strategy of taking off limit orders to increase or decrease the price is used more on the stock markets with HTF algoritms, anyway some trades have to be occurred to move the price.

Awesome to have Darkstar in here. I read everything he posts and hope he continues to visit here from time to time. BTW, how's the book coming?

Price change acts to soak up liquidity and when it does that, it'll go in search of the next big area of orders. If there is a disequilibrium on one side of price (in the form of thin liquidity) it is much easier for price to move in that direction. If you can identify clusters of orders just beyond that area, you have a good idea which way price is headed.

episodic volatility; large price move within a short amount of time.

Here's my shot at understanding: We're looking for signs of transitory volatility; which episodic includes. Transitory volatility is strong price movement away from fundamental values by uninformed traders. I relate uninformed traders to losers. What's one way to show you lost your trade? Your stoploss order gets hit. Stop losses are one-way market orders, and along with uninformed traders using breakout market orders could easily move price away from fundamental values.

I'm unsure but do dealers accelerate their pulling of limit orders at extreme price levels, thus leaving less available liquidity which invites bid/ask bounces and the more chance for episodic volatility to occur? If so, do they then hope to deal with "informed" traders asap to know where price is going?

Would large orders seen on T&S in the opposite direction of the move during these volatility extremes be a sign that informed traders are entering the market?

Magic Trader I fully agree with your posts. Price tends to pivot across large order areas. Just when it gets to the very extremes and some, it comes running back the other direction.

Back to stop loss hunting topic, here's a quote i think it's pretty much important:
A picture is attached:
how can we know how big the "pool" (in purple) is?
how can we identify stop losses in that chart?
is other information needed? an orderbook?

I'd like to know your thoughts people.

What surprise me is that no one provides a service which collates all the data from the major brokerages into one data stream. Order flow analysis would surely be much easier with that sort of data.

Or does anyone know of such a service ?

http://www.myfxbook.com/community/outlook - updated each 60 sec.

Great for tracking the flow in real-time. You can see volume too. But it could use more traders.

And typically for retail, all but one average position are losing )

Thanks for the suggestions but we must be thinking of different definitions of the term 'order flow'.

Tracking retail positioning in real-time is 'order flow'. By some accounts 30% of USD/JPY trading is retail (think Mrs Watanabe). Maybe that's true, maybe it's not, but certainly retail is big these days. And I like knowing what a big part of a market is doing, especially if most of them are losers.

I find it funny how people try to extract order flow information from price charts, when real order-flow data is available in many places. Not saying that extracting order flow from charts it's not possible, it is, but it's the hard way to do it. But then again, it's easier to just look for a S/R support line on a chart and say that there are stops there (probably true) than aggregating positioning information from multiple sources and analyzing it with quantitative methods which are beyond the typical retail fibos, EMAs and MACDs.

You will not find something like "GS is now buying 3 bln EUR/USD and JPM is just selling 200 mil GBP/USD". You have to get by with what you can find, not with what you wish you had.

whats interesting to me is that when i go back in history of the chart ,the last days of august are always volatile ,and are deadly for trendfollowers
i look back and i see the same volatility for the last 3 years,does anyone know why that is?
its abit like trendfollowing in december

heres what it looks like

Yes you're on to it. This type of service is necessary to communicate correct exchange rates between banks. ICAP's FX Spot (EBS) is an example of this service. Correct me if I'm wrong about ICAP(EBS)'s role in the interbank market.

I now understand why all the order flow threads fade out. Because nothing of value has been said. What does FF market sentiment have to do with order flow mindset/stop hunting?

My intention here is not to argue with anyone but what I really would like to say is that if you have questions about VSA or other types of order flow PLEASE START YOUR OWN THREAD.

I am currently studying the shit out of T & E but I wanted this thread to still be active with IDEAS about order flow stop hunting. But this is not the case now, the last pages of the thread looks more to discuss VSA than anything other.
Please stick to the subject.

Thanks guys, hope no one got offended because it's not directed toward anyone in particular.
Take care

I hear ya, Carnegie. I, too, am reading Trading and Exchanges. I big read...but I am tackling it...chapter by chapter. All fascinating stuff. THis thrread has been awesome. Thanks for starting it. I have printed out quite a bit of the posts and taken many notes. I really want to figure out how the internal market ...the REAL market ...really works. Not learn about some technical indicator, pattern, etc....other than perhaps how it might affect the orders coming in. Keep up the journey and questioning/understanding.

Good luck, I can tell you that you wont find anything here.

I am really thinking about reading EVERYTHING out there about market structure and then figuring out my own little trading system around it; i.e. how I see the market. Maybe it's the only way, it feels like the right thing to do now. It will take time but I guess it's worth it.

Take care

This term 'order flow' is not clearly defined imo. I assumed it meant the effect of orders coming into (or being removed from) the market. Therefore in my mind 'volume' and 'order flow' are closely related. Hence the relevance of VSA techniques to illuminate the underlying flow of orders.

However, with Carnegie's request to not confuse this thread with VSA I'm pretty sure I'm not understanding the term 'order flow' or 'order flow stop hunting' in the context of this thread.

Please can anyone provide a definition of order flow to make it distinct and separate from VSA ?

My girlfriend occasionally glances at my computer screens while I trade/analyze the markets. Sometimes she asks me questions about it, and I try and explain things to her about what I do and how I do it. The other night, she looked at my screens and said: “How in the world are you able to make money doing this, it just seems so incredibly complicated”. And I told her, that the reason I am able to make money is exactly because it is complicated. If it was easy and simple, everyone would be able to make money, and there would be no one to lose it to them. Essentially, no one would make money. I think this is the reason, why figuring out this ‘Order Flow’ thing is so complicated. In my opinion it is the best may to make money in trading, because it is the only type of trading where the trader knows with a high degree of probability, why something happens before the fact.

Now, I do not trade with ‘Order Flow’ information. I found a different way to be profitable, and for the time being I am happy with it. I have been consistently profitable for long enough to know that my method works. But I am aware of the fact that I am like a blind person. Even though I am profitable, more often than not I have no clue what happens behind the scene that makes the price do this or that. And the only thing that can answer that is knowledge about ‘Order Flow’.

Like other people in this thread, I have spent a lot of time researching and thinking about this. And I arrived at the conclusion, that for me right now will be very difficult if not impossible to figure this thing out. The reason for that is MONEY. Order flow information cannot be found on a price chart. You may be able to find patterns on the chart that may give you a clue about the order flow, but only in hindsight. By the time you see this patterns, more often than not it will be too late to act on it. You need the information about order flow, before the pattern shows up on the chart, and actually be one of the contributors to its creation. And to have access to that kind of information, you need money. At the very least enough money to get a prime broker (currenex/EBS) account. You would also need a solid paid news service such as IFR, for information/rumors about option barriers and such. Knowing someone on the inside of a large bank or brokerage also will not hurt. This is all sources of information, and it is that information that is at the core of a trading strategy using order flow.

But even having the above is not enough. It is also necessary to have a deep understanding of how the market works, who are the big market participants, what their goals are and how they go about fulfilling them. The T & E book is a great source for learning that. Armed with that knowledge and having access to he information described above, the next step would be to watch how the price reacts around certain levels. These levels can be option barriers, stops that can be faded, pockets of open interest etc. Most of the time this will be just rumors, so you need to know what to look for, to determine if the rumors will materialize. There needs to be some sort of reaction at this levels that would suggest the information is valid and good to act on. After that one can start to formulate a strategy, around these observations.

This thread, like so many others on FF, is looking for an answer. An answer that can be put in a post. That’s why many of the threads looking at order flow have died out. How to trade with order flow, cannot be found in a theoretical debate, because it is not very scientific in its nature. It is more of an art, a way of thinking and viewing the market. And that can only come after having the proper mindset, knowledge, information and experience. I am willing to bet money, that if Darkstar, or anyone else who trades using order flow would come out and spill the whole thing out, would not make most people reading it, profitable. It will still require hard work studying, analyzing and putting that information into a usable strategy.

As for me, I am leveraging the crap out of my abilities at the moment, while patiently watching my account grow. Hopefully in a couple of years, I will have enough money to gain access to the information needed to trade with order flow. At that point it will have a more practical meaning for me. And in the mean time, I will enjoy studying the theory behind it, and trade my way towards it.

Sorry for the long ramble.

Well, it's kind of impossible for the thread not to explore different possibilities. That's because the thread is leaving both components of the subject - order flow and stop hunting - up to the individual posters to define.

If you get more specific with definitions then, maybe the replies will be more helpful. What you may find though, is that both of these things are only able to be inferred and subjectively interpreted for us retail traders with broker provided data. Doesn't make info here useless IMO but, (surprise!) it may not reveal a Grail.

Yeah, I mean when you remove Volume as a component of Order Flow then, you might want to call it something else.

is there a pdf version of this online (the full 600 pages) or you all read hard copy?