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Order Flow - Finding cluster of stops on chart

  • #181
  • Jan 19, 2011 4:53am Jan 19, 2011 4:53am
Quoting Magic Trader
I agree. What DS has shared already should be enough to get everyone started in the direction that will help their trading. If it hasn't, maybe they weren't meant to have this information?

Darkstar, if you continue refining your book to the point that anyone can pick it up and make profit from it, do you worry you've let the cat out of the bag? I'm sure your own personal trading is way beyond that, at this point, though. I would be thrilled to read your book as it is. Part of what makes order flow so awesome is the self-discovery process that takes...
He stated in past that not many of those books will be printed, and of those who will be lucky possessors of it, not many will be able to exploit the essence of the book itself.
So don't worry.

What I'm worrying about now is this thread xD
I now get why threads like these always disappear, I'm starting to feel the urge to hide it underground, and this urge is fighting hard with the need to dig deeper and deeper in the subject.


Quoting xXTrizzleXx
Oh. My. Goodness.

I was actually about to fall asleep when I envisioned how this could be applied. This assumes there are no significant fundamental changes in the associated currencies of the pair though?

The way I'm putting this together, is that DarkStar's illustrations have given a model for taking advantage of the extremes of ranging markets. Let's assume that Market Mover A wants to buy below the perceived value of USD/CHF. Upon reaching the lower extreme of the range, we can assume that we will have participants who will be positioning themselves long, and would set their sell-stops below the range. Market Mover A has his buy-limit orders positioned slightly below this range, and to enable his order to be filled, quickly executes an sell market order of sufficient size to push price to these sell-stops, which when hit, will liquidate into his buy-limits. This will be further facilitated by uninformed traders, who think this is a genuine break-out to the downside. The speed of execution will be such that it is fast enough to avoid a significant amount of latent liquidity turning into pending orders, (which would make things harder for Market Mover A by essentially building a liquidity wall to his buy-limits). Market Makers would then need to adjust their bid/ask to take into account this changed liquidity situation, resulting in the production of the illustrated liquidity vacuum. When his order is filled, the sell market order previously open, is then closed by means of a buy market order equal or larger to the former, which gets price moving into Market Mover A's intended direction back to the perceived fundamental value of the currency. As price heads back upwards, the Market Makers would have to deal with the liquidity vacuum, by shifting their bid/ask quotes to account for it, to protect their inventories.

(note: Orders will be placed within the vaccuum, but I am making the assumption that the liquidity provided by them will be sufficiently small so that they can be considered insignificant, due to the small time interval over which this occurs)

On a chart this should look like a strong move upwards once more, even though the volume (size of the order) which caused it, may not seem proportionally large. Additionally, uninformed participants who were tricked by Market Mover A's pseudo-break out, would be squeezed. Their buy-stops, which they placed for protection, would, when executed - further empower the up-move, along with informed participants, riding the move back to the perceived fundamental value. They are in essence going to profit from the mispricing.

I may be viewing things from an angle that is..."too close to the situation"; too infinitessimal, but I'm hoping the logics of this are sound, and would like to hear others' interpretations so far.

grkfx, has essentially provided an excellent model for understanding the dynamics of trends - I would expound on my interpretation of it, but must finish my homework.

With the dynamics of ranges and trends covered, and understanding where the high-probability points of entries are, we should be able to anticipate a move to break-even quickly, such that our exposure time is reduced.

Everybody loves a free trade. http://cdn.forexfactory.com/images/s.../yim/happy.gif


You pretty much got it, to me that's A way for this to be done.
But that's only 1 of the opportunities i think.

Everything turns aroung this "vacuum" that gets created, a disequilibrium that can be exploited.

To exploit these "inefficiencies", these repeating patterns, we actually need to know what to search for, but some of the things have been listed from Darkstar.

Quoting Darkstar
And thats just one factor that can be analyzed with this model. Think about how a large order hitting the book would alter the profile... or what happens pre/post news events.. or how a fast price change would interact with the slow conversion of latent interest to pending orders... or what happens when a central bank steps in to defend a price.. or how market makers act to maintain a balanced book... or or or... the list is endless.
As seen, a vacuum, a disequilibrium, can be created in 2 ways:
-Liquidity drying up for fear/waiting, and i think this liquidity becomes "latent"
-Liquidity getting eaten out from big orders

Large orders hitting the book, pre/post news or any other fast change in price, just as Darkstar states.

One thing, are latent orders what people use to call "Icebergs" in orderbook?
  • #182
  • Jan 19, 2011 6:21am Jan 19, 2011 6:21am
Quoting seagreen
You can't imagine how many people here wish they were your girlfriend.
I hope people take this in context, having read Darkstar's earlier post.
  • #183
  • Edited 7:17am Jan 19, 2011 7:02am | Edited 7:17am
Quoting auxesis
I hope people take this in context, having read Darkstar's earlier post.
Funny thing is I think even without the earlier post the statement would still hold true

Theres a lot of focus on Darkstar and rightly so but grkfx posts have been just as valuable IMO we can only go down from here chuckle chuckle.

I mean how do you follow THAT? And Scott I wouldnt worry about this thread nothing much has been given away that won't take some servere effort on ones part to "crack" and like the man said we're pretty dam "lazy". But a lucky few will push a bit harder and make it count.
Time hides Nothing
  • #184
  • Jan 19, 2011 7:15am Jan 19, 2011 7:15am
Quoting Darkstar
Then I gave it to my girlfriend.
Most people won't get it because they can't. If concepts were so easily understood, people wouldn't need so badly to be taught. As logical as a concept may be, people for whatever reason just won't grasp it. It's quite amazing.

I consider it part of natural law. Most won't understand, and most of those that do won't be apply to apply it. In the end, those who profit from such information probably would have become profitable anyway, it just may have taken longer without some guiding text.

Trading is not a new game, so if the majority haven't caught on by now, they probably never will. It's the biggest game in the world (outside the games played by powerful nations) attracting many of the alleged brightest minds our species have to offer, yet so many of them fail. I wouldn't worry about any cats being let out of the bag.
  • #185
  • Edited 7:43am Jan 19, 2011 7:31am | Edited 7:43am
Quoting Mr J
Trading is not a new game, so if the majority haven't caught on by now, they probably never will.
I wouldn't write people off quite so completely. Nothing is fixed and everybody has the opportunity to improve their understanding incrementally, it just takes a little time and effort. As Darkstar said, you need an appropriate conceptual framework to fit new information into and if you haven't got it then you have to acquire it. So the situation isn't hopeless, people are just starting from differant levels initially, some have further to go than others.

It is true that some will never get there but I think that's more from going in the wrong direction than through lack of abiblity. The latest research indicates that intelligence itself is more flexible than generally realised; learning is itself a skill that needs to be developed like a muscle. I think the key is to be curious and open-minded. Those that fail are usually just stuck looking for short-cuts that don't exist or are not sufficiently interested and motivated to uncover what they need to know.

http://www.bbc.co.uk/news/magazine-12140064

Edit : This is a great quality thread by BTW, one of the few that I will re-read many times.
  • #186
  • Jan 19, 2011 7:32am Jan 19, 2011 7:32am
Quoting Mr J
Most people won't get it because they can't. If concepts were so easily understood, people wouldn't need so badly to be taught. .
Rubbish... anyone can its just most won't but its not because they can't. I don't believe anyone is smarter than the next person, just that some spend more effort understanding than others (becasue they want to). We all have brains and forever 2x2 will equal 4

Just my opnion
Time hides Nothing
  • #187
  • Jan 19, 2011 7:41am Jan 19, 2011 7:41am
Well, the bulb finally switched on for me, thanks to many excellent posts in this thread. Stop hunting, indeed! I'll say nothing more than thanks!
  • #188
  • Jan 19, 2011 8:08am Jan 19, 2011 8:08am
Just spinning the wheels in my dimly lit noggin'

In the example (modifying DS's first pic) sitting just below current price is a block of short market orders. I'm called to fill a very large "long" order, the customer wants a "specific price". What price do I quote, knowing as soon as I star to fill price will rise. What can I do to give myself a better fill? What happens to the marketfield? what's it going to look like?

Can I spot this activity in real time to take advantage? What information do I need to know beforehand?

fwiw
Attached Image
  • #189
  • Jan 19, 2011 8:29am Jan 19, 2011 8:29am
Quoting auxesis
Just spinning the wheels in my dimly lit noggin'

In the example (modifying DS's first pic) sitting just below current price is a block of short market orders. I'm called to fill a very large "long" order, the customer wants a "specific price". What price do I quote, knowing as soon as I star to fill price will rise. What can I do to give myself a better fill? What happens to the marketfield? what's it going to look like?

Can I spot this activity in real time to take advantage? What information do I need to know beforehand?

fwiw
If I understand things correctly, you need to identify the currently perceived fundamental value, then recognize the false move you have described which baits all the uninformed retail traders, and then trade back in the direction of the fundamental value. All of this can be seen on a naked price chart.
  • #190
  • Jan 19, 2011 9:14am Jan 19, 2011 9:14am
Quoting auxesis
I hope people take this in context, having read Darkstar's earlier post.
Well, in or out of context, it's going to be hard to compete with the one I have.

http://www.darkstarforex.com/kim.jpg
  • #191
  • Jan 19, 2011 9:19am Jan 19, 2011 9:19am
Quoting Wamo
If I understand things correctly, you need to identify the currently perceived fundamental value, then recognize the false move you have described which baits all the uninformed retail traders, and then trade back in the direction of the fundamental value. All of this can be seen on a naked price chart.
Retail traders don't really move the market most of the time. False moves against fundamental values can even bait semi-informed professional traders. Sometimes they can bait even informed traders if certain market participants have goals unrelated to fundamental values, and are willing to risk capital to achieve objectives within a certain time frame, before the overwhelming amount of fundamental value order flow can catch up with them.

I don't want to make things too complicated, but there are so many possibilities.
Private message me for a link to my order flow website.
  • #192
  • Jan 19, 2011 9:43am Jan 19, 2011 9:43am
Quoting Darkstar
Well, in or out of context, it's going to be hard to compete with the one I have.

http://www.darkstarforex.com/kim.jpg
Holy sh*t!
  • #193
  • Jan 19, 2011 10:05am Jan 19, 2011 10:05am
Hmm.. in reality, wouldn't we need some kind of news service or something to complement it with our new understanding of how this imbalance looks like?
What I mean is that now that we know what it is, we have to know what OTHERS think about it, and therefore we have to understand MARKET SENTIMENT.

As I recall, darkstar used IFR right? Because it would be impossible to see this just on a chart, it would only be possible AFTER the fact?
  • #194
  • Jan 19, 2011 10:20am Jan 19, 2011 10:20am
Quoting Darkstar
Well, in or out of context, it's going to be hard to compete with the one I have.
LOL

this thread will soon be transformed in an online dating service

don't think that you want some real competitors

watch your back
  • #195
  • Jan 19, 2011 11:46am Jan 19, 2011 11:46am
Quoting Carnegie
Hmm.. in reality, wouldn't we need some kind of news service or something to complement it with our new understanding of how this imbalance looks like?
What I mean is that now that we know what it is, we have to know what OTHERS think about it, and therefore we have to understand MARKET SENTIMENT.

As I recall, darkstar used IFR right? Because it would be impossible to see this just on a chart, it would only be possible AFTER the fact?
Or, if one pays attention to the price action via the longer wicks in the cluster one can form an analysis as to what the intent of the move is going to be such as the many various options or senerios as GRKFX stated. Or if you happen to be sitting at the computer and see price move 30 or so pips in a matter of a couple of minutes that would be in my mind the disequilibrium in the market at that time. Or the gaps that show up in the charts during news time. Dark has only painted the participants and the mechanics of the move. It is only actual experience and trading that will get us there. Only my two cents on the original question by Carnegie of how you see it on the chart.
  • #196
  • Jan 19, 2011 12:58pm Jan 19, 2011 12:58pm
"Louie
Or, if one pays attention to the price action via the longer wicks in the cluster one can form an analysis as to what the intent of the move is going to be such as the many various options or senerios as GRKFX stated. Or if you happen to be sitting at the computer and see price move 30 or so pips in a matter of a couple of minutes that would be in my mind the disequilibrium in the market at that time. Or the gaps that show up in the charts during news time. Dark has only painted the participants and the mechanics of the move. It is only actual experience and trading that will get us there. Only my two cents on the original question by Carnegie of how you see it on the chart."

This in fact happened this morning and it is also happening right now as I am typing this. Red line is USD and Blue is CHF these are based on percent strength in real time of all quotes of each currency from all pairs available, not just usdchf.

Notice how after the vacuum created, price quickly reversed to come back to fundamental value. Is this what we are hoping to see?
Attached Image (click to enlarge)
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  • #197
  • Edited 1:42pm Jan 19, 2011 1:20pm | Edited 1:42pm
Well I can also see that when this huge vacuum occurred, there was little change in the USD as reflected by the small movement of the red line at that time.

This thread has finally put the rest, ( or rather some more ) of the pieces of the puzzle together for me. Thank you every one. And special thanks to DS for the latent liquidity charts. and that excerpt from his book.
  • #198
  • Jan 19, 2011 1:21pm Jan 19, 2011 1:21pm
Quoting smjones
[i]"Louie
Or, if one pays attention to the price action via the longer wicks in...
I'd say that is certainly one aspect of it. This has a lot to do with the mechanics behind pin bar situations as opposed to clean trending markets. Basically, is there real time support or resistance behind a move or does the move fall on it's face? A strongly trending market (sharp slope) with small pullbacks indicate a strong bid re-population, while a strong move that collapses on itself shows no professional interest. Large traders have to average in anyways, so if values are shifting, the pros will have robots that quickly enter bids or asks throughout the move. I believe this is what creates the almost surgically straight trend lines seen on certain smaller time frames.
  • #199
  • Jan 19, 2011 1:30pm Jan 19, 2011 1:30pm
Quoting Scotty B
I'd say that is certainly one aspect of it. This has a lot to do with the mechanics behind pin bar situations as opposed to clean trending markets. Basically, is there real time support or resistance behind a move or does the move fall on it's face? A strongly trending market (sharp slope) with small pullbacks indicate a strong bid re-population, while a strong move that collapses on itself shows no professional interest. Large traders have to average in anyways, so if values are shifting, the pros will have robots that quickly enter bids or asks...
Yes, this makes sense to me. If this is one aspect of it, do you think there is a way for the disequilibrium to be identified on a chart and be able to separate it from a lack of professional interest? Or, is there any need to separate it as they both seem to cause the same effect on small time scales.

There seems to be an aspect that has not been discussed much and that is the Option barriers that I see all the time on Thompson and have piggy backed trades to to them, with very good success. Could this be a form of that latent liquidity?
  • #200
  • Jan 19, 2011 1:45pm Jan 19, 2011 1:45pm
Quoting Scotty B
I'd say that is certainly one aspect of it. This has a lot to do with the mechanics behind pin bar situations as opposed to clean trending markets. Basically, is there real time support or resistance behind a move or does the move fall on it's face? A strongly trending market (sharp slope) with small pullbacks indicate a strong bid re-population, while a strong move that collapses on itself shows no professional interest. Large traders have to average in anyways, so if values are shifting, the pros will have robots that quickly enter bids or asks...

Very good post.
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