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  • #121
  • Feb 3, 2011 10:14am Feb 3, 2011 10:14am
Quoting UnnamedPlayr
The quotes from that TrueFX site lag and don't match with the professional terminal prices.
Of course they do :-p They are not for trading purposes.

These ECN are optimized for algorithmic trading, not manual. Only your robots will have a chance of seeing the real quotes. By the time your brain processes the price, it's already obsolete in a moving market.
  • #122
  • Feb 3, 2011 10:49am Feb 3, 2011 10:49am
That's funny.

Algos? What was that again?
  • #123
  • Feb 3, 2011 10:58am Feb 3, 2011 10:58am
Hey guys,

I'm back here now for a minute or two. As you may have noticed, I don't have much time yet. I started studying uni and it fucked my life.
Anyway I've been spending my time reading game theory books and looking at MSFT 5 min chart + Level 2 quotes and trying to figure out how the hell I'll keep the pace..

I'm new to level 2 so if you guys have any ideas of how to learn it or additional info, feel free to post it! Just trying to get a "feel" of how a order flow trader looks at the market..

Take care
  • #124
  • Feb 3, 2011 11:23am Feb 3, 2011 11:23am
Quoting CindyXXXX
Mate... wait until exams! I know how you feel! When Im on schedual I just get my uni shit out of the way by staying on track (tusk tusk) everyday so I then have the best part of the day to focus on trading.

Got exams in 3 weeks and I'm on the forum procrastinating my ass off... Its really bad I need help@ lol This is me right now doing an assignment that's due on Monday aghh
I know it's fucked man.. I have no idea how to cope with trading AND studying..

Anyway I was thinking about one thing, I am 100% sure I am wrong now but I'll ask it anyway..
What is the meaning of the level 2 order book? Now the way I see it, is it shows WHERE the limit orders, stop orders etc are.. however, they wont move the market. The MARKET ORDERS will move the market.. So in reality my question is, how do you use the order book?

As I look at this order book I see numbers flashing like 25.66 then up one tick to 25.67 and then down one tick etc and it all takes time to move a tick. However, I have noticed that when it moves from let's say 25.66 down to 25.63 in just a sec (meaning a big sell order flooded the market).. EVERYBODY removes their orders (or atleast every order around the market i.e. close to the price).

What I am looking for in level 2 stuff is this liquidity consumption etc.. But sometimes there are 35 000 orders on 25.66 (ask) and then 1 sek later it's only 9000, yet still the market moves down. What is this? Someone faking hands?

Also, there is another thing I've been noticing that made me think. We're looking for order IMBALANCE in order flow trading. Sometimes, the bid price is like 3-4 X larger than the ask.. Say bid 16 000 shares and ask 3500 shares. Yet still, price doesn't pump up. This is what I was thinking about, there has to be something with MARKET ORDERS and how one will entice someone to click market buy instead of limit buy. That's the question

I have attached a picture (I know there shouldn't be any charts. but this isn't a chart.. and plus, I am the owner of this thread, so I can do whatever I want )

Take care
Attached Image
  • #125
  • Feb 3, 2011 11:29am Feb 3, 2011 11:29am
Quoting Carnegie
Now the way I see it, is it shows WHERE the limit orders, stop orders etc are.. however, they wont move the market. The MARKET ORDERS will move the market..
Stop orders are "held" market orders, so they do consume liquidity and don't show up on the order book.
  • #126
  • Feb 3, 2011 11:34am Feb 3, 2011 11:34am
You don't need any institutional or futures level 2 order books to rip Spot FX apart....

Think of the metagame like DS said. Market Structure, Stop Hunts, where is the money.... whats going to cause the orders. Some are calling it "liquidity hunts" and whatever but... in my book it's called stop hunting, and it's quite readable at certain times.

You don't need to see the orders or the charts, though for me the charts help to monitor the situation, especially with the pairs and crosses instead of looking at the numbers I can watch it.

use info from off the charts to help, from sources that have been discussed here already.
  • #127
  • Feb 3, 2011 11:57am Feb 3, 2011 11:57am
Quoting CindyXXXX
I'm issuing a "please explain"
They: robots,algos,liquidity movers
You: track,recognize,front run


Carnegie:
stop orders are usually latent and will be actively liquidated

And prices can move even when there are no active buyers or sellers.
It happens when bid or ask prices are adjusted down or up.
Watch currency mini futures to see that phenomenon.

The order book is a place of bluffing and spoofing.
Don't wonder if there is heavy size on the bid but prices move down.
They're bluffing to suck in inexperienced trader and immediately cut off their own liquidity while selling.
  • #128
  • Edited 1:09pm Feb 3, 2011 12:57pm | Edited 1:09pm
Quoting Carnegie
However, I have noticed that when it moves from let's say 25.66 down to 25.63 in just a sec (meaning a big sell order flooded the market).. EVERYBODY removes their orders (or atleast every order around the market i.e. close to the price).

What I am looking for in level 2 stuff is this liquidity consumption etc.. But sometimes there are 35 000 orders on 25.66 (ask) and then 1 sek later it's only 9000, yet still the market moves down. What is this? Someone faking hands?
It's exactly that - faking. To quote from a high frequency trader:

The vast majority of the activity in a book is usually made up of add and cancel operations as market makers jockey for position, with executions a distant third. In fact I would argue that the bulk of the useful information on many stocks, particularly in the morning, is in the pattern of adds and cancels, not executions, but that is a topic for another post.

Anyway, you have absolutely no chance of watching the order book change manually:

To give some idea of the data volumes, the Nasdaq TotalView ITCH feed, which is every event in every instrument traded on the Nasdaq, can have data rates of 20+ gigabytes/day with spikes of 3 megabytes/second or more. The individual messages average about 20 bytes each so this means handling 100,000-200,000 messages per second during high volume periods.

Of course, we are talking about all the Nasdaq stocks, not a single one. But do you believe that you are able to keep up with these orders without using an algorithm?

BATS "Stubby Triangles". Drop the quote from a valid price to 0.001 and then back up to a lower price level. When the new price level hits 0.001 as well, do it all over again at approx. 380 times a second.

http://www.nanex.net/FlashCrash/Crop...ENB_072310.png

http://www.nanex.net/FlashCrash/CCircleDay.html

What I'm trying to say is that algorithms own order flow trading. You have no chance going against them with primitive methods like watching with your eyes a Level 2 order book on any broker.

http://www.nanex.net/FlashCrash/Crop...TLT_082610.png
  • #129
  • Feb 3, 2011 1:27pm Feb 3, 2011 1:27pm
Algo front running is another category in order flow trading and looking for dynamic liquidity pattern.
Knowledge of market structure and conditions, accurate data and tools are indeed very helpful to track them.

Yeah,you must be a little bit crazy to figure out that stuff.
  • #130
  • Feb 3, 2011 1:31pm Feb 3, 2011 1:31pm
Quoting UnnamedPlayr
Algo front running is another category in order flow trading and looking for dynamic liquidity pattern.
Knowledge of market structure and conditions, accurate data and tools are indeed very helpful to track them.

Yeah,you must be a little bit crazy to figure out that stuff.
Agree with you. What I'm trying to make others understand is that you can front run an algo only with another (high-frequency) algo.
  • #131
  • Feb 3, 2011 1:35pm Feb 3, 2011 1:35pm
Not necessarily.

It can be "easier".
  • #132
  • Feb 3, 2011 1:46pm Feb 3, 2011 1:46pm
Nice discussion here. BTW thanks Adal for the info.

The real deal is that I am not interested in becoming an order book trader. By no means.. The first second I noticed, I aint got a fucking chance on this as it is moving this fast. But I was interested of the "flow". I.e. the liquidity conspumtion etc and how price moves.. I thought to myself it would be better to SEE it happening than only to read it (when darkstar says liquidity distribution disequlibirum etc.. better to read AND see).

So that's the idea behind it.. Im trying to build up a "foundation" on order flow. So if it's not order book.. then what should I look at?
I figured T&E is only theoretical, so if I combined it with something happening in the market.. I could learn "faster" and more accurate. Maybe that's wrong

Take care
  • #133
  • Feb 3, 2011 5:13pm Feb 3, 2011 5:13pm
Quoting Carnegie
So that's the idea behind it.. Im trying to build up a "foundation" on order flow. So if it's not order book.. then what should I look at?
I figured T&E is only theoretical, so if I combined it with something happening in the market.. I could learn "faster" and more accurate. Maybe that's wrong
Take care
I'm no expert but just a suggestion because i think i know where you are at. You probably already know more than you realise. Spend some time away from the forum and reading this stuff. Try to come up with 1 idea of a situation with an inefficiency where you could front run, stop hunt or whatever (doesn't matter if it's wrong or extremely simple). Try to trade it, you will learn alot. Come up with another idea or adjust the 1st idea etc. This is what will get you thinking about trading orderflow.

I took a big step when i realised that i needed to stop trying to find out other peoples ideas and come up with my own. This is the step that will stop most people from being successful at this type of trading. Not because it is even all that hard, just because people will go on trying to figure out someone elses 'secret' or idea or edge rather then just trying to find their own
  • #134
  • Feb 3, 2011 6:59pm Feb 3, 2011 6:59pm
Quoting CindyXXXX
Hey DS

I deleted it but will try and repeat what I said...

Basically I was just suggesting that correlation may play an informative role in interpreting currency supply and demand/ order types...

Yeah, that wasn't the important part. You mentioned that you saw some divergence between them and acted on it for 80 or so pips profit.

What I wanted to say was that you shouldnt get discouraged by the inability to convert what you did into a repeatable system. The fact is you saw something that was interesting and you acted on it for a profit.

You'll find that many of your best trades are going to be one off events where some little voice in your head says you should take it. You heard that voice when you took the trade above but then you went and shit on it by trying to turn what you did into a system. Forget about the system and work on listening to that voice.

I've beaten the horse to death by now but I'll say it again.. trading is an art, not a science. Focus on becoming the artist that compelled you to take that trade and you will get where you want to go.

PS- there are a bunch of other posts I want to address but it will have to wait til tomorrow...
  • #135
  • Feb 3, 2011 7:14pm Feb 3, 2011 7:14pm
hey darkstar

what do u think about trading based on just tick volume
http://www.forexfactory.com/showpost...9&postcount=78

here i posted a chart on a time where demand was abundant and evrytime it went down was on low voluem(no demand) i didnt see any big selloffs in this
so i guess it must be big instituions buying on dips

i had about 7 trades based on volume,and pocketed around 30 pips in 2days,
  • #136
  • Feb 3, 2011 9:21pm Feb 3, 2011 9:21pm
Last month I posted else were that since early December I had noticed that the way price was reacting someone had been buying the EUR/USD for over a month.

http://www.traderslaboratory.com/for...tml#post109830

Well today I read a post that said:
=====================

For example, you might be tempted to say that a certain Asian central bank manipulates EUR/USD all the time… I would suggest they sometimes get it right but quite often get it wrong. When they get it right, traders on the other side of the trade cry “manipulation”.
When they get it wrong (like in November when they bought EUR/USD from 1.40 on down below 1.29), no one says a peep…

http://www.forexlive.com/162632/all/...be-manipulated

=====================

well if this is true, and they are still in their position, then their trade is starting to look very promising.

.
perception is reality
  • #137
  • Feb 3, 2011 9:46pm Feb 3, 2011 9:46pm
Quoting Darkstar
Yeah, that wasn't the important part. You mentioned that you saw some divergence between them and acted on it for 80 or so pips profit.

What I wanted to say was that you shouldnt get discouraged by the inability to convert what you did into a repeatable system. The fact is you saw something that was interesting and you acted on it for a profit.

You'll find that many of your best trades are going to be one off events where some little voice in your head says you should take it. You heard that voice when you took the trade above but then...
I hear you. Acting on that kind of interpretations makes for good traders, and it also, as you say, makes trading an art. Example of a trade based on a particular event:

Some week, there had been a lot of particular news that should have made a pair go in one direction. I can't remember which pair but I know the news were very bearish. Yet, the price kept moving in a tight range, and did so for a few days still. My decision was to long the pair, since someone must have been setting up a big position to the upside and a reversal was in order. It made me some big bucks!
“Nothing great in the world has ever been accomplished without passion.”
  • #138
  • Feb 3, 2011 10:27pm Feb 3, 2011 10:27pm
Quoting Deevz
I hear you. Acting on that kind of interpretations makes for good traders, and it also, as you say, makes trading an art. Example of a trade based on a particular event:

Some week, there had been a lot of particular news that should have made a pair go in one direction. I can't remember which pair but I know the news were very bearish. Yet, the price kept moving in a tight range, and did so for a few days still. My decision was to long the pair, since someone must have been setting up a big position to the upside and a reversal was in order. It...
Yes what you guys talk about are information that doesn't appear on the chart. Since it does not appear on the chart or an indicator it can be difficult to quantify and perceive by 99.9% of other traders. If you cannot see it on an indicator the only initial way to begin to realize it is by that little voice in your head, that certain feel of the market. That feel of the market where you know price is going to break out in a certain direction, even though the rest of the market is currently oblivious to it. That feel of the market where you know the charts may be lying to you, because the real move is about to happen in the other direction, while the market is loaded up in the wrong direction. That voice/feel that can tell you if the market stands a good chance of blowing through a certain level or not.

Now in the beginning it can be hit or miss as you may initially think you can do it every second of every day. But eventually when you get good at it, you can become consistent at it, and begin to very very slowly systematize a portion of it, so you can identify such trades, such inefficiencies faster, and with greater frequency.

When you have seen one of those trades, it can light a bulb in your head to search in that direction. Some people forget about it and never search further, don't make that mistake.
When you have actually placed the first live profitable trade with it, your interest grows further.
When you have actually placed a highly leveraged profitable trade, your interest skyrockets. Hopefully this is the point of no return as you realize that what you are doing is the very foundation of the markets and what makes price move.
When you have placed those types of trades consistently for months and months, eventually the process gets ingrained in your subconscious, and it will change your mindset and trading forever.

Eventually you discover that it took you a lot of searching through all the garbage and working out your inner demons to finally get to that point.
Private message me for a link to my order flow website.
  • #139
  • Feb 3, 2011 11:12pm Feb 3, 2011 11:12pm
Interesting post grkfx. The last sentence especially so.
  • #140
  • Feb 4, 2011 8:04am Feb 4, 2011 8:04am
GRKFX, very very interesting post there.

When I am finished with reading T&E, and a couple of books about game theory, I will do something that you wrote in the other thread that I believe many forgot. I will sit down with a piece of paper and write down all my thoughts about the market and what is happening. And what I THINK creates inefficiencies etc.. what it all is TO ME.

Now today I put my alarm on 1 o'clock to have time to watch the NFP. I watched it on 15 MIN 6J 03-11 (JPY futures). That was some really neat shit!

I watched it on a chart and tried to cope with the L2 on the JPY futures aswell. Price spiked up hard as hell and then reached a point where the ask just went CRAZY. Now I understand what you guys mean with imbalance (or if it was disequilibrium in orders).. In the beginning it was relatively balanced like bid7ask 25:30 etc +-3 to 5 orders.
Then it spiked up, and reached a point where ask went 150:25 or something. That was like crazy! Price just dropped down immediately to where it started from. Really cool!

Now I just have to figure out what it is I have seen.

Take care guys.

BTW I forgot to tell you guys that I recorded my screen with camstudio so I'm playing up the chart + DOM in super slow motion, this is so I can see in "normal" pace what is happening with the DOM when price is moving (I want to see this "liquidity consumption). I have the video on my computer so if you want it just tell me!
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