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Order Flow - Achieving the mindset

  • #341
  • Feb 15, 2011 9:25am Feb 15, 2011 9:25am
Quoting Carnegie
I find it extremely interesting when people dive right into a discussion without understanding the context.
IF you had read the whole thread, you would have understood as it is extremely obvious - that I am not here to "get another system", or "read another book". Even if you read the ONE SINGLE POST above the one you quoted, I clearly stated "I need to define TO MYSELF what inefficiency etc. is". Isn't that to try to fight the dragon?

Nasir is correct here, I already know that I have to do the work on my own, and that is exactly what I...
sorry that i came off rude, it wasn't a critic on you

learning economics or microstructure may be interesting, but how exactly does it help you trading? the skill is in realizing whats going on on the chart (sorry) as the action unfolds, that's what i call "read the market like a book"
not by staring blindly at the chart, but by analyzing and reviewing of what's happening, how price is reacting where and when and how long a move will be supported by whom and why.
Invincibility lies in the defence, the possibility of victory in the attack
  • #342
  • Feb 15, 2011 9:34am Feb 15, 2011 9:34am
Quoting silverheat
sorry that i came off rude, it wasn't a critic on you

learning economics or microstructure may be interesting, but how exactly does it help you trading? the skill is in realizing whats going on on the chart (sorry) as the action unfolds, that's what i call "read the market like a book"
not by staring blindly at the chart, but by analyzing and reviewing of what's happening, how price is reacting where and when and how long a move will be supported by whom and why.
Truth is silverheat I do have an answer to that - economics and microstructue WILL help you in trading, and WILL help you in realizing whats going on in the chart as the action unfolds, but I am not interested in discussing it on the thread, because it is another discussion.
If you want to, we can discuss per PM. Eventually, this discussion will evolve into difference between TA and FA and other shit that I have already chosen my "way", and if I fail or not we will see. If I do, then we will both know you are correct and I will have to apologise, until then, I have chosen my path and going to walk that journey until I realize that it may or may not work.

Take care and happy trading mate.
  • #343
  • Feb 15, 2011 10:57am Feb 15, 2011 10:57am
Quoting hilmy83
i'm up for it. And like GEfx, i'm a family man too. Plus i don't drink..that's a real kicker eh. but i'm always up to meet up with fellow traders
Perhaps we could continue this via PM. I'm sure there is a Starbucks somewhere that will work for the three of us.
  • #344
  • Feb 15, 2011 11:13am Feb 15, 2011 11:13am
Quoting GEfx
Perhaps we could continue this via PM. I'm sure there is a Starbucks somewhere that will work for the three of us.
Last time I clog the thread with chit chat. Sorry. Its funny were all family men. I have a three year old son and my wife is going to have a girl this week or next. Anyhow coffee, beer or whatever is fine. And for the record I just like to look at beautiful women no womanizing for me. Cheers hope all traded well today price in eurusd traded in a expected manner which is always nice when your day is made easier.
  • #345
  • Feb 15, 2011 11:25am Feb 15, 2011 11:25am
Quoting Carnegie
Truth is silverheat I do have an answer to that - economics and microstructue WILL help you in trading, and WILL help you in realizing whats going on in the chart as the action unfolds, but I am not interested in discussing it on the thread, because it is another discussion.
If you want to, we can discuss per PM. Eventually, this discussion will evolve into difference between TA and FA and other shit that I have already chosen my "way", and if I fail or not we will see. If I do, then we will both know you are correct and I will have to apologise,...
you don't need to study engineering to learn how to drive a car, but whatever

if that's your way i have to respect that, trade well
Invincibility lies in the defence, the possibility of victory in the attack
  • #346
  • Feb 15, 2011 12:14pm Feb 15, 2011 12:14pm
Quoting silverheat
but by analyzing and reviewing of what's happening, how price is reacting where and when and how long a move will be supported by whom and why.
How is one supposed to understand how, why and by whom price is reacting if they don't understand the players and how they have to execute based on the market structure?

Your post seems to have contradicting elements in it.

Not getting onto you, just really interested in how you know who is doing what and why without studying...
  • #347
  • Feb 15, 2011 1:03pm Feb 15, 2011 1:03pm
Hi Carnegie,
Thanks for starting this thread. I have enjoyed reading along as it unfolds. My view of and experience with order flow is probably different from what others here have developed or are developing. It seems to me that what ever is being developed here, either as a group or individually, will have little meaning unless it can be described on a forex chart. Would you be opposed to someone taking the lead and posting a chart with "order flow analysis" commentary? I am not offering my services, and instead recommend that you take the lead, to at least post something that frames the discussion or the questions at hand. Please feel free to tell me to go to hell, as I will not be offended. I have spent 7 years studying and trading charts, so for me nearly any meaningful discussion has to involve a chart at some point.
  • #348
  • Feb 15, 2011 1:08pm Feb 15, 2011 1:08pm
Quoting Jimmy Jones
How is one supposed to understand how, why and by whom price is reacting if they don't understand the players and how they have to execute based on the market structure?
by taking a guess

there are buyers & sellers with different time horizons

there are support and resistance areas where market imbalances occured, big market orders were processed, price was supported and stops by different participants were set

there are prefered entry points by larger, smarter or more patient participants and points where dumb, impatient, panicking or greedy traders will enter/exit

there are events, predictable & unpredictable that could influence trading decisions or demand immediacy by different participants

this all and a lot more in conjunction will generate orders

as price progresses participants will adapt their orders, new participants will enter, old will leave, new decisions will be made

when you enter a trade you want someone paying you at a higher price than you bought, so you need traders to carry your position onwards and price targets where you know are traders left willing to take over your position ...

so, by taking a guess who, when, where and why those participants will make decisions you trade
Invincibility lies in the defence, the possibility of victory in the attack
  • #349
  • Feb 15, 2011 1:14pm Feb 15, 2011 1:14pm
Quoting silverheat
by taking a guess

there are buyers & sellers with different time horizons

there are support and resistance areas where market imbalances occured, big market orders were processed, price was supported and stops by different participants were set

there are prefered entry points by larger, smarter or more patient participants and points where dumb, impatient, panicking or greedy traders will enter/exit

there are events, predictable & unpredictable that could influence trading decisions or demand immediacy by different participants

this...
So you are saying you were born with all that knowledge you just posted! AMAZING!

I kid, but you seem to be off your rocker mate. All that stuff you just listed is a result of your studying to try and understand what is going on, why it is going on and whom is doing it! That's all we are trying to do here!

BTW I am just kidding around with you, not trying to offend. Peace.
  • #350
  • Edited 1:49pm Feb 15, 2011 1:27pm | Edited 1:49pm
Quoting Jimmy Jones
So you are saying you were born with all that knowledge you just posted! AMAZING!

I kid, but you seem to be off your rocker mate. All that stuff you just listed is a result of your studying to try and understand what is going on, why it is going on and whom is doing it! That's all we are trying to do here!

BTW I am just kidding around with you, not trying to offend. Peace.
no offence taken, just saying i'm guessing, the market tells me if i am right or wrong

grkfx said it better though: you have to formulate trading ideas

edit: lol, off the rocker, i had to look that up

Just imagine the kind of person you'd expect to find "on a rocker." An elderly person, the stodgy old grandma or grandpa most every household has in residence (the expression dates from 1897, before nursing homes were so acceptable). Most of the time they just sit and rock, hands folded, muttering quietly. But every now and then a sudden agitation overcomes old Uncle Nancy, he jumps up and cavorts around the house. Or runs off to the wars with his WWII Home Guard helmet on-- "out of uniform" so to speak, like Hyacinth Bucket's old dad.

i take that as a compliment
Invincibility lies in the defence, the possibility of victory in the attack
  • #351
  • Feb 15, 2011 2:04pm Feb 15, 2011 2:04pm
Quoting silverheat
i take that as a compliment


I'm just saying, instead of guessing what the structure of the FX market is, why so bad to actually try and learn about it? Maybe it will help my decisions, maybe it won't, but I won't know either until I have an understanding.
  • #352
  • Feb 15, 2011 10:35pm Feb 15, 2011 10:35pm
Hey Carnegie,

I also agree with eurotrash, about learning more about price discovery and the mechanics of how price moves, but wanted to inquire as to whether you answered a few questions which Darkstar recently posed a few weeks ago:

[/quote]Before you can solve the game you need to define the scenario. Who are the participants? What are their objectives? What strategies are they using? How much of the global information set do they have access to?[/quote]

These should definitely be the source of your next efforts if you have not already found the answers to these questions.

Participants-wise I've grouped them into a few main categories, in order of increasing influence in the foreign exchange market. I have also (and I don't know if I am erroneous in doing so) that the higher up the player is in the following hierachy, the more access they have to the global information set. It would make sense to align the participants as follows:

 

  1. Central Banks & Governments
  2. Major Commercial Banks (your UBS, Deutsche Bank and Citigroup)
  3. Smaller Commercial Banks
  4. Hedge Funds
  5. Corporations/Companies and other Utilitarian Traders
  6. Retail Forex/Retail Forex Brokers

Let's analyze for example corporations/companies.

We know that their primary business objective is to create a profit for their investors. In the event where they conduct business across national boundaries, they will be exposing themselves to currency-exchange risk, where by they may lose profits due to fluctuations in the underlying exchange rates. They desire to curb these losses, and must thus find strategies to do so.

Some of these strategies include the use of derivatives, such as futures, forwards or options to hedge against uncertainties in currency fluctuations. By understanding the inherent need these participants have to exercise such derivative contracts, and noting their position in the information and influence hierachy, especially relative to the underwriters of such derivatives, we observe that they will be at a distinct disadvantage, motivating their underwriters to exploit them. I then surmise that it should be possible to create positive expectancy systems based upon scenarios in which weaker participants are being exploited, especially when we throw our knowledge of market microstructure and liquidity dynamics into the mix.

Like Gaston wrote, it's all about asking the right questions, and I believe you can't get any more right than those Darkstar has asked of us. Find out what these participants have as objectives, and how they go about achieving in it, and in the process, think of how it affects the foreign exchange market. Hint: Central Banks have a mandate to exercise monetary policy - think of how they go about doing this.

grkfx, Darkstar, Gaston, UnamedPlayer, eurotrash, Monroe, Marv - thank you for invoking creating thinking within my head!

And to Carnegie, kudos for the quality discussion!

PS.
@CindyXXXXX,

I recall recently there was a trade you took where you felt that two currency pairs - I believe GBP/USD and EUR/USD were not moving 'proportionately' and as a result you took a trade based on gut instinct, which turned out quite nicely.

I was of the belief that divergences in correlated currencies (such as EUR/USD and GBP/USD), as you saw in that trade, can also be a potential order flow generator, but I cannot think of a reason why! The trade shocked me because I know of one profitable trader whose bread and butter is trading such divergences, but I only attributed it to probability, until recently, where my understanding now indicates that perhaps; just perhaps - there may be an underlying reason for the observed reaction post-divergence. The only probable reason I could think of, would be a move by participants to mitigate risk in their portfolios, when they observe correlated markets to be acting abnormally.

Any suggestions?

Regards,
xXTrizzleXx

  • #353
  • Feb 16, 2011 12:16am Feb 16, 2011 12:16am
Thanks for that post Trizzle.
  • #354
  • Feb 16, 2011 5:07am Feb 16, 2011 5:07am
Quoting GEfx
Hi Carnegie,
Thanks for starting this thread. I have enjoyed reading along as it unfolds. My view of and experience with order flow is probably different from what others here have developed or are developing. It seems to me that what ever is being developed here, either as a group or individually, will have little meaning unless it can be described on a forex chart. Would you be opposed to someone taking the lead and posting a chart with "order flow analysis" commentary? I am not offering my services, and instead recommend that you take the...
Hey GEfx,

If you feel that it would contribute something to the thread although it doesn't have much with the way we are looking at order flow then you are welcome to do so. But keep it clean and no 5 charts a day posting please.
And btw, I would never tell anyone to go to hell

Trizzle:
Without saying too much, I can tell you that I found your comment funny. You know why? Because you picked the EXACT same participant as I did the other day. PS. Darkstar has a great post (old) that discusses this.

Take care and good luck guys
  • #355
  • Feb 16, 2011 7:58am Feb 16, 2011 7:58am
Quoting Carnegie
Hey GEfx,

If you feel that it would contribute something to the thread although it doesn't have much with the way we are looking at order flow then you are welcome to do so. But keep it clean and no 5 charts a day posting please.
And btw, I would never tell anyone to go to hell
Hi Carnegie,
I think it is best that I pass on posting anything, and instead I will check in from time-to-time to see what is developing here. I have been reading some of the material that Gaston and DS have posted. I would recommend a read through the Technical Analysis Falicy thread for fti's material on market structure, too, if anyone has the time (fti ran a tier one currency operations in Sinapore but is not around much now due to health reasons). Good luck everyone and good trading (been good today so far!).
  • #356
  • Feb 16, 2011 8:51am Feb 16, 2011 8:51am
Sitting in school and wanting to do everything else but my uni assignment I started to think about order flow. Then I started remembering one thing that Unnamed mentioned and the other stuff that Cindy was talking about.

Remember unnamed said "think about global money/liquidity shift"?
Then cindy mentioned something about GBP staying flat as other currencies wasnt.. So that made me think about a question of mine, isn't this global money shifted in and out IN ALL OF THE CURRENCIES and not just one of them?

Like if I buy Apple then price moved up because I bought the stock but buying EURUSD wouldn't the implication of that be that I bought EUROs therefore the EURCHF, EURJPY and all other EUR "markets" should move due to my order. Why isn't it so?

IF it were so, I came to another conclusion, and that's an interesting one. The fact that there is risk aversion would therefore influence all other currencies, since they are all "tied" together; the impact is on all of them. Therefore if I shorted one currency against another, it isn't an impact on just THAT particular currency pair, but in all others which I shorted in.. is this correct or is this stupid as hell?

Thank you and take care
  • #357
  • Feb 16, 2011 9:01am Feb 16, 2011 9:01am
Quoting Carnegie
Like if I buy Apple then price moved up because I bought the stock but buying EURUSD wouldn't the implication of that be that I bought EUROs therefore the EURCHF, EURJPY and all other EUR "markets" should move due to my order. Why isn't it so?
You are correct assuming that when you buy the euro, using the E/J as an example, the yen is not moving down. If the euro is rising and the yen is holding steady or rising, the E/J must move up with the euro. There are, of course, no exceptions to this.
  • #358
  • Feb 16, 2011 10:16am Feb 16, 2011 10:16am
Carnegie,

Glad you noticed that about all the currency pairs being the same. Now think about how you could capitalize on this information alone.

I'll give you a clue, if one correlated pair moves first before the other then we can anticipate what the other pair may do!

Or if the Dollar makes new highs and the EUR/USD hasn't traded lower yet then it may have to catch up!

Hope this gives you some ideas.

James.
  • #359
  • Feb 16, 2011 11:38am Feb 16, 2011 11:38am
Quote
Quoting xXTrizzleXx
Hey Carnegie,

I also agree with eurotrash, about learning more about price discovery and the mechanics of how price moves, but wanted to inquire as to whether you answered a few questions which Darkstar recently posed a few weeks ago:

Before you can solve the game you need to define the scenario. Who are the participants? What are their objectives? What strategies are they using? How much of the global information set do they have access to?
These should definitely be the source of your next efforts if you have not already found the answers to these questions.

Participants-wise I've grouped them into a few main categories, in order of increasing influence in the foreign exchange market. I have also (and I don't know if I am erroneous in doing so) that the higher up the player is in the following hierachy, the more access they have to the global information set. It would make sense to align the participants as follows:

 

  1. Central Banks & Governments
  2. Major Commercial Banks (your UBS, Deutsche Bank and Citigroup)
  3. Smaller Commercial Banks
  4. Hedge Funds
  5. Corporations/Companies and other Utilitarian Traders
  6. Retail Forex/Retail Forex Brokers

Let's analyze for example corporations/companies.

We know that their primary business objective is to create a profit for their investors. In the event where they conduct business across national boundaries, they will be exposing themselves to currency-exchange risk, where by they may lose profits due to fluctuations in the underlying exchange rates. They desire to curb these losses, and must thus find strategies to do so.

Some of these strategies include the use of derivatives, such as futures, forwards or options to hedge against uncertainties in currency fluctuations. By understanding the inherent need these participants have to exercise such derivative contracts, and noting their position in the information and influence hierachy, especially relative to the underwriters of such derivatives, we observe that they will be at a distinct disadvantage, motivating their underwriters to exploit them. I then surmise that it should be possible to create positive expectancy systems based upon scenarios in which weaker participants are being exploited, especially when we throw our knowledge of market microstructure and liquidity dynamics into the mix.

Like Gaston wrote, it's all about asking the right questions, and I believe you can't get any more right than those Darkstar has asked of us. Find out what these participants have as objectives, and how they go about achieving in it, and in the process, think of how it affects the foreign exchange market. Hint: Central Banks have a mandate to exercise monetary policy - think of how they go about doing this.

grkfx, Darkstar, Gaston, UnamedPlayer, eurotrash, Monroe, Marv - thank you for invoking creating thinking within my head!

And to Carnegie, kudos for the quality discussion!

PS.
@CindyXXXXX,

I recall recently there was a trade you took where you felt that two currency pairs - I believe GBP/USD and EUR/USD were not moving 'proportionately' and as a result you took a trade based on gut instinct, which turned out quite nicely.

I was of the belief that divergences in correlated currencies (such as EUR/USD and GBP/USD), as you saw in that trade, can also be a potential order flow generator, but I cannot think of a reason why! The trade shocked me because I know of one profitable trader whose bread and butter is trading such divergences, but I only attributed it to probability, until recently, where my understanding now indicates that perhaps; just perhaps - there may be an underlying reason for the observed reaction post-divergence. The only probable reason I could think of, would be a move by participants to mitigate risk in their portfolios, when they observe correlated markets to be acting abnormally.

Any suggestions?

Regards,
xXTrizzleXx

[/quote][/quote]

here is something u people may find interesting and also in the first post there are summaries of his posts alone.

http://www.forexfactory.com/showpost...ostcount=39819

.
  • #360
  • Edited 12:27pm Feb 16, 2011 12:02pm | Edited 12:27pm
Quoting redbaron1981
Carnegie,

Glad you noticed that about all the currency pairs being the same. Now think about how you could capitalize on this information alone.

I'll give you a clue, if one correlated pair moves first before the other then we can anticipate what the other pair may do!

Or if the Dollar makes new highs and the EUR/USD hasn't traded lower yet then it may have to catch up!

Hope this gives you some ideas.

James.
Well i trade these correlations every day and its not that much simple.

Quote
I'll give you a clue, if one correlated pair moves first before the other then we can anticipate what the other pair may do!

other pair may catchup,.... or when the first one stops going up the lagged one may start falling like a rock.

Quote
Or if the Dollar makes new highs and the EUR/USD hasn't traded lower yet then it may have to catch up!

again it could also mean that there must be something wrong* with EurUsd and its just waiting for Dollar to stop and than move to the upside.


*we will always find that out on Bloomberg etc but than we are some 100 pips late, But imagine if some people know about it before hand and they might be causing that Divergence on our charts by loading up.

for an example open up the 4H charts of GbpUsd and EurUsd and see what happened between 18-JAN to 25-JAN. If i remember correctly it was the Rating downgrade on 25-JAN. 230 pips not bad ehh?

I see these kinda Divg's 4-6 times a week but knowing the outcome is not that much simple or easy every time and this is what i am working on these days


.
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