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Order Flow - Achieving the mindset

  • #381
  • Feb 17, 2011 11:47am Feb 17, 2011 11:47am
Option barriers are only one part to clear the books and to cash in.

Again, the stop huntings only occur at the near same levels (and there are many more not only round numbers)
if there was before an imbalance between prices and certain participants.
The other alternative is when the market movers had reached a balanced inventory and now have the nerve to shift the price into a new value are.
  • #382
  • Feb 17, 2011 11:53am Feb 17, 2011 11:53am
Hey guys,

Once again you are giving me an excuse to do something besides my assignments, and for that I humbly thank you all!

If I may, I'd like to share some thoughts on the ideas transpiring:

I always looked at options from a speculative perspective, as a means to possibly get a handle of market activity during an identifiable space of time.

Typically, if I had an option at imaginary level A, and needed price to remain below it in order for me to be in the money, as price gets closer to my option, I would initiate short positions, for in so doing I would be consuming bids, and would thus be moving price down, provided I had sufficient clout. However, I would not be leaving these positions open - they would have attached stop-loss orders above the imaginary level A, where I feel I have had too much, and that it makes no more sense to play this options defense game. If price were to move to these levels, then the execution of my stops should further cascade price movement up from level, until the value traders step in, and take advantage of the mispricing it would create.

By positionning myself adequately, I would hope to take advantage of this inefficiency.

grkfx gives lots of insightful commentary - if you are aware that when an options barrier is breached, and stops are triggered, causing a degree of movement past it, entering at the options level would bring us into unnecessary draw-down. I also agree here with him in entering safely after the dust begins to settle...how you go about determining when the dust has settled is down to your personal preference.

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How do you know that the inefficiency you are describing has not already taken place and any market moves have already happened?

This is also a very important point in my opinion which was raised. What if the move that we were anticipating already transpired? Is there any activity before the event which may hint that the participants who would have wanted to defend the option may have been squeezed out already? You noted there was notable bouncing off the level early in the day, on Feb. 15th, but the activity on Feb. 16th would suggest to me that the interest to defend would have been exhausted by then.

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Why hasn't the price moved up yet? What is the market waiting for? Where are the order flow generators to move price up? What is taking them so long?

If our anticipation is correct I would posit that the order flow generators would enter soon after the move transpires - the fact that they are taking so long may indicate that their priorities/motives may have changed.

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The longer you hold such trades into the few hours to few days, you become susceptible to the order flow from market sentiment. If the sentiment stays bearish or accelerates to the downside, then your trade is smoked.

Time is of the essence. Perhaps a trade management strategy which gets risk off the table in a timely manner can be employed.

Just my humble opinions. Lovely discussion guys!

Regards,
xXTrizzleXx
  • #383
  • Feb 17, 2011 11:55am Feb 17, 2011 11:55am
Quoting relyt
Are you suggesting that using option barrier information isn't a legitmate way to trade, or that we need to rethink the way in which we use that information in our trading?
You can use option information to trade.

You may or may not need to rethink the way in which you use the information.

Option activity is not the only thing that is going on. It is not the only thing that is generating order flow. Sometimes the market is highly sensitive to option activity on one day, yet on other days the order flow generated by option activity is very minimal.

I don't know if the trade Carnegie is in will be successful or not, but if price is not moving yet to your desired location, to the location that you think price should go, you can ask the question why isn't the market moving yet? If his trade entry was because of some inefficiency of the option activity, and the trade is not moving up by now, maybe there is something else generated order flow? Maybe something else is influencing price?
Private message me for a link to my order flow website.
  • #384
  • Edited Feb 18, 2011 7:49am Feb 17, 2011 12:08pm | Edited Feb 18, 2011 7:49am
GRKFX: You are 110% correct in the fact that it was a bad trade, atleast regarding MY definition of inefficiency, if it wasn't.. where are all the orders?

Thank you very much.
  • #385
  • Feb 17, 2011 12:17pm Feb 17, 2011 12:17pm
Quoting Carnegie

So in that sense, the only question for me is if I should fade it or play the cascade.
As a trader you have three choices, you can fade it, play the cascade, or....

Staying out?

Staying out until a better, clearer inefficiency presents itself is a very viable, reasonable option.
Private message me for a link to my order flow website.
  • #386
  • Feb 17, 2011 12:20pm Feb 17, 2011 12:20pm
Quoting Carnegie
Sorry UP, I really don't understand what you mean.

However, I think I have solved (for me) something on the stop-hunting.
The interesting thing is when someone is defending a option.. then if they LOSE, most likely their stops are just above or below the strike price. Because it really wouldn't make any sense to defend it - lose - and have stops far away from the strike price right?
Especially since the further away their stop, the more money they are putting at stake - these large participants do not have the luxury of flexible position sizing a-la Oanda that we lucky retailers have.

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So in that sense, the only question for me is if I should fade it or play the cascade. In my mind, let's say someone wants to dump allot into the defenders stop thus hunting the option.
Now let's say the defender doesn't put allot of money on the defending therefore the stops aren't large, so if the hunters liquidation is bigger than the outstanding stops, price will immediately snap back creating this "fake breakout" and maybe is the vacuum darkstar is talking about.

But, IF, the hunter is liquidating a pool smaller than the stops, price should...

So many different ways to play it..this is why there is no one set methodology if X crosses with Y then enter here TP here and SL here..I think this is why the whole concept of an order flow mindset was what Darkstar and the others were trying to emphasize. I belive a fluid interpretation of what's going on is quintessential.

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Now the second question of mine is that there are different types of options; some where you have to just poke price thru and some where you have to have price staying above/below the area right? Then there is another dilemma: knowing which type of option it is..

Yes there are different types of options, like the ones you have described, barrier options, DNT options, vanilla options, etc. Sometimes the type is actually indicated.
  • #387
  • Feb 17, 2011 12:23pm Feb 17, 2011 12:23pm
A lot of discussion here. Time for something more concrete - actual order flow trading and front-running: http://tr8dr.wordpress.com/2011/02/1...you-dont-know/
  • #388
  • Feb 17, 2011 3:09pm Feb 17, 2011 3:09pm
Quoting Carnegie
So in that sense, the only question for me is if I should fade it or play the cascade.
That's the big question I have, also. And the best answer I've come up with is "it depends"
  • #389
  • Feb 17, 2011 3:53pm Feb 17, 2011 3:53pm
Now getting back to my question from the other thread? Does anyone know what TC stands for on the options maturity calander? I have not been able to find what this means.

On the flip side, anyone watching the Euro today. 1.3600 is a pretty strong level. Rumor of central bank activity there. Wonder if it has to do with the Portugal news of a coming bailout in April. Anyway it is winding up tighter than a drum. Can't wait for the fireworks to happen.

Cheers
  • #390
  • Feb 17, 2011 4:09pm Feb 17, 2011 4:09pm
Quoting Louie
Now getting back to my question from the other thread? Does anyone know what TC stands for on the options maturity calander? I have not been able to find what this means.
I've been told it means "transferable contract". Not sure what significance, if any, it has for us, though.
  • #391
  • Feb 17, 2011 4:20pm Feb 17, 2011 4:20pm
Quoting relyt
I've been told it means "transferable contract". Not sure what significance, if any, it has for us, though.
Thanks for the info.
  • #392
  • Feb 17, 2011 4:35pm Feb 17, 2011 4:35pm
Quoting Carnegie
Sorry UP, I really don't understand what you mean.
I know it's a bit hard to understand when someone has never seen it before.
Please understand that i won't elaborate it because that are usually the 3 main pillars in stop hunting drives.
  • #393
  • Feb 17, 2011 5:03pm Feb 17, 2011 5:03pm
Quoting UnnamedPlayr
Option barriers are only one part to clear the books and to cash in.

Again, the stop huntings only occur at the near same levels (and there are many more not only round numbers)
if there was before an imbalance between prices and certain participants.
The other alternative is when the market movers had reached a balanced inventory and now have the nerve to shift the price into a new value are.
Think creatively and you see this on a chart.
The road to pipland is arduous and fraught with challenge.
  • #394
  • Feb 17, 2011 6:13pm Feb 17, 2011 6:13pm
i have been hearin alot mindet for trading recently,i'll really like to learn what it is about
  • #395
  • Feb 18, 2011 11:01am Feb 18, 2011 11:01am
Quoting Guerrillawar
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.
Hey, we're trying to get together for coffee but you do not accept PM. Please send me a PM for details.
  • #396
  • Feb 19, 2011 1:09am Feb 19, 2011 1:09am
hey carnegie are u looking for something like this?

Inserted Video



this is very cool
theres always more liqidity at higher offers
just explains why someone with more money would push for those
  • #397
  • Edited 1:48am Feb 19, 2011 1:14am | Edited 1:48am
Inserted Video



5 grand for this technology,

i think unless ur an algorithm theres no way to trade orderflow in this small timeframe,maybe there is,havent tried it,so i dont know ,but im guessing u have to have fast fingers,have fat ones and die off,

maybe if u apply these methods
http://www.forexfactory.com/showthread.php?t=200074
  • #398
  • Feb 24, 2011 6:32am Feb 24, 2011 6:32am
seems like we've run out of fuel, didn't we?
  • #399
  • Feb 24, 2011 6:33am Feb 24, 2011 6:33am
Quoting scott89
seems like we've run out of fuel, didn't we?
Quite the opposite...
Time hides Nothing
  • #400
  • Feb 24, 2011 6:36am Feb 24, 2011 6:36am
Lots of behind the scenes work going on!
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