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Order Flow - Achieving the mindset

  • #401
  • Feb 24, 2011 6:43am Feb 24, 2011 6:43am
Lol, that's what i was actually thinking, I didn't want to ruin the athmosphere feeling xD
I'm reading T&E to understand market functionality, it'll take a while, then i'll read again these 2 interesting threads. I guess it'll be an eye-opener.
  • #402
  • Feb 24, 2011 7:54am Feb 24, 2011 7:54am
Care to share what does T&E means?
Thanks
  • #403
  • Feb 24, 2011 8:08am Feb 24, 2011 8:08am
I have been learning so much lately, and I am just so thankful that I began to view stuff in terms of orders beforehand, because it enabled me to think of these topics from an order-flow perspective, during the process of learning.

I used to be a strictly Technical Trader before, and paid absolutely no regard to Fundamental Analysis. However, with a bit of study, I am beginning to see how a general knowledge of Fundamental Anaylsis, can be used to interpret current driving globabl themes, in terms of an order flow perspective.

For example, I am sure that everyone is aware of the tension in the Middle East, as well as the possible implications it will have on oil production. Decreased production from these producers, will be a hit to the globabl supply, and in a world where the demand for oil is ever-increasing, will necessarily bring about rising prices.

Such tensions tend to bring on a hint of risk aversion to the global climate. Investors will generally opt to move to safe-haven denominated assets. Here-in lies our sentiment-based order flow generator.

The most popular risk-averse currencies are USD, JPY and CHF. Thus I anticipated a movement of funds from Euros to the USD, as I enjoy trading the EUR/USD pair (don't we all? ). However, this pair has been rising rather than falling, which initially confused me greatly!

Then I began to make the connection between rising oil prices and realized that the U.S and Japan are some of the worlds largest oil importers. For such heavily oil-based economies, I would posit that rising oil prices would negatively impact them, as the costs of several goods/services will increase as well.

The Swiss Franc however, is not as exposed to oil-based risks as the former two nations, and thus it would make sense to anticipate capital flows to CHF-denominated assets. I posit that this may be a significant contributing factor to why USD/CHF is at record lows. In my analysis, as long as the tension remains and oil prices increase further, we should be able to further profit from downward moves in USD/CHF. And how will I go about doing this? Zooming down and entering in regions where the intraday orderflow aligns with what I believe to be the prevailing orderflow direction.

I am not laying this down here, in an attempt to predict, or anything of that matter - don't get me wrong! I would also appreciate any further insights or corrections to my analysis/anticipation.

I just found it incredible that I am now beginning to position myself for trades using information that does not lie on the charts. I don't know if this may come off as glaringly obvious for most, but the use of Fundamental Factors as a potential order-flow generators, for me is a first, and I am thrilled. I remember a post by Darkstar emphasizing the importance of the speed of processing potential order flow scenarios, and if I was able to make these connections last week, I think I would be sitting quite handsomely!

Hope I did not bore you with my rave, but just felt compelled to write this down here, which serves as an electronic journal of my development as a speculator.

Regards,
xXTrizzleXx

EDIT: @ Tilt, he is referring to Trading & Exchanges by Larry Harris. Wonderful literature on market (micro)structure.
  • #404
  • Edited 8:23am Feb 24, 2011 8:11am | Edited 8:23am
Quoting Tilt
Care to share what does T&E means?
Thanks
Hey Tilt

T&E means "Trading and Exchanges" its a book by a guy called Larry Harris about market micro structure... very boring but I guess an interesting look into market mechanics if you wanna put a positive spin on it. Some bits are pretty interesting but I gotta say, the guy talks like a robot in 0's and 1's lol. But don't get me wrong it is a great one to have. Possibly the most educational in regards to markets that I own.

Some people will tell you this book is a prerequisite for trading. I strongly disagree. Its a prerequisite for order flow trading, this is for sure.

The books getting pretty old now though, I wish he'd make a new edition.
Time hides Nothing
  • #405
  • Feb 24, 2011 8:18am Feb 24, 2011 8:18am
Quoting xXTrizzleXx
I have been learning so much lately, and I am just so thankful that I began to view stuff in terms of orders beforehand, because it enabled me to think of these topics from an order-flow perspective, during the process of learning.

I used to be a strictly Technical Trader before, and paid absolutely no regard to Fundamental Analysis. However, with a bit of study, I am beginning to see how a general knowledge of Fundamental Anaylsis, can be used to interpret current driving globabl themes, in terms of an order flow perspective.

For...
Good stuff shizzle
Time hides Nothing
  • #406
  • Feb 24, 2011 9:09am Feb 24, 2011 9:09am
Quoting CindyXXXX
Hey Tilt

T&E means "Trading and Exchanges" its a book by a guy called Larry Harris about market micro structure... very boring but I guess an interesting look into market mechanics if you wanna put a positive spin on it. Some bits are pretty interesting but I gotta say, the guy talks like a robot in 0's and 1's lol. But don't get me wrong it is a great one to have. Possibly the most educational in regards to markets that I own.

Some people will tell you this book is a prerequisite for trading. I strongly disagree. Its a prerequisite for order...
Oh that's what it is...I have this book.Yeah I gave up on it once,thought it was too advanced for me...I will take a look again...some day http://www.forexfactory.com/images/icons/icon10.gif
Steb by step as they say.
Thanks Cindy & trizzle http://www.forexfactory.com/images/icons/icon7.gifhttp://www.forexfactory.com/images/icons/icon14.gif
  • #407
  • Feb 24, 2011 9:46pm Feb 24, 2011 9:46pm
Let me throw in one of my thoughts regarding order flow mindset, which I have ingrained within me.

Either you are placing trades which are impossible(or near impossible) to lose, or you are providing liquidity for those that do.
Private message me for a link to my order flow website.
  • #408
  • Feb 25, 2011 1:42am Feb 25, 2011 1:42am
i think that the oil prices are driven by opec coutries and big oil monopolies rather than the true demand and supply of oil
they find any turmoil in this world that has an impact on oil prices and raise the price of oil
and also oil speculators,just jumping on the bandwagon when theres bad news in middle east
driving oil up
i remember a the quote from orange juice traders at cme from the wall street warriors show
a pit trader said that the traders at the pits speculators are determening the price of frozen concentrated orange juice,
so the crowd drives it up,.and they always go the same way when threres natural disasters,
moving the offers away,who are waiting for higher price'
to dump their holdings
people skills is very needed in this complexed trading environment
as speculators can affect the price


does anyoen have a clue how the price of oil last year went from 50$ to 30$ in one day?
  • #409
  • Feb 25, 2011 5:51am Feb 25, 2011 5:51am
Quoting grkfx
Let me throw in one of my thoughts regarding order flow mindset, which I have ingrained within me.

Either you are placing trades which are impossible(or near impossible) to lose, or you are providing liquidity for those that do.
500 pips SL and 5 pips TP. I do it all the time!
  • #410
  • Feb 25, 2011 8:12am Feb 25, 2011 8:12am
Quoting seagreen
500 pips SL and 5 pips TP. I do it all the time!
Thats not what I meant... How about a minimum of 1:1 R:R.
Private message me for a link to my order flow website.
  • #411
  • Feb 25, 2011 8:39am Feb 25, 2011 8:39am
Quoting grkfx
Thats not what I meant... How about a minimum of 1:1 R:R.
I know, just wanted to mislead the people. But seriously it is a very good idea to think in terms of (almost) impossibility of hitting your sl before placing a trade.
  • #412
  • Feb 25, 2011 8:46am Feb 25, 2011 8:46am
Think in terms of how can you identify the conditions and environment for placing a trade that is impossible to lose. Many of my trades are already won, before they are placed.

Then ask yourself what are you doing today, to help you catch the trades of the future which are impossible to lose.

What habits can you develop to help you consistently capture the trades of the future that are impossible to lose.
Private message me for a link to my order flow website.
  • #413
  • Feb 26, 2011 7:01am Feb 26, 2011 7:01am
I have followed this thread for while. I felt there is some confuse in the conception of order flow. I often heard a lot of fx gurus, expert, professional, skilled traders and fx educators talked about order flow. When they open their mouth, "order flow" came out, .... But, when ask detail of "order flow", then, they would give you a lot of different explanation of order flow.

Fx market is very complicated market, which consists of many players, all of them have their way to operation of their fx business. Understand of their way of business processing would be better to understand and follow the market movement (price swing). There are orders from all of players. The orders are not transperant to other players. Some orders are business top,top, ......, top secret. There is no means to discover what are orders and how many are orders.

But, we can hear some news about big loss when a player made a blowout. French bank, UK bank, NAB case, etc.

1. Central Banks provide their currency, increase or decrease their money.
2. Big players provide fx service to corporation need.
3. Big players invest in fx in terms of fundemental factors, drivers.
4. Big players invest in fx in terms of tech factors, drivers.
5. Small players follow big players to do the same proccess as 3, 4.
6. Market makers, dealers provide services through fx spot and option, future platform.
7. Market makers, dealers do clearing market, fading market to maintain their stock and their control of stock flows.
8. Others, do what process?

Big players and market makers are often hedge their position when they enter the market in risk control. So, we often see price swing up after breakout a level, then, swing down to before level. Market dealers sell you one lot, they will buy one lot in somewhere to hedge their stocks(currency), due to they can't print currency.

I like to introduce a conception of "Hedge level of big players", you may haven't heard this terminology. Price is often below or above a price level. Market makers maintain the level. Buy/sell are hedged at this level. Market swing drivers often emerge out (fundy or tech), and driver force (or buy/sell orders/activities) push price through the hedge level. Later, price often come back to hedge level when market is quiet, in order for market makers get their stock back. This is one of market behaviour mode, I felt, I may be wrong.

Watching this hedge level, then, you may know who is dominant force in the market(who is winner), then, you follow the winner to go, cut your loss, chase winner's direction swing.

Sorry, I don't know if I can use a chart to illustrate my point. See eur-usd daily.
Attached Image (click to enlarge)
Click to Enlarge Name: HedgeLevel_euro_26_2_2011.jpg Size: 102 KB
  • #414
  • Feb 26, 2011 7:13am Feb 26, 2011 7:13am
Quoting Jack168
I have followed this thread for while. I felt there is some confuse in the conception of order flow. I often heard a lot of fx gurus, expert, professional, skilled traders and fx educators talked about order flow. When they open their mouth, "order flow" came out, .... But, when ask detail of "order flow", then, they would give you a lot of different explanation of order flow.

Fx market is very complicated market, which consists of many players, all of them have their way to operation of their fx business. Understand of their way of business...
So basically a retest of the breakout? Yes this is quite common, though I never heard this market maker theory behind it though...

This is something that happens all the time on any timeframe. think of the breakout of ranges in the asian session for example, during early london, price will break out and usually at some point retest and grab orders at the break point, or the middle point of the range.
  • #415
  • Feb 26, 2011 7:55am Feb 26, 2011 7:55am
Have some questions I'd like to get clarified from you guys if you don't mind:

1) What order types do you use to get into trades? Limit, Market, or both? Initially I've been playing around with Limit orders, and yes it does allow you to pick some fantabulastic tops/bottoms now and again, but I can't help but feel like the same thing could have been done using market orders, and then simply waiting for price to hit your market order. Granted you won't get the mental masturbation of knowing you were lucky enough to pick a top/bottom, I'm thinking the more valuable trade-off would be that it prevents against those trades that simply just don't work out.

2) Do you employ a fixed fractional, or fixed percentage style of risk management, and why?

Regards,
xXTrizzleXx
  • #416
  • Feb 26, 2011 7:57am Feb 26, 2011 7:57am
Quoting xXTrizzleXx
Have some questions I'd like to get clarified from you guys if you don't mind:

1) What order types do you use to get into trades? Limit, Market, or both? Initially I've been playing around with Limit orders, and yes it does allow you to pick some fantabulastic tops/bottoms now and again, but I can't help but feel like the same thing could have been done using market orders, and then simply waiting for price to hit your market order. Granted you won't get the mental masturbation of knowing you were lucky enough to pick a top/bottom, I'm thinking...
Personally - Market orders ALWAYS. I hate sitting there with a limit order wondering if its at the right price and wondering if it will hit or miss. The only time I will use a limit order is when I want to re open a position straight after getting stopped out. This way the price is known, if it misses my limit I'm still in my original position, if it hits my stop I'm straight back in the position I want to be in but at a better price. Its a win win! (provided I'm positioned correctly! If I'm not its a lose lose lol)
Time hides Nothing
  • #417
  • Feb 26, 2011 7:34pm Feb 26, 2011 7:34pm
Quoting CindyXXXX
Personally - Market orders ALWAYS. I hate sitting there with a limit order wondering if its at the right price and wondering if it will hit or miss. The only time I will use a limit order is when I want to re open a position straight after getting stopped out. This way the price is known, if it misses my limit I'm still in my original position, if it hits my stop I'm straight back in the position I want to be in but at a better price. Its a win win! (provided I'm positioned correctly! If I'm not its a lose lose lol)
I don't understand why you would want to get back in after your stop is hit? Do you mean to get in the trade at the same price where your sl was?
  • #418
  • Feb 26, 2011 8:28pm Feb 26, 2011 8:28pm
Quoting seagreen
I don't understand why you would want to get back in after your stop is hit? Do you mean to get in the trade at the same price where your sl was?
Yeah sometimes you know you have a good thing going but you just didn't allow enough room to allow for all the bollixing and noise. I know (or believe) the mark up/down is a false one but instead of moving my SL back I will submit a small defeat and re enter at a better price in a new trade. Not always right at my stop though sometimes I'll get back in with a market order when I'm not as confident.

Some will say why don't you average down and to that I say - Cause I don't want to, I don't need to, I am happy to take my 2% loss and have another go. if the second time I'm stopped out then I was just plain wrong to begin with and its time to re evaluate. But that never happens lol

Some may say, whats the point getting stopped and re opening to which I say that rules are rules if I've decided on a risk level then thats that. Of course my SL is in a place where I believe the market will struggle to go but obviously its not always that easy. I pay the spread twice and that may seem silly but the point is to improve the initial entry price which in a way is averaging down but I do it in separate trades not the same one.
Time hides Nothing
  • #419
  • Feb 26, 2011 8:37pm Feb 26, 2011 8:37pm
random post by me

The beauty of order flow trading is that it takes a lot of work in order to achieve the mindset and trade profitably. The advantage is that most other people do not do order flow trading properly, or are not willing to do the work necessary to achieve that level of success.

Since it is so difficult, and most people don't make it, or are not willing to put in the work, order flow trading can be much more profitable than other forms of trading the markets. Because as you grow in skill and proficiency in the art of order flow trading, you have less and less competitors. Less and less people are proficient in the art of true order flow trading and since there are less competitors you make more money in the end above and beyond that of normal profitable traders. The more work something takes, the easier it is to make money from it in the end as most other people failed, or not willing to put in the work necessary.

So the best order flow traders don't have much competition because they have put in the work necessary and can easily pull obscene amounts of money from the market as the people on the other sides of their trades are consistent losers.

Any beginner can throw up a chart, slap on a few indicators and trade a moving average crossover.

But very few people can think deeply about the market and truly understand and decipher what is moving the market, what it's expectations are, what the emotions of the participants are, what will generate order flow, why price is moving and what will cause price movement into the future, and how to profit from it.

Once you become that 'master artist' of the market then you never go back to create those sub par pieces of work(sub par trades). You go straight for creating the masterpieces and go for the jugular.

Enjoy
Private message me for a link to my order flow website.
  • #420
  • Feb 26, 2011 8:42pm Feb 26, 2011 8:42pm
Hey GRKFX I've been really enjoying your insights on this thread and thanks for getting it back on topic there (oops)

May I ask a question? What is the trade frequency like for the way you trade? Do you trade everyday? once a month? Once a week? And how long do you hold your positions for on average?

I have just always wondered this about you order flow guys, do they trade often or rarely or just "whenever the shoe fits"

Thanks
Time hides Nothing
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