How does order book scalping work? | Forex Factory

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How does order book scalping work?

  • #1
  • First Post: Oct 30, 2008 10:22am Oct 30, 2008 10:22am
Is there any literature on this?
  • #2
  • Oct 30, 2008 9:35pm Oct 30, 2008 9:35pm
Id like to add another question. Ive read about Traders in prop firms bread and butter being 'capturing the spread', how does this work?

Leon
Living the adventure in my head.
  • #3
  • Oct 31, 2008 3:04am Oct 31, 2008 3:04am
Only works in the futures exchange since there is no orderbook for Spot FOREX. You closely watch the Depth of Market Chart and look for changing in Bid and Ask orders.
  • #4
  • Oct 31, 2008 7:18am Oct 31, 2008 7:18am
Sorry, I am new at this. So what do you do with the depth of book? In spot, you can get some level two quotes on the ecns? Is that helpful?
  • #5
  • Nov 1, 2008 2:50am Nov 1, 2008 2:50am
Quoting pairs18
Sorry, I am new at this. So what do you do with the depth of book? In spot, you can get some level two quotes on the ecns? Is that helpful?
don't bother With this at all until you have a currenex broker
  • #6
  • Nov 1, 2008 6:50am Nov 1, 2008 6:50am
No need to worry about until you are trading with some expert and reliable broker.
  • #7
  • Nov 1, 2008 12:24pm Nov 1, 2008 12:24pm
'Capturing the spread' is buying the bid and selling the ask.
As for order book strategies, Google 'SOBI order book' and start reading.
The breaking of a wave cannot explain the whole sea.
  • #8
  • Nov 1, 2008 3:32pm Nov 1, 2008 3:32pm
Quoting pairs18
Is there any literature on this?
The quick answer is that it doesn't.
  • #9
  • Nov 1, 2008 3:45pm Nov 1, 2008 3:45pm
Quoting Craig
'Capturing the spread' is buying the bid and selling the ask.
As for order book strategies, Google 'SOBI order book' and start reading.
That's exactly it.

You must have level 2 and time&sales. level 2 for orders, time&sales for seeing how fast these orders are being filled. then you pick a stock which is not very fast moving, but not very very slow either, and there has to be a spread more than 1-3 pips, about 6 and above. So, you take a look at level 2, the books on both sides don't look too fat, t&s shows the orders being filled and shows through which ecn they are being filled the most often. Take a look at a chart for a general idea of the stock's direction, and go the same way. So, if the stock is generally going up, and you have a spread of 10 pips, say bid side 30.00 and offer side 30.10. what you do is you bid, so you place a bid at 30.00 through an ecn which is being filled most of the time (t&s), and once you're filled, (your position is at b/e, 0), you offer out at 30.10, and wait to be filled. once you are, you've made +10.

this is the technical part of this strategy. i've tried to do this on forex with EFX demo, their navigator has level 2, but demo is not being filled by live orders, obviously, so it didn't work out as good as i wanted, i don't have live account with them though.
Trax Tibidax Tibidox...
  • #10
  • Nov 1, 2008 3:54pm Nov 1, 2008 3:54pm
It probably does not work as well with forex due to the book not representing all market participants. Most people I know of do this type of stuff on stocks.
The breaking of a wave cannot explain the whole sea.
  • #11
  • Nov 1, 2008 4:10pm Nov 1, 2008 4:10pm
I completely agree with you, but with small positions, I think it's scalpable on the broker's level 2, though it only represents the market of its own clients, still, the orders are there, and you can fill them and get filled. it's riskier with large orders though.
Trax Tibidax Tibidox...
  • #12
  • Feb 8, 2011 8:15pm Feb 8, 2011 8:15pm
Quoting TJPLD
Only works in the futures exchange since there is no orderbook for Spot FOREX. You closely watch the Depth of Market Chart and look for changing in Bid and Ask orders.
There are several OrderBooks for FX, but what you have to have is a low latency aggregation to use it. There is one in particular that's affordable and the data is available for integration into MT4/5
  • #13
  • Mar 5, 2011 3:26am Mar 5, 2011 3:26am
Quoting Rockshore
There are several OrderBooks for FX, but what you have to have is a low latency aggregation to use it. There is one in particular that's affordable and the data is available for integration into MT4/5
Rockshore,

Which broker have this low latency aggregation ?

Regards.
Ludo.
  • #14
  • Mar 5, 2011 11:52am Mar 5, 2011 11:52am
Dukascopy bank have ecn level 2 too, but you dont see all big players
In 2 months of trading with them was only two clear scalping situation .. pair USD/CHF - 94.02 -there was order on ask 500 milions (normally market depth shows 150) .. when it was filled market jump to 94.17 .. and in EUR/USD - 1.3850 - bid 1000 milions (market went thru 2 pips up and fall 30 pips )
  • #15
  • Mar 6, 2011 6:54am Mar 6, 2011 6:54am
Quoting PTscalper
Dukascopy bank have ecn level 2 too, but you dont see all big players
In 2 months of trading with them was only two clear scalping situation .. pair USD/CHF - 94.02 -there was order on ask 500 milions (normally market depth shows 150) .. when it was filled market jump to 94.17 .. and in EUR/USD - 1.3850 - bid 1000 milions (market went thru 2 pips up and fall 30 pips )
We'll dukascopy does not show you full book depth. Only 5 levels (5 best priced bids or offers) OrderBooks for FX must show you full depth in order to be effective. Not to mention that its got to be neutrally based, not broker skewed for their own orders coming in which causes them to move prices and supplies of inventory.
  • #16
  • Mar 6, 2011 7:18am Mar 6, 2011 7:18am
You need Level 2 data and a ECN broker ie full futures $10 per pip Min, which will let you place a buy order on the Bid, you'll then sit in a cue effectively until your order it filled, if the market moves up you'll never get filled as your trying to buy below the ask.

Level 2 lets you see the orders and your order appear in the cue, but it moves so damn fast it's meaningless and you'll just end up staring at it and hours will fly buy.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #17
  • Last Post: Jun 22, 2011 10:47am Jun 22, 2011 10:47am
Quoting Rockshore
We'll dukascopy does not show you full book depth. Only 5 levels (5 best priced bids or offers) OrderBooks for FX must show you full depth in order to be effective. Not to mention that its got to be neutrally based, not broker skewed for their own orders coming in which causes them to move prices and supplies of inventory.
Dukascopy offer special script, which give you more than 5 levels
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