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Order Flow - Achieving the mindset

  • #701
  • Edited 4:46am Mar 15, 2011 4:32am | Edited 4:46am
Quoting redbaron1981
GRKFX xXTrizzleXx

Great posts.
I concur - This is what I come on FF for, you guys really got me thinking, Thank you

In fact I'm gonna go one better and put this down as an epiphany. Lots of work to do
Time hides Nothing
  • #702
  • Mar 15, 2011 5:07am Mar 15, 2011 5:07am
So in simple terms:

Price at the moment = sentiment at the moment.

Identify an event that will cause a shift in sentiment.

Aim to enter at an area where price had diverged away from sentiment and be prepared to average down. Try and get your entry as close to the extreme high or low somewhere where massive order flow will be generated. This could mean a preceding a news event.

If you go on the basis that current price = Sentiment if sentiment shifts price has too, then if an opportunity where price is well away from sentiment you have a high probability trade!

New route of study is to look into what the sentiment drivers of the market are.

Thanks,

James
  • #703
  • Mar 15, 2011 5:31am Mar 15, 2011 5:31am
Quoting redbaron1981
So in simple terms:

Price at the moment = sentiment at the moment.
It's great that you read the information and try to interpret it in your own unique way. People need to try to figure it out for themselves and see what works and what doesn't, and what needs tweaking etc.

Normally I hibernate a little bit after a long post, but I will post a small response.

Price at the moment does not necessarily equal sentiment at the moment. There are many times that price on an intra day basis can deviate from the sentiment. That could signal a potential trade opportunity, or it could not signal anything at all.

For example sentiment might be bullish, but price drops a little bit and hits a few sell stop orders and deviates from the bullish sentiment. If you had the mindset that "Price at the moment = sentiment at the moment" then how would you reconcile that? Did the sentiment shift to being bearish from bullish? Or is it a mispricing that you can capitalize on?

The current market price can sometimes signal a temporary, very temporary agreement in sentiment. Or other times it can be a mispricing, a huge mispricing, but certain market participants have not figured it out yet, but they might over the coming minutes, hours or days.

You can identify an event. I call it more of a scenario that plays out. It could be news, or it could be a whole host of other reasons.
Private message me for a link to my order flow website.
  • #704
  • Mar 15, 2011 5:51am Mar 15, 2011 5:51am
Grkfx,

You put it in writing better than what I could myself. So its exactly like what what you have said before.

The market has sentiment but price can easily be mis priced intra day or on any time frame and deviate from true value but eventually sentiment will kick in and bring it back to equilibrium or perhaps mis price it again.

It is up to the OF trader to recognize when price has diverged and take advantage of it. I guess its almost the same as a mean reversion. but to value and not some mathematical calculation.

  • #705
  • Mar 15, 2011 6:00am Mar 15, 2011 6:00am
Quoting redbaron1981
Grkfx,

You put it in writing better than what I could myself. So its exactly like what what you have said before.

The market has sentiment but price can easily be mis priced intra day or on any time frame and deviate from true value but eventually sentiment will kick in and bring it back to equilibrium or perhaps mis price it again.

It is up to the OF trader to recognize when price has diverged and take advantage of it. I guess its almost the same as a mean reversion. but to value and not some mathematical calculation.

...
It is up to trader to recognize if price has diverged from sentiment, and if, and then how to structure the trade properly to take advantage of it. Sometimes the order flow trader can make the determination that sentiment alone is not enough of a order flow generator to help support the trade and they pass on the opportunity.

Then they need to determine many others things like how fundamental value can play a role with sentiment. When sentiment can change in a split second and reverse completely, when sentiment can get even intensify even more.

Theres like a million different things to think about.

As for mean reversion. I don't care what people call it. Whether they call it mean reversion or reversion to sentiment, or some mathematical formula. It's all about order flow and what will generate order flow. If it doesn't generate order flow, then what good are all the fancy mathematical formulas? I just care about what will move the market.
Private message me for a link to my order flow website.
  • #706
  • Mar 15, 2011 6:11am Mar 15, 2011 6:11am
Quoting grkfx
If it doesn't generate order flow, then what good are all the fancy mathematical formulas? I just care about what will move the market.

Just a bit of loose trivia or perhaps opinion what have you but just out of interest...

What do you think is difference between Fundamental traders and order flow traders?

I would guess that generally speaking order flow traders are focused on ORDERS which is in a sense tied into fundamentals by way of how people will act etc. Of course a fundamental trader knows that he needs others to be aware of his value predictions in order for it to hold weight. The markets not going to move on his trade alone.

For example a fundamental trader will make value judgments about current prices and price impacts of new or expected developments

An order flow trader will look at the order flow and perhaps liquidity effects for certain happenings

it seems a simple question with an obvious answer but with a bit more thought the 2 seem to merge


But essentially what is the difference? Do you think its a time frame thing... Fundamental traders are generally longer term traders, or are they in essence the same thing? One needs the other and vice versa so in the end they are kind of the same?

In the end its just one of those pointless posts that confuse an already complicated equation in that it really doesn't matter, as the man just said, all that matters is whats gonna move the market who cares what you call yourself...

But just out of interest..

How would others here classify, divide or merge the 2?
Time hides Nothing
  • #707
  • Mar 15, 2011 6:33am Mar 15, 2011 6:33am
Quoting CindyXXXX
Just a bit of loose trivia or perhaps opinion what have you but just out of interest...

What do you think is difference between Fundamental traders and order flow traders?
To me, foundies trade based on foundamental informations, like news etc..., while orderflowers trade based on traders reasons and reactions.
Orderflow is not just about deviation of price from sentiment, it's about how informed players react to the fact that there is a mispricing in act and how they take advantage of uninformed players.
So, what an orderflow has to do is to notice a mispricing and think about various outcomes and scenarious, and IF one of those scenarios is almost sure to happen, then just exploit it.
It's not a sure science, you know. You cannot watch a soccer player kicking a ball and know where it is going exactly, but if you know that that soccer player wants to goal then you know that the ball is gonna hit the net.


edit1: An informed player that acts on other informed players' games.
  • #708
  • Mar 15, 2011 6:42am Mar 15, 2011 6:42am
Quoting CindyXXXX
Just a bit of loose trivia or perhaps opinion what have you but just out of interest...

What do you think is difference between Fundamental traders and order flow traders?
Big difference. My mindset is an order flow trader is that I have to stay in harmony with everything what will generate order flow, no matter if it fundamental, or irrational, or logical, or a potential rumor, or something else.

I have my order flow sensors constantly on the lookout and playing scenarios about what will generate order flow.

So for example if tomorrow I determined, for some weird reason some crazy astrological pattern is generated order flow, then I need to pay attention.

If I determine that some moving average crossover generates sufficient order flow to move price then I have to pay attention.

You pay attention to weird/illogical things even if they conflict with your current view of the market. Because an order flow trader focuses on everything that can generate order flow no matter how irrational it can be. Now I don't believe in astrology, or moving average crossovers just so you know. But, if I was to determine that they can move the market in the future then I need to adjust to that new order flow generator. If I was to determine that some really big hedge fund executed huge orders based off some astrological pattern, then you need to pay attention because......... its generating order flow!

Now I don't believe in astrology, nor do I currently think it will generate order flow in the future. But as an order flow trader you need to be flexible to what can move the markets. You need to be open to different possibilities so you can perceive different mispricings and inefficiencies. You stay in harmony with whatever generates order flow. Now I have a certain process that I go through to determine if it does that works for me.

There are a ton of scenarios where fundamentals don't generate enough order flow. Or the market misprices itself by a huge amount away from fundamentals. Yes there are those inefficiencies to take advantage of as well for sure.
Private message me for a link to my order flow website.
  • #709
  • Mar 15, 2011 6:43am Mar 15, 2011 6:43am
Quoting CindyXXXX
Just a bit of loose trivia or perhaps opinion what have you but just out of interest...

What do you think is difference between Fundamental traders and order flow traders?

I would guess that generally speaking order flow traders are focused on ORDERS which is in a sense tied into fundamentals by way of how people will act etc. Of course a fundamental trader knows that he needs others to be aware of his value predictions in order for it to hold weight. The markets not going to move on his trade alone.

For example a fundamental trader...
My humble thoughts about it:

IMO it is different thing. Bassicaly fundamental traders dont have to think about the stop orders , limit orders , S/R mainly becouse they do not care about charts. Order flow trading might have some fundamental analysis in it but this is only the part of equation. The rest lies in understanding of market psychology ,estimation of the order placement and good TA skills. my 2c
  • #710
  • Mar 15, 2011 6:48am Mar 15, 2011 6:48am
Quoting CindyXXXX
Just a bit of loose trivia or perhaps opinion what have you but just out of interest...

What do you think is difference between Fundamental traders and order flow traders?

I would guess that generally speaking order flow traders are focused on ORDERS which is in a sense tied into fundamentals by way of how people will act etc. Of course a fundamental trader knows that he needs others to be aware of his value predictions in order for it to hold weight. The markets not going to move on his trade alone.

For example a fundamental trader will...
IMO, is exactly the same on the core. The difference is what you call "order flow" analysis is just branding the technicalities behind a trade and to try to create a pseudo academic-rational approach on the markets but at the end is the same.

You are expecting FA (in any timeframe) to have an impact, so you look for a trigger in a IF scenario using "complex" definitions and theories behind who is who and stops and etc which is exactly the same for a FA trader with the only difference on the terminology. In simple words, taking a break or fading a move in S/R areas.

sisse
Pending conversations? PM for a chat...I am mainly in OTM now
  • #711
  • Mar 15, 2011 6:53am Mar 15, 2011 6:53am
Quoting CindyXXXX
Just a bit of loose trivia or perhaps opinion what have you but just out of interest...

[b]What do you think is difference between Fundamental traders and order flow traders?
The most important pointless post I've read in a while I reckon. Fundies are trading longer TF and off fundamentals out of necessity - their priority on the lower TFs is liquidity as can be seen by the million and one stop hunts on charts. OFs only care about orders whatever TF and whatever the motivation of the participant. If you know how a participant trades, you know where the orders are. Dealers can only take on so much risk. Technicals act in concert in very predictable ways.
  • #712
  • Mar 15, 2011 7:20am Mar 15, 2011 7:20am
Quoting triphop
The most important pointless post I've read in a while I reckon. Fundies are trading longer TF and off fundamentals out of necessity - their priority on the lower TFs is liquidity as can be seen by the million and one stop hunts on charts. OFs only care about orders whatever TF and whatever the motivation of the participant. If you know how a participant trades, you know where the orders are. Dealers can only take on so much risk. Technicals act in concert in very predictable ways.
I would differ with that. Pure fundie traders dont have to be concern about liquidity becouse their positions have long time-span and large drawdowns hence they are proportionally smaller. They do not intend to peek exact top or bottom imo.
  • #713
  • Mar 15, 2011 8:00am Mar 15, 2011 8:00am
Interesting replies cheers

After all of that would anyone agree to the notion that order flow in itself is like an outside force...?

TA, Fundamental, Contrarian are types of price motivated traders who look at acting on a perceived value.. Where as an OF trader is not concerned with this guessing game but rather takes advantage of the fact that other are.

On the outside looking in?

Or put it more simply and to include the factors of non profit motivated traders into the equation, the first 3 types of traders trade price or perceived value where as an order flow trader trades traders

Anyway sorry to get all deep and meaningful I just think its an interesting distinction
Time hides Nothing
  • #714
  • Mar 15, 2011 8:05am Mar 15, 2011 8:05am
Quoting Greenhaze
I would differ with that. Pure fundie traders dont have to be concern about liquidity becouse their positions have long time-span and large drawdowns hence they are proportionally smaller. They do not intend to peek exact top or bottom imo.
Almost the exact opposite - the bigger you are, the more you really do have to concern yourself with liquidity.
  • #715
  • Mar 15, 2011 8:13am Mar 15, 2011 8:13am
1)Fundamental traders look for deviations of price from true value.

2)Technical traders look for repeating patterns in price behavior.

3)Order Flow Traders seek to predict the future order activity of 1 and 2.

Its all about what you analyze and how you make your trading decisions.

KK.. I'm off to the book cave. Luck be with you.
  • #716
  • Mar 15, 2011 8:17am Mar 15, 2011 8:17am
Quoting triphop
Almost the exact opposite - the bigger you are, the more you really do have to concern yourself with liquidity.
Thats true in a nutshell but all i meant is if you are a fundie trader and can live with couple hundreds pips of dd then you dont have to concern yourself with liquidity when scaling in to the position in comparison to the other guy who want to execute very large order at the strict price level.
  • #717
  • Mar 15, 2011 8:26am Mar 15, 2011 8:26am
Quoting grkfx
Big difference....
Even have to find out how reactors work.

http://www.businessinsider.com/japan...no-risk-2011-3
.
  • #718
  • Mar 15, 2011 9:30am Mar 15, 2011 9:30am
Quoting nasir.khan
Even have to find out how reactors work.

http://www.businessinsider.com/japan...no-risk-2011-3
.
Thats right!

That would be really hardcore analysis. But if you did have a team ready to perform that kind of analysis, that is a pretty nice information edge you would have there.

10% drop in the stock indexes is some pretty good money...
Private message me for a link to my order flow website.
  • #719
  • Mar 15, 2011 2:14pm Mar 15, 2011 2:14pm
'Twas the night before Christmas, when all through the house

Not a creature was stirring, not even a mouse;

The stockings were hung by the chimney with care,

In hopes that St. Darkstar soon would be there;

  • #720
  • Mar 15, 2011 3:59pm Mar 15, 2011 3:59pm
Quoting eurotrash
Intro is up...
dude... how many times did you hit browser refresh, and at what intervals? lol

fast execution....
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