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Order Flow - Achieving the mindset

  • #1,141
  • Mar 30, 2011 3:40pm Mar 30, 2011 3:40pm
Quoting PiptheRipper
I hope to start a brief discussion on the following?

How does end of the month and end of the quarter affect money flow?
....
Cool Runnings...
I'll give you an example, but for equity market,on how the equation in the money flow may be affected. Usually stocks in the Dow Industrials index tends to do well on the closing friday of each quarter, because that was when the arbitrage traders bought back stocks that they had sold short to hedge expiring future contracts.

this is one of those situations when you can get a good price because the person on the oder side of the trade was a "forced seller", you just facilitated the transactions by providing the liquidity.

all the best!
  • #1,142
  • Mar 30, 2011 3:42pm Mar 30, 2011 3:42pm
Quoting hilmy83
I'm betting against down move. Price willl move to value area 4175 during late asian/early euro hours. From the chart i can see quite of a build up of short orders around there.

And if my guess is right, the shorts will get squeezed to 4200.


If not, you'll make money from longs like me :-(
My limit order was missed by a a few pips,and then I had a friggin problem with the platform...oanda is giving me shit these days,i don't know what's up with that!
Anyway,finaly I entered long with market order around 80,and now SL at BE.
Take profit is 4220...but I might close around 4200 if we get there...keeping my fingers crossedhttp://www.forexfactory.com/images/icons/icon10.gif
  • #1,143
  • Mar 30, 2011 3:48pm Mar 30, 2011 3:48pm
Quoting Tilt
My limit order was missed by a a few pips,and then I had a friggin problem with the platform...oanda is giving me shit these days,i don't know what's up with that!
Anyway,finaly I entered long with market order around 80,and now SL at BE.
Take profit is 4220...but I might close around 4200 if we get there...keeping my fingers crossedhttp://www.forexfactory.com/images/icons/icon10.gif
wth? i thought you were gonna short?

damn it.Now i have to go short cause that's how order flow works..

j/k
  • #1,144
  • Mar 30, 2011 3:58pm Mar 30, 2011 3:58pm
Quoting hilmy83
wth? i thought you were gonna short?

damn it.Now i have to go short cause that's how order flow works..

j/k
lol...I said I was going to fade the brake on short side.
I guess I told it wrong...hell I am trying! http://www.forexfactory.com/images/icons/icon10.gif sometimes english gets the better of me!
...so I fade the brake of lower trendline... I had my BUY limit order 1.4035...was missed I think somwhere around 15 pips ( now that I think of it its quite a big miss)!
  • #1,145
  • Mar 30, 2011 4:27pm Mar 30, 2011 4:27pm
Quoting Darkstar
Aww man, you know I didn't mean it like that.
Dude, demo trading is tax free, that's why we don't even bother going live!
  • #1,146
  • Mar 31, 2011 1:38am Mar 31, 2011 1:38am
Quoting triger88990
I'll give you an example, but for equity market,on how the equation in the money flow may be affected. Usually stocks in the Dow Industrials index tends to do well on the closing friday of each quarter, because that was when the arbitrage traders bought back stocks that they had sold short to hedge expiring future contracts.

this is one of those situations when you can get a good price because the person on the oder side of the trade was a "forced seller", you just facilitated the transactions by providing the liquidity.

all the best!
I know about "forced sellers" on contract expiry, when they roll on to the next contract but i am not really sure what are you trying to say here. Can you give some examples of that?
  • #1,147
  • Mar 31, 2011 2:35pm Mar 31, 2011 2:35pm
Hey Guys,

This is what I've been looking at recently trying to get my head around what Grkfx has been going into. The first pic is one that Darkstar posted on Carnegies other OF thread. Darkstar goes on to quote this paragraph which I presume is from his book.

"Latent order interest is simply an accounting of participants who can/will trade if price were to move to a specific price level, but due to the costs associated with managing orders, remain on the sidelines until it does so.

To give you an example of how this manifests itself in the real world; imagine that you are a fundamental trader with an analysis which shows security A to be with 1.000. If price is currently hovering around 1.000, you likely have very little interest in participating in the market. However, if price suddenly moves down to .500 without a change in the underlying fundamentals, you’re going to have a great deal of interest in buying. In this example your desire to trade at .500 would be latent interest.

Latent order interest is predominantly comprised of fundamental traders so it tends to remain constant as long as the information related to fundamental value remains unchanged. When new information becomes available, this curve will shift up or down to reflect the aggregate opinion of what that new information means for fundamental value.

As a general rule however, the opinions formed by fundamental traders are slow to materialize. It may take a number of hours or even days for this new information to become properly digested. In the interim, the latent demand will curve will become somewhat wider and flatter due to the variability of interpretations regarding the data."

Second pic is one I knocked up quickly to try and show how this would seem in real life. The extremes in sentiment and sentiment itself for that matter are dynamic. The extremes in sentiment are the areas where there would be a higher density of latent interest so basically the more participants who are willing to enter the market.

Now from what I can make it is at these extremes that Grkfx/Darkstar would be looking to enter. Now the only thing that I don't understand is how we would know at what levels this latent interest is sitting. The other problem I would see is that surely this is the same as top and bottom picking but with the added cushion that if we know at what level this latent interest would enter at we could have a far higher probability trade.

Darkstar mentions above that:

"Latent order interest is predominantly comprised of fundamental traders so it tends to remain constant as long as the information related to fundamental value remains unchanged"

I think we would have to look more intio FA to try and figure out what would cause these guys to get of there behinds and trade.

What do you guys think?

All the best,

James.
Attached Image(s) (click to enlarge)
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  • #1,148
  • Mar 31, 2011 3:31pm Mar 31, 2011 3:31pm
Quoting redbaron1981
Second pic is one I knocked up quickly to try and show how this would seem in real life. The extremes in sentiment and sentiment itself for that matter are dynamic. The extremes in sentiment are the areas where there would be a higher density of latent interest so basically the more participants who are willing to enter the market.
Just responding to the pic, I would think sentiment is far more correlated with price and less so with fundamentals. This allows moves away from fundamental value, to a point where value traders will want to enter.
  • #1,149
  • Mar 31, 2011 4:17pm Mar 31, 2011 4:17pm
Quoting eurotrash
Just responding to the pic, I would think sentiment is far more correlated with price and less so with fundamentals. This allows moves away from fundamental value, to a point where value traders will want to enter.
I agree Euro trash also if The market as a whole calculates fair value as a discount of the possible future outcomes as Darkstar states then events will have a major effect of distorting price and sentiment.

The aim of the diagram was more with help to visualize whats happening. My main aim now is to find out how we can identify these extremes. I always note that Mike(Mqb11) always like to play price action where its at an extreme and has space. The concept of latent liquidity being at the extremes clarifies why Mike would be trading like this.

This whole concept is as DS puts it Sentiment Arbitrage. One setup I've been thinking about is where an event occurs and price then becomes at an extreme of sentiment. We then have an opportunity to trade with fairly high probability.

By now i'm starting to grasp exactly what an order flow trade is based on. The difficult part is identifying the factors that would be needed for a trade like this. Truly mind boggling stuff!

All the best,

James.
  • #1,150
  • Mar 31, 2011 4:26pm Mar 31, 2011 4:26pm
Maybe that can help you a bit:

A day in the life of a trader Hong Kong July 2009
Hostet by Bernard Lo,Bloomberg TV

http://www.dbfx.com/popups/video_day_in_the_life.jsp
  • #1,151
  • Mar 31, 2011 4:42pm Mar 31, 2011 4:42pm
Quoting UnnamedPlayr
Maybe that can help you a bit:

A day in the life of a trader Hong Kong July 2009
Hostet by Bernard Lo,Bloomberg TV

http://www.dbfx.com/popups/video_day_in_the_life.jsp
Unnamedplayr,

Thanks for the link will check it out now. You never seek to amaze me with these links you find.

All the best,

James.
  • #1,152
  • Mar 31, 2011 9:49pm Mar 31, 2011 9:49pm
Quoting redbaron1981
Hey Guys,

This is what I've been looking at recently trying to get my head around what Grkfx has been going into. The first pic is one that Darkstar posted on Carnegies other OF thread. Darkstar goes on to quote this paragraph which I presume is from his book.
Thats a good post redbaron! Thinking for yourself, and developing your own concepts to work on, and playing out your own scenarios is a critical component to attaining the order flow mindset and achieving success.

I will certainly post my response/comments with some charts/pictures within the next few days.
Private message me for a link to my order flow website.
  • #1,153
  • Apr 1, 2011 3:06am Apr 1, 2011 3:06am
Quoting redbaron1981
The aim of the diagram was more with help to visualize whats happening. My main aim now is to find out how we can identify these extremes. I always note that Mike(Mqb11) always like to play price action where its at an extreme and has space. The concept of latent liquidity being at the extremes clarifies why Mike would be trading like this.
I think it is safe to say Mike is 99.99% pure technical trader. Great bars at great locations. You can see the order flow in bars (technical order flow, not sure if that is real term or not). I think some folks here are looking for the order flow that creates the bar in the first place and get in a little bit earlier or use other methods of order flow to trade. Like it has been said, order flow is different things to different people and used in different ways. I'm sure you'll find your niche as you learn more and more. FA & TA can be a powerful combo.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #1,154
  • Apr 1, 2011 3:29am Apr 1, 2011 3:29am
Quoting UnnamedPlayr
Maybe that can help you a bit:

A day in the life of a trader Hong Kong July 2009
Hostet by Bernard Lo,Bloomberg TV

http://www.dbfx.com/popups/video_day_in_the_life.jsp
Interesting projection for the EUR in the coming months. Plays right along the Sachs projection for the near future.
  • #1,155
  • Apr 1, 2011 3:29am Apr 1, 2011 3:29am
Quoting grkfx
Thats a good post redbaron! Thinking for yourself, and developing your own concepts to work on, and playing out your own scenarios is a critical component to attaining the order flow mindset and achieving success.

I will certainly post my response/comments with some charts/pictures within the next few days.
Grkfx,

I keep on thinking that one day your going to post something which will like a massive light bulb going off can't wait to see your comments/charts.


LasVahGoose:I know Mike is purely technical however he also stresses location location location!! I think the two diagram I put in my earlier post explains exactly why.

All the best,

James.
  • #1,156
  • Apr 1, 2011 4:21am Apr 1, 2011 4:21am
A few interesting quotes from the video Unnamedplayr posted.
All of these are by Mercer.

Markets are not efficient.

There are biases in markets figure out a way of extracting those biases.

Now heres whats really interests me.

Short term moves can be ver random and the media will then try to fit an explanation to it.

Dbfx look at over shoot models based on an Intra day/day-day bases volatility you can figure out if a market has overshot its relationship with its co drivers and use that as a trading strategy by taking a contrarian trade at those levels.

I think the last paragraph explains exactly what were looking for. What we need to do now is try to indentify the underlying co drivers and then the levels that participants will enter the market when prce has diverged to far away from its co drivers.

James.
  • #1,157
  • Apr 1, 2011 5:09am Apr 1, 2011 5:09am
this is what i look at, with my charts...

http://fxtrade.oanda.com/analysis/news/

https://fxtrade.oanda.com/analysis/news/ubs

http://fxtrade.oanda.com/analysis/forex-order-book

http://forexblog.oanda.com/

http://www.bloomberg.com/news/markets/

http://www.forexfactory.com/calendar.php
  • #1,158
  • Apr 1, 2011 6:29am Apr 1, 2011 6:29am
Quoting Louie
Interesting projection for the EUR in the coming months. Plays right along the Sachs projection for the near future.
UBS 3 months projection for EUR is 1.3
  • #1,159
  • Apr 1, 2011 7:57am Apr 1, 2011 7:57am
Quoting seagreen
UBS 3 months projection for EUR is 1.3
I wasn't going to comment on this cause I have been monitoring that as well. 1 month is 1.40 and we are slowly working our way back there but there support levels seem to stay in tack.
  • #1,160
  • Apr 1, 2011 9:53am Apr 1, 2011 9:53am
Quoting Louie
I wasn't going to comment on this cause I have been monitoring that as well. 1 month is 1.40 and we are slowly working our way back there but there support levels seem to stay in tack.
UBS historical calls (inflection points) below. I'll let you judge how good they are.

2010-07-18: EURUSD 1m 1.20, 3m 1.15
We expect any support the euro receives in the run-up to the release of bank stress test results on July 23 to be short-lived.

2010-08-02: EURUSD 1m 1.28, 3m 1.15
We adjusted our one-month dollar forecasts and maintain our medium-term view that the euro will weaken as quite a bit of good cyclical news is now priced in.

2010-09-27: EURUSD 1m 1.35, 3m 1.25
With the Fed last week warning that it may make additional asset purchases if US inflation remains too low, we see the dollar staying weak into the Nov. 3 Federal Open Market Committee meeting.

2010-10-11: EURUSD 1m 1.40, 3m 1.25
We have changed our one-month forecasts for EURUSD in the wake of our economists now expecting the Fed to announce quantitative easing in the form of a programme of bond purchases on the order of $100-200 bn a quarter.

2010-11-15: EURUSD 1m 1.30, 3m 1.25
We now forecast EURUSD to fall to 1.30 over the next month, from a previous target of 1.40. Over a three- to twelve-month time period, we think EURUSD should trade in a 1.25-1.30 range.

2011-02-28: EURUSD 1m 1.37, 3m 1.30
A confluence of factors has put the US dollar under pressure, leading us to raise our 1m and 3m EURUSD forecasts to 1.37 (from 1.30) and 1.30 (from 1.25), respectively.
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