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Order Flow - Achieving the mindset

  • #1,381
  • Apr 15, 2011 5:50am Apr 15, 2011 5:50am
Quoting nasir.khan
Yeah ofcourse i was just talking about the thread, it has stopped to progress for sometime now.

BTW Monroe, When u are fading SR, what MM do you use and what are the Technical implications of your methodology.

Lets say you are going to take out stops above 1.4530 in fiber, put all the order flow things aside like barriers and other orderflow generators. How would u approach this setups in terms of MM and entries and exits . I believe you will have different trade plans to imply to different price action that OF will generate.

I am little...
what's up nasir... well that's one thing I am still messing with, but as of right now, it's a comfort thing for me based on the trade and how things have been going recently, but generally when I am cruising right along... for intraday, I risk between 5-10% depending on the trade, usually 30 pip stop 30-50 tp... though sometimes I run it longer and I'll take some off the table and get my stop to BE.
  • #1,382
  • Edited 8:17am Apr 15, 2011 6:37am | Edited 8:17am
Quoting Carnegie
sup brothers?

The last couple of weeks I have moved away from the stop hunting concept as I feel it is "finished" and all that needs to be worked on is experiencing them a couple of gazillion times.

I have moved on to thinking about where the orders are. While I am not very interested to share everything (no, its not because its classified it's because most of it is wrong...) I will put out some ideas here and I need some discussions about it.

I have been moving into algos and HFT some, currently looking at arbitraging because I see these V-shaped patterns in our chart as arbitraging. However, I seem to have got the concept totally wrong.. Does even arbitrage include in order flow? Or is it more about arbitraging sentiment?

I have allot more to explain and ask but I have little time now so talk to you guys later!
Take care
I figured I'd get involved with the discussion. I'm a relative noob at this but I've been following, reading, and trying to understand this for the past year like many of you. You're not afraid to express your frustration with this. I can definitely relate to it. Having all this information floating in your head not really knowing if your assumptions are right or wrong(they sure feel wrong most of the time).

So here goes at the risk of sounding stupid because I have no one to confirm anything I now believe. I'm going to reflect on some things as I've come to understand them. Like you I've finally ended my obsession with stop hunts. When I first started reading about them I was fascinated. I now understand them as just a tiny part of a much bigger picture.

What I've been doing is personally is backing up a bit and looking how the daily events shape the market. Watching everything play out. Today for example will be an experiment. It's very roughly laid out in my head but I'll be watching it today regardless. I won't be trading it just observing. Friday is notorious for profit taking. As a j16 member mike taught me this very quickly. So we know friday can be used for profit taking at the end of the day. What causes a trader to take his profits before the weekend? Uncertainty of whats going to happen over the weekend maybe? Im my honest noob opinion we've had a dramatic last couple weeks. I believe some traders will be uncertain if they want to hold over the weekend so why not close out positions and have a stress free weekend?

So to recap the basic idea of this
FACT: Traders sometimes take profit at the end of the weekend causing sizable moves.

So if I can understand what will cause traders to close out trades at the end of the weekend I now have an orderflow generator. If I figure this out then guess what? I have another piece of understanding as to why the market moves that can be anticipated.

I think I'm on the right track with this. Not necessarily in my experiment. but the mindset in general I believe to be correct.

You said that you we're interested in the V shaped patterns that occur in charts. You describe them as areas that may be used for sentiment arbitrage. Let's try and dissect what events could occur to make a pattern like this play out. These are just brainstorming ideas so don't take them seriously. News release. already priced in. uninformed traders jump in long creating disequilibrium price goes up. informed traders see price deviating from true value. they short. price falls back to true value. informed traders take profit. V pattern is the aftermath. doesn't sound unreasonable right?

EDIT- Upon rereading this after I wrote it. Maybe it's not about the V shaped pattern at all.

Maybe someone accidentally put a huge order in knocking out stops causing a cascade. A huge accidental order might be seen on the DOM correct?(I don't watch l2 idk) Other traders would jump in on this pushing price even more. eventually traders would see price deviating from true value and push price back to equilibrium. These are just some ideas. More importantly I think is that these are ideas that can be tested repeatedly.
Cautiously optimistic. . .
  • #1,383
  • Apr 15, 2011 8:33am Apr 15, 2011 8:33am
Quoting supremeChaos
i have some questions to the experienced OF traders.
i have attached 2 charts:
1st shows a 10minute chart with the trade in question (blue triangle, = entry; green circle = exit; EUR$, this was last night's chart, i think mid-NY session)
2nd chart shows it as a 1 hour chart (i placed a box on the entry & exit area for reference)

i'm very curious..
1. how far is this from OF trading? is this 1 way of OF trading?
2. if so, is this a kind of trade that u normally take?
3. is there another way of OF trading for this specific trade?
4. what would...
It doesn't matter how you took this trade, but it's simply beautiful! I was in a similar one on USDCAD. Less pips but still pocketed the whole day's range. Reminded me of a strategy posted by merlin - wait for the market to make a day's high (low), sell (buy) and exit at the days low (high)
  • #1,384
  • Apr 15, 2011 8:44am Apr 15, 2011 8:44am
Quoting Carnegie
sup brothers?

The last couple of weeks I have moved away from the stop hunting concept as I feel it is "finished" and all that needs to be worked on is experiencing them a couple of gazillion times.

I have moved on to thinking about where the orders are.
Sorry brother, but this is nonsense. If you're "moving" into the subject of where the orders are that means you still haven't finished with stop hunting concept. I'm thankful to you for opening and contributing to all these threads, there's lots of useful info here, actually more than enough to start making money. Maybe it's time for you to leave the forum for some time and practice, practice, practice.
  • #1,385
  • Apr 15, 2011 9:22am Apr 15, 2011 9:22am
Quoting Tact1cal
So to recap the basic idea of this
FACT: Traders sometimes take profit at the end of the weekend causing sizable moves.
So if I can understand what will cause traders to close out trades at the end of the weekend I now have an orderflow generator. If I figure this out then guess what? I have another piece of understanding as to why the market moves that can be anticipated.
Good thinking.... This would help cause more V-shapes on fridays than other days. Low market impacting news fridays would be ideal for that.


Quoting Tact1cal
Maybe someone accidentally put a huge order in knocking out stops causing a cascade.

My brain talking out loud, it is likely to be wrong...


Stop losses remove liquidity, but if stop losses volume are significantly greater than limit volume in a given range, then the quotes may skip right through and cause more stop losses to be executed; this I believe is a stop loss cascade.

This occurs until enough limits are hit to retrieve liquidity. What this means in my unscrambling mind, is that unless you know that large amounts of limit orders are backing you up then there is a risk of joining the cascade as it shoots through your smaller limit order towards your own stop loss. I see stop loss hunting as for those that have huge capital to trade with or those that have access to analysing where limit orders have been placed. However, in addition to this you are not just overcoming the stop losses but the cascade accelaration would be enhanced by traders with stop entry orders / market orders (break out traders) and these are not even able to be seen in most order books.

Order flow might change so that the vacuum behind the cascade actually fills with limit orders. If the limits volumes are greater than those hunting the stops then a trend starts moving that way and your stop becomes the hunted one, unless scalping from the stops you collected.

I think that to do genuine stop loss hunting you need a genuine limit order book.
  • #1,386
  • Apr 15, 2011 9:40am Apr 15, 2011 9:40am
Quote
I think that to do genuine stop loss hunting you need a genuine limit order book.

In the half baked situation I described that would be a legitimate argument for needing the order book. You'd need to see that accidental order take place and only people watching it at the time could react.

The beauty of it is that there are all kinds of different situations. They don't all need the order book.
Cautiously optimistic. . .
  • #1,387
  • Apr 15, 2011 10:04am Apr 15, 2011 10:04am
Quoting seagreen
Sorry brother, but this is nonsense. If you're "moving" into the subject of where the orders are that means you still haven't finished with stop hunting concept. I'm thankful to you for opening and contributing to all these threads, there's lots of useful info here, actually more than enough to start making money. Maybe it's time for you to leave the forum for some time and practice, practice, practice.
Actually that was written badly by me, I am not moving into the concept of "knowing" where the orders are as the stop hunts already work with that concept, it is the same thing, but larger liquidity areas thus I need to understand the IDEA behind it.

You are correct.. maybe I need to do that!

Thank you and take care
  • #1,388
  • Apr 15, 2011 10:22am Apr 15, 2011 10:22am
Quoting Tact1cal
In the half baked situation I described that would be a legitimate argument for needing the order book. You'd need to see that accidental order take place and only people watching it at the time could react.

The beauty of it is that there are all kinds of different situations. They don't all need the order book.
The above is a genuine order flow view held in this and other threads.



However for me...


In the pic below, I can't for the life of me determine precisely why stop hunts 1 and 2 were successful, while stop hunt 3 was unsuccessful.

  1. Are the green boxes where you would place your limit orders to hunt the stops?
  2. Why was stop loss hunt 3, turned into a cascade, while stop loss hunt 2 and 1 were successful?
  3. How would you determine this without knowing that a greater volume of limit orders are arriving?
  4. How would you determine the position to place your stop loss hunting limit order?

With question 4, I can't see how you can determine this, largely because the volume of other traders limit orders would significantly impact on the length of the stop run hunt, and therefore affect your ability to place your own accurate stop hunt limit order.

Or are you suggesting that stop loss hunting limit orders don't need to be perfect just need to be placed? If this is the case how do you determine your own stop loss for example stop loss hunt 3?

just trying to learn and get that mindset

Attached Image (click to enlarge)
Click to Enlarge Name: Stop Loss Hunting.jpg Size: 54 KB
  • #1,389
  • Apr 15, 2011 10:27am Apr 15, 2011 10:27am
Quoting supremeChaos
i have some questions to the experienced OF traders.
i have attached 2 charts:
1st shows a 10minute chart with the trade in question (blue triangle, = entry; green circle = exit; EUR$, this was last night's chart, i think mid-NY session)
2nd chart shows it as a 1 hour chart (i placed a box on the entry & exit area for reference)

i'm very curious..
1. how far is this from OF trading? is this 1 way of OF trading?
2. if so, is this a kind of trade that u normally take?
3. is there another way of OF trading for this specific trade?
4. what would...

For order flow you have to get an idea of what's the market sentiment, also you should be able to answer some questions like: who has demand for the currency and where most likely that demand will show up, who has been selling the currency, what interests do they have, why are they doing so, is the market focus right now in some expectations ?

After all that even then you have to be careful, there could be some many bearish news for the EUR one session and then the next one someone else could have a big demand for EUR, someone that does not care much about the short or long fundamentals in the underlying, they just have demand for the currency and that's it, they need to buy it right now, and that will make a shift in the supply/demand for that currency.
  • #1,390
  • Apr 15, 2011 11:01am Apr 15, 2011 11:01am
Quote

Or are you suggesting that stop loss hunting limit orders don't need to be perfect just need to be placed? If this is the case how do you determine your own stop loss for example stop loss hunt 3?

just trying to learn and get that mindset

I'm not suggesting anything and I don't have answers to your questions. I wouldn't place a trade anywhere on that chart. It's not about the chart and why some random S/R level failed or held. It's about finding situations where orders will be placed. Do you know where the orders were on that chart chart? I sure as hell don't. It's not about knowing every move in the market.
Cautiously optimistic. . .
  • #1,391
  • Edited 12:32pm Apr 15, 2011 11:55am | Edited 12:32pm
Quoting aquaart
The above is a genuine order flow view held in this and other threads.



However for me...



In the pic below, I can't for the life of me determine precisely why stop hunts 1 and 2 were successful, while stop hunt 3 was unsuccessful.[list=1][*]Are the green boxes where you would place your limit orders to hunt the stops?[*]Why was stop loss hunt 3, turned into a cascade, while stop loss hunt 2 and 1 were successful?[*]How would you determine this without knowing that a greater volume of limit orders are arriving?[*]How would you determine...
Hi Aquaart,

I have spent years learning about trend analysis and support and resistance along with fundis, fibs and all the other stuff. I have only recently spent time and money researching supply and demand and orderflow (6 months or so).

I found understanding horizontal SR along with trend was the key and all I will ever need, once you have that even the market makers games start to make sense, you can hold trades with more confidence and even add to trades at the same places the dealers do (play them at their own game).

IMO stop hunt 3 failed because they hadn't flushed the stops behind the low far left. I have no idea what timeframe or chart that is so I am unable to do a proper analysis but it is a clear range and when I look at ranges now I just see them as levels for dealers to accumulate orders at the best possible prices.

Your chart is making lower highs and lower lows so if I had the higher timeframes to look at and they were in agreement I would be looking for a possible breakout to the downside.

Stop hunt 1, not really a stop hunt imo, is just a lack of buying sentiment. To me every one of those four swing highs were accumulation of discounted short orders and I see the two swing lows as the dealers / big money taking profits and forcing the price back up to a level to re-enter and make even more money.

I try not to complicate trading by wondering about news, fundis, fibs, pivots or anything like that, I have learned that trend will blow through that stuff like a knife through butter, to me the markets are just one big cash machine for the big money to feed their greed. They are constantly hunting for liquidity, constantly looking for the best places to buy and sell. I couldn't care less about where this big order or that big order might be, it is all about liquidity.

A very simplistic view I know but it works for me. I hope it makes some sense.
  • #1,392
  • Apr 15, 2011 1:08pm Apr 15, 2011 1:08pm
Quoting frankkn
Dude is that you in your avatar? I'm sure you've heard this before but you look just like Charlie from It's Always Sunny in Philadelphia
Haha, the picture isn't me, it's Charlie.
  • #1,393
  • Apr 15, 2011 1:12pm Apr 15, 2011 1:12pm
Quoting jag1966
IMO stop hunt 3 failed because they hadn't flushed the stops behind the low far left.

...

Stop hunt 1, not really a stop hunt imo, is just a lack of buying sentiment. To me every one of those four swing highs were accumulation of discounted short orders and I see the two swing lows as the dealers / big money taking profits and forcing the price back up to a level to re-enter and make even more money.
I concur.

Hunt 3 was a failed trade because the next level of stops were relatively close. In the hunting game the objective is to maximize the yield on a position, so you should always expect that price will be pushed as far as needed to trigger ALL the stops.

I like to look for fade trades where the next round of stops is >50 pips away. For example, lets say you see stops at 1.100, 1.090, 1.060, and .999.

Assuming sentiment is moderately bullish for the price, you would let the stops at 1.100 and 1.090 run off without doing anything. If it reversed on either of em, so be it. You'll lose far more often playing those trades then you will win, so don't beat yourself up over it.

The stops at 1.060 are your target for fading. This is because it costs way too much money for a hunter to push price an additional 61 pips to trigger .999 (Usually anyway. If the stops at .999 are HUGE, it would be worth it, but I'm trying to keep it simple). So enter your buy limits at .060 and ride it as long as appropriate.

Re hunt 1: I see too many of you guys trying to trade every stop level listed on ifr. Hunting stops is more involved then that... you have to THINK about the hunter and where his best interests lie. Stop hunting (from a large traders perspective) is a damn risky enterprise and they aren't going to take that risk for a handful of intraday trader stops. Look for the Big stops and those that will provide a good risk reward ratio for the hunters and you'll see your winrates improve dramatically.

Luck be with you.
  • #1,394
  • Apr 15, 2011 1:34pm Apr 15, 2011 1:34pm
Quoting Darkstar
I concur.
...
Luck be with you.
You have no idea how much that helped me. Thanks so much, DS.

Have a nice weekend.
  • #1,395
  • Apr 15, 2011 1:54pm Apr 15, 2011 1:54pm
aha! so that's how the big guy does it.....
  • #1,396
  • Apr 15, 2011 4:01pm Apr 15, 2011 4:01pm
Quoting Monroe
aha! so that's how the big guy does it.....
Just when i was thinking the road had ended. lol

Well that's how this thread works.
.
  • #1,397
  • Apr 15, 2011 4:58pm Apr 15, 2011 4:58pm
The road to market efficiency is paved with Darkstar's posts. Gotta hurry until it's too late.
  • #1,398
  • Apr 15, 2011 10:34pm Apr 15, 2011 10:34pm
try to think "where would successful traders place their stops?". if i'm in profit, or have been in profit, my stop isn't going to be sitting under the lowest low (long). I'd want that at breakeven.. or a method to put them close enough to price so that I can maximize profits yet far enough away from average volatility..

Glad to see you posting in here, Frankkn.
  • #1,399
  • Apr 15, 2011 11:51pm Apr 15, 2011 11:51pm
Thanks for your replies DarkStar and jag

Quoting jag1966
I found understanding horizontal SR along with trend was the key and all I will ever need, once you have that even the market makers games start to make sense, you can hold trades with more confidence and even add to trades at the same places the dealers do (play them at their own game).
It has been the same for me with horizontal SR and trendlines. However, for me although i understood what all of these terms and ideas were individually, bid / ask spread, long trade (buy entry sell finish) limits, liquidity, vacuum, stops, stop hunting, s/r, ranging, trends, fundamentals, technicals, sentiment, market makers, ECNs, broker and dealer; I had never actually drawn them together to understand trade mechanics and how each of the player's ideals affect the market micro-structure.

This in turn stopped me from understanding stop hunting producing liquidity and therefore giving a greater view of likely market direction. Now that I know that if I can identify where the stops are, I can also identify where big players limit orders (liquidity production) is going to be and also the reason why they need to do this.

Quoting jag1966
IMO stop hunt 3 failed because they hadn't flushed the stops behind the low far left.
Quoting Darkstar
Hunt 3 was a failed trade because the next level of stops were relatively close. In the hunting game the objective is to maximize the yield on a position, so you should always expect that price will be pushed as far as needed to trigger ALL the stops. I like to look for fade trades where the next round of stops is >50 pips away. For example, lets say you see stops at 1.100, 1.090, 1.060, and .999.
I had always noticed that entry areas that were in close quote proximity that the limit entry further away from current quotes was more likely to produce a result but less likely to produce a successful result once in, but had not connected the reason why... It is because there is range of stops that need to ALL be triggered to maximise liquidity with minimal risk.

Quoting jag1966
I try not to complicate trading by wondering about news, fundis, fibs, pivots.... ....it is all about liquidity. A very simplistic view I know but it works for me. I hope it makes some sense.
Which is what Order Flow has solved for me... ...stop hunting and limit entries produce liquidity.

Quoting Darkstar
Hunt 3 was a failed trade because the next level of stops were relatively close. In the hunting game the objective is to maximize the yield on a position, so you should always expect that price will be pushed as far as needed to trigger ALL the stops.

I like to look for fade trades where the next round of stops is >50 pips away. For example, lets say you see stops at 1.100, 1.090, 1.060, and .999.

Assuming sentiment is moderately bullish for the price, you would let the stops at 1.100 and 1.090 run off without doing anything. If it reversed...
Thank you for the specifics, gives me greater clarity.


Quoting Darkstar
Re hunt 1: you have to THINK about the hunter and where his best interests lie. Stop hunting (from a large traders perspective) is a damn risky enterprise and they aren't going to take that risk for a handful of intraday trader stops. Look for the Big stops and those that will provide a good risk reward ratio for the hunters and you'll see your winrates improve dramatically.
That's the key... risk versus liquidity... winrate going upwards... I hope

.
  • #1,400
  • Apr 16, 2011 3:20pm Apr 16, 2011 3:20pm
Here is another potential helpful exercise.

If you have traded for long enough, whether live or demo, large or small account, chances are you have had a few losing trades every now and then. Chances are you have had consecutive losing trades, whether they are 2 in a row or 5 in a row.

Losses are a normal part of the trading process. Rich traders have losses, even order flow traders have losses. But the consecutive series of losses is slightly different. It signals that your trading system and mindset may not be in sync with the market. That you may not be in harmony with the order flow.

Hopefully you have kept a trading journal of all your trades. You should be able to easily spot the times where you have a consecutive series of losses. Instead of just attributing it to bad luck, or acceptable losses of your system, you can actually in a good amount of cases, do something about it.

Go back to the dates of those losing trades, and find the news releases and news articles/commentary for those specific days. See if there was anything there that could of changed the fundamental value and/or sentiment value of the market. Don't go and look at your charts and place more indicators or things like that on your chart. The information that you are looking for that can help you avoid consecutive losing trades is only available outside of the charts.

I assure you, if you placed consecutive losses they were either a result of:

1. You not following your system
2. Your trading system did not account for information outside of the chart that moved the market.

Enjoy.
Private message me for a link to my order flow website.
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