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Order Flow - Achieving the mindset

  • #1,461
  • Apr 28, 2011 1:24am Apr 28, 2011 1:24am
Quoting Adal
You have no chance scalping M5 or lower where you go head to head with the machines. They will skin you.

At the same time there is an excellent opportunity now in betting on a breach of 1.5 in EUR/USD. Experience comes into play in knowing how to do this so that you are not mopped up if this does not happen eventually or if the road there is more complicated (visiting 1.44 before for example). My technical and behavioral analysis got me in at 1.45, so it's a low risk trade for me now. In fact, I will exit slightly before 1.5, no need to take chances...
Adal, I have been scalping M5 based on my understanding of the flow. I have a good win rate with book half at 20, move stop to b/e for half and hold. Yesterday shorted from 4687 to 4645 and then added a long from there on ...still holding half a position.

Though I am confused on the 1.5 being bet as the next level. How to actually arrive at such conclusion? Understanding a longer term flow is something I am lacking and leaving pips on the table......for example I had taken a long from 4380 only to close it around 4525 denying me the run till 1.5...
  • #1,462
  • Apr 28, 2011 2:16am Apr 28, 2011 2:16am
This can be really simple if your doing your homework. Currently bids around 1.4820-30 ASB. And Asks at 1.4900 in defense of the barrier.
  • #1,463
  • Apr 28, 2011 3:25am Apr 28, 2011 3:25am
Quoting Scotty B
If you see lots of 5-10 contracts fire off micro seconds apart, you can see it's a robot. Still, knowing this I can honestly say one needn't make it this complicated. You can game the market or just trade it. It's a bit of a jump, but it's worth it.
Actually I myself watching that phase for entering market, someone must be preparing something, I just need to find the reason & decide my side, even I mostly comfortable with that, still I feel there are some urges inside me to achieve higher state of understanding.
  • #1,464
  • Apr 28, 2011 4:20am Apr 28, 2011 4:20am
Quoting Adal
You have no chance scalping M5 or lower where you go head to head with the machines. They will skin you.
Just out of curiosity, what do you mean? I know many people who trade M1 or M5 successfully.
  • #1,465
  • Apr 28, 2011 4:29am Apr 28, 2011 4:29am
Quoting Scotty B
If you see lots of 5-10 contracts fire off micro seconds apart, you can see it's a robot.
Just as, or more, likely a manual order executed using time-averaging to minimise market impact.
  • #1,466
  • Apr 28, 2011 7:23am Apr 28, 2011 7:23am
I said that M5 and M1 is hard because it's high-frequency territory. Hundreds of math, stats and physics Phd's are looking for patterns there, due to the huge coast line and high potential profitability. All the simple stuff is already exploited. But if you can find your profitable methods there, sure, why not. I use M5 to optimize my longer term entries. But, I will actually trade M5 only with an automated quantitative system that is still work in progress.

1.5 is more likely to being taken out than not due to it's huge psychological importance. In situations like this it's much more likely for it to being touched than not, so it's a good trading opportunity (1.5 is more "round" than 1.40). Unfortunately, it's a rare trading opportunity. Sane MM remains a must, it is never a bet the farm event, because you never know when the unexpected arrives (think some high-impact event, like a natural disaster).
  • #1,467
  • Apr 28, 2011 7:40am Apr 28, 2011 7:40am
Quoting Adal
I said that M5 and M1 is hard because it's high-frequency territory. Hundreds of math, stats and physics Phd's are looking for patterns there, due to the huge coast line and high potential profitability. All the simple stuff is already exploited. But if you can find your profitable methods there, sure, why not. I use M5 to optimize my longer term entries. But, I will actually trade M5 only with an automated quantitative system that is still work in progress.
I don't know where you're getting this from. The shorter time-frames are driven by dealers not bots, and knowing their ways is a good way to profit intra-day. And the assumption that all the PhD's are researching hft only is mistaken. For liquidity reasons, you need to scale up a bit if you want to get decent returns on larger accounts.
  • #1,468
  • Apr 28, 2011 7:45am Apr 28, 2011 7:45am
Quoting CindyXXXX
I think all hes saying is that bots are driving the orders at that level, of course all orders go through dealers
What does that mean?
  • #1,469
  • Apr 28, 2011 7:49am Apr 28, 2011 7:49am
Quoting medici
What does that mean?
Nothing

just robots playing... Makes it easier if you ask me... more consistency
  • #1,470
  • Apr 28, 2011 7:52am Apr 28, 2011 7:52am
Quoting CindyXXXX
I guess that scalping as in tic and very small TF is a game owned by bots as they have the fastest order execution (this is how I am interpreting what Adal was saying)

Meaning that to get the liquidity that is only available for seconds at a time takes a very fast bot... Is this mistaken?

I heard somewhere that a trading firm bought an office building (or floor on it) accross the street from the NYSE exchange and housed its bot there in order to improve the execution time.
Key words, by which to weigh the substance things.
  • #1,471
  • Apr 28, 2011 7:53am Apr 28, 2011 7:53am
Inserted Video
  • #1,472
  • Apr 28, 2011 7:58am Apr 28, 2011 7:58am
Quoting CindyXXXX
I heard somewhere that a trading firm bought an office building (or floor on it) accross the street from the NYSE exchange and housed its bot there in order to improve the execution time.
It's called colocation, and you put your server next to the exchange one, not across the street It's a must for HFT. Actually the NYSE servers are in New Jersey, not at the location most people associate with the stock market (the floor). Also, NYSE is just one place where the US stocks are traded, there are other exchanges for US stocks which specifically cater for HFT traders (like BATS or DirectEdge). For example, BATS says that it's average order processing time is 191 microseconds. That's 0.19 milliseconds.

Medici, the dealers you mention, are they human or not? Most market-making is automatic these days.
  • #1,473
  • Apr 28, 2011 8:04am Apr 28, 2011 8:04am
Quoting CindyXXXX
Seriously?

And here was me waiting to learn something from a much ore experienced trader. Shame on me

Whatever, New york stock exchange exchange, oops sorry didn't realize I was being marked on this work

And yes I was watching a show and that's what it said.. They even showed the machine sitting there but I am not one to simply believe everything I've seen on TV and state it as a fact
Apologies. Didn't mean to offend you. Neither was I intending to teach anything - just to keep some false assumptions spreading as true.

The truth about how the fx market works intra-day is partly public knowledge and available for traders serious enough to learn about it. See the works of Carol Osler and Rich Lyons.
  • #1,474
  • Apr 28, 2011 8:04am Apr 28, 2011 8:04am
Quoting Adal

Medici, the dealers you mention, are they human or not? Most market-making is automatic these days.
In the fx market? Really? When did that happen? Over Easter?

The dealers I mention are human beings who make a living from controlling the fx market.
  • #1,475
  • Apr 28, 2011 8:16am Apr 28, 2011 8:16am
Quoting medici
In the fx market? Really? When did that happen? Over Easter?

The dealers I mention are human beings who make a living from controlling the fx market.
Whatever, you have such a way of twisting words. I said most market-making, not FX market making, especially when only 1/3 of FX is spot.

But explain to me how can Deutsche Bank fill your order on autobahnFX in miliseconds if a human dealer must approve it or set the price. Oh, I know, only small fish trade there. The big shots trade by phone, right
  • #1,476
  • Apr 28, 2011 8:19am Apr 28, 2011 8:19am
Quoting CindyXXXX
EDIT: So Merdici these human dealers you mention, I guess they manually match each individual order that passes through them by the second, wow they must be quick!
Come on man, stop being an ass - I mean that with the most possible respect, with 2 seconds of thought you must be able to see what Adal is saying?
These are dealers that deal with large orders, mostly over the phone, and much of their day is about making a profit from the business of executing those orders, as well as from the advantage their central position in the market provides.

I think I understand what Adal is trying to say, but I can't see how it fits with the fx market. Apologies for any irony, but it amuses me that people take their imaginings for the truth.
  • #1,477
  • Apr 28, 2011 8:24am Apr 28, 2011 8:24am
Quoting Adal
Whatever, you have such a way of twisting words. I said most market-making, not FX market making, especially when only 1/3 of FX is spot.

But explain to me how can Deutsche Bank fill your order on autobahnFX in miliseconds if a human dealer must approve it or set the price. Oh, I know, only small fish trade there. The big shots trade by phone, right
I am becoming all too familiar with questions like these - being asked to explain/defend statements I never made.

And, correct, you don't just click on the button with large orders.
  • #1,478
  • Apr 28, 2011 8:37am Apr 28, 2011 8:37am
Quoting CindyXXXX
I think Carnegie had the sit there... I dunno but this thread is sort of being burried by random stuff... I suppose its a discussion or whatever but just a shame cause it started out very focused and I guess that's just the nature of order flow, everyones gone off on their own path I guess

I can see where Carnegie was coming from.

With all due respect to ScottyB... We all know he knows his stuff... But in his own words:



So whats the point? Why posts unhelpful things>?

Maybe it would be better or save us some time to just say:

"Hey...
Ease up a bit! I was happy with Scotty's post. I'm not looking for a hand out, but for me when someone I think knows what they are talking about mentions stuff that doesn't work for them, I take notice, so I can thin about and I correct my focus if I think the information might be good. I think he was responding to me and the use of futures data anyhow, not to everyone in the thread.
  • #1,479
  • Apr 28, 2011 11:41am Apr 28, 2011 11:41am
Cindyxxxx I see you have graciously removed your comment from my earlier post. I do agree you need to ease up. I wasn't eluding to blindly follow the bid ask news call outs but to use them to you advantage with a flow mindset.
If you put the picture of the nights events together you can use them to your advantage.
0026 gmt weak stops at 1.4780/50. 0310 gmt offers 1.49 a likly place for some resistance if price gets there. 0528 gmt bids around 1.4820-30 ASB. 0559 weak stops below 1.4800. 7:23 gmt supernatural on top at 1.4850.

I will let you figure out what price the market was at and draw a picture of what happened after the flow release.
Using the orderflow mindset it was easy to play off the 4830 support level into the 1.4850 level. The french consumer spending or the german unemployment change were not earth shakers but had to be closely monitored. Also keeping a mindful watch on the Greek issue going on for the south bound train. I wan't suprised that price broke the 4830 level since the tech charts were showing the pretty trend line with price on the top of there channel. Looking how things unfold as price broke many of the stops below the support 4830 would be easy lunch such as the cluster of stops thread taught us. Could not help thinking as the break of this level some of the longs from the day before could be moving there stops up to lock in more profit. So not a complete shocker on where it stopped.
So in closing, the post was not a trade call but info that is available to all. Don't be so damb fast to judge. Maybe ask the poster to elaborate to clarify the merit of their post.
Regards
  • #1,480
  • Edited 9:43pm Apr 29, 2011 9:32pm | Edited 9:43pm
Making things simpler and taking a longer-term approach reduces the necessity of having to compete for liquidity with other participants who have adopted this methodology as it undoubtedly becomes more mainstream.

Increasing the time-scope of the trades inherently brings you into off-the-charts territory. Coupled with the fact that practitioners will have several different interpretations of order flow generators, and how they structure their trades, makes me feel more comfortable that my edge(s) is(are) safeguarded. This is because the probability of practitioners having my experiences and trading exactly like me is quite slim. In the end, I feel much more comfortable trading in this manner.

I guess it was the paranoia of my edge(s) being diminished by the actions of other practitioners (especially in the short term) that drove me to get off the charts, as it is a seldomly chartered realm, due to the discretionary aspects involved. I actively made it a priority to leave MT4 closed (except to place trades) and can remember literally dreaming about possible trade scenarios playing out. I am of the opinion that the effect of keeping this in the subconscious part of the mind goes a long way in ingraining it and making it easier to grasp.

What ScottyB presented is what I initially thought it was all about, but it encompasses so much more than that, that you can get quite creative with it.

Try the constructive exercises grkfx has presented and just watch the markets. Create a hypothesis based on a logical approach to the markets and watch your observations play out in real-time. If your observations conform to your hypothesis, you may be on to something.

Eventually the methodology becomes moulded to your personality to the extent that it is not easily communicable to others who have not trod the path you have. The path is different for everyone, and the multitude of different ways of playing this can bring about some confusion, as individuals may be misled to believe that there is solely one way to play it, or that all approaches are equal, but 'some are more equal than others'. After a while you just learn to keep your method to yourself - not because you are being selfish, but because after a point it becomes counterproductive to impose it on to someone else.

Of course, this is all just my opinion - take it with a grain of salt!

Good luck,
xXTrizzleXx
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