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Order Flow - Achieving the mindset

  • #1,501
  • Edited Mar 18, 2014 7:03pm May 1, 2011 11:40pm | Edited Mar 18, 2014 7:03pm
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Time hides Nothing
  • #1,502
  • May 2, 2011 12:07am May 2, 2011 12:07am
i'm only half-joking when i say : grab a copy now before cindy deletes like he does.

that's so annoying btw.
Congratulations ScalaFX for coming out of the closet!
  • #1,503
  • May 2, 2011 12:10am May 2, 2011 12:10am
Quoting nubcake
i'm only half-joking when i say : grab a copy now before cindy deletes like he does.

that's so annoying btw.
Would you like a refund? Oh well be annoyed, but I'm probably just saving you from some BS if I delete anything anyway.
Time hides Nothing
  • #1,504
  • Edited 12:28am May 2, 2011 12:12am | Edited 12:28am
Quoting CindyXXXX
.

Hey thanks for posting that!
Do your time and enjoy the ride...
  • #1,505
  • May 2, 2011 12:29am May 2, 2011 12:29am
Thanks Cindy, much appreciated.
Stubbornly persistent
  • #1,506
  • May 2, 2011 12:38am May 2, 2011 12:38am
Quoting CindyXXXX
Anyway do you think the Osama bin Laden Assassination will have any effect on the USD today?
Not too sure about USD, but CHF here I come!
  • #1,507
  • May 2, 2011 12:56am May 2, 2011 12:56am
Anyone read Lyons book?

I got a High Distinction in Mathematics and Statistics but still don't know WTF he's on about in all his equations. Do you think understanding the mathematics behind price determination is important for a trader or are the core concepts and participants involved all that an aspiring trader really needs to take from it.

That is, a trader who is not using quantitative strategies. I'm with him, with him, with him, then DART! he starts mathing it up and I'm gone and zone out for the next few pages
Time hides Nothing
  • #1,508
  • May 2, 2011 1:05am May 2, 2011 1:05am
Quoting CindyXXXX
Anyone read Lyons book?

I got a High Distinction in Mathematics and Statistics but still don't know WTF he's on about in all his equations. Do you think understanding the mathematics behind price determination is important for a trader or are the core concepts and participants involved all that an aspiring trader really needs to take from it.

That is, a trader who is not using quantitative strategies. I'm with him, with him, with him, then DART! he starts mathing it up and I'm gone and zone out for the next few pages
Never read Lyons, and it is very low on my to do list.

Well if you want to be a quant, then you study quant stuff I guess.

If you want to be an order flow trader, then you study order flow, information flow, news, liquidity, global macro stuff,etc.

There are some top hedge fund managers that are quants. There are many that are non quants as well. There are more non quants in the list. So I guess that is a hint, but each person's skills lie in different strategies.
Private message me for a link to my order flow website.
  • #1,509
  • May 2, 2011 1:24am May 2, 2011 1:24am
Quoting grkfx

If you want to be an order flow trader, then you study order flow, information flow, news, liquidity, global macro stuff,etc.
Thanks,

Lyons gives some great insight as to how money is thrown around between dealers and how they respond to orders so in this sense it's sort of a good book to clarify some things on that. But yeah, it is quite a confusing book to try and follow every word (for me anyway).
Time hides Nothing
  • #1,510
  • May 2, 2011 4:43am May 2, 2011 4:43am
Quoting CindyXXXX
Anyone read Lyons book?

I got a High Distinction in Mathematics and Statistics but still don't know WTF he's on about in all his equations. Do you think understanding the mathematics behind price determination is important for a trader or are the core concepts and participants involved all that an aspiring trader really needs to take from it.

That is, a trader who is not using quantitative strategies. I'm with him, with him, with him, then DART! he starts mathing it up and I'm gone and zone out for the next few pages
I've read it, it's basically got two types of things: empirical observations and theoretical models. imo the models are unnecessary to understand, they are just (if my memory serves me correctly) alternative models of how information might get incorporated into price, or how x might affect price. You may want to get the gist of what the model suggests, but other than that I wouldn't bother. The hot potato model is probably the most useful model in there to understand, if you want to understand how dealers actually work, though again imho, the mathematics of the model is unnecessary for our purposes. Another potentially interesting one is how the spread is constructed, with the adverse selection component etc, though you'll want to supplement that with Osler's Price Discovery in Currency Markets.
The point I guess is just understanding the microstructure on a deeper level, though whether this is helpful with trading is another matter.
  • #1,511
  • May 2, 2011 6:47am May 2, 2011 6:47am
Quoting CindyXXXX
Anyone read Lyons book?

I got a High Distinction in Mathematics and Statistics but still don't know WTF he's on about in all his equations. Do you think understanding the mathematics behind price determination is important for a trader or are the core concepts and participants involved all that an aspiring trader really needs to take from it.

That is, a trader who is not using quantitative strategies. I'm with him, with him, with him, then DART! he starts mathing it up and I'm gone and zone out for the next few pages
That's how I've read it. The most useful idea in the book is hot-potato trading and the fact that dealers inventory life is very short.
  • #1,512
  • May 2, 2011 7:37am May 2, 2011 7:37am
Quoting CindyXXXX
Thanks,

Lyons gives some great insight as to how money is thrown around between dealers and how they respond to orders so in this sense it's sort of a good book to clarify some things on that. But yeah, it is quite a confusing book to try and follow every word (for me anyway).
IMO the key is getting enough knowledge to understand what you need to know to visualize or understand the process better. imo too much math will take you off the path depending on your goals. jmo but too much may not be necessary...

Horses for courses really....
Do your time and enjoy the ride...
  • #1,513
  • May 5, 2011 10:41am May 5, 2011 10:41am
Sorry if this is a frequent noob and/or stupid question, but how does order flow relate to auction market theory and/or volume spread analysis?

Thanks
  • #1,514
  • May 5, 2011 11:12am May 5, 2011 11:12am
Quoting lolpie
Sorry if this is a frequent noob and/or stupid question, but how does order flow relate to auction market theory and/or volume spread analysis?

Thanks
technically price action like a plain pin bar could relate to order flow because it was orders that created whatever pattern or candle that develops...

I think anyway you cut it Auction Market (which I'm not 100% sure about as I've never tried it) and VSA are just another form of TA, so in my opinion there is no relationship between that and what this thread is about.
Time hides Nothing
  • #1,515
  • May 5, 2011 12:16pm May 5, 2011 12:16pm
Quoting CindyXXXX
technically price action like a plain pin bar could relate to order flow because it was orders that created whatever pattern or candle that develops...

I think anyway you cut it Auction Market (which I'm not 100% sure about as I've never tried it) and VSA are just another form of TA, so in my opinion there is no relationship between that and what this thread is about.
Thinking about the name for it makes little sense, doing it makes more sense.
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My signature is: "Classified".
  • #1,516
  • May 5, 2011 12:29pm May 5, 2011 12:29pm
Quoting lolpie
Sorry if this is a frequent noob and/or stupid question, but how does order flow relate to auction market theory and/or volume spread analysis?

Thanks
The short answer is, they are not at all related. From what I can tell of AMT, it is an extrapolation of price history data to show where price has spent the majority of its time. In theory, if you know where price has spent the most time, you can infer where "True value" resides. With this info in hand, you can arb out any deviation from that value.

Vsa tries to do the same thing but under a slightly different premise. Instead of calling the price at which a majority of the volume traded true value, VSA assumes that there is some big player(s) acting at those levels to manipulate price. Supposebly once you find evidence of this manipulation, you can then infer a directional bias of the market and trade accordingly.

What both of these systems(strategies?) have in common is that they extract all their information from the chart. Presumably, external factors will manifest themselves in price data, so it isn't important to consider those external factors in your trading decisions.

In short, order flow trading is a metagame analysis system for predicting the future course of price change. By focusing ones effort on making quality predictions, high probability trades can be entered in the present. To accomplish that goal, Order Flow Traders focus the majority of their analysis on external factors like participant strategy, fundamental factors (news/data/etc), and microstructure processes.

Order Flow Trading is catagorically at odds with both ATM and VSA because they start from vastly dffierent assumptions about the path to profits. While VSA and ATM follow some amalgamtion of the efficient market hypothesis and behavior finance theory, OF rejects both as fatally flawed concepts. Further, while VSA and ATM seek to distill historic price data into an indicator based method of point and click, OF focuses on learning how to analyze external information for discretionary trade execution.

Now I'm not saying that VSA or ATM are bad strategies or that you can't make money with them (I have absolutly no idea with regard to their merits and don't really care to find out), I'm only pointing out that they are not at all related to order flow trading.

Hope that helps. Luck be with you.
  • #1,517
  • May 5, 2011 12:43pm May 5, 2011 12:43pm
Quoting Darkstar
The short answer is, they are not at all related. From what I can tell of AMT, it is an extrapolation of price history data to show where price has spent the majority of its time. In theory, if you know where price has spent the most time, you can infer where "True value" resides. With this info in hand, you can arb out any deviation from that value.

Vsa tries to do the same thing but under a slightly different premise. Instead of calling the price at which a majority of the volume traded true value, VSA assumes that there is some big player(s)...
In my understanding AMT could be described in pretty much the same way you describe Order Flow Trading. The fundamental difference seems to be that between auction markets (such as exchange traded markets) and dealer markets (such as fx).

So the questions are

1) If there really is that much difference in basic philosophy between OFT and AMT?

2) What difference auction vs dealer markets make from a trading perspective?
  • #1,518
  • May 5, 2011 1:03pm May 5, 2011 1:03pm
Quoting medici
In my understanding AMT could be described in pretty much the same way you describe Order Flow Trading. The fundamental difference seems to be that between auction markets (such as exchange traded markets) and dealer markets (such as fx).

So the questions are

1) If there really is that much difference in basic philosophy between OFT and AMT?

2) What difference auction vs dealer markets make from a trading perspective?
Hmmm.. Im not sure how to answer either of your questions. From an order flow perspective auction and dealer markets are exploitable in different ways, but in the grand scheme its really irrelivant which you trade on.

I don't pretent to be an authority on amt, but after reading the intro materials suggested on the amt thread here at forexfactory, I'm left with the impression that its a chart based strategy. If amt traders can make trading decisions without looking at the chart and/or volume, I would entertain the idea that they could be more closely related then I first assumed. If not, I'm going to stand by my prior assessment.
  • #1,519
  • May 5, 2011 5:57pm May 5, 2011 5:57pm
Quoting yaed
Thinking about the name for it makes little sense, doing it makes more sense.
So why in the world are these people throwing orders at the market? Who are you talking about?
  • #1,520
  • May 5, 2011 5:58pm May 5, 2011 5:58pm
Looks like IFR newsfeed is down today. Or is it just Oanda?
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