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  • #1,641
  • May 12, 2011 10:34am May 12, 2011 10:34am
So thats what you meant by no charts! Thanks for sharing... interesting indeed.

Quoting Scotty B


The Dashboard is vital to my decision making. Thought I'd share it. Took me a Half a weekend to get it all linked up. I want you all to check it out and lets discuss over the next few days what it means. The highest differentials are not necessarily the best trades, the highest returns are...In most cases. This should always be your first filter for a trade. I'll discuss more over the coming weekend.

Regards,

Jim

P.S. Google is great for the flow trader!
  • #1,642
  • May 12, 2011 11:56am May 12, 2011 11:56am
Quoting Scotty B
I let the rate differential tell me about the country's economy I'm looking at. If it's high, there is likelely inflation and strong growth, therefore intercountry investments will be attractive. It's just the way I see it, you can look at it how you like.

I don't have a lot of time right now, but later I'll discuss other things I look at after I have some leads based on the diffs.

What is the biggest problem with the Lira right now guys? I think it will be a good buy, but investors are scared and some are leaving while Goldman is sqeezing...
Ok, I see you just use it as a filter and that's why you put it as a separate cause for order flow. It's interesting that I had something similar in mind and wanted to put it on paper just a few days ago. Thanks for saving my time, Jim
  • #1,643
  • May 12, 2011 12:09pm May 12, 2011 12:09pm
Damn Scotty.....nice work man! Thank you for providing that.

Although I have been reading all the books I could get my hands on, was still having mental blocks to try and work past . However, for some reason, seeing a layout like this finally made a few things click for me.

---------------------------------------

Just a shout out to Cindy: I appreciate your earlier post (#1600 ) and the questions you posed...felt like you read my mind in the frustrations I had been feeling. Now the responses that are coming out because of that post, have really helped me peel away some of my own blocks.
  • #1,644
  • May 12, 2011 12:42pm May 12, 2011 12:42pm
Quoting CindyXXXX
yes lets, nice work thanks. ((almost 50 views and not one "TY" "good idea" "thanks for sharing"... (amazing))
Yeah, actually one of those views was me, I saved the picture and the sheet, but I didn't have the time to take a look.
Now that I'm looking at it, it's really a nice work Scotty B, thank you so much for sharing this and apologize me if i didn't say it immediatly hehe
  • #1,645
  • Edited 5:08pm May 12, 2011 3:18pm | Edited 5:08pm
Quoting Scotty B

What is the biggest problem with the Lira right now guys?
Just hit a record monthly high account deficit (way beyond any expectations), investors ran scared, and now it stands at it's weakest level in 2 months. From Reuters:

May 12 (Reuters) - Turkey's lira IYIX= slipped to its weakest level to the dollar in two months on Thursday, as fears of the surging current account deficit and economic overheating in Turkey exacerbated broad investor risk aversion.
By 0646 GMT the lira stood at 1.59, after a previous close on the interbank market of 1.5779. The yield on the benchmark Feb 20, 2013 bond <0#TRTSYSUM=IS> rose to 8.7 percent from 8.66 percent a day earlier.
Turkey's March current account deficit soared to a record monthly high of $9.766 billion, data showed, far in excess of a consensus forecast and prompting calls from analysts for urgent rate hikes.[nLDE74A05G]


So I guess it's sorta backed into a corner. The central bank needs to do what central banks do best and stimulate that puppy, to encourage investor flows back into the economy. Hence, a raising of rates.

But how low can it go and how long before the bank will raise rates?


I have never followed this pair at all, I'm guessing the spreads are huge
Time hides Nothing
  • #1,646
  • May 12, 2011 6:07pm May 12, 2011 6:07pm
Quoting CindyXXXX
So I guess it's sorta backed into a corner. The central bank needs to do what central banks do best and stimulate that puppy, to encourage investor flows back into the economy. Hence, a raising of rates.

But how low can it go and how long before the bank will raise rates?


I have never followed this pair at all, I'm guessing the spreads are huge

The CBRT has been doing something unusual to battle inflation pressures. Instead of raising rates, they've actually lowered them somewhat and raised the reserve requirements on banks instead. I think part of the TRY's struggles have to do with how the market views that as kind of a bizarre strategy. It will be interesting to see if it actually works. More info here:

http://www.reuters.com/article/2011/...74B1MA20110512


And yes, the spreads are big at about 60 pips, but not as large as USD/ZAR at 250 pips!
  • #1,647
  • Edited 8:50pm May 12, 2011 8:28pm | Edited 8:50pm
Quoting capitalist88
The CBRT has been doing something unusual to battle inflation pressures. Instead of raising rates, they've actually lowered them somewhat and raised the reserve requirements on banks instead. I think part of the TRY's struggles have to do with how the market views that as kind of a bizarre strategy. It will be interesting to see if it actually works. More info here:

http://www.reuters.com/article/2011/...74B1MA20110512


And yes, the spreads are big at about 60 pips, but not as large as USD/ZAR at 250 pips!...
That's right. The vibe that the central bank president gives is that foreign money is not welcome in Turkey. Rates are at rock bottom lows, however, they are still quite attractive relative to other currencies. Goldman Sachs said a couple weeks ago that it is bullish the dollar vs. the lira. Reading that made me laugh. I believe they are the "aggressive buying" bank that's been mentioned in news articles in the past week. My view is that Goldman is putting a squeeze on weak hands and getting cheap liquidity. By buying the Dollar they are only philosophizing, why would you want to buy an instrument that is so expensive to hold vs the lira? The idea behind investing is to make your money grow while keeping costs to a minimum. That's why they are producing so much market impact, they are not interested in holding the dollar vs the lira because it is such an expensive trade over time. I admit, some of the orderflow is money leaving Turkey, but it's mostly just a squeeze.

The lira is a good trade, and the spreads are actually quite low if one trades during liquid hours. You can get ~ 6-7 pip spreads during active market hours.

I believe the Lira will become a carry trade over the next few years. The risk that the Central bank president is taking is that he will push foreign investors out the door and they won't come back for fear of foolish policies, leaving Turkey obsolete. I don't think that will happen though.

Now, I mention all of this for the sake of giving an example of how I look at order flow in a real-time context.

That fact of the matter is that the USDTRY is paying high returns right now as we speak. This is the "drive through" I've been referring to. As long as it is open, money will flow to Turkey and will continue to do so until the central bank president comes out in Hitler garb and declares all foreign investment illegal. This flow (which Goldman IS a part of), will be reflected in the exchange rate long term.

Now, forget about Turkey for a minute. In all honesty, it's probably a crappy example because of the clown running things. But do notice my strong focus on interest rates. Like I said yesterday, it's not all about the highest rate differentials, it's about the highest returns you get for the least risk. You need to look at the ratio of pip value/daily interest. You want to find the pairs that offer the lowest commitment of capital with the highest daily interest payments. This allows one to preserve portions of capital for accommodation of reasonable draw down during times of market liquidation (profit taking). Trends exist as long as incentives do. This is the bedrock idea upon which I stand. People will take advantage of incentives as long as incentives exist. This is what the Turkish central bank president is focusing on, he is trying his damnedest to make the Lira look unappealing to prevent and deter what he calls "hot money flows."

What about GBPAUD, guys? It reached 1.5 recently, spurring profit taking, but incentives have not changed. It's pip value/daily interest payments are attractive if you're running a large cap fund... Orderflow trading in terms of value trading would suggest that all pullbacks will fade......CAREFUL use of leverage and a little patience will yield some interest (the meat) and some very predictable rate change (the bread).
  • #1,648
  • May 13, 2011 7:17am May 13, 2011 7:17am
I have followed this (along with the other orderflow threads) with great interest but in my opinion it has just turned into a fundy analysis thread.
I agree that obviously this creates orderflow but I dont really think that is orderflow trading.
I my opinion orderflow trading is trading using information of orders. Thinking about large orders - stops- when informed traders are entering the markets, when traders get trapped and are forced to liquidate, barrier options, level II data,reading the tape etc etc - This to me is orderflow trading.
I know the fundys create orderflow but imo its not orderflow trading and i don't believe after all these orderflow discussions this is all we have come to.
  • #1,649
  • May 13, 2011 9:01am May 13, 2011 9:01am
Quoting abritton76
I have followed this (along with the other orderflow threads)...
What do you mean by trading fundamentals? Buying on good news and selling on bad?
Order flow trading means gathering, analyzing and acting on all available information that could cause shifts in liquidity structure and agressive order flow, whether it is fundamental releases, political news, stops and liquidity placement, M&A, options and so on.
  • #1,650
  • May 13, 2011 9:08am May 13, 2011 9:08am
Quoting Scotty B

What about GBPAUD, guys? It reached 1.5 recently, spurring profit taking, but incentives have not changed. It's pip value/daily interest payments are attractive if you're running a large cap fund... ......CAREFUL use of leverage and a little patience will yield some interest (the meat) and some very predictable rate change (the bread).

Scotty, i think you are focusing too much on the yield differencials here without taking everything into context. As far as fundamentals go then i agree with you that AUD is in better shape than U.K. but that alone doesn't make it a good idea to short the pair at the lows.

To explain this further we must go through the reasons why gbpaud is this low as it is.

First, let us find out whether we are dealing with GBP weakness or AUD strength here. It cannot be both otherwise the move down would be more gradual and without the larger swings that occured the beginning of the year.

Taking GBP you can see that it's relatively high compared to usd and relatively stable (sideways) compared to EUR. Australian dollar on the otherhand is in crazy new high compared to USD, and in lows compared to EUR. Taking this simple logic into account i conclude that we are dealing with AUD strength here.

Next thing to do is to find the reasons WHY we are having AUD strength. For the sake of simplicity let's assume that currency valuation is coming out of the expectation of interest rates. Expectation of higher rates would mean higher currency value, correct ? Now when was the last time RBA lifted rates ? On Nov 2010. That's half a year ago. You can see that the price of audusd (taking that pair as an example) at that point was at around 0.99. Given the fact that the market expected a rate increase a month earlier we can conclude that this wasn't much of a surprise. And the market confirmed that by forming a ranging environment for that pair for the next four months. Since this wasn't a surprise and no further rate increases hasn't been expected so far i (and that is my opinion, you don't need to accept that ) conclude that this ranging environment is the PERCIEVED VALUE for this pair. Price can deviate from that value a bit but it doesn't have any real basis to be way higher than that WITHOUT the change in the underlyings (clearly higher interest rate expectations in this example).

Remembring the above i conclude that audusd shouldn't be where it is now. Put in another words: AUD should not be as strong as it is today.

What else do we know about aud. It's a commodity currency. A gold currency to be exact. Long story short you should be able to conclude that aud is this strong because of the strength of the price of gold. You can see the high correlation between AUD and gold after aud broke that percieved value area.

Now, given that you (Scotty) are bearish on gold i find it difficult to understand the real basis for further aud strength. Look what happen to gbpaud at the beginning of 2011 and put the value of gold next to it.

As far as future trading interest goes in terms of fundamental value then even this speaks against you:

End of QE2 meaning hawkish bias for interest rates expectations thus higher value of dollar and lower value of booming commodities.

All in all, i can't find any rational reason that makes it higher than 50% probability for gbpaud to weaken further AT THIS POINT. I'm not saying that gbpaud is reversing its long term trend. I'm saying that there is a good chance to get a sizable retracement (maybe 1000 or more points) in that pair before i would even consider selling that pair.


Quoting Scotty B
Orderflow trading in terms of value trading would suggest that all pullbacks will fade
Sure, in normal economic environment. Today isn't normal economic environment.
  • #1,651
  • May 13, 2011 9:21am May 13, 2011 9:21am
Yes seagreen these things create orderflow but that is not orderflow trading (or at least not what the generally excepted meaning of reading orderflow is)
I am not going to give a definition of orderfow trading as it will be disputed but normally it refers to trading the actual orders - i.e the Level II or the tape and volumes- or perhaps, seeing as in fx this info is not available another method of thinking about which orders are where.
But just saying that for example trading the news events or Bounces of Ma's etc etc (just because the produce alot of orders) is ordeflow trading--- well its not-not in the traditional sense of the word -not in my opinion anyway.
  • #1,652
  • May 13, 2011 9:23am May 13, 2011 9:23am
Quoting abritton76
I have followed this (along with the other orderflow threads) with great interest but in my opinion it has just turned into a fundy analysis thread.
I agree that obviously this creates orderflow but I dont really think that is orderflow trading.

I would say this is that so called advanced order flow trading where consensus is betting on a certain direction thus creating a sentiment that causes excess imbalances between buying and selling interest. As you know any of that excess imbalance will eventually revert to it's mean (or possible beyond it with that new sentiment). You just have to be able to find that catalyst that's strong enough to create that opposite order flow. This is what i would call TRUE trading. I think that was the way Livermore traded....eventually (apart from tape reading).


Quoting abritton76
I my opinion orderflow trading is trading using information of orders. Thinking about large orders - stops- when informed traders are entering the markets, when traders get trapped and are forced to liquidate, barrier options, level II data,reading the tape etc etc - This to me is orderflow trading.
I know the fundys create orderflow but imo its not orderflow trading and i don't believe after all these orderflow discussions this is all we have come to.

Well, you are right of course. But you are referring to order flow trading in a micro level. If that is the only thing that you are interest here then this is probably not the right place for you. You would save a shitload of time if you just tried to apply for a job at Deutcshe Bank, UBS etc. What you need is that delicate information that most don't and trade their pockets.

I believe this thread is more about the order flow mindset. And this is what we are doing - creating that mindset.
  • #1,653
  • May 13, 2011 9:33am May 13, 2011 9:33am
Quoting abritton76
Yes seagreen these things create orderflow but that is not orderflow trading (or at least not what the generally excepted meaning of reading orderflow...
Yes this is not order flow trading in it's traditional definition.
  • #1,654
  • May 13, 2011 9:45am May 13, 2011 9:45am
I have followed all the orderflow threads- in particular DS's. I know at times he has talked about how much he risks on indivdual trades- 15 percent or so I think if i remember.Why? because he has an actual edge-or so i believe- not some vague definition but a really strong edge! This where i thought all this orderflow discussion was going.
There is no edge presented in this thread- nothing quantifiable anyway.
I am not saying that this type of holistic analysis cannot be successful but I certainly wouldn't risk 15 % of my account on anything presented so far- its very vague at best.
I am not trying to disrupt the thread though so rant over, sorry - just a bit frustrated where this "orderflow" thread ended up.
  • #1,655
  • May 13, 2011 9:52am May 13, 2011 9:52am
Quoting abritton76
I have followed all the orderflow threads- in particular DS's. I know at times he has talked about how much he risks on indivdual trades- 15 percent or so I think if i remember.Why? because he has an actual edge-or so i believe- not some vague definition but a really strong edge! This where i thought all this orderflow discussion was going.
There is no edge...
I hope you understand that an edge that allows you to risk 15% of capital (thus being a really good edge) will not be discussed and explained here. I also hope you'll keep it to yourself if you find one.
  • #1,656
  • May 13, 2011 10:10am May 13, 2011 10:10am
Believe me i am not looking for any handouts- holygrail etc etc- I am just saying that these orderflow discussions started out as one thing and now seem to have totally changed into --- well... anything that can move the market is orderflow trading- great- that helps a lot.
  • #1,657
  • May 13, 2011 10:44am May 13, 2011 10:44am
Quoting abritton76
Believe me i am not looking for any handouts- holygrail etc etc- I am just saying that these orderflow discussions started out as one thing and now seem to have totally changed into --- well... anything that can move the market is orderflow trading- great- that helps a lot.
So you've digested all the material suggested here, spent thousands of hours working this thing out and still believe you need more guidance?
  • #1,658
  • May 13, 2011 10:55am May 13, 2011 10:55am
Quoting abritton76
Believe me i am not looking for any handouts- holygrail etc etc- I am just saying that these orderflow discussions started out as one thing and now seem to have totally changed into --- well... anything that can move the market is orderflow trading- great- that helps a lot.
Thanks abritton for stating the unstated. I was about to write the same thing. The thread has deviated from OF trading to fundies trading. For the uninitiated fundies trading is actually about good/bad news. But that is not true.

An explanation might be that by analyzing fundies we can predict the OF in a certain direction as in which currency is getting stronger than the other based on their economies. But then what is fundies trading? Isnt that the same thing? I mean as a fundies trader if I cant understand the direction and currency strength, how will I make money? So, basically if I am making money as a fundies trader, somehow I might be an OF trader too.

That being said, this thread has some quantifiable edges. Though most of them might not been obvious outright.

@Scotty - Thanks for the sheet.
  • #1,659
  • May 13, 2011 11:01am May 13, 2011 11:01am
Quoting abritton76
I have followed all the orderflow threads- in particular DS's. I know at times he has talked about how much he risks on indivdual trades- 15 percent or so I think if i remember.Why? because he has an actual edge-or so i believe- not some vague definition but a really strong edge! This where i thought all this orderflow discussion was going.
There is no edge...
Ok, so you want to risk 15% of your account on a trade. Got it. Do you know what type of trade you want to place? Do you know if you want it to be a day trade, swing trade, position trade? Do you know if you want to position size 15% of your account every 20 pips? Or 15% of your account every 200 pips? What type of move are you trying to catch? Do you want gradual trend, or just quick volatility? Can you even handle a 15% drawdown on your account emotionally?

What type of move do you want to catch? You can look at a chart and take a look at the market moves and take your pick on which ones you want to catch in the future. Once you decide which movements you want to catch it is all about getting into the head of the market participants generating the order flow. So if you wanted to short EUR/USD at 1.4942, then you start trying to build a system around catching those trades. It doesn't include any moving averages or trendlines or anything like that.

Before you start risking 15% of your account on one trade, you better have a near perfect understanding of what order flow will be generated after you establish your position. In other words you should be placing trades that are near impossible to lose. In other words, the trade is won before it is placed because there will be massive order flow coming into the market. So you have the whole scenario and market participants planned out in your head, who will do what that will take your trade into the profit.
Private message me for a link to my order flow website.
  • #1,660
  • May 13, 2011 11:28am May 13, 2011 11:28am
Quoting abritton76
Believe me i am not looking for any handouts- holygrail etc etc- I am just saying that these orderflow discussions started out as one thing and now seem to have totally changed into --- well... anything that can move the market is orderflow trading- great- that helps a lot.
Hey abritton,

I think its best not to start a semantics debate here. If you are looking more at stops/barriers/bids and offers which arguably affects short-term trading more than long-term ones, this thread (and along with all the others) has more than enough information for you to glean and create a trading plan.

If you want the thread to move towards this direction again, maybe you could post some questions to start some discussion going? You can't really expect others to start this type of discussions for you when they have nothing much to ask right? On top of that, there was never a formal definition of order flow trading in the first place.
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