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Order Flow - Achieving the mindset

  • #2,281
  • Edited 8:36pm Jul 4, 2011 8:15pm | Edited 8:36pm
Limit orders are important for the very reason that they PROVIDE liquidity. The IMPACT of a market order on price is directly related to the amount of liquidity being provided for that market order. If there is no limit orders being provided at any given price level and there is a sudden rush of market orders then price will gap until liquidity is found to fill them. If there is a massive amount of limit orders at a given price, price will not move through until the liquidity has been consumed.

Quote
"A lack of limit orders leads to a lack of liquidity."
Hmmmm so it leads to a lack of liquidity. If you are trading with size and wanting to limit the impact of your orders in the market you simply will not enter market orders if there is not enough liquidity(limit orders) to fill them. So any participant concerned with market impact will not demand liquidity. The result is there is little demand and little supply. Maybe that's what he might have been referring too. I don't think this applies to every participant though. What if your motivation is to MOVE price?

Quote
I can't remember who said it or where it was (I want to say capitalist), but my mind is telling me this sentence is of great importance...
I think it's important too. I've spent a lot of time thinking about the real world implications of order types.
Cautiously optimistic. . .
  • #2,282
  • Jul 4, 2011 8:39pm Jul 4, 2011 8:39pm
So I don't think there ever exists a complete lack of limit orders, maybe the quote would have been better to say "the fewer limit orders the less liquidity".

I was thinking the same thing. If I have decent size I want to move (either entering or exiting the market), i'm going to be looking for places where I can execute with the least amount of impact on price.

A collection of buy / sell orders (either to get into or out of the market), could provide me that liquidity i needed to get filled with as little price impact as possible.

Hence the importance of understanding the microstructure of the market one is looking at. What set of tools and rules are in place for someone to enter and exit the market? The reason for understanding that is making more sense now...

I'm thinking out loud here, I'm halfway excited because this is the first time in a month a tiny bit of clarity is peaking through the jumbled mess of information rolling around in my head.
  • #2,283
  • Jul 4, 2011 9:39pm Jul 4, 2011 9:39pm
Liquidity represents the option for market participant to execute orders. Ergo, limit orders (and stops) ARE liquidity. If you reduce their availability for any reason, you have reduced liquidity.

Market orders are not liquidity. They only match against limit orders and therefore consume/reduce liquidity.

Hope it helps.
  • #2,284
  • Jul 4, 2011 9:44pm Jul 4, 2011 9:44pm
Quoting Darkstar
Liquidity represents the option for market participant to execute orders. Ergo, limit orders (and stops) ARE liquidity. If you reduce their availability for any reason, you have reduced liquidity.

Market orders are not liquidity. They only match against limit orders and therefore consume/reduce liquidity.

Hope it helps.
Thanks for the reply!
  • #2,285
  • Jul 4, 2011 11:27pm Jul 4, 2011 11:27pm
Quoting Darkstar
Liquidity represents the option for market participant to execute orders. Ergo, limit orders (and stops) ARE liquidity. If you reduce their availability for any reason, you have reduced liquidity.

Market orders are not liquidity. They only match against limit orders and therefore consume/reduce liquidity.

Hope it helps.
Hmm? Since (most) stop orders turn into market orders upon being triggered, stops don't generally produce liquidity. They're a potential consumer of liquidity.
  • #2,286
  • Jul 5, 2011 12:50am Jul 5, 2011 12:50am
Quoting capitalist88
Hmm? Since (most) stop orders turn into market orders upon being triggered, stops don't generally produce liquidity. They're a potential consumer of liquidity.
The people hunting the stops have set take profit limit orders, so when the stop loss market orders get triggered they hit the limit orders.

Thus, in that case they are a concentration of liquidity to be taken advantage of.
Private message me for a link to my order flow website.
  • #2,287
  • Jul 5, 2011 2:14am Jul 5, 2011 2:14am
I was watching Nu before "NZIER Business Confidence" came out. It spiked up pretty fast and just before the announcment and than the annoncment came out pretty good thoughi dint get any expected fig.

I saw the opportunity to short ( did so @ 8320) as the people who bought in anticipation of healthy figure had got their targets and may have been got out in the spike.
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  • #2,288
  • Jul 5, 2011 3:42am Jul 5, 2011 3:42am
It seems to me that right now is a hunt for 1.45 on EURUSD.
  • #2,289
  • Jul 5, 2011 4:21am Jul 5, 2011 4:21am
why would they be hunting for 1.45 on EU?

1.4450 to 1.46 maybe...

I'm playin' UJ...
  • #2,290
  • Jul 5, 2011 4:35am Jul 5, 2011 4:35am
I think they are going for 4390 etc.

* 05 Jul 11: 05:56 GMT (SGA) - FX NOW! EUR/USD

"Small stops by intraday specs are sighted below 1.4400."
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  • #2,291
  • Jul 5, 2011 4:38am Jul 5, 2011 4:38am
Quoting nasir.khan
I think they are going for 4390 etc.

* 05 Jul 11: 05:56 GMT (SGA) - FX NOW! EUR/USD

"Small stops by intraday specs are sighted below 1.4400."
.
100 pips for small intraday specs stops?
  • #2,292
  • Jul 5, 2011 4:38am Jul 5, 2011 4:38am
Quoting Monroe
why would they be hunting for 1.45 on EU?

1.4450 to 1.46 maybe...

I'm playin' UJ...
Stop are reported below 4400 but i think we may not go that that much down even if we do so i am certain of a bounce at 4430.

Are you going for 81.30 on UJ?
.
  • #2,293
  • Jul 5, 2011 4:45am Jul 5, 2011 4:45am
Quoting nasir.khan
Stop are reported below 4400 but i think we may not go that that much down even if we do so i am certain of a bounce at 4430.

Are you going for 81.30 on UJ?
.
I cannot reveal my plays in public anymore, but I can say that there are some offers from people front running the ichi cloud and stops above though...
  • #2,294
  • Jul 5, 2011 5:02am Jul 5, 2011 5:02am
Quoting Monroe
I cannot reveal my plays in public anymore, but I can say that there are some offers from people front running the ichi cloud and stops above though...
Ok fine.

I also heard that Exporters offers were moved from 81.00 and they are now at 81.50.
So maybe we are on the same boat.

I am looking to short Cable above 6150 and buy Eg at 8965.
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  • #2,295
  • Edited 5:58am Jul 5, 2011 5:03am | Edited 5:58am
Quote
Originally Posted by capitalist88
Hmm? Since (most) stop orders turn into market orders upon being triggered, stops don't generally produce liquidity. They're a potential consumer of liquidity.

Quoting grkfx
The people hunting the stops have set take profit limit orders, so when the stop loss market orders get triggered they hit the limit orders.

Thus, in that case they are a concentration of liquidity to be taken advantage of.

I think a better explanation would simply be that buyers ADD liquidity to sellers and TAKE liquidity from competitor buyers regardless of the order type.

Keeping that in mind a market order can be both depending on what exactly we are talking about.

A market order can very well be a "hidden" liquidity provider especially when anticipating the market technically where you can expect a flow of orders (breakout traders for example) to kick in. All of this is a sweet liquidity to an informed seller.
  • #2,296
  • Jul 5, 2011 5:22am Jul 5, 2011 5:22am
Quoting nasir.khan
I think they are going for 4390 etc.

* 05 Jul 11: 05:56 GMT (SGA) - FX NOW! EUR/USD

"Small stops by intraday specs are sighted below 1.4400."
.
ACB were reported to be bidding at 4460. Dont see much downside from there on. As Monroe put it 100 pips for small spec stops is too many.
  • #2,297
  • Jul 5, 2011 5:33am Jul 5, 2011 5:33am
Quoting vicky_ag
ACB were reported to be bidding at 4460. Dont see much downside from there on. As Monroe put it 100 pips for small spec stops is too many.
Yeah a lot of buying pressure at 4450/60. I corrected my post earlier to that we may not go that much far down.
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  • #2,298
  • Jul 5, 2011 6:00am Jul 5, 2011 6:00am
Rumours of stops below 4450; presumably deepening with the buying just above. Could they be targeted before any up-move?
  • #2,299
  • Jul 5, 2011 6:15am Jul 5, 2011 6:15am
Quoting Vorbis
Rumours of stops below 4450; presumably deepening with the buying just above. Could they be targeted before any up-move?
There is heavy buying at those levels but maybe some bearish news could push it down.

I am waiting at 4435 to buy.
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  • #2,300
  • Jul 5, 2011 7:52am Jul 5, 2011 7:52am
Hey guys, I'm an order flow infant. Hope it's cool to post around while I wait for my T&E to show up.

So there are rumors of EU stops from 4415-4450, could they be used to fuel a drive to the barrier at 4600? 4600 also happens to be daily supply, from a more technical standpoint.

Can anyone comment on my thought process?
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