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What is order flow trading?

Quoting RPropShop
As already said many times in this forum, orderflow trading is a mindset. It is not a trading system, it not a trading method, it is not reading the DOM, it is a way of seeing and conceptualizing the market place.
To my knowledge, trading order flow is indeed reading & interpreting the DOM+TOS correctly and nothing else. And this is why imo it has no place in retail Forex.
Well in that case Myo, you should know that the term ‘orderflow trading’ was first introduced by my mentor, Darkstar, here in FF back in 2006 or so.

Some commercial websites and trading educators surf off the hype around this term and sold trading education, webinars, books… Most of them, coined the term inappropriately to define what in reality is ‘tape reading’.

Saying that ‘it has no place in retail Forex’ because you do not have DOM+TOS translate a lack of knowledge of the story behind orderflow trading which was introduce by a forex trader on a forex online forum…

And I repeat orderflow trading as nothing to do with DOM+TOS trading which are tape reading !
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Quoting RPropShop
Well in that case Myo, you should know that the term ‘orderflow trading’ was first introduced by my mentor, Darkstar, here in FF back in 2006 or so. Some commercial websites and trading educators surf off the hype around this term and sold trading education, webinars, books… Most of them, coined the term inappropriately to define what in reality is ‘tape reading’. Saying that ‘it has no place in retail Forex’ because you do not have DOM+TOS translate a lack of knowledge of the story behind orderflow trading which was introduce by a forex trader...
Well, you have just taken the marketer´s standpoint, which is fine, if you are satisfied with his product and it makes money for you. Outside of this forum I have never heard anyone use the word "orderflow" in this context though; only in connection with trading futures.
  • Post #44
  • Quote
  • Edited at 7:54am May 27, 2013 7:33am | Edited at 7:54am
Being a marketer himself now, do not affect the degree of Darkstar's property...

If you have never heard of orderflow expect in connection with trading futures, give a try to academic Forex papers by author like Carol L Osler, Martin DD Evans, Richard K Lyon.

I am pretty sure DS took choose the name of his work from those papers.
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Quoting RPropShop
Being a marketer himself now, do not affect the degree of Darkstar's property...
Depends, since to my knowledge your mentor is an amateur (meaning, he has no relevant professional background in finance), and any type of educational material being sold by an outsider should imo be regarded as highly suspicious to begin with.

Quote
If you have never heard of orderflow expect in connection with trading futures, give a try to academic Forex papers by author like Carol L Osler, Martin DD Evans, Richard K Lyon. I am pretty sure DS took choose the name of his work from those papers.

Clearly had no time to read them yet, but wasn´t aware of these papers. Thanks for pointing them out.

Would you be willing to call - let´s say - 5 consecutive live Forex orderflow trades and document your thinking along the way? I´m very interested in this.

Edit: If you already have done this in the past, please point me to said posts.
Anyway, to answer OP´s question, here is a link to a thread on another board, where a prop trader shares some of the strategies he uses to read and trade the markets. He doesn´t give away much but it´s something and you will get some insight into what I consider "real" order flow trading. You will probably have to register to read the whole thing.

http://www.trade2win.com/boards/mone...us-thread.html
Quoting RPropShop
Well in that case Myo, you should know that the term ‘orderflow trading’ was first introduced by my mentor, Darkstar, here in FF back in 2006 or so. Some commercial websites and trading educators surf off the hype around this term and sold trading education, webinars, books… Most of them, coined the term inappropriately to define what in reality is ‘tape reading’. Saying that ‘it has no place in retail Forex’ because you do not have DOM+TOS translate a lack of knowledge of the story behind orderflow trading which was introduce by a forex trader...
This.

Orderflow trading is simply global macro/ sentiment analysis. Nothing more. Throw in some knowledge of stop hunts, barrier option plays, liquidity vacuums, and that's about it.
What is any ocean but a multitude of drops?
  • Post #48
  • Quote
  • Edited at 10:54am May 27, 2013 8:35am | Edited at 10:54am
Quoting Myo
{quote} Depends, since to my knowledge your mentor is an amateur (meaning, he has no relevant professional background in finance), and any type of educational material being sold by an outsider should imo be regarded as highly suspicious to begin with. {quote} Clearly had no time to read them yet, but wasn´t aware of these papers. Thanks for pointing them out. Would you be willing to call - let´s say - 5 consecutive live Forex orderflow trades and document your thinking along the way? I´m very interested in this. Edit: If you already have done this...
I would be glad, unfortunately with my day job in a bank, intraday trading my own account, moderating my blog & tweeter feed, etc time is an issue.
I have a myfxbook account which is also my trade explorer on FF so you can follow my development through it.
There is some good resources on the net, just look at DS but also grkfx for example. Blog like FXbrief website is also a great resource for OFT.
When I will be granted with some free time I will do my best to post some examples at least of past trades of my account. In the mean time I gave you plenty of resources to work with. And when you go through them, be honest with you and ask yourself if price move because of RSI or MACD moving in certain direction, a daily candle looking like a inverse fish eaten by a cat, or because some significant orderflow has been generated by market players following some macro or sentiment shift.
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Quote
be honest with you and ask yourself if price move because of RSI or MACD moving in certain direction, a daily candle looking like a inverse fish eaten by a cat, or because some significant orderflow has been generated by market players following some macro or sentiment shift.


Yes, I am aware of that. In the meantime I´m still curious about how you would trade "order flow" without the help of an order book. Drop some knowledge when you find the time.
Quoting TranceTrader
Maybe you'd like to enlighten me with what I'm missing? I see lots of different explanations for order flow trading (some using charts only?) but from my research on the subject, the description above best describes the strategy. If you can provide convincing contrary evidence then I will happily stand corrected. Regards, {quote}
Only the FX dealing desks of the big banks in London and NY have good info about the orders, but this is not making the order flow trading impossible. Quote reading gives you pretty good idea what orders are filled at the market. I use this approach for years.
Quoting Myo
{quote} Yes, I am aware of that. In the meantime I´m still curious about how you would trade "order flow" without the help of an order book. Drop some knowledge when you find the time.
You are still focusing only on the technical tools like DOM, but as it was mentioned several times already, it is more of a mindset.

The core concepts of OFT - market psychology, sentiment analysis, metagame analysis - have been applied ever since the markets exists. "Reminiscences of a Stock Operator" is an example and the book was published in the 1920s. Since market microstructure studies became more in-depth some new concepts were added, but the very core remains the same.

I learned most of it from Darkstar as well and while I can't say who was the first to use the term OFT and again, many people have a different definition for it, the book was an eye-opener. I don't care if he has a CTA certificate or not. He didn't invent something new, but summarized and explained it very well. However, the key to applying it successfuly is to stay curious and a bit sceptical. So do a lot of research for yourself and forget about trying to copy someone elses strategy 1:1.
An example:

AUD/USD is trading higher mostly on what I perceive as short covering. The bids at 0.96 proved stronger than the shorts expected and flow info indicates there were model funds buying ahead to squeeze the weak shorts out of their position. Market sentiment for the Aussie is still negative and nothing changed fundamentally. Therefore, I think selling rallies towards 0.97 would be a good opportunity. As I read this morning, there are sovereign offers reported from 0.9700 to 0.9720 and we can expect such a rally to run into decent selling interest, not just from the sovs. USD long positioning is a bit at extreme levels, but AUD short positioning has still room to expand, it does not look like a crowded trade yet.
Quoting CaymanTrader
An example: AUD/USD is trading higher mostly on what I perceive as short covering. The bids at 0.96 proved stronger than the shorts expected and flow info indicates there were model funds buying ahead to squeeze the weak shorts out of their position. Market sentiment for the Aussie is still negative and nothing changed fundamentally. Therefore, I think selling rallies towards 0.97 would be a good opportunity. As I read this morning, there are sovereign offers reported from 0.9700 to 0.9720 and we can expect such a rally to run into decent selling...
That is definetly the reasoning of an intraday orderflow trader.
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Quoting CaymanTrader
An example: AUD/USD is trading higher mostly on what I perceive as short covering. The bids at 0.96 proved stronger than the shorts expected and flow info indicates there were model funds buying ahead to squeeze the weak shorts out of their position. Market sentiment for the Aussie is still negative and nothing changed fundamentally. Therefore, I think selling rallies towards 0.97 would be a good opportunity. As I read this morning, there are sovereign offers reported from 0.9700 to 0.9720 and we can expect such a rally to run into decent selling...
I think this week we have building approvals m/m and private capital expenditure q/q from Australia which can have slight effect on the sentiment are expected to give positive value and also I think big shots are taking the stops out to fill the liquidity gap for one more round of short selling ,Any way just keeping an eye,Thanks for your opinion mate
Quoting CaymanTrader
An example: AUD/USD is trading higher mostly on what I perceive as short covering. The bids at 0.96 proved stronger than the shorts expected and flow info indicates there were model funds buying ahead to squeeze the weak shorts out of their position. Market sentiment for the Aussie is still negative and nothing changed fundamentally. Therefore, I think selling rallies towards 0.97 would be a good opportunity. As I read this morning, there are sovereign offers reported from 0.9700 to 0.9720 and we can expect such a rally to run into decent selling...
I shorted it prior to the US data release, got an average fill of 0.9680 now. First target 0.9610, 2nd open - will need to see the reaction to 0.96 first.

IMO, the markets was just waiting for an excuse to run the USD higher...

Attached Image (click to enlarge)
Click to Enlarge Name: AUDUSD.PNG Size: 29 KB
Quoting CaymanTrader
{quote} I shorted it prior to the US data release, got an average fill of 0.9680 now. First target 0.9610, 2nd open - will need to see the reaction to 0.96 first. IMO, the markets was just waiting for an excuse to run the USD higher... {image}
With you there, but EUR was the pick of the bunch, been waiting for this all week.
Time hides Nothing
Quoting CindyXXXX
{quote} With you there, but EUR was the pick of the bunch, been waiting for this all week.
Well, the EUR/USD drop looks even better than the one in A/U or any other major pair, so good job.
Quoting CaymanTrader
{quote} I shorted it prior to the US data release, got an average fill of 0.9680 now. First target 0.9610, 2nd open - will need to see the reaction to 0.96 first. IMO, the markets was just waiting for an excuse to run the USD higher... {image}
on the same line I bet on USD Swinging short for this week on GBP/USD took short on the basis of prior and current sentiment ,Consumer confidence gave another hint for major players to short I hope the next bids will be on 1.49980 keeping an eye on the levels ,Order flow really rocks
AUD/USD worked out very well.

I think AUD/JPY stops below 97 are next. Just looks too good, right?
Attached Image (click to enlarge)
Click to Enlarge Name: AUDJPY.PNG Size: 50 KB
Markets driven by month-end flows and no real fundamental reason for this USD downmove, so good opportunity to fade.

We'll need to keep a watchful eye on USD/JPY and Treasuries though...
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