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Surfing Risk Intraday - Volume Profile and Order flow

  • #181
  • Apr 16, 2014 10:52am Apr 16, 2014 10:52am
Quoting Risk Surfer
{quote} Hey Dappa, will try to answer your question here briefly then come back on later with more detail if you need it First of all, Swing high points that are created by a lack of buying, are generally of much higher quality (more likely to hold) than swing highs that are created by an excess of offers (sell limits) despite great buying pressure. One way to tell the difference in real time, is by looking at the DOM in real time. The DOM displays all the limit orders (offers above the price, bids below) as well as each market order that gets executed...

well I trade spot, I don't have acces to times and sales chart, so what your saying is that I wouldn't know looking at a forex spot chart?

Second I wanted to know how the volume would look at a swing high or low in correlation to lack of buying or selling, or is that irrelevant, because I am looking at spot and not a platform with a DOM?
  • #182
  • Apr 16, 2014 11:22am Apr 16, 2014 11:22am
Quoting dappa
{quote} well I trade spot, I don't have acces to times and sales chart, so what your saying is that I wouldn't know looking at a forex spot chart?
Yeah

Quoting dappa
{quote}Second I wanted to know how the volume would look at a swing high or low in correlation to lack of buying or selling, or is that irrelevant, because I am looking at spot and not a platform with a DOM?
Here's two examples,

1) There is a very blunt/flat top to this profile meaning a lot of buyers (market orders) bought into the offers (limit orders) at the high. We sold off after the buyers ran out of bullets

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2) This profile is pointy/thin at the low meaning that sellers (market orders) weren't aggressive in selling into the bids (limit orders). Price shoots higher as the market realizes the weakness of sellers

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Out of the 2 examples the second swing point is much stronger. The first swing point is more likely to be retested sooner rather than later

Regarding SpotFX I would assume that the tick data provided by most platforms would correlate to the actual volume that traded fairly well, so you should be ok
Trade ideas posted daily with a follow up each night. See post #1
  • #183
  • Apr 18, 2014 10:04am Apr 18, 2014 10:04am
I understand what your saying, so looking at volume, is really relative to market orders pushing the price up or down, So from your example, looking at a price gap (down move) if volume is low, it reflects little selling pressure even if the liquidity gap is large. It signals weak selling, in the form of market orders, correct?

Vice versa for buying?

Now as far as the buy example, the volume reflects the market pressure of the buyers, not sellers when the price fell from that level, the high volume at that price just indicates heavy buying but too much sell limits for buyer to absorb, sellers absorbed the buying pressure, buyers ran out of steam and price fell cause no one else left to buy at that level, correct?

So in essence , volume is looked at in context of price movement and in hindsight , looking back at a level, you know what occurred when price turned or broke, but with respect to the volume, if you understand what I am trying to say?
  • #184
  • Apr 18, 2014 10:27am Apr 18, 2014 10:27am
Hey this is a liitle off topic, but, if I was to use Sierra charts for trading spot forex, where could I get a data feed from at a reasonable price?

Second, would it be to any advantage to use Sierra charts and a seperate data feed over my brokers feed on MT4?

I know sierra charts are better and you can use them to look at many different intruments, you can have market profile data plotted on the chart,but as far as the data feed for volume and price, would it matter since spot is not centralized?
  • #185
  • Apr 21, 2014 12:55pm Apr 21, 2014 12:55pm
Quoting dappa
I understand what your saying, so looking at volume, is really relative to market orders pushing the price up or down, So from your example, looking at a price gap (down move) if volume is low, it reflects little selling pressure even if the liquidity gap is large. It signals weak selling, in the form of market orders, correct? Vice versa for buying?
Yeah when 'thin' volume is left behind on a directional move it represents a lack of trading akin to a stop run. We can also see this as an unfinished auction (because it was one sided). These gaps are often 'filled in' at some point by heavy trading in the area that needs repairing


Quoting dappa
Now as far as the buy example, the volume reflects the market pressure of the buyers, not sellers when the price fell from that level, the high volume at that price just indicates heavy buying but too much sell limits for buyer to absorb, sellers absorbed the buying pressure, buyers ran out of steam and price fell cause no one else left to buy at that level, correct? So in essence , volume is looked at in context of price movement and in hindsight , looking back at a level, you know what occurred when price turned or broke, but with respect to the...
You're correct on both parts, the buyers ran out of steam and price started to drift down (no one left to buy). 2 things then happen
1) Buyers are offside and many of them will puke (stop out/cover)
2) the aggressive sellers at the highs will have to start chasing the price down if they still want to get short

Both will accelerate the price downwards until we have found a new level of acceptance.

That 'flat top' sticks out like a sore thumb to me and I use those kind of things as target when I do my analysis for subsequent session as I know it will be magnetic
Trade ideas posted daily with a follow up each night. See post #1
  • #186
  • Apr 21, 2014 1:00pm Apr 21, 2014 1:00pm
Quoting dappa
Hey this is a liitle off topic, but, if I was to use Sierra charts for trading spot forex, where could I get a data feed from at a reasonable price? Second, would it be to any advantage to use Sierra charts and a seperate data feed over my brokers feed on MT4? I know sierra charts are better and you can use them to look at many different intruments, you can have market profile data plotted on the chart,but as far as the data feed for volume and price, would it matter since spot is not centralized?
As far as I know Sierra have their own data feed and they combine the two together for around $30-40 per month You'd be very hard pushed to get any decent data for less than that. I'm not sure what instruments they offer but all the major futures will be there and surely the spot FX pairs too.
In terms of the quality and the reliability of the data I can't say for certain but I think Sierras tick data will be streaks ahead of your brokers execution feed, they'd also have a lot more historical data.
Trade ideas posted daily with a follow up each night. See post #1
  • #187
  • Apr 21, 2014 1:08pm Apr 21, 2014 1:08pm
Quoting Risk Surfer
Check out this weak high in ES back at the 1865.00 High volume area. It looks horrible to me and I feel we are likely to trade back up here, maybe even this week to 'repair' that blunt profile {image}
Here's an update, We're back at 1865.00 as expected.

I'd expect a stop run above here at some point, maybe even today while no ones watching

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Trade ideas posted daily with a follow up each night. See post #1
  • #188
  • Apr 22, 2014 8:03am Apr 22, 2014 8:03am
ES trade plan for today

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Trade ideas posted daily with a follow up each night. See post #1
  • #189
  • Apr 22, 2014 10:17am Apr 22, 2014 10:17am
So the stops were run above 1865.00 finally, it was only a matter of time

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Trade ideas posted daily with a follow up each night. See post #1
  • #190
  • Apr 22, 2014 11:01am Apr 22, 2014 11:01am
Quoting Risk Surfer
ES trade plan for today {image} {image}
Came within 1 tick of our first target for Longs, seeing a bit of downside pressure now. Volume is very weak across the board today, we're in holiday mode still
Trade ideas posted daily with a follow up each night. See post #1
  • #191
  • Apr 23, 2014 8:13am Apr 23, 2014 8:13am
ES trade plan for today. Note we have AAPL and FB earnings after the bell today which are certain to be market moving.

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Trade ideas posted daily with a follow up each night. See post #1
  • #192
  • Apr 23, 2014 9:12am Apr 23, 2014 9:12am
Market doing exactly what we expected, Filling in / Repairing the lack of volume from yesterdays breakout / stop run, as we push down to retest 1866.00

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Trade ideas posted daily with a follow up each night. See post #1
  • #193
  • Apr 23, 2014 9:26am Apr 23, 2014 9:26am
Quoting Risk Surfer
Market doing exactly what we expected, Filling in / Repairing the lack of volume from yesterdays breakout / stop run, as we push down to retest 1866.00 {image}
I don't get that concept, there was a break out with thin volume.

Then the market traded down back to the break out level where price broke out with low volume?

Now high volume is kicking up, orders coming in at that level, Buy limits and market orders to buy?


I read that standing limit orders once price reaches that price, they turn to market order?
That only makes sense, if you place a limit buy, once price reaches the buy limit, you have now bought at the market price. Now you have an open position that has to be now closed at a profit or loss, correct?
  • #194
  • Edited 10:19am Apr 23, 2014 9:41am | Edited 10:19am
Quoting dappa
{quote} I don't get that concept, there was a break out with thin volume. Then the market traded down back to the break out level where price broke out with low volume?
Yes but the price trading back down to the breakout point is the result of the market 'needing' to auction the zone properly. When price broke higher we left behind very low volume meaning we know very little about the supply/demand in that area.
The market needs to come back to this low volume zone and throughly trade there which gives the visual effect of filling in the low volume on the volume profile graphic


Quoting dappa
{quote} Now high volume is kicking up, orders coming in at that level, Buy limits and market orders to buy? I read that standing limit orders once price reaches that price, they turn to market order? That only makes sense, if you place a limit buy, once price reaches the buy limit, you have now bought at the market price. Now you have an open position that has to be now closed at a profit or loss, correct?
I think there is a small issue with the terminology.

There are three types of market participant

Those entering/exiting using limit orders
Those entering/exiting using market orders
Those with open positions

Limit orders can only be filled by market orders, once a limit order has been filled it becomes an open position, as does the market order that filled the limit order.
Once you have an open position you can choose whether you want to exit using a limit or a market order.

I think you understand already but I just wanted to make that clear as the the statement "standing limit orders once price reaches that price, they turn to market orders" is incorrect
Trade ideas posted daily with a follow up each night. See post #1
  • #195
  • Apr 23, 2014 12:30pm Apr 23, 2014 12:30pm
Quoting Risk Surfer
{quote} Yes but the price trading back down to the breakout point is the result of the market 'needing' to auction the zone properly. When price broke higher we left behind very low volume meaning we know very little about the supply/demand in that area. The market needs to come back to this low volume zone and throughly trade there which gives the visual effect of filling in the low volume on the volume profile graphic {quote} I think there is a small issue with the terminology. There are three types of market participant Those entering/exiting...

Yeah, I guess what I meant to say was that, limit orders wether to buy or sell are opened when the market price reaches those limits?

When those limit are reached, the limit order is executed at market price and is an open position?

The open market order and the limit order are open until someone closes for a profit or a loss?

Am I right?
  • #196
  • Apr 23, 2014 12:37pm Apr 23, 2014 12:37pm
Hey a stop run is for instance, sellers that have sold looking for more sell orders so that they can buy back their position by buying lower to sellers looking to get short or by pushing through buy limits to hit the sell stops and liquidate, correct?
  • #197
  • Apr 23, 2014 12:37pm Apr 23, 2014 12:37pm
Hey sorry for hammering you with the questions, just wanna get my head around the mechanics
  • #198
  • Apr 23, 2014 1:13pm Apr 23, 2014 1:13pm
Quoting dappa
{quote} Yeah, I guess what I meant to say was that, limit orders wether to buy or sell are opened when the market price reaches those limits? When those limit are reached, the limit order is executed at market price and is an open position? The open market order and the limit order are open until someone closes for a profit or a loss? Am I right?
Yep, another way to think of it is that if everyone was using limit orders (no one using market orders) the price would never move. Everyone would just be sat there on the bid (buyers) or the offer (sellers) looking at each other. It takes someone to trade at market (to buy from the offer or sell to the bid) to move the price. When you're trying to exit a position you can either use a limit order and hope someones market order fills you, or you can use a market order to buy/sell from someones limit order to exit immediately, to cost of this is getting a worse price.

Quoting dappa
{quote}Hey a stop run is for instance, sellers that have sold looking for more sell orders so that they can buy back their position by buying lower to sellers looking to get short or by pushing through buy limits to hit the sell stops and liquidate, correct?
Yep so a stop order is usually a pending market order that only triggers once that price trades. Market psychology dictates that some prices are very likely to have a lot of stop orders waiting there, often much larger size than can be absorbed by the limit orders on the other side, this is why the price shoots up or down very quickly when the number of market orders outweighs the limit orders on the opposite side.

A market professional knows where the stops are likely to be. Imagine a large fund needs to get long 10,000 S&P contracts. You can't just buy that kind of size without moving the market in your direction (giving you a worse average entry price). If we are trading just above an obvious support level, it may be beneficial for the fund manager to actually sell first, pushing the price below the support level. He knows all the muppets will have their stop orders just below the support level. When he pushes price below the support, all these automatic market sell orders get triggered, meanwhile he is sitting on the bid with his limit orders, absorbing all that selling, which stops the price going lower, It's likely that he will get filled on all his 10,000 contracts at that one price without moving the market an inch

Quoting dappa
{quote}Hey sorry for hammering you with the questions, just wanna get my head around the mechanics
No worries bro, I can talk about this stuff all day, I'm a bit of a market junky
Trade ideas posted daily with a follow up each night. See post #1
  • #199
  • Edited 1:39pm Apr 23, 2014 1:25pm | Edited 1:39pm
{Quote}Yes but the price trading back down to the breakout point is the result of the market 'needing' to auction the zone properly. When price broke higher we left behind very low volume meaning we know very little about th{quote}

I don't understand this, If price broke a level, wasnt it demand that cause the price to rise?

If the price comes back to the level, isn't it because sellers pushed it back down,( Sell limits, market sells), sell stops from buyers maybe getting hit?

When you say the market needs to auction the zone properly, who are you referring too?
Traders drive the price, selling and buying.
  • #200
  • Apr 23, 2014 1:42pm Apr 23, 2014 1:42pm
What does a stop run look like, high volume bar breaking a supply level and price turns around after?

you have a pic to post , just a chart pic, I cant make sense of candles with that volume profile overlay on it. Confuses me.

The two scenarios that take place the majority of the time in the market is stop runs to fill large orders and price coming into, for instance a supply level and buy volume has slowed down, signaling buyers running out of steam and price not able to break through the swing point.

Buy volume increases meaning a large up bar accompanied by high or moderate volume?

I know you mentioned that he volume is related to the market orders which is what is represented by the price bars and volume bars, correct?
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