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Order flow trading thread

  • #21
  • May 13, 2014 11:09pm May 13, 2014 11:09pm
Quoting shellsnail
{quote} Yes I get where you are coming from but I haven't really figured out a good method to trade higher time frames (H4 and above) yet though - still learning and experimenting - so I can't really comment on whether this will work...

Learn VSA man, it will give you an edge. Or better yet learn wyckoff, a lot harder but a more complete picture.
Being a trader is lonely, but being a great trader is lonelier still
  • #22
  • May 13, 2014 11:36pm May 13, 2014 11:36pm
Quoting saneblane
{quote} Learn VSA man, it will give you an edge. Or better yet learn wyckoff, a lot harder but a more complete picture.
I think most of the methods out there are all related in some way or another. It's always good to know more but I think ultimately these things don't help make you make the good trades...

Thing about trading the daily charts is that the results can take a long time to present itself, especially when trading with a huge R:R ratio (1:10) like mine (I have just taken a string of 13 losses for a 13% loss over the last 2 months); so it's too early to say what works and what doesn't, I'd give it a year at least.. I don't believe in backtesting on the higher time frames, especially when the method used requires discretionary analysis (although entry is completely rule-based...)

to bring this back on topic, I think the higher time frames don't necessarily behave the way as the smaller time frames... Aggregation of micro behaviour is not so straightforward.
Build good relationships with others.
  • #23
  • May 13, 2014 11:47pm May 13, 2014 11:47pm
Quoting shellsnail
{quote} I think most of the methods out there are all related in some way or another. It's always good to know more but I think ultimately these things don't help make you make the good trades... Thing about trading the daily charts is that the results can take a long time to present itself, especially when trading with a huge R:R ratio (1:10) like mine (I have just taken a string of 13 losses for a 13% loss over the last 2 months); so it's too early to say what works and what doesn't, I'd give it a year at least.. I don't believe in backtesting...
That's a whole other topic, they say all time frames behave the same in forex and that's not true at all, at least not in my opinion. But the higher time frames are known for staying the coarse more without noise. It also gives you more time to react. Trading on a daily is boring as hell man, I don't know how you do it, but I have noticed that it follows macro economic pulls than other time frames. I have only tried to trade it once but i almost got bored to death, 4 and under for me.
Being a trader is lonely, but being a great trader is lonelier still
  • #24
  • May 13, 2014 11:51pm May 13, 2014 11:51pm
I wouldn't say they are the same thing at all. In my mind Wyckoff is the best thing you could learn about trading, it's what some of the best traders in the world use. His teachings are as straight forward as you can get, I mean breaking through the ice? and jumping the creek? nothing is left to chance, sometimes I wonder if you need to know all of it, but it does give you a better grasp of the underlying workings of the market, and it's part of the reason I was able to start flow trading. Give it a try, you can't go wrong with his work.
Being a trader is lonely, but being a great trader is lonelier still
  • #25
  • May 14, 2014 1:37am May 14, 2014 1:37am
Please let me offer this.

Several years ago, when I traded futures, I participated in a demonstration offered by a futures broker. The broker's purpose was, of course, to get more clients, but the demonstration showed how a professional trader uses their trading platform—understand that this trader was a former S&P floor trader who became an off-floor trader trading the e-Mini S&P. He had been trading 15+ years, and he was not a retail trader. The demonstrations were one hour long, and were offered every trading day for one month. Each session included 30 minutes of him trading, demonstrating the broker's platform, and 30 minutes of Q&A. That was about 20 hours of a commercial trader, in real-time, and I was there for every session!

Again, he is only trading the e-Mini S&P. His number one tool, which we participants did not see, was available only to the off-floor traders. That tool was a display that showed real-time order flow. From the trader's description, it was an ECN type of display that showed order size with a time stamp. The only tools from the broker's trading platform he used was the Depth of Market (DOM), one 5-minute chart with a 9-period RSI indicator, and the ordering tools. He did no point-and-click ordering on the platform window, but had a separate hand-held keypad with which to place orders. Over the several hours of the demonstrations, the trader would discuss what he was observing: the actual orders coming in, the sizes, when an order was a “tease” and when there was real momentum. His smallest size was 5 contracts, while he generally traded 10 to 25 contracts. There were no secret mathematical formulas or black box program making his decisions, just all discretionary trading. Needless to say, this was a real education.

Trading order flow is actually watching the orders flowing in and out of the markets, and then making trading decisions from that information. The trader that I witnessed made trading decisions on real order flow information. Using anything less than that is a pseudo type of order flow trading, and perhaps a folly. The only way that a retail currency trader would even come close to having that visibility is with a DOM display on the futures currency markets, but you still do not see the actual size of the orders being placed. Perhaps some of you know a Forex broker offering DOM visibility on currency pairs. I do not. Maybe it is available, but I also do not know any Forex broker offering real-time order flow information to the retail trading market. As far as I know, that information is available only to the commercial traders, or those who are on the other side of my order screen.

My best to all of you.
  • #26
  • Edited 2:03am May 14, 2014 1:49am | Edited 2:03am
Quoting roundturn
Please let me offer this. Several years ago, when I traded futures, I participated in a demonstration offered by a futures broker. The broker's purpose was, of course, to get more clients, but the demonstration showed how a professional trader uses their trading platform—understand that this trader was a former S&P floor trader who became an off-floor trader trading the e-Mini S&P. He had been trading 15+ years, and he was not a retail trader. The demonstrations were one hour long, and were offered every trading day for one month. Each session included...

Thanks for your post man, that was very enlightening. Although what you said might be true, I cannot deny the information and the research that is infront of me. I cannot say for sure that his information would match up with my own or not, but the information that I have comes in live also, and I am the one who has to use the information the best that I can. As a retailer it's the best that I can do, but I do not believe that DOM is the only way to trade flow. There are platforms now like Ctrader that offers dept of market, I do not know if it might be as complete as his, but keep in mind that his information was also at best 80 percent complete in my view. I thank you for you post, but I have to push forward.

That gave me an idea, when I am finished with my research I will compare it with Ctrader dom and see if it's any good. Thanks alot man that was another great idea.
Being a trader is lonely, but being a great trader is lonelier still
  • #27
  • May 14, 2014 1:58am May 14, 2014 1:58am
roundturn, I just want to say something you are one of fhe few like me who rarely talk in forum. You joined in 2007 and have only 2 post...

But by now you should at least trading well in forex.

Thank you for sharing your experience. I know it must be hard trying not to talk at all since 2007 while absorbing/filtering all the knowledge these past year.

I would like to comment about the way the trader play. The trader STILL use indicator so that mean that it must help him filter something. And secondly some people have lot of experience so when they see the chart I are able to see more than usual aka pattern analysis. Ofcourse he's not going to tell you about that, he don't want to confuse newbie. Also you said he use a tool that is not on "retail platform" I wonder how can he train people to use program when the tool doesn't exist the the retail side....I understand as a trainer you don't want to be embarrass losing money infront of people so you got to use "cheating dom tool"...

You know what they say : There's more than meets the eye.
  • #28
  • May 14, 2014 2:07am May 14, 2014 2:07am
Quoting victor_ray
roundturn, I just want to say something you are one of fhe few like me who rarely talk in forum. You joined in 2007 and have only 2 post... But by now you should at least trading well in forex. Thank you for sharing your experience. I know it must be hard trying not to talk at all since 2007 while absorbing/filtering all the knowledge these past year. I would like to comment about the way the trader play. The trader STILL use indicator so that mean that it must help him filter something. And secondly some people have lot of experience so when they...
You say that was his second post in 7 years? Man, unreal. Well it did help me to get another idea so it wasn't wasted after all.
Being a trader is lonely, but being a great trader is lonelier still
  • #29
  • May 14, 2014 2:37am May 14, 2014 2:37am
I trade the order flow for 8 years. Unfortunately it is much difficult these days probably because of the HFT's and lower volatility. To trade the order flow you need to know very well how the market operates and what is the motivation of the largest market participants. They just want to make money and that's why the order flow goes in the direction with least resistance. Of course it may go first in the opposite direction if they need liquidity.
I used the following strategies during the years:
- test of support/resistance levels (options barriers)
- protection of (retracement off) of support/resistance levels (options barriers)
- order flow related to the opening and closing of large financial centers (6 AM, 12:30 PM, 4PM London time)
First I need to know where could be possibly placed the larger orders (bids, offers, stops). That's why I draw my road map (http://theultimatetradingedge.com/blog/?p=1008). The I wait for a test of these levels and trade. This is the concept in general. Today I do this mostly with options rather than spot, because RR is much better. My volatility strategies are based purely on the order flow (http://theultimatetradingedge.com/blog/?p=394)
  • #30
  • May 14, 2014 2:47am May 14, 2014 2:47am
Quoting srmfx
I trade the order flow for 8 years. Unfortunately it is much difficult these days probably because of the HFT's and lower volatility. To trade the order flow you need to know very well how the market operates and what is the motivation of the largest market participants. They just want to make money and that's why the order flow goes in the direction with least resistance. Of course it may go first in the opposite direction if they need liquidity. I used the following strategies during the years: - test of support/resistance levels (options barriers)...

Thanks lot man, what you said there made some sense, and I have noticed that the market does seem to follow the path of least resistance more often than not. i will review your post some more tomorrow and see if I can use any of the information in your post in my strategy.
Being a trader is lonely, but being a great trader is lonelier still
  • #31
  • May 14, 2014 2:50am May 14, 2014 2:50am
Quoting roundturn
Please let me offer this. Several years ago, when I traded futures, I participated in a demonstration offered by a futures broker. The broker's purpose was, of course, to get more clients, but the demonstration showed how a professional trader uses their trading platform—understand that this trader was a former S&P floor trader who became an off-floor trader trading the e-Mini S&P. He had been trading 15+ years, and he was not a retail trader. The demonstrations were one hour long, and were offered every trading day for one month. Each session included...
at last some facts,
tradewith60
  • #32
  • May 14, 2014 2:54am May 14, 2014 2:54am
Quoting 60minuteman
{quote} at last some facts,
I'm not going to let you turn this thread into bullshit. If you have nothing to add then sit down and take a seat.
Being a trader is lonely, but being a great trader is lonelier still
  • #33
  • May 14, 2014 3:02am May 14, 2014 3:02am
Quoting saneblane
{quote} Thanks lot man, what you said there made some sense, and I have noticed that the market does seem to follow the path of least resistance more often than not. i will review your post some more tomorrow and see if I can use any of the information in your post in my strategy.
This is just the basics. The trick is to know well the market and update your strategy when the trading conditions change. For example, the 3rd type of strategies could be traded only via options now.
  • #34
  • May 14, 2014 3:09am May 14, 2014 3:09am
Quoting srmfx
{quote} This is just the basics. The trick is to know well the market and update your strategy when the trading conditions change. For example, the 3rd type of strategies could be traded only via options now.
I have already accounted for that. And my trades average about one or two instant the most. Meaning on a 1 hour time frame, a trade might last about 2 hours the most, after that the flow dries up most times to not worth being in the trade, I might monitor it sometimes, but it's tiring so I just cut them now. What you describe there is real market info that I had to deal with, so I know you at least been trading flow. On an 30 minute chart I have averaged that good market movement only last for about an hour and a half, but it's an on going process, I am still collecting data. So much information to process, but when money is flowing you just jump on. I might check out the options thing too, and see how that works.
Being a trader is lonely, but being a great trader is lonelier still
  • #35
  • May 14, 2014 3:18am May 14, 2014 3:18am
Not sure if this will be of much relevance since I don't trade spot fx anymore, but...

I trade FGBL (bund futures) and my method is definitely based on "order flow". I use Market Delta's footprint as my main tool for reading the flow (it's basically a "chart" but at each price point it shows the orders which hit the bid vs the orders that lifted the offer). This allows me to see the impact of orders on the market - for example, if lots of orders have hit the bid at some price without breaking through. Kind of a historical time & sales in chart form. Equally important is the DOM so I can see obviously how much is at each price, but more importantly how the orders/algos there react to trades at their price, and all the little nuances that you pick up that can give you an idea of what's going on. And of course also the time & sales window to see what’s going through and the speed etc. And regular charts, to give me some context of where we are and what's happened so far, potential levels, etc. All on 1 minute timeframe.

So first of all, the way order flow generally appears to be traded in spot fx by those in the “order flow community” (iykwim) is to figure out what will make people trade in the future, and front run them. So for example, you might think there are going to be stop orders under some swing low, and the market is approaching that area. Your thought process might be “Ok so there’s probably stops under there, and they’re probably a target for those pushing the market down, as they’ll want to liquidate into the stops. So I’m going to get short as well and try to profit from that.” Or you might think “So-and-so just said such-and-such, that should result in people wanting to buy, so let me get long to front run their flow.” Or stuff like “The market is bullish because it expects x, however I think they’ve mostly already bought what they want and when we get x they’ll exit their longs, so I’m going to look to get short to profit from that.” Just a few examples of course.

Obviously you can’t see orders trading in spot fx so you just have to guess where orders are likely to be, and what’s likely to happen. Which is all well and good if it works for you. But if you want to trade order flow then I don’t see why you’d stick with spot fx, when you can trade “real” order flow in the futures or similar markets. You still have to rely on your interpretation of what’s happening of course, but you are seeing real orders trading, the actual amounts on offer, and you can see how the market really trades and what really moves price. No more mystery about order flow. It seems the only people who think order flow is some mysterious subject are those who’ve only ever traded spot fx – it was once a massive mystery to me as well and took me ages to truly understand, since all I had was theory. And of course you can still use the “theoretical order flow” analysis in these markets as well, to figure out bias etc.
  • #36
  • May 14, 2014 3:19am May 14, 2014 3:19am
Quoting saneblane
{quote} I have already accounted for that. And my trades average about one or two instant the most. Meaning on a 1 hour time frame, a trade might last about 2 hours the most, after that the flow dries up most times to not worth being in the trade, I might monitor it sometimes, but it's tiring so I just cut them now. What you describe there is real market info that I had to deal with, so I know you at least been trading flow. On an 30 minute chart I have averaged that good market movement only last for about an hour and a half, but it's an on going...
With options you can trade predictable changes in volatility. These predictable changes of volatility are usually caused by the order flow. For example, the volatility may go down during the early US session and you can by a strangle in anticipation of price move caused by orders related to the London fix. Of course you must watch the quotes to see if there are any large orders, to check if there are options expiries for the NY cut, etc.
  • #37
  • Edited 3:45am May 14, 2014 3:32am | Edited 3:45am
I just added a picture of my trade setup to give a better understanding of my tools, I am trying to get a new indicator made that would be more accurate at making calculation of the live market data than the one I have now. It's crude but this is the way I get my information of money flowing back and forth in the market.
Attached Image (click to enlarge)
Click to Enlarge Name: Flow Trading.jpg Size: 127 KB
Being a trader is lonely, but being a great trader is lonelier still
  • #38
  • Edited 3:53am May 14, 2014 3:36am | Edited 3:53am
Quoting eurotrash
Not sure if this will be of much relevance since I don't trade spot fx anymore, but... I trade FGBL (bund futures) and my method is definitely based on "order flow". I use Market Delta's footprint as my main tool for reading the flow (it's basically a "chart" but at each price point it shows the orders which hit the bid vs the orders that lifted the offer). This allows me to see the impact of orders on the market - for example, if lots of orders have hit the bid at some price without breaking through. Kind of a historical time & sales in chart form....

As long as you trade order flow then your info is relevant, I started this thread to hear different ideas about other flow traders and how they get there data. Some get there orders information before it affects the market. I on the other hand have to wait for it to hit the market before I can jump onto it. Yea you are right, I do not know where orders are, I just have to wait for price to flow and follow my instinct to know if i should follow. It's crude but with experience you get a feel for it. I might not stay on Forex you are right. But for now I want to learn as much about it as I can. Thanks again, always good to hear from a veteran trader like yourself.
Being a trader is lonely, but being a great trader is lonelier still
  • #39
  • May 14, 2014 3:56am May 14, 2014 3:56am
Quoting saneblane
{quote}Some get there orders information before it affects the market. I on the other hand have to wait for it to hit the market before I can jump onto it.
Absolutely nothing wrong with that and in fact it keeps you away from 'attempting' to predict. Its all about anticipating and then reacting to expected outcomes.

In fact if your making decisions based on orders entering the market (as opposed to interpreting limit orders etc..) then maybe building a 'pseudo' cumulative delta indi across all your currencies may help you. Just some thoughts...
  • #40
  • May 14, 2014 4:00am May 14, 2014 4:00am
Quoting Pipalicious
{quote} Absolutely nothing wrong with that and in fact it keeps you away from 'attempting' to predict. Its all about anticipating and then reacting to expected outcomes. In fact if your making decisions based on orders entering the market (as opposed to interpreting limit orders etc..) then maybe building a 'pseudo' cumulative delta indi across all your currencies may help you. Just some thoughts...

Another great idea man. But I am limited by the things I can do, so I can't do things as fast as some programmers on here can. All I can do is do the research and hope that it can be coded step by step. I am talking to a coder now and trying to get something going. Thanks for the idea.
Being a trader is lonely, but being a great trader is lonelier still
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