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Order flow trading thread

  • #81
  • May 15, 2014 1:09am May 15, 2014 1:09am
I just came across an article : Comparing Seven Money Flow Indicators by Markos Katsanos

Biography
Markos Katsanos is a technical analyst, trading system developer and author.
He is a contributing author for "Technical Analysis of Stocks & Commodities" and a member of the Technical Securities Analysts Association of San Francisco (TSAASF).

He is the inventor of two new technical indicators. In showing the relationship of volume to price movement, his Finite Volume Element (FVE) and Volume Flow (VFI) Indicators have become popular tools used by traders and the code was incorporated in almost all Technical Analysis and trading software.

I well aware that the orderflow everyone really want is the "banks data flow". But majority retail trader can never have access to those anyway.

I could have post the article anywhere but I decide to put in this thread because this thread is not a "system" so this is more like research material but on the "indicator perspective".

For newbie at least they will get to know the tool from an expert test perspective not some "half hearted lazy rule breaking that many people on forexfactory do." When you know the tool better you will loss less...or you don't even use at all lol.

For the pro maybe you can learn something like trying to divergence...with real money flow data...

--
Side note: The article mention the test with with historical 10 year data 2000 to 2010 (which mean it include the 2008 housing crash bubble)
Attached File(s)
File Type: pdf Comparing Seven Money Flow Indicator.pdf   2.3 MB | 13,851 downloads
  • #82
  • May 15, 2014 1:14am May 15, 2014 1:14am
Thanks a lot Victor i'll give it a read.
Being a trader is lonely, but being a great trader is lonelier still
  • #83
  • Edited 2:34am May 15, 2014 1:46am | Edited 2:34am
Quoting saneblane
Also if anyone has any theories about the way the market works and the way money flows, then please post it so we can all hear and bounce ideas around. I know it's hard sharing crazy views on the market sometimes for fear of ridicule, but I put mine out there and I am glad I did, even if I leave FF now, some of the ideas I have gotten on this thread probably saved me years to find out on my own. You can learn something from anyone is my way of thinking, thanks again guys and keep it coming.


My take on Order Flow -- it's not complicated.

on the 1 M timeframe
1) "extreme high" OR "extreme low" volume
2) Tick "churning" at exact price ==> essentially this: Visualize a yoyo. The yoyo rolls down, at the end of the move there is a sudden tension in the string; the yoyo "spins on itself for a few seconds" and then goes back up. This "spin on itself for a few seconds" is visible on the chart.

An actual example that just happened as I write this.

08:00 GMT
EURUSD 1M == SELL 1.3716
Attached Image (click to enlarge)
Click to Enlarge Name: 05-15-14-01.gif Size: 20 KB


At this point the trade is at break even:
08:07 GMT
Attached Image (click to enlarge)
Click to Enlarge Name: 05-15-14-02.gif Size: 18 KB


Looking ok now:
Attached Image (click to enlarge)
Click to Enlarge Name: 05-15-14-03.gif Size: 20 KB


Here is the Order Flow "signature" that I look for (at support or resistance) -- the yoyo effect
Attached Image
  • #84
  • May 15, 2014 5:00am May 15, 2014 5:00am
Quoting Mingary
{quote} My take on Order Flow -- it's not complicated. on the 1 M timeframe 1) "extreme high" OR "extreme low" volume 2) Tick "churning" at exact price ==> essentially this: Visualize a yoyo. The yoyo rolls down, at the end of the move there is a sudden tension in the string; the yoyo "spins on itself for a few seconds" and then goes back up. This "spin on itself for a few seconds" is visible on the chart. An actual example that just happened as I write this. 08:00 GMT EURUSD 1M == SELL 1.3716 {image} At this point the trade is at break even: 08:07...
wtf Mingary you posted some charts!
  • #85
  • May 15, 2014 5:12am May 15, 2014 5:12am
Quoting Vitez
{quote} wtf Mingary you posted some charts!
I hope it's ok then... I would not want anyone getting the wrong idea about me...
  • #86
  • May 15, 2014 7:33am May 15, 2014 7:33am
Beware total Order Flow newbie here. Please don't shot!

From what I understood thus far. Retail spot FX traders can see neither the real volume nor the L2 data. The only thing we have in our hands is the ticks fed by our dear broker. So OF can only be "sensed" by this mean, correct? A tick is a time, a bid and an ask. So from that we have to get as much information as possible.

This is Mingary's trade tick by tick from 5:40 to 7:16 GMT. How can we extract information from this?
(vertical grey line is the minute change)
Attached Image (click to enlarge)
Click to Enlarge Name: OF.png Size: 27 KB
No greed. No fear. Just maths.
  • #87
  • Edited 9:48am May 15, 2014 9:24am | Edited 9:48am
Quoting Mingary
{quote} My take on Order Flow -- it's not complicated. on the 1 M timeframe 1) "extreme high" OR "extreme low" volume 2) Tick "churning" at exact price ==> essentially this: Visualize a yoyo. The yoyo rolls down, at the end of the move there is a sudden tension in the string; the yoyo "spins on itself for a few seconds" and then goes back up. This "spin on itself for a few seconds" is visible on the chart. An actual example that just happened as I write this. 08:00 GMT EURUSD 1M == SELL 1.3716 {image} At this point the trade is at break even: 08:07...

Thanks for posting. I don't know how other flow traders get there information but as for me I don't trade on charts anymore, I use it sometimes to get my bearings but nothing more, I came up with a strategy of how money flows and surprisingly it works good enough, take for example the EURUSD/USDCHF negative correlation, they look correlated on the chart but when you are watching the money flows through the market, EUR and CHF and not correlated at all, the USD is the invisible hand the guides both of them and keep them in line. If they break correlation with the USD then you can trade EURCHF on more extreme situations, it doesn't happen often but you see it happen a few times, and it's a reason that the pip movements on EURCHF is so little. Then you have the JPY, whenever money if flowing out of the USD and going to JPY then you have a big chunk of the market that is behind you, the Japanese and US economies are so big and so connected in terms of import and export that a lot of the money that flows is led by the cost of doing business.

When money is flowing you get to know how it flows and why it does so, these relationships and price behavior are just a few ways that I look at the flows of money in the market and make decisions on them. There are other things to consider but I hope you get the idea, my signals for entering a trade are based on the inter relationships of the way that these economies are close together, and make a decision based on if these ties deviate or come together at different times of the day. It sounds complicated but you get use to it.
Being a trader is lonely, but being a great trader is lonelier still
  • #88
  • Edited 9:59am May 15, 2014 9:45am | Edited 9:59am
Quoting PipMeUp
Beware total Order Flow newbie here. Please don't shot! From what I understood thus far. Retail spot FX traders can see neither the real volume nor the L2 data. The only thing we have in our hands is the ticks fed by our dear broker. So OF can only be "sensed" by this mean, correct? A tick is a time, a bid and an ask. So from that we have to get as much information as possible. This is Mingary's trade tick by tick from 5:40 to 7:16 GMT. How can we extract information from this? (vertical grey line is the minute change) {image}
Hey Pipmeup thanks for your post, the information you post about the ticks is an interesting one. the thing about a tick is that in my view it can be very misleading. For VSA which I do for fun sometimes, it can be used as showing of activity, but for my purposes it's simply not enough information. Take for example what a tick is, it's a tick in price change only but the thing is no tick is the same, for example if you are trading EURUSD and price ticks on the AUDUSD it does muddies the water on your chart, it affect the USD ever so slightly and when you take into consideration that the currencies seem to have different weight with their ticks (I am still trying to figure this out and it's my next place to research) for example the tick from the AUD against the USD might cause a price change of 1 pipette, whereas a tick from the JPY would affect the USD by 3 pipettes or even 1 pip,and then add to that, these currencies are being bought and sold at one time and you have a soup of confusion, and the signal on your chart even though it looks good, the market goes against it because the weight of the currencies has shifted in the market. That's why I don't use tick information it's not enough for me yet, haven't researched it enough. But I believe that it would show interesting things, for example the impact a currency might have on a tick by tick basis is not static, so there is something else going on that I don't understand yet.

The more I trade flow is the more questions I get and things I learn and act upon, and I understand now why it's hard for most to make money, and why 90 percent of traders fail, there is a lot of things going on under the hood at anyone time. Nothing in the market is stagnant it's always evolving from one moment to the next, I am just trying to track these and assign importance to them. There are other things that I track but since you ask about tick am going to stick to that.
Being a trader is lonely, but being a great trader is lonelier still
  • #89
  • May 15, 2014 10:01am May 15, 2014 10:01am
Quoting saneblane
{quote} Thanks for posting. I don't know how other flow traders get there information but as for me I don't trade on charts anymore, I use it sometimes to get my bearings but nothing more, I came up with a strategy of how money flows and surprisingly it works good enough, take for example the EURUSD/USDCHF negative correlation, they look correlated on the chart but when you are watching the money flows through the market, EUR and CHF and not correlated at all, the USD is the invisible hand the guides both of them and keep them in line. If they break...
How do you estimate the inflow/outflow of the currencies? I tried to do this (http://www.forexfactory.com/showthread.php?t=435706) but the results aren't extraordinary because the lag is too big.
No greed. No fear. Just maths.
  • #90
  • May 15, 2014 10:22am May 15, 2014 10:22am
Quoting PipMeUp
{quote} How do you estimate the inflow/outflow of the currencies? I tried to do this (http://www.forexfactory.com/showthread.php?t=435706) but the results aren't extraordinary because the lag is too big.
It took me almost 2 years of research to get that answer, I remember a day last year I was up for so long that my heart started to beat irregularly, when I looked at the clock I was up for just over 24 hours. I had to go sleep quickly before I past out or my heart fail, Lol I almost died getting the answer to that question and it's still not perfect but It is accurate enough for my purposes. As for how I do it, it's something I probably won't share on the net, I am a real trader after all and we like to keep our edge. I would talk about anything else but this one almost got me killed Literally.

And nice post man, I looked at it, and those were the kinds of questions I faced, I couldn't articulate them like you of coarse but I knew what was happening at the time. To find the answer to that question you have to change almost everything you might think about how Forex works. I won't share it on the net, but I have told you I might need your help to come up with a more reliable formula, and when I am ready I will contact you if you're still interested.
Being a trader is lonely, but being a great trader is lonelier still
  • #91
  • Edited 10:39am May 15, 2014 10:27am | Edited 10:39am
Quoting saneblane
{quote} Thanks for posting. I don't know how other flow traders get there information but as for me I don't trade on charts anymore, I use it sometimes to get my bearings but nothing more, I came up with a strategy of how money flows and surprisingly it works good enough, take for example the EURUSD/USDCHF negative correlation, they look correlated on the chart but when you are watching the money flows through the market, EUR and CHF and not correlated at all, the USD is the invisible hand the guides both of them and keep them in line. If they break...
Hi,
To not rely on charts would be good.
My approach is more "VSA" based. Having better tools would certainly be an advantage... I do realize I have to rely on whatever is exposed on the MT4 platform and that is very poor, therefore I had to come up with something rather unique (in my opinion). The major issue that I have is that I see that "something is happening" but I have not found anything that would tip he scale in favor of a bullish or bearish activity, only a certain behavior at support or resistance that seems to help make a Buy/Sell decision.
  • #92
  • May 15, 2014 10:30am May 15, 2014 10:30am
Quoting PipMeUp
Beware total Order Flow newbie here. Please don't shot! From what I understood thus far. Retail spot FX traders can see neither the real volume nor the L2 data. The only thing we have in our hands is the ticks fed by our dear broker. So OF can only be "sensed" by this mean, correct? A tick is a time, a bid and an ask. So from that we have to get as much information as possible. This is Mingary's trade tick by tick from 5:40 to 7:16 GMT. How can we extract information from this? (vertical grey line is the minute change) {image}...

For one thing, Tick activity at a given price.
  • #93
  • May 15, 2014 10:43am May 15, 2014 10:43am
Quoting Mingary
{quote} For one thing, Tick activity at a given price.
OK sir. Let's turn the graph 90° ;-)
A/U range bar chart 20 pips. The histogram is calculated at the point where it is drawn. So the right side of the line is the "future" as far as it is concern.
Note that the construction of the histogram is perhaps wrong as I'm not sure what I shall graph.
Attached Image (click to enlarge)
Click to Enlarge Name: AUDUSD-RG20.png Size: 25 KB
No greed. No fear. Just maths.
  • #94
  • May 15, 2014 10:46am May 15, 2014 10:46am
Quoting PipMeUp
{quote} OK sir. Let's turn the graph 90° ;-) A/U range bar chart 20 pips. The histogram is calculated at the point where it is drawn. So the right side of the line is the "future" as far as it is concern. Note that the construction of the histogram is perhaps wrong as I'm not sure what I shall graph. {image}
Ok. So now it looks like some sort of "Market Profile"..
What do you make of it?
  • #95
  • May 15, 2014 10:49am May 15, 2014 10:49am
Actually that was my question No clue!
No greed. No fear. Just maths.
  • #96
  • May 15, 2014 10:53am May 15, 2014 10:53am
Quoting PipMeUp
Actually that was my question No clue!
Me neither.. (:
  • #97
  • May 15, 2014 10:53am May 15, 2014 10:53am
An example of order flow trading. Short-term specs were short after the post ECB sell off. Bids in the 1.3650/40 zone (http://theultimatetradingedge.com/blog/?p=1016) contained the downward price move. The daily range was higher than the ATR20. Perfect conditions for a short squeeze. The perfect time usually is after the initial reaction to major economic data.
Attached Image (click to enlarge)
Click to Enlarge Name: oft.png Size: 41 KB
  • #98
  • May 15, 2014 10:57am May 15, 2014 10:57am
Quoting PipMeUp
{quote} OK sir. Let's turn the graph 90° ;-) A/U range bar chart 20 pips. The histogram is calculated at the point where it is drawn. So the right side of the line is the "future" as far as it is concern. Note that the construction of the histogram is perhaps wrong as I'm not sure what I shall graph. {image}
That's an interesting profile there, knowing where the most activity can help you a lot. This information could be useful for the traders who flip a coin and use tight stops, I never really looked into market profile much, but in a sense what I am doing is profiling also, just from a different perspective. It seems we all have the same questions just trying to answer them in different ways.
Being a trader is lonely, but being a great trader is lonelier still
  • #99
  • May 15, 2014 11:00am May 15, 2014 11:00am
Quoting srmfx
An example of order flow trading. Short-term specs were short after the post ECB sell off. Bids in the 1.3650/40 zone (http://theultimatetradingedge.com/blog/?p=1016) contained the downward price move. The daily range was higher than the ATR20. Perfect conditions for a short squeeze. The perfect time usually is after the initial reaction to major economic data. {image}
Interesting...
Where does that information come from?
  • #100
  • May 15, 2014 11:08am May 15, 2014 11:08am
Quoting srmfx
An example of order flow trading. Short-term specs were short after the post ECB sell off. Bids in the 1.3650/40 zone (http://theultimatetradingedge.com/blog/?p=1016) contained the downward price move. The daily range was higher than the ATR20. Perfect conditions for a short squeeze. The perfect time usually is after the initial reaction to major economic data. {image}

Nice example, that's a clear cut trade. The taking profits and then the huge buying that came onto that demand zone was a clear cut situation of buying pressure.
The 5 minute chart is not my forte though, my concentration is not good enough down there to trade on a chart. And it seems you look out for news for your flow, that's something I don't really pay attention too either, but I am going to do it soon and see how often money flow correlates with sentiment.
Being a trader is lonely, but being a great trader is lonelier still
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