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question regarding order flow

  • #1
  • First Post: Apr 18, 2015 4:33pm Apr 18, 2015 4:33pm
Hi, I'm trying to get my head around order flow and a hypothetical question popped up in my head.

Large orders slip the market right?

so if you were to buy 1,000 lots in a time of low liquidity, you would cause a large spike up, immediately putting you into profit
then if you waited until a time of very high liquidity to close the trade you would not get as much slippage on the downside, and you will have made a profit

would this be correct?
  • #2
  • Edited 5:18pm Apr 18, 2015 5:04pm | Edited 5:18pm
Quoting dekpips
Hi, I'm trying to get my head around order flow and a hypothetical question popped up in my head. Large orders slip the market right? so if you were to buy 1,000 lots in a time of low liquidity, you would cause a large spike up, immediately putting you into profit then if you waited until a time of very high liquidity to close the trade you would not get as much slippage on the downside, and you will have made a profit would this be correct?

Yes and No.

When you are trading large positions in low liquidity, you are still trading at the prices available...

So, hypothetically speaking...

You enter your 1,000 lot trade when EURUSD hits 1.0000..your trade flows throw at all available prices until your order is filled and in this, you are raising the price based on availability alone...

But...this doesn't mean that you get your 1,000 at 1.000, it means that the value of your position is cost averaged up to when your order fills.

You have effectively filled your order and moved the price of market, but it doesn't necessarily mean you are in profit as it will be a cost averaged price.

When you go to offload this lot...again, under the assumption of low liquidity, you are offloading to all the buyers below you.

Meaning, if the cost of your average price of buying is greater than the cost average price of your selling, you have moved the market in 2 directions and made a profit.

IF, however, your cost average buys are less than your cost average sells, you have still moved the market in 2 directions with your trading, but can still come out as a Net loser.
Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #3
  • Apr 18, 2015 5:21pm Apr 18, 2015 5:21pm
Quoting Magix
{quote} Yes and No. When you are trading large positions in low liquidity, you are still trading at the prices available... So, hypothetically speaking... You enter your 1,000 lot trade when EURUSD hits 1.0000..your trade flows throw at all available prices until your order is filled and in this, you are raising the price based on availability alone... But...this doesn't mean that you get your 1,000 at 1.000, it means that the value of your position is cost averaged up to when your order fills. You have effectively filled your order and moved the...
thanks for the answer

of course I realise you wouldn't get filled at 1.000 but in steps until your whole order is filled, but at that point the other "parts" of your order that got filled at the lower prices should be in profit right? And then if you were to unload during a period of high volatility, then you shouldn't cause as much slippage downwards as you did on the way up during low volatility and should make a net profit

naturally this is all hypothetial and i'm using it to build a clearer image of how the markets work
  • #4
  • Apr 18, 2015 5:25pm Apr 18, 2015 5:25pm
Quoting Magix
{quote} Yes and No. When you are trading large positions in low liquidity, you are still trading at the prices available... So, hypothetically speaking... You enter your 1,000 lot trade when EURUSD hits 1.0000..your trade flows throw at all available prices until your order is filled and in this, you are raising the price based on availability alone... But...this doesn't mean that you get your 1,000 at 1.000, it means that the value of your position is cost averaged up to when your order fills. You have effectively filled your order and moved the...
Good answer.
  • #5
  • Apr 18, 2015 5:38pm Apr 18, 2015 5:38pm
Quoting dekpips
{quote} thanks for the answer of course I realise you wouldn't get filled at 1.000 but in steps until your whole order is filled, but at that point the other "parts" of your order that got filled at the lower prices should be in profit right?
NO.

Quoting dekpips
And then if you were to unload during a period of high volatility, then you shouldn't cause as much slippage downwards as you did on the way up during low volatility and should make a net profit
Not necessarily.

To gain a better sense of this, you'd want to go to your local stock exchange and sign up with a broker with Level2 quotes.

L2, tells you where the bidders are at and where the sellers are at, and even gives you an idea of the size of the quantities they have available.

L2 works well in the stock markets because they are centralized...FOREX however, is not. The volumes you have available are the volumes your broker has available and that happens to be current, relative to the second...S1 chart.

Now, there are some Brokers that do have L2 quotes, but this only gives a general idea as to the traders per broker...not the market in general.

If you keep in mind how small of a market the retailers, you and I, actually are in the grand scheme of 5 trillion dollars per day...you must appreciate that you are not, can not, nor will ever have a full grasp of all that is available by way of bids and asks.

The black swan should help out your perspective on this, as you must appreciate that even ECNs (or so they claim), never had enough swissy sellers to fill the market load of their perspective buyers...meaning, stop losses were non-existent, because there was nobody on the other side of the equation....


RELATIVE TERMS.

I used to be a season ticket holder for the Calgary Flames <-NHL hockey.
I was a season ticket holder during one of their shitty seasons...
After midpoint in the season, and because I was busy, I tucked my 2 tickets underneath my windshield wiper, hoping somebody would take them and enjoy the night out on me. When I returned to my vehicle, I found 4 tickets, my 2 plus 2 others under my windshield wiper!!

The flames, this year, had a great season. So much so, that there are lineups 30, 000 deep to buy play off tickets.

Get what I am saying here?
Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #6
  • Apr 18, 2015 10:32pm Apr 18, 2015 10:32pm
Quoting Magix
{quote} NO. {quote} Not necessarily. To gain a better sense of this, you'd want to go to your local stock exchange and sign up with a broker with Level2 quotes. L2, tells you where the bidders are at and where the sellers are at, and even gives you an idea of the size of the quantities they have available. L2 works well in the stock markets because they are centralized...FOREX however, is not. The volumes you have available are the volumes your broker has available and that happens to be current, relative to the second...S1 chart. Now, there are...
I am pretty confused, but I am pretty sure what you are sayin' is the Flames still s*ck and there is not that much to do in Calgary. I mean really, they made the playoffs, whoop to doo, isn't that like graduating kindergarten? It's nice and all, and they have a ceremony, but come on.

But what really confuses me is the fact that isn't Canuck a mildly pejorative term and who the h*ll names their team the Canucks?

Go Flames!
The world you desire can be won. It exists.. it is real.. it is possible..
  • #7
  • Apr 19, 2015 3:56am Apr 19, 2015 3:56am
Quoting Mr. Scott
{quote} I am pretty confused, but I am pretty sure what you are sayin' is the Flames still s*ck and there is not that much to do in Calgary. I mean really, they made the playoffs, whoop to doo, isn't that like graduating kindergarten? It's nice and all, and they have a ceremony, but come on. But what really confuses me is the fact that isn't Canuck a mildly pejorative term and who the h*ll names their team the Canucks? Go Flames!
Really, I was shooting for the basics of supply and demand...

I could probably lose my citizenship over this, but the whole hockey thing eludes me...

Not wanting to take away from their success, the Flames had a good year, especially for the Flames. It was what is called a "Rebuild", year for them. Scrapped all the high paid players and started a scratch team with a lot of rookies and is the first year they've made the playoffs in a long time.

But yeah, the kindergarten thing and the, not much to do in Calgary is pretty accurate.

As far as the Canucks go, and along the same lines as my example...the Canucks have home iced the last 2 games, first 2 games of the playoffs...30,000 people in Calgary waiting to buy tickets here, in Vancouver for Game 1 of the playoffs, there were 100 vacant seats.

And...

Canucks seems like it should be a pejorative term, but it ain't. Well, nobody I ever met was offended by being called a Canuck, maybe just the Vancouver Hockey fans....
Money Can't Buy Happiness. Poverty Can't Buy SHIT! You Choose!
  • #8
  • Apr 19, 2015 10:39am Apr 19, 2015 10:39am
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Without VSA, you're playing checkers while the Smart Money plays chess.
  • #9
  • Last Post: Apr 19, 2015 9:39pm Apr 19, 2015 9:39pm
where do you find this kind of charting
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