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Using Balance and Unbalance to your advantage

  • #141
  • Sep 15, 2015 12:21pm Sep 15, 2015 12:21pm
Quoting stevepatt
Hi gspajon; Do you take Zones of Supply/Demand into account? EUR/USD has been moving between a Zone of Supply and Demand since early this year. It depends on how many Sell Orders are still active at this Level, the Market might have to drop before it can find enough Demand to give the Market the Momentum it needs to break through this Supply Zone.
Hello Stevepatt...what you refer to as price moving between "zones of supply and demand" I call a "balanced" market. As you note there are orders at either end of a price range. Sell orders at the top, and buy orders at the bottom. It is in these areas where order flow is most revealing. If there are enough buy orders (for example) to overwhelm the sellers at the top of the range, prices will rise out of the range and stop those sellers out...these stop orders are really market buy orders when they are hit, and that will further exacerbate an off balance, "buyers" market, and cause price to accelerate to the up side...in what I call a "whoosh"...

However if that does NOT happen, as was obvious today, that means the buyers don't have enough volume to overwhelm the sellers and thus, give up. They close their long positions with sell orders and add to the sellers, who are selling the top and..."whoosh" price falls until there is no one else left to sell...then the game starts all over at the other side of the range.

To me that is order flow...NOT supply and demand, because I seriously doubt the global supply or demand for EURO's or US Dollars has changed much in the last 2-3 weeks. I may be wrong on that however.
  • #142
  • Sep 15, 2015 12:25pm Sep 15, 2015 12:25pm
Quoting carbonado
" i must say,your way of trading is very prolific...am one of the readers you talked about...lol......do you trade these way on stocks too,why am asking is i tend too notice more gaps on stocks chart that usual..hence,you might be missing some levels as they might not appear. it seems this method is most prolific on the daily,what do you think.
I do not trade stocks, but I do trade the E-Mini futures market. That is also a nearly 24 hr market, but because it is US based the major volume comes in during the NY session. Thus I am able to trade that session on a daily basis, (scalping 30-60 points a day).

I understand what you mean by gaps though. Those gaps usually represent, price change during "after market" and "premarket" trading from futures traders. Thus if futures traders pushed the price higher overnight, then the instrument will gap higher, and thus that gap can represent an imbalance in the market.
  • #143
  • Sep 15, 2015 2:44pm Sep 15, 2015 2:44pm
Quoting gspajon
{quote} An excellent question!! Please keep in mind that I cannot "predict" the future. My entries may indeed be wrong. But I ask myself, "what is more likely to happen". As I mentioned at the beginning there is an 80% chance that price will move my direction and give the chance for some profit (not always as much as I want) once the order flow has changed from balanced to unbalanced. I place my order in the same area where I saw the one side overwhelmed the other. It is never an exact point...always a "zone" so I try to place my order in the middle...
Thanks for the answer, please keep posting your charts with your thoughts, I will follow and try to understand.
Its been a while I'm focusing in trade retest of ranges too, but not easy to understand the picture behind it and the orderflow that causes movements, many times I got stopped out.
  • #144
  • Sep 15, 2015 5:52pm Sep 15, 2015 5:52pm
Quoting Ainur
Thanks for the answer, please keep posting your charts with your thoughts, I will follow and try to understand. Its been a while I'm focusing in trade retest of ranges too, but not easy to understand the picture behind it and the orderflow that causes movements, many times I got stopped out.
I guess I am free to say this now that this thread has been reclassified. You are welcomed to contact me regarding the order flow course that I teach. I cover in detail how to "see" the order flow in those candles and how you can use that to your advantage. If you are interested please don't hesitate to contact me. [email protected]
  • #145
  • Sep 16, 2015 2:11am Sep 16, 2015 2:11am
"
Quoting gspajon
{quote} I do not trade stocks, but I do trade the E-Mini futures market. That is also a nearly 24 hr market, but because it is US based the major volume comes in during the NY session. Thus I am able to trade that session on a daily basis, (scalping 30-60 points a day). I understand what you mean by gaps though. Those gaps usually represent, price change during "after market" and "premarket" trading from futures traders. Thus if futures traders pushed the price higher overnight, then the instrument will gap higher, and thus that gap can represent...
"

another question,gspajon.....when you trade,do you exit your trades before news release,i mean new like fomc and do you scalp currencies,why the prereference for e-mini futures to currencies,is there any advantage.
  • #146
  • Sep 16, 2015 8:10am Sep 16, 2015 8:10am
great work GSPAJON!

I dond't speak english very well so i don't know if i have understand all the 3d. So i resume some point .Could you check if there are write ?

1) LOOK FOR A BALANCE ZONE
a balance zone is a 'range price' where the selleres and buyers are balanced. The price moves between the two edge of the 'range'.



2)LOOK FOR THE IMBALANCE IN ZONE
When the buyers overwhelm the sellers or viceversa.

HOW WE CAN SEE THE IMBALANCE ?
on the chart we have a long candle that close above(buyers are taking control) of below(sellers are taking the control) the edge of the balance zone. IThis candle means that the buyers are close over a level of price where the sellers before are defended and viceversa.


3) after the break of the BLANCE ZONE wait THAT THE PRICE PULLBACK TO THE EDGE.
after the break the price often returns to the edge of the BZ or in the BZ. we don't have any logical explanation of this pullback but only an empiric reply (80% of the time).
We can place a limit order on the edge and in the centre of the BZ whit the stop under this zone(is it right ??????).



is it right ?ì The ENTRY RULE is correct ?
  • #147
  • Edited 8:29am Sep 16, 2015 8:10am | Edited 8:29am
Quoting carbonado
another question,gspajon.....when you trade,do you exit your trades before news release,i mean new like fomc and do you scalp currencies,why the prereference for e-mini futures to currencies,is there any advantage.
Hello again Carbonado...When I DAY trade most of my trading occurs after news announcements because they mostly come out an hour before the market opens. However, some doe occur during the session, like the FOMC. To answer your question, I trade my plan and that usually results in my exit before most major announcements. I do not specifically exit trades because a particular announcement is about to be released, rather the volatility that occurs usually causes me to exit, either by limiting my trade or by stopping it. In any case I trade as I would any other trade and am usually lucky enough that the increased volatility of that day usually limits me out long before I have to worry about it.

I do NOT scalp or day trade currencies. I prefer the transparency and "fairness" of the futures market. My broker has a feed that comes off the exchange and that is sent directly to my computer with out interference. The difference between the Offer (FX-Bid), and the Bid (FX-Ask) is only one tick. Thus the Price is the Price. Because of the regulations, my orders go out into the actual market and are filled by parties unknown. This is as it should be. My broker charges me a fee for each transaction, as does the market "settlement" provider. Each of these parties, have to -by law- show the settlement procedure at the end of every day.

This is not so in the retail FX market. The broker quotes you prices that he/she controls. Therefore they also control the spread. When you enter a trade (because the retail market is such low volume), your order never goes out to the actual FX market. Your Broker is the counter party to your trade. Worse yet, your broker knows where your stop and limit orders are. So think about that for a minute...your broker is on the other side of the trade...the same person that controls the prices you see, AND the spread you have to overcome to make money. Its like playing poker where the other players can see your cards...

So if you are scalping and only looking for what...15-20 pips? Less? Your spread and the quoted prices become very important to your success. If the broker can manipulate that you are in a losing game. I wouldn't have believed it until I actually saw the broker's platform for myself. I don't feel this is worth the aggravation for scalping or any "end of day exit" trading.

However, I do trade FX on a longer term basis, which is why you see me using Daily, Weekly, and Monthly charts. For me to get "messed" with the broker will have to manipulate the price 100-150 pips...not likely. So I day trade the futures market for its fairness and transparency, and swing trade, or position trade the FX market for its higher leverage, and liquidity.

Hope that answers your question.
  • #148
  • Sep 16, 2015 8:15am Sep 16, 2015 8:15am
Quick Update on the commodities:
Oil: Still inside a range, and the balance on this market is beginning to extend into the weekly chart. The position here is still only slightly positive, but still waiting to see what tomorrow will bring.
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Gold: This too is at the top end of the daily balance zone and it looks like the monthly chart is trying to balance as well. Position is positive with 323 pips locked in at present. I think its fair to say the "pre FOMC volatility" has started.
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  • #149
  • Sep 16, 2015 9:00am Sep 16, 2015 9:00am
Quoting 81raffae
... 1) LOOK FOR A BALANCE ZONE a balance zone is a 'range price' where the selleres and buyers are balanced. The price moves between the two edge of the 'range'. ...
Almost correct...but you have it reversed...a ranging price area is the RESULT of balanced order flow...When the sellers and buyers are absorbing (or balancing) the volume of the other, the result is prices that range or stabilize. As we cannot literally "see" the orders when they are placed in the market (especially not on FX markets) we use price action to show us what the order flow is doing...price action is the RESULT of order flow.

Quoting 81raffae
...2)LOOK FOR THE IMBALANCE IN ZONE When the buyers overwhelm the sellers or viceversa. HOW WE CAN SEE THE IMBALANCE ? on the chart we have a long candle that close above(buyers are taking control) of below(sellers are taking the control) the edge of the balance zone. IThis candle means that the buyers are close over a level of price where the sellers before are defended and viceversa. ...
We see the imbalance because we see that where before prices were ranging...now they are not...the order flow was balance and now it is unbalanced...that long candle you refer to represents the side that overwhelmed the other. So one can clearly conclude that the order flow has now unbalanced.

Quoting 81raffae
...3) after the break of the BLANCE ZONE wait THAT THE PRICE PULLBACK TO THE EDGE. after the break the price often returns to the edge of the BZ or in the BZ. we don't have any logical explanation of this pullback but only an empiric reply (80% of the time). We can place a limit order on the edge and in the centre of the BZ whit the stop under this zone(is it right ??????). is it right ? The ENTRY RULE is correct ?
We do have a logical explanation...I gave it earlier in this thread...but I will say it again...

When one side overwhelms the other...lets just say the buyers have overwhelmed the sellers...that means that there is more buying volume than selling volume and price will rise...the sellers will at some point exit their trades...this will be by stopping out or by simply exiting...when the sellers exit, they MUST enter buy orders to exit...these new buy orders are all flooding into the market at once and further unbalancing the already unbalanced market. That RESULTS in a long candle that pushes outside the range you mentioned earlier...clear so far?

Ok...now...once all the seller's have stopped out, and all the buyers that pushed price out of the range are in...who is left to keep pushing prices higher? If there is no one else to enter more buy orders, price STOPS RISING. At this point many of the buyers may exit their trades...especially those who bought late...this will cause selling...prices will fall...price will come back to the area where the buyers started overwhelming the sellers to begin with...

There are more buyers (like me) waiting there...they all enter their buy orders and the market is once again unbalanced on the buy side...prices rise, and you have the opportunity to profit.

Is that easier to understand?
  • #150
  • Sep 16, 2015 9:21am Sep 16, 2015 9:21am
Quoting gspajon
{quote} Almost correct...but you have it reversed...a ranging price area is the RESULT of balanced order flow...When the sellers and buyers are absorbing (or balancing) the volume of the other, the result is prices that range or stabilize. As we cannot literally "see" the orders when they are placed in the market (especially not on FX markets) we use price action to show us what the order flow is doing...price action is the RESULT of order flow. {quote} We see the imbalance because we see that where before prices were ranging...now they are not...the...
great!
i have study many stuff about order flow but I never understand how i can apply it to the chart. Now ,thanks this 3d i realized.

Order flow is another way to look the chart.I hope that i will change my mind from technician to order flow .
  • #151
  • Sep 16, 2015 9:47am Sep 16, 2015 9:47am
Quoting 81raffae
great! i have study many stuff about order flow but I never understand how i can apply it to the chart. Now ,thanks this 3d i realized. Order flow is another way to look the chart.I hope that i will change my mind from technician to order flow .
I am very gratified that you found something of value here. In fact that whole point of this thread and my course is to give people a practical application to the "mindset". It is one thing to say you have to change the way you think...it is quite another to actually find a way to utilize information in a practical way to your own benefit.

But the journey doesn't end there...there is much more...after a very short while of studying and applying order flow principles, you will soon find that its simplicity is beyond compare, and will be inclined to start applying those other theories that are essential to your success.

Most people when I first start working with them are caught up in the "system trap". They are under the impression that if only they can learn to enter and exit at just the right time, they will be on their way to fame and fortune...this could not be farther from the truth. The reality is that your true "edge" in the market has nothing to do with order flow, price, or even the markets themselves. It is YOU...and what you do...and why you do it.

As my coach, Jason Alan Jankovsky says, "You need to know, WHY you do, WHAT you do, the WAY you do it..." Once you know the WHY in anything you do, you will be unstoppable.

Never forget, your success or failure in trading has NOTHING to do with the markets.
  • #152
  • Sep 16, 2015 10:07am Sep 16, 2015 10:07am
Update on OIL:
Stopped out with a -50 pip loss...volatility has now come in in a big way...
Attached Image (click to enlarge)
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  • #153
  • Sep 16, 2015 10:11am Sep 16, 2015 10:11am
Update on gold...my last remaining trade for now...
Stop moved down to lock in 340 pips.
Attached Image (click to enlarge)
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  • #154
  • Sep 16, 2015 3:52pm Sep 16, 2015 3:52pm
Hello All,

Well after being stopped out on my Oil Short I am reading a new opportunity going the other way, Long this time.

As you can see below the daily chart balanced over the course of 7 days and has now unbalance to the buy side. A long liquidation move started yesterday evening (most likely profit takers getting out before tomorrows FOMC announcement). I am anticipating that buyers will come back in force after the announcement and if price comes back into the area of balance, I will also be long.

I have placed two orders as you see here and because I am anticipating some increased volatility I placed my stop a significant distance away. I doubt I'll need all that room, but won't know until after tomorrow.
Attached Image (click to enlarge)
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  • #155
  • Sep 17, 2015 10:35am Sep 17, 2015 10:35am
Hello All. I wanted to let you know about a new opportunity that I am looking at

NZD/USD: The below chart shows that the order flow, as soon on a weekly basis, has now balanced. this is a precursor to reversal. Looking in closer to the daily chart you can see that price has risen out of what looking like a "bottoming" formation. Many here call it a "double bottom". Looking down even closer to the intraday chart you can see in great detail that the order flow bounced once (stopping me out of my earlier short), then came down and balanced. The balance zone is clearly defined and two days ago broke above. Price RIGHT NOW is retesting that area where the buyers overwhelmed the sellers, and I have entered a long position. I also have another pending buy order just a little bit lower, in case volatility with today's much anticipated news announcement can trigger in another position.

Stop is as you see here.
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  • #156
  • Sep 17, 2015 12:34pm Sep 17, 2015 12:34pm
Looking good on Kiwi so far...just a half hour before the "big news" the Kiwi position has triggered and is currently slightly positive. I didn't expect it to look this way so soon, but will take it...

Now the only thing will be keeping the stop out of the way of the volatility that is sure to come in the next 2 hrs.
Attached Image (click to enlarge)
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  • #157
  • Sep 17, 2015 1:30pm Sep 17, 2015 1:30pm
Updates:

Gold: Stopped out with 340 pips profits.
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Kiwi: Trade has blasted skyward and is now 70 pip positive...I will most likely move the stop closer or perhaps even break even at the end of today's trading.
Attached Image (click to enlarge)
Click to Enlarge Name: kiwi.PNG Size: 85 KB
  • #158
  • Sep 17, 2015 2:26pm Sep 17, 2015 2:26pm
Yet another Kiwi update!!

This market is moving fast and the players are very active on both sides. We got the "whoosh" after the FED announcement, but it appears like profit takers are now active at the end of the day, pushing prices back into the balance zone...for any of you considering a long...this is what it looks like. My position was up as much as 120 pips but has now fallen back to 55. I have moved my stop to BE+10 pips. I did not anticipate the sellers to come in as quickly as they have.
Attached Image (click to enlarge)
Click to Enlarge Name: kiwi.PNG Size: 86 KB
  • #159
  • Sep 17, 2015 2:34pm Sep 17, 2015 2:34pm
Hi, Gspajon nice thread.

I think Kiwi made some massive stophunt, Showing continuation of the global downtrend. Ye, let's wait for the close of the day.
  • #160
  • Sep 17, 2015 2:38pm Sep 17, 2015 2:38pm
Quoting bodring
Hi, Gspajon nice thread. I think Kiwi made some massive stophunt, Showing continuation of the global downtrend.
Thank you bodring...if by "stop hunt" you mean that all the shorts liquidated...I agree...

This is typical of what happens when one side of the order flow overwhelms the other...what surprised me was the speed at which it occurred. This tells me that there were players lined up on both sides of this news event just waiting for a particular move. As I write kiwi is rising again, but I will have to see after at least 24 hrs how the order flow shapes up when all the headlines are gone.
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