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Order Flow - Finding cluster of stops on chart
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Jan 13, 2011 11:56pm
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Originally Posted by Darkstar Think about how price change and the distribution of liquidity interact. Your looking for a disequilibrium in that distribution which should give you a highly predictable outcome. Trade with the anticipation of that outcome and you have the makings of a high probability system. | Let me ponder upon that for my first post in this thread. A price move in any direction leaves a trail of limit orders behind it because of the mindset of most participants: they missed out on the move and, if the price comes back, they want to get in on it. One of the ramification of that is that, a good way to exit a position if you're a big volume trader at the end of a trend would be to support the price into a very low liquidity area, which requires little effort, and if herd behavior kicks in, the way back should be paved with fresh liquidity to make your exit.
Just speculating on this, of course. Don't take it as true. | 
Jan 19, 2011 12:28am
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Originally Posted by Marv Well then I hope she never gets it.  | Maybe. What fun is a contest of knowledge if everyone knows? Makes the game tougher for those who knew first. | 
Jan 22, 2011 2:06pm
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Originally Posted by Darkstar A product like an ipod priced at the efficient value will produce the highest quantity of ipods sold. However, financial market securities provide zero utility, so there is no value in acquiring properly priced units. As such, the demand drops to zero at the efficient value. | Id tend to disagree here. A currency has the utility of allowing me to buy things. Good luck purchasing foreign goods if you don't have the right currency! An option has the utility of hedging me against risk, reducing the volatility of my speculative portfolio. Same for futures, which producers can use to hedge against price variations. All those securities have their utility.
If I need the utility those securities provide, then I might buy it even if it is overpriced. | 
Jan 22, 2011 2:55pm
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Originally Posted by Adal Then again, if anybody would knew which is an efficient price and which is not, they could just start speculating it. | You hit it on the nail here in my opinion.
Is there really such a thing as the true value of something? The value of securities is non-causal, meaning they depend on what will happen in the future, and as such are non-physical systems. Since there is always a future in which the price of the security is different, its present value is NEVER the current price.
So, when there is a price area where the orders are getting matched efficiently, an "equilibrium point" as some have called it, it is not because the security is at its true value, it is because half of the people transacting at that equilibrium point are wrong.
So many thoughts coming to my head as I write those words... Anyhow, just my two cents.
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Jan 22, 2011 3:47pm
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Originally Posted by Darkstar Not true. The Vacuum occurs after EVERY price change, but in most instances it is created and closed so quickly that it can't be detected with the naked eye.
News events and the like create excessive price change. Because the price change is large, so is the vacuum that it creates. Subsequently, it is more noticable. | Yes, price has a very high tendency to come back a long way after a big move during news.
By the way, I too sent you a request on your website not long ago. Don't mind the non-sense about rhinos and stuff, I had to write something :P.
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Jan 22, 2011 3:53pm
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Originally Posted by UnnamedPlayr I don't coun't a price shift as a vacuum.
It is a time based process.
Either there is liquidity or not. | There doesn't have to be a lack of market liquidity for the price to shift. I think the point here is, if the shift is not leaving some liquidity in its trail, no matter how many people are pushing for the shift, it takes only one order in the opposite direction force the market back to where it started before the shift.
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Jan 22, 2011 5:02pm
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Originally Posted by UnnamedPlayr That is your opinion.
For me a true vacuum is still the fact when at the same price level no seller and no buyer had been executed.
Otherwise it's a normal liquidity lack (either one side). | There are no absolutes. When scientists make a vacuum, its quality depends on the density of matter that is left inside it. There is no such thing as a "perfect" vacuum, but under a certain density, depending on your standards, you can qualify it as one.
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Jan 22, 2011 5:24pm
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Originally Posted by Vorbis I thought that was precisely what made price move?
If each buy order can find a sell at X price, why would it move? Wouldn't it be against exchange rules for it to do so? | Depends on your reference value for measuring liquidity. If there is more liquidity at a given price than there is demand, then the price wont get through it, you're right on that. I simply meant that there can be a lot of liquidity available but so much demand for that liquidity that the price will still shift.
I don't know if such a situation can occur in a realistic scenario tho... If there are a lot of liquidity seekers, the liquidity should usually withdraw itself, unless it's liquidity provided by uninformed traders.
Not sure why we are talking about this tho, it feels like running in circles. Sorry if I started it XD.
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Jan 23, 2011 2:41pm
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Originally Posted by LasVahGoose you can probably place an order on either side of a round number randomly in either direction and grab 10-20 pips if you wanted to trade that way. There are always going to be orders above and below those areas (don't want to say always like 100% always, but 'almost' always).
So are Order Flow traders mostly scalpers? I kind of get that impression... Nothing wrong with that, just curious. | Personally, I've been using orderflow trading to catch moves upward of 300 pips quite succesfully. I managed to pick up my account 5000% in 6 weeks using my own methodology and, yes, Ill admit, making extensive use of the 50:1 leverage Oanda empowers me with  .
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Jan 23, 2011 3:12pm
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Originally Posted by chriskins There is no order book, or centralised volume information. So not sure what you have but I would guess unless you work for a central bank or a huge IB then you have nothing that is exploitable. | And why would you need centralized information? Have you ever heard about a sample, the very basis of statistics? 
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Jan 23, 2011 6:02pm
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Originally Posted by scott89 '[color=black][font=Verdana]
Anyway, I don't know about you guys, but I don't fell like making money without understanding would be enough to me anymore at this point. Actually, 'making money' passed in background for me. Couriosity leads me to research the truth, to try to understand WHY things happen and HOW they do. | Yes, it' s not about the money, but about becoming a master at your art  .
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Jan 23, 2011 6:40pm
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Originally Posted by Darkstar The retail/insti dichotemy is a bit of a red herring. The fact is insti traders do the same things that retail traders do, just on a bigger scale. So if retail disapeared tomororw, you wouldn't notice much, if any, difference in the way price behaved. Liquidity would be lower, but there would be fewer orders chasing it as well... | You think so? I'm a firm believer of that dichotomy, or the informed/uninformed, or smart money, however you call the model. The fact that there are traders out there that can be manipulating or tricking others into taking the other side of the market, thus the why retail traders are wrong most of the time. Every bit of evidence seems to point in that direction, in my opinion.
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Jan 23, 2011 8:02pm
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Originally Posted by Darkstar I'm not trying to imply that there aren't informed and uninformed traders out there. What I'm saying is that the line of demarcation isn't retail/institutional. There are informed traders in retail just as there are uninformed traders in insti, so eliminating retail isn't going to materially alter the distribution of wins and losses.
Remember, to get an institutional account doesnt require some magic trading skills or the passage of some complicated test. If you have the money and the desire, there are plenty of brokers who will set you up an... | I agree that the frontier is not that between retail and institutional, I actually dont have any opinion on institutional traders. All that I am implying is, wherever that frontier is and whatever form it takes, the vast majority of retail traders are on the wrong side of it.
No disagreements here, all is well  .
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